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CHAPTER 2

THEORETICAL FOUNDATION

2.1 Theoretical Foundation

As mentioned in the chapter above, this study will emphasize on the demand side of

the counterfeit products (counterfeit software and counterfeit cosmetics), which is

particularly on the role of consumer complicity towards counterfeit products that are

sold in both virtual and physical markets. Counterfeiting has a varied apprehension

and a clear comprehension on counterfeiting is essential as a basis of conception for

this research study. Product Counterfeit can be defined as those copied products that

are sold and are highly identical to the authorized copy and claiming that it is

legitimate (Waziri, 2011). Counterfeit goods are also known as reproductions of

similar to legitimate product appearances, inclusive of its packaging, trademark and

labeling (Ha & Lennon, 2006). Low prices, no warranties, incorrect spelling of brand

names, smeared or incorrect packages are mostly associated to identify counterfeit

products (Imrani, 2012).

Following that, the replicated study for this research has developed a model of

constructs that predict the factors forming consumer complicity to attain counterfeit

products. These constructs or factors include: ethical concerns (driven by idealism

and relativism), collectivism, hedonic shopping experiences, and perceived quality.

How these different construct forms the consumer complicity is discovered in this

research. A comprehensive understanding of these constructs must be explored

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before conducting this research to fully comprehend the roles of these variables. This

chapter requires understanding of various opinions of the definition of the variables.

Hence, the section below provides experts’ insights, theories and findings on the

variables that are gathered from various sources.

2.1.1 Ethical concerns (driven by idealism and relativism)

Ethical concerns are circumstances that occur whereby a choice of substitutes must

be judged as right or wrong (Business Dictionary). A strong correlation with

consumer complicity that is based on Forsyth’s theory, the taxonomy of ethical

ideologies will be determined by idealism or relativism (Forsyth D. , 1980). Ethics

position theory stresses two dimensions (idealism and relativism) whereby the belief

is that, individuals’ judgment, reasoning, activities and sensations are influenced by

personal moral philosophies, mainly in intense situations (Forsyth, O’Boyle, &

McDaniel, 2008).

Idealism here is defined as the extent of ethic a person possesses when there is a

believe that hurting others is wrong even though the benefits reaped is the utmost for

others (Forsyth D. , 1980). An idealist embraces the believe is that harm can be

prevented and does not mean for a downside outcome for others (Karande &

Singhapakdi, 2002).

Whereas, relativism is concerned with the neglecting of universally acceptable

morals for a more flexible notions of right and wrong based on the circumstances.

(Valentine & Bateman, 2011). Relativists are likely to change their morals based on

the situations overcome, ignoring the ethical principals (Oumlil & Balloun, 2009).

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Forsyth also defined that idealism and relativism can be dimensioned into high and

low levels to create the two by two classification of ethical ideologies in Table 2.1

below.

Table 2.1 Taxonomy of Ethical Ideologies

Ethical Ideology Dimensions

Situationists High Relativism High Idealism

Subjectivists High Relativism Low Idealism

Absolutists Low Relativism High Idealism

Exceptionists Low Relativism Low Idealism

Note: Adapted From Forsyth (1992,p.462)

(Mauques & Pereira, 2009)

Based on the Table 2.1 above, situationists are likely to reject universally accepted

morals and tend to carry out actions to produce positive outcomes in situations.

(Forsyth D. , 1992). Subjectivists are similar to situationists as these people tend to

ignore the universally accepted morals and principles, but subjectivists shapes the

moral judgment based on personal gains, values and perceptions (Barnett, Bass, &

Hebert:, 1998). Therefore the ethics of harmful actions towards others is tentative

towards the situation. For Absolutists, individuals believes that actions reflects

morals and aims for positive outcomes for all parties involved while considering the

universal morals, due to this, during judgment, it is done sternly particularly if

actions might harm others. (Forsyth D. , 1992). While for exceptionists, similar to

absolutists, desires universal moral principles to be intact, however, exceptionists

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find it almost impossible for negative outcomes to be evaded, but it is occasionally

essential to occur in terms of causing harm to benefit others (Forsyth D. , 1992).

Hence, for this research, ethical ideologies such as idealism and relativism will be

utilized as constructs to measure the ethical concerns that may possibly form the

consumer complicity.

2.1.2 Collectivism

In order to predict the intentions to purchase counterfeits, according to Hofstede’s

theory, collectivism, which was initially referred to cultural distinctions, will be

utilized as a predecessor (Hofstede G. , 1980). The individualism and collectivism

dimension is referred to as the relationships between one another and the collectivity

present in a society that mirrors the way people live together is implied by different

values and behaviors in the society (Hofstede G. H., 2001)

Collectivism focuses on community empowerment and self-actualization, aiming at

increasing the emotional and physical safety of the members (Carson, 2009).

Collectivists believes in associating themselves in relation to a group, concealing

personal goals and gains for the betterment and benefit of the whole community,

maintaining relationships with the group even when personal costs exceeds the

rewards attained (Finkelstein M. A., 2012). Collectivism is found to be related with

altruistic motives for aiding and formation of volunteer role identity (Finkelstein M.

A., 2011). It is found that collectivists are likely to be apprehensive with the results

of one’s behavior for the members of the group and are likely to be more willing to

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sacrifice personal interest to acquire the collective interest (Smith, Dugan, Peterson,

& Leung, 1998; Contact Center Solutions Industry, 2006).

2.1.3 Hedonic Shopping Experience

For this study, based on established hedonic shopping researches, it is proposed that

consumers are likely to be aroused by engagements in counterfeit trade in both

physical and virtual marketplace (Hirschman & Holbrook, 1982). When choosing a

shopping channel it is influenced greatly by hedonic motives which is, reflected by

the enjoyment of the shopping process and highlights on the shopping experience

encountered (Kim & Forsythe, 2007)

Hedonic motivations are seen to have influential encouragements on shopping

behavior in traditional and online shopping environments (Menon & Kahn, 2002).

When people shop, one of the main factor contributing to the reason for shopping is

the hedonic value, which is tied to the emotional aspects of the shopping experience,

hence, associating the feelings, sensations and enjoyment of the whole shopping

experience (Irani & Hanzaee, 2011).

In defining hedonic experiences, attractive stimuli is an essential component to

facilitate a desired shopping environment incorporating utilitarian and hedonic

motives as part of the holistic approach that is created (Ballantine, Jack, & Parsons,

2010). Hedonic consumption is more towards the shopping’s entertainment and

emotional bond created (Babin, Darden, & Griffin). Whereas utilitarian consumption

is more towards the task-related activity where satisfaction is generated based on the

acquired product (Arnold & Reynolds, 2003).

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Hence, this hedonic shopping experience construct aids in discovering the emotional

aspect of consumer behavior towards counterfeited products.

2.1.4 Perceived Quality

Perceived quality is defined as the consumer’s judgment on a products overall

superiority whereby the perceived quality is likely to differ from the actual quality

(Zeithaml, 1988). Evaluation of a product quality is likely to be affected based on the

marketing elements such as price, place, promotion and the brand itself (Aghdaie,

Dolatabadi, & Aliabadi, 2012).

A consumer’s overall feeling about the brand and product driven by the intangible

perceptions of a product or service defines perceived quality (Ramaseshan & Tsao,

2007). Price, appearance, component and features, advertisements and brand name

are some of the product characteristics that have the ability to enhance consumer’s

perceptions of quality (Ramaseshan & Tsao, 2007).

Perceived quality is believed to be the result of satisfaction whereby it is driven by

the compliance between perceived performance and customer expectations

(Ranjbarian, Sanayei, Kaboli, & Hadadian, 2012). Some studies illustrates that

perceived quality has the ability to affect the store brand image (Zins, 2001) (Selnes,

1993). Hence, this store brand image might be corresponding in terms of the channel

of distribution of physical market for this study.

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2.1.5 Consumer Complicity

Consumer complicity is the eagerness to acquire, distribute and utilize counterfeit

products, according to the theory stated in the replicated journal. Complicity here

can be defined as the accountability for the directive and exclusions that allow harm

to occur but that are not necessarily causally effectual directly (May, 2010).

Complicity is considered a criminal law only when the individual is legally

responsible or liable for criminal wrongdoings that are based on other individual’s

behaviors (US Legal). Assisting and encouraging the offense of breaking the law

includes: someone who initiates and causes other people to designate the offense,

someone aiding in committing the offense and someone who is legally responsible to

attempt to at least avert the commission of the offense (US Legal).

The reasons for consumers purchases of counterfeit products is mainly due to the

perception of it being a victimless crime that is harmless and fun, as this has no

obvious and direct impact on the purchaser (Cheek & Easterling, 2008).

Based on Chaudhry’s findings, Table 2.2 below highlights on the intrinsic, which is

the personal characteristics of the consumer and extrinsic which is the virtual

shopping environment that forms the overall demand for complicity for fake

products.

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Table 2.2 Variables Inducting Consumer Complicity Towards Purchase of Counterfeit Products.

Intrinsic Determinants Extrinsic Determinants Demographics of Consumer

Age, income, level of education, gender High versus Low spenders of counterfeit products Level of disposable income Other psychographic variables (Example: types of risk-taker)

Product Attributes Image / Perceived fashion content Price, Quality, Performance Investment at risk Purpose (personal use versus gift)

Attitude towards Counterfeiting

Anti-big business sentiment Social benefit of dissemination Attitude of counterfeits in a product category (Movies versus Pharmaceuticals)

Shopping Experience Location (Example: Internet or flea market) Situation (Example: Holiday trip in China) Ease of accessing counterfeits (Example: Internet downloads)

Cultural Values Individualism versus Collectivism

Social Marketing Communications Effectiveness of anti-piracy ads

Ethical perspective Attitude towards morality and lawfulness Idealism and Relativism

(Chaudhry P. E., 2012)

Hence, some of these constructs have been applied for this study. In order to gain a

more detailed description on the theoretical framework, it would be clearly stated in

the section below.

2.2 Theoretical Framework

A theoretical framework depicting the relationships among the constructs and

variables explained in the previous section is replicated the same way for this study.

The change would only be on the context of the study, which is in terms of the place

of research, the type of consumers, and the type of multiple products selected for this

study. The Figure 2.1 below clearly demonstrates the frameworks of this study.

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Figure 2.1 Theoretical Framework Model.

The table above links various factors to consumer complicity, these factors include

the ethical perspectives, which are driven by idealism and relativism, collectivism,

hedonic shopping experiences and the attitudes (the ethical concerns and perceived

quality) towards counterfeit products.

Ethical perspectives aids in influencing consumer behavior on obtaining counterfeit

products, which is an originator to complicity (Wilcox, Kim, & Sen, 2009) (Vitell,

Singhapakdi, & Thomas, 2001). Therefore, it is relevant to be included as part of the

research to discover the hypothetical testing on it. In regard to the ethical

perspective, which is driven by idealism and relativism being interrelated with

complicity, some of the hypothesis developed for this study in regard to this, are as

follows:

Consumer Complicity

Collectivism

Hedonic Shopping

Experience

Ethical Concerns

Idealism

Relativism Perceived Quality

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H1. An idealism ideology is positively related to ethical concern- the more idealistic

the consumer, the greater the ethical concern with complicity.

H2. A relativism ideology is negatively related to ethical concern- the more

relativistic the consumer, the lesser their ethical concern with complicity.

Figure 2.2 Hypothesis Linking Ethical Perspectives to Consumer Complicity.

Collectivism on another hand might have the prospective that could enhance the

willingness to attain counterfeit products (Husted, 2001). In terms of acquisition of

counterfeits, collectivism as an influencing factor to complicity is indeed

questionable. Hence, the hypothesis below is developed to test the significant

impacts of this probability.

H3. Collectivism is positively related to consumer complicity.

Ethical Concerns

Idealism

H2 Relativism

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Figure 2.3 Hypothesis Linking Collectivism to Consumer Complicity.

This study also focuses on the impact of the channels of distribution, that is,

counterfeit products that are available in physical markets and virtual markets. It is

proposed that consumers are excited by illegal actions in the engagement of

counterfeit trade in both the market places (Hirschman & Holbrook, 1982) (Babin,

Darden, & Griffin, 1994). It is indeed noteworthy to discover the senses of

experiences and other persuasive variables that are invoked by the characteristics of

each channel touch-points, which aids in building up consumer complicity. Thus, the

development of the following hypothesis was created.

H4. Hedonic shopping experience is positively related to consumer complicity.

Figure 2.4 Hypothesis Linking Hedonic Shopping Experience to Consumer Complicity.

Consumer Complicity

Collectivism

Consumer Complicity

H4

Hedonic Shopping

Experience

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In terms of the framework that is developed for this study, consumer attitudes are

predicted to have a possibility of correspondence with consumer complicity.

Consumer attitudes here are formed based on the individual’s ethical concerns

towards complicity, as well as, the perceived quality of those counterfeited products.

There are various reasons to why consumers’ purchases counterfeit products and this

reasoning varies with each person. However, the morality of ethics possessed by

individuals is ought to be questionable, especially for those individuals who are

consumers of counterfeit products. This appealed the formation of the following

hypothesis.

H5. Ethical concern is negatively related to consumer complicity with counterfeit

products.

Figure 2.5 Hypothesis Linking Ethical Concerns to Consumer Complicity.

Whereas, in regard to the perceived quality which forms consumer attitudes to

counterfeit products, this could relate to the motivation of acquiring counterfeit

products in this study, acquiring counterfeit software and cosmetics. A high product

quality is likely to motivate and excite a consumer to purchase the counterfeit

products, particularly, former to the actual purchase of the product (Eisend &

Consumer Complicity

H5 Ethical

Concerns

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Schuchert-Guler, 2006). The price and quality of counterfeit products are one of the

most common elements that form up a perception towards a product. The perception

varies on each individual, so, to better comprehend the perception of quality of the

counterfeit products, the following hypothesis is generated.

H6. Perceived quality is positively related to consumer complicity.

Figure 2.6 Hypothesis Linking Perceived Quality to Consumer Complicity.

These hypotheses formed for this study is aimed to meet the aims and benefits of this

research study, which has been discussed previously. Therefore, testing of these

entire hypothesis stated above, based on the constructs determined is intended to

provide an understanding on the contributing factors that forms consumer complicity

towards counterfeit products.

Consumer Complicity

Perceived Quality