Is Overseas Political Challenge Always Harmful to Chinese Multinationals? - Implications on Chinese Purchase Willingness

Abstract: Multinationals are subject to questioning about organizational legitimacy issues by foreign governments when expanding overseas. This issue has become more prevalent over the past two decades with the rapid development of emerging countries and the exponential expansion in outward foreign direct investments from the firms of these emerging countries. Many emerging-country multinationals, particularly Chinese ones, confront political challenges in overseas. Accordingly, the global marketing economy is increasingly politicized, however previous research on consumer behavior has not paid attention to this political element. Against this background, this thesis draws on signaling theory to investigate the effect of overseas political challenges suffered by Chinese multinationals on domestic consumer purchase willingness, through shaping brand awareness and brand image in the home country. This study adopts a quantitative approach and administers an online questionnaire-based survey to assess Chinese people's willingness to purchase products made by Huawei (a Chinese national brand). Through PLS-SEM analysis of the survey data consisting of 314 valid questionnaires, our results reveal that the overseas political challenges faced by Chinese multinationals does not directly influence domestic consumer purchase willingness. Instead, awareness of this international political pressure can exert a directly positive effect on brand awareness and brand image in the home country, which in turn triggers domestic consumer purchase willingness. Our study suggests that overseas political challenge delivers a positive signaling effect and is conducive to domestic consumer purchase willingness. By building a theoretical link between overseas political challenge and consumer purchase willingness, uncovering the bright side of the challenging overseas environment faced by many multinationals, this study advances research on consumer behavior and gains deeper insight into the effect of these political challenges as well as extending the application of signaling theory.