The Effect of Country of Origin on Brand Equity: An Empirical
Study on Generic Drugs
Shamindra Nath Sanyal1 1and Saroj Kumar Datta2 2
1. Lecturer of Marketing Management, School of Management Studies, Narula
Institute of Technology, Kolkata- 700 109, India, e-mail: email@example.com.
2. Dean and Professor, Faculty of Management Studies, Mody Institute of Technology
& Science, Lakshmangarh- 332311, Rajasthan, India, e mail:
The Effect of Country of Origin on Brand Equity: An Empirical Study on
Purpose – The purpose of this paper is to explore the impact of country of origin image on
brand equity of branded generic drugs.
Design/methodology/approach – Brand equity of branded generics is examined through
an analytical review. Country of origin image is hypothesized to influence components of
brand equity, i.e., brand strength and brand awareness, which in turn influence brand
equity. An empirical investigation was carried out among professionally similar
respondents, i.e., doctors of different categories in Kolkata megapolis, India.
Findings - Results showed that country of origin image had a positive and significant
effect on components of brand equity i.e., brand strength and brand awareness, derived
from factor analysis conducted on brand equity components. The result also showed that
country of origin image of branded generics significantly, but indirectly affected brand
equity through the mediating variables, brand strength and brand awareness.
Research limitations/implications – Different variables have influence on brand equity.
This study dealt with only one type of variable, i.e., country of origin image which may
limit the total process of brand equity enhancement.
Practical implications - Marketing actions should be implemented to enhance brand
strength and awareness levels. Country of origin image should be assessed as a
multidimensional concept for enhancing brand equity. Marketers should be aware of the
fact that physicians are influenced by the brand’s original country image.
Originality/value - This research work has extended prior country of origin research by
conceptualising the country of origin image as a brand equity enhancing tool in a new area
called branded generic drugs.
Keywords Brand equity, Brand strength, Brand awareness, Country of origin, Branded
Paper category - Research paper.
Generic drugs are made to be chemically and therapeutically similar to the original brands,
but are significantly cheaper because they are allowed to enter the market after the patent of
the original brand expires. In this way, generic manufacturers do not incur R&D costs and
are able to offer a significant price advantage to the originator brand (Kanavos et al., 2008).
Generics are certified drugs equivalent to those brand-name medicines that are allowed to
enter the market when the patents of original drugs expire (Moreno-Torres et al., 2007).
The introduction of generics has not only helped control total health care costs, but also
provided a unique opportunity to study market evolution of pharmaceutical products. Since
the patent expiration dates can be well observed by the researcher, it is relatively easy task
to define the market opening date, which is unlikely in other markets including the FMCG.
The purpose of this project is to judge the brand equity and thereby, market acceptance of
the generic drug in the Indian market, especially, considering the effect exerted by the
random factor called country of origin. Variable like pricing has already been considered
by many authors as it is a responsible one which determines the degree of acceptance of the
generic products after patent expiration, but no concrete work has been carried out so far
considering country of origin for the generic pharmaceutical products. It will be the
endeavour of the researchers to study the equilibrium relationships amongst the factors that
are deemed responsible for the demand estimation of the generic drug in the Indian market.
WTO Agreement and India
TRIPS and The annex 1C of the Marrakech Agreement (1994), also known as the Trade-
Related Aspects of Intellectual Property Rights settlements (TRIPS) came into force in
January 1, 1995, willing to strengthen the institutional and judicial structure and to
harmonize the rules regarding the intellectual property rights (Souza, 2008).
The WTO Agreement came into effect in 1995 but India received a transitional period of
ten years for the introduction of product patents on pharmaceuticals and other allied areas.
Pharmaceuticals and chemical products will now be subject matter of patents by virtue of
Patent (Amendment) Act, 2005 passed by the Indian Parliament. The new amendment to
the Patent Act aims to fulfill India’s legal obligations under the WTO TRIPS Agreement
within the stipulated time (January 1, 2005) (UNCTAD Report, 2005). Prior to January 1,
2005, only process patents were permissible whereby any person could make the final
product by an alternative route known as the reverse engineering process. Under the WTO
agreement, India was required to introduce several provisional measures, including the
‘mail box system’ or grant ‘Exclusive Marketing Rights’ (EMRs) during the transition
period (UNCTAD Report, 2005).
Mailbox is a special type of mechanism for accepting patent applications till a product
patent regime was actually put in place. Among the pharma companies Pfizer, worlds
number one pharma company, emerged as the biggest patent applicant with 373
applications. Among Indian companies Dr. Reddy's was the aggressive filer with 205
mailbox applications followed by Panacea Biotech with 75 applications (Financial Express,
In case of developing countries, though it has been conceived that implementation of
TRIPS and other trade related agreements will result in loss of wealth and growth rate, yet
the countries that have been able to develop innovation capacities for pharmaceutical
production process development are expected to be on the positive side of the scenario.
Generic Drugs Defined
Generic product can be defined as the product containing an active ingredient which is
“off-patent” in majority of its markets. The essential attribute of generic drugs is that they
cost less than their original brand equivalents (Lofgren, 2002). Factors such as age, gender,
race, income, and health insurance plans tend to affect consumers’ attitude toward generic
drugs. In general, younger and more educated consumers were found to be generic drug
purchasers (Yelkur and Capella, 1995). For prescription as well as patients benefit plans,
generics are one of the best options available in today’s healthcare market. They offer the
therapeutic benefits of their brand-name counterparts for only a fraction of the cost,
providing more affordable access to pharmaceutical care (Snow Jr., 2007).
In developed countries, generics are those drugs which do not have patent protection and
the originator brand’s competitors can copy them without facing any legal problems. In
India, very few drugs are patent-protected and most of the drugs are 'generic' as per
international standard. However, Indian pharmaceutical companies have been marketing
these generics drugs as branded generics by giving different proprietary names. Most of the
big pharma brands in India are branded generics. These branded generics are usually given
a brand name but the trend is the generic name is primarily focused as a brand name
(Sharma et al., 2009). In Indian pharma market, ‘non-branded generics’ are also being
marketed at very low price relative to their ‘branded generic’ counterparts. Pharma
companies are generally supplying these non-branded generics mainly to the government-
run hospitals and also to the markets where high degree of price-consciousness is prevalent.
A vast literature has analyzed the dynamics of original brand market shares and prices
responding to generic entry after patent expiration. With few exceptions, studies have
mainly focused on the US market.
Many of the authors have emphasized on the price factor which is a very important one to
intensify the competition in the off-patent drug markets. Whether generic entry leads to a
reduction in the market share of the originator product depends on factors that may
encourage or discourage generic uptake besides the perceived price competitiveness of
generics (Kanavos et al., 2008).
Original brand market share has been found to be directly proportional to the age of the
original brand, while it is negatively correlated to the number of entrants in the market.
This latter variable was found to be proportional to the total size of the market and
negatively related to the age of the original brand (Hurwitz and Caves, 1988).
Even if their market share decreases after patent expiration, prices of original brand
increase after the entry of generics. These enter the market at a significant price discount
that then declines over time (Grabowski and Vernon, 1992)
In a more recent study (1996), Grabowski and Vernon showed that in the USA generic
competition was found to be intensifying, with major brand names typically losing half of
their market share within a year of patent expiry (Grabowski and Vernon, 1996). In his
PhD dissertation, Ching (2000) developed an empirical dynamic oligopoly model to study
competition between brand-name original and generic drugs. The model highlights the role
of consumer learning and consumer heterogeneity in explaining respectively the initial
slow diffusion of generic drugs into the markets and the pricing increase of original brand
after generic entry.
None of the above-mentioned literatures has considered the effect of country of origin on
the perception of brand equity of generic products (branded or non-branded). One of the
factors that is widely believed to have a high influence on customer perception toward a
specific product, or brand, is the country of origin (O’Cass and Lim, 2002).There are
literatures that have shown the effects to explore the impact of country of origin
information on brand perception and brand image structure or brand equity (Koubaa, 2008;
Yasin et al., 2007; Jin et al., 2006;). It has been observed that country of origin influenced
consumers’ overall perception of brands and there were differences in influences across
highly reputed brands and comparatively less reputed brands. Brand origin is found to be of
significant impact on brand image perception. The effect of country of origin image on
brand image is very strong (Koubaa, 2008). Again, country of origin image has a
significant impact on brand equity dimensions and brand equity (Yasin et al., 2007). But
both these literatures have derived their decisions particularly in consumer durables.
According to Jin et al., (2006), brand origin is an “identifiable feature” for India,
customers. In other words, consumer associates brands with countries where the brands are
originally developed rather than with the countries in which the products are currently
produced (Jin et al., 2006). This is a very important statement in favour of the country of
origin effect, but the aforesaid literatures have been developed on FMCG like Cadbury or
Two things are taking place. First, these literatures have definitely emphasized on the
importance of country-of-origin effect, but, they have either done their studies on consumer
durables or FMCG products and not on any pharmaceutical products.
In general, evaluations of a country in terms of favorable or unfavorable parameters
associated with a product leads to a corresponding favorable or unfavorable evaluations of
the product (Gürhan-Canli and Maheswaran 2000). In general, primarily motivational or
cognitive factors have been analysed in the context of country of origin effects
(Maheswaran, 2006). Previous research has shown that consumers have an active dislike or
hostility towards certain countries due to certain historical circumstances, and then such
enmity influences their subsequent purchase behavior (Klein et al., 1998). But the type of
emotion induced by historical evidences associated with these emotions will determine
whether dislike or hostility effects will obtain (Maheswaran, 2006).
But these literatures have only highlighted the country of origin effect on different factors
related to brand equity study and brand perception phenomena. In an era of increasing
globalization, brand origin may be an important alternative for the more general concept of
country of origin provided that the country of origin for a single product most likely
becomes multi-nation orientated (Jin et al., 2006).
Country of origin is often associated with product quality (Lusk et al., 2006). Consumers
might use country of origin because quality cannot be determined until a product is actually
consumed; that is, country of origin is used in place of missing product information.
Consumers may use a country’s reputation to predict the quality of products (Lusk et al.,
2006). The multidimensional effect of country of origin image influences product beliefs
and attitudes for brands with different levels of equity (Hui and Zhou, 2003). However,
there are number of examples when the product is manufactured in a country with
comparatively lower images than the country of brand origin, country of manufacturer
information produces significantly negative effect on evaluation of products. This effect is
more prominent for low equity than high equity brands (Koubaa, 2008). Again, Thakor and
Lavack (2003) explored that the role of brand origin was potentially very important in
determining brand image.
To the best knowledge of the authors, no scholarly article was developed so far exploring
the effect of brand’s country of origin image on brand equity in Indian branded generic
drug segment. Therefore, this study is expected to cover a new area in establishing
relationship between country of origin image and brand equity of branded generic drugs in
Indian pharma business environment.
In our opinion, the country of origin effect will be of enormous importance especially in
case of dynamics of entry of generic drugs in the era of globalization with the expiry of
patent of many blockbuster drugs within 2010. If the Indian pharmaceutical companies
want to market generic drugs in international market, it is necessary to focus on the price
factor as well as the quality which will be affected by the concept of Indian origin products.
Our emphasis will be to make out a dynamic relationship incorporating the factors called
the country of origin image and brand equity in Indian branded generics segment.
What is Brand Equity?
Brand equity facilitates the acceptance of new products and the allocation of preferred shelf
space, and enhances perceived value, perceived quality, and premium pricing options
(Schiffman & Kanuk, 1997). From a consumer’s perspective, brand equity is the “added
value bestowed on the product” by the brand name (Park & Srinivasan, 1994). It appears
when consumers willingly pay for the same level of quality due to the attractiveness of the
name attached to the product (Bello and Holbrook, 1995). Aaker (1991) explained brand
equity measurement into the following five dimensions: brand awareness, brand
associations, perceived quality, brand loyalty and market behavior.
Regardless of its definitions, brand equity actually represents a product’s position in the
minds of consumers in the marketplace (Sanyal and Banerjee, 2008). It is precisely the
well-established representation and meaningfulness of the brand in the minds of consumers
that provides equity for the brand name (Yasin et al., 2007). The study of Elliot and Percy
(2007) connotes that brand equity generates from consumer awareness for the brand that
sets associations in memory that are linked to the said brand. In course of time, this positive
brand attitude takes on strong emotional associations that extend well beyond simply
‘liking’ the brand (Elliot and Percy, 2007). Brand awareness for a purchase may take two
forms: recognition or recall (Rossiter and Percy, 1997). Majumdar (1998) constructed a
very interesting table pointing out the measurement of brand knowledge constructs. We
have cited a part of the said table here relevant to our studies (Table 1). This table shows
the brand awareness components (brand recall and brand recognition) and their
corresponding measure and purpose of measure.
Table 1: Around Here
But the brands must be salient to facilitate purchase for either of this form of brand
awareness. It means it is associated in memory with the consumer’s set of preferred brands
to meet a particular need, and is likely to come to mind when the need for such a product
occurs (Ehrenberg et al., 1997).
The equity of a brand is partly measured in terms of the awareness it evokes. The role of
brand awareness in brand equity depends on the level of awareness that is achieved (Yasin
et al., 2007). The brand will be dominant when the brand awareness will be higher, thereby
increasing the probability of the brand to be purchased. As a result, raising the level of
awareness increases the likelihood that the brand will be considered by the customers to
purchase (Nedungadi, 1990). It will, in turn, influence buyer’s decision making.
Previous studies have shown that consumers who recognize a brand name are more likely
to purchase that particular brand because familiar products are preferred to those that are
normally not familiar (MacDonald and Sharp, 2000).
Brand Strength Defined
According to Aaker, brand strength represents differentiation multiplied by relevance. The
logic is that a brand must have both characteristics in order to be strong (Aaker, 1996).
The Young and Rubicam model suggested the hypothesis that brands are built sequentially
along the four dimensions viz. differentiation, relevance, esteem and knowledge (Aaker,
1996) as shown in the Figure 1.
Figure 1: Around Here
As per the Interbrand method, brand strength depends upon the variables like leadership,
stability, internationality, support, protection, market and trend (Moorthi, 2003). In this
study we will establish brand strength with the help of the variables suggested by
Objectives of the Study
The main objectives of this study are
1. To explore how the country of origin factor affects the brand strength of branded
2. to study the effect of country of origin factor on the brand awareness of branded
generic drugs and;
3. to establish that the country of origin image of branded generic drugs has a positive
impact on the formation of brand equity.
To achieve the objectives of survey, a structured questionnaire was designed to collect
primary data from respondents. The questionnaire consists of a 5-point Likert Scale ranging
from ‘never’ to ‘always’ option. Instead of putting the option ‘do not know’, we have used
This questionnaire consisted of 21 statements out of which 8 were used by previous
researchers (Yasin et al., 2007, Kumar and Barker, 1987). 13 statements were developed by
the authors where some of the variables were selected from the brand strength
measurement developed by Interbrand.
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To choose the sample for this study, random sampling technique was used. Since the
respondents were medical doctors and all of them either attached to a hospital (state-run or
corporate) or clinics (personal or general), the respective names were randomly chosen
from the list of doctors provided by Indian Medical Association, Kolkata Branch and
Behala Branch (southwest fringe of Kolkata city), under the state of West Bengal, India.
The survey was done in Kolkata megapolis area. Three state-run medical colleges, one
state-run institute of post-graduate medical education and research, six small to medium
state-run and three corporate hospitals were included apart from physicians exclusively
with clinic connections.
The respondents so chosen from the cross-section of physicians were not well-exposed to
terms like brand equity, brand awareness, brand strength etc. although they were well
aware of terms like country of origin, quality, research and development etc. As a measure
of abundant precaution, we explained the necessary terms provided in the questionnaire to
make it easy for them to respond correctly.
The demographic part of the questionnaire asked the respondents to record their gender,
education and income. Since all the respondents (sample size n = 200) are practicing
physicians, their levels of education are recorded (i.e. Medical graduate, Post graduate
diploma, Post graduate degree, Member/Fellow of Royal Colleges and Doctoral). Some
respondents marked their education in more than one field (e.g. medical graduate, post