KOREASCHOLAR

Introduction
With the advent of new technology and progress of globalization, the adoption of offshore outsourcing policies, especially in the service sector, becomes a common practice. The motivation to outsource globally arises from a pursuit for agility to cope with changing environment (Gilley & Rasheed, 2000; Mukherjee, Gaur, & Datta, 2013), cost reduction (Ang & Straub, 1998), and eventually competitive advantage (Kang, Wu, Hong, & Park, 2012; Kremic, Tukel, & Rom, 2006). However, recent service research represents outsourcing as a double-edged sword, with both damaging and beneficial consequences (Rasheed & Gilley, 2005), and one of the major concerns of offshore service outsourcing is that customer-based brand equity of the service provider maybe affected negatively. At the moment, few international marketing or business studies empirically test the negative implications of offshore outsourcing on customer loyalty and brand equity. The comparisons between front-end and back-end service outsourcing as well as between BRIC and non-BRIC nations are also missing in the literature. Service providers need strategic information about the possible risks of outsourcing specific types of services to specific countries (Pappu, Quester, & Cooksey, 2005). Therefore, based on the literature of brand equity and country-of- origin (COO) theory, we constructed an integrated framework to explain the outcomes of offshore outsourcing from a service and brand marketing point of view.
Theoretical Development
COO literature indicates that consumers transfer negative perceptions of a country to perceptions of products (Pappu, Quester, & Cooksey, 2006). This principle should apply to perceptions of outsourced back-end services—an increasingly common tactic by service firms (Blumberg, 1998)—such that outsourcing to an Asian economy has negative effects on brand associations and quality. The better the perception of the country that performs outsourced services, the better perception of brand equity, including both associations, quality perception, and ultimately brand loyalty. Because the front-end service employees have more direct interaction with customers, this influence will be stronger as compared to back-end service outsourcing. Meanwhile, we predicted that consumers should perceive India (and other BRIC economies) more favorably, because of their rapid economic development.
Research Design
To test the hypotheses, this study probed into New Zealand consumers’ perceptions of outsourcing services in the banking industry to India and the Philippines. We adapted the SERVQUAL scale to measure the perception of outsourcing. Subjects’ COO perception and customer-based brand equity were also collected in the online questionnaire. The survey procedure produced 288 completed and usable questionnaires: 132 with India as the country of origin and 156 for the Philippines.
Result and Conclusion
An initial analysis confirmed the validity of the research tool. The results from multigroup structural equation modelling showed that outsourcing services, in light of country-of-origin effects, has a long-term negative impact, especially for front-end services, on both brand equity and brand loyalty. Consumers appeared more concerned with the quality of customer service and general administration than information systems and technology. Meanwhile, although subjects’ outsourcing and COO perceptions are negative for both India and the Philippines, the results indicated no significant difference between the two nations regarding the levels of impact of such perceptions on brand equity. Based on the findings from the study, we recommend that organizations should consider outsourcing back-end functions before moving to front-end services, because the back-end services have less impact on brand equity. Managers should also have great discretion about where to send back-end services, because consumers’ COO perceptions do not relate significantly to brand equity for outsourced information systems or technology.

• Harry Gu(SHU-UTS SILC Business School, Shanghai, China)
• Ashish Sinha(University of Technology, Sydney)