Business Ethics and Counterfeit Purchase Intention: A Comparative Study on Thais and Singaporeans

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1 Business Ethics and Counterfeit Purchase Intention: A Comparative Study on Thais and Singaporeans Dr. Atthaphol Jirotmontree DBA (Marketing), Marketing and Consumer Behavior, Prince of Songkla University, holds DBA degree in marketing from the University of South Australia. He is currently lecturing at the Faculty of Commerce and Management, Prince of Songkla University (Trang campus), as well as the Faculty of Management Sciences, Prince of Songkla University (Hatyai campus). His research interests are in marketing, consumer behavior and consumer psychology, atthapholj@gmail.com Abstract The present study investigates counterfeits purchase intention among Thai and Singaporean consumers, using TPB behavioral-intention model to examine money ethic and business ethic factors on purchase intention. SEM path analysis found attitude and subjective norm to be significant and positive in Thai sample, and specified the indirect impact of subjective norm through attitude. In Singaporean sample, the direct paths of attitude, subjective norm and business ethic on intention are positive and significant. The overall results show that attitude and subjective norm are important constructs in explaining consumer s intention to purchase counterfeits. While business ethic consideration is observed to be present among Singaporean respondents only, subjective norm exerts indirect social pressure on attitude to influence behavioral intention in both study samples. Keywords: Counterfeit Purchase Intention; TBP; Money Ethic; Business Ethic 119

2 Background An attitude toward business ethics is referred to as the subjective assessment by a given individual with respect to sets of premises that make up various business philosophies (Preble & Reichel, 1988, p. 942). It forms the core component of empirical study on business ethics which highlights individual s attachment to philosophies underlying the concept of business ethics. There has been an increase public concern for ethical matters in the area of businesses given higher costs of business operation in corrupted environments (Choe & Lau, 2010, p. 225). Importantly, today, business ethics are gaining importance as the survival of organizations depends on the integration of business codes with the societal ethics (Mohsin, Muhammad & Muhammad, 2011, p. 59). As ethics conveys the conception of what is right conduct and behavior, investigating the motives behind unethical behaviors such as counterfeit purchasing would shed light on how individual attach to moral perceptions. Counterfeiting is noted to be an economic problem of international importance which calls for a variety of countermeasures (Eisend & Schuchert-Güler, 2006, p. 1). It is imperative to understand the specific reasons why people purchase counterfeit products in order to devise actions against such unethical phenomenon. Counterfeit goods are those which illegally imitate, copy or duplicate a good or use a registered trademark without authorization. Counterfeiting, therefore, infringes upon the legal right to copy of the right s owner (Rutter & Bryce, 2008, p. 1146). International Intellectual Property Alliance (IIPA), a private international sector coalition of trade associations representing U.S. copyright-based industries, acknowledges the need shows for concrete solutions to reduce the global piracy level worldwide (IIPA, 2012, p. 3). Literature Review 1. Counterfeit Consumption The purchase and consumption of counterfeit goods is widespread across a broad range of age, gender and socio-economic status (Rutter & Bryce, 2008, p. 1158). The study maintained that the purchase of counterfeit goods is not necessarily subcultural, but instead is within everyday leisure. These consumption routines are becoming common part of other social practices. Many studies have investigated consumer's intention to purchase counterfeit products in association with variables such as attitudes, buying behavior, and product use 120

3 (Eisend & Schuchert-Güler, 2006, p. 2). For instance, Rutter and Bryce (2008, p. 1156) identified cost as the prime motivation for the purchase of counterfeit goods across product categories. Consumers believe that legitimate goods are often overpriced and want to experience the cheaper counterfeits prior paying higher prices. Purchasing of the counterfeits is also viewed as a means to increase the number of items consumers could afford (Rutter & Bryce, 2008, p. 1157). Eisend and Schuchert-Güler (2006, p. 1) mentions studies which found high income consumers in well-developed countries also buy counterfeits despite their capability to afford the genuine brands. Perceived affordability (i.e. perceived financial control) can become a motivator of counterfeit purchase regardless of whether the item is expensive or inexpensive (Chen, Fu & Tu, 2011, p. 279). Therefore, financial motive is not the only possible explanation accountable for the conscious purchase of counterfeits goods. In addition, Eisend and Schuchert-Güler (2006, p. 14) suggests that people buy counterfeit products because they want to demonstrate their capability to afford branded goods, their belonging to a particular social group, or the use as symbolic self-extension. 2. Ethics Ethics refers to inquiry into the nature and grounds of morality where the term morality is taken to mean moral judgments, standards, and rules of conduct (Ha & Lennon, 2006, p. 299). Such individual differences in personal moral philosophy are significant determinants of one's stance toward controversial ethical issues. Studies have shown that moral ideology - beliefs about the basis on which moral decisions should be made - is an important determinant of attitudes toward a variety of social and moral issues. Importantly, personal ethical ideology has been identified to have considerable impact upon when and how an individual decides to engage in socially disapproved behavior (Henle, Giacalone & Jukiewicz, 2005, p. 219).Essentially, ethical ideology refers to a system of ethics used to make moral judgments, which offers guidelines for judging and resolving behavior that may be ethically questionable. Prior research has found ethical and/or legal effects on consumer behavior, such that beliefs about counterfeits or lawfulness have affected purchase intent for fashion-related products, but not for other types of products (Ha & Lennon, 2006, p. 301). The importance of ethics in commerce is immense. While groups of individuals are attached to the philosophies underlying the concept of business ethics (Choe & Lau, 2010, p. 226), studies have shown that culture and the industry of occupation shape one s ethical perceptions (Gbadamosi & Joubert, 2005, p. 755). Individuals ethical values and preferences for business philosophies are influenced by both the institutional and personal characteristics, 121

4 and females were found to exhibit more ethical behavior than men (Bageac, Furrer & Reynaud, 2011, p. 396). This may vary so greatly even within one culture, of which impacts the perceptions of what is ethical or unethical (Sims & Gegez, 2004, p. 253). International businesses are hence presented with challenges in dealing with consumers, in different countries, who represent different cultural values. 3. TRA and TPB Models The use of theory of reasoned action (TRA) and theory of planned behavior (TPB) has been shown as valid theoretical frameworks in many behavioral research settings (Chang, 1998, p. 1825). TRA regards a consumer s behavior as determined by his/ her behavioral intention, where such intention is a function of attitude toward the behavior and subjective norm As TRA predicts behavioral intention toward that behavior which assumes rational, volitational and systematic behavior, perceived behavioral control was added into the model as another determinant of behavioral intention (Chang, 1998, p. 1826). It is conceptualized as the consumer s subjective belief on the difficulty in performing the behavior. TPB is, thus, an extension of TRA made necessary by the original model s limitations in dealing with behaviors over which people have incomplete volitional control (Ajzen, 1991, p. 183). In the case of behaviors that are difficult to perform (i.e. purchasing illegal counterfeits), TPB should stand to be more applicable than TRA. After all, the purchase of counterfeit items seems to be a difficult decision considering price advantages over the original products (Penz & Stöttinger, 2005, p. 568). TPB has been adopted in many studies to explain unethical decision making. Chang (1998, p. 1831) supports TPB to be the more appropriate model to explain unethical behavior of illegal software downloading in Hong Kong. This is also agreed upon in Jirotmontree s (2011, p ) study which contrasted the two intention-behavioral models and concluded TPB to be better in explaining online shopping for counterfeit products in Thailand. However, studies find mixed conclusions on definite determinants of intention. While Chang (1998, p. 1831) and Penz and Stöttinger (2005, p. 572) maintain perceived behavioral control to be the main predictor of unethical behavioral intention, Jirotmontree (2011, p. 12) observes attitudes to show the strongest predictive power in the model. 122

5 Objectives/ Research Questions The present study adopts TPB behavioral intention framework (Azjen, 1991, p. 182) to relate how consumers make decisions on counterfeit purchases intention. Attitude, subjective norm and behavioral control are postulated to have a direct relationship with intention (Azjen, 1991, p. 188). The more favorable the attitude is with respect to a behavior (i.e. buying the counterfeits), the stronger the likelihood is for that individual to perform the behavior under consideration. H1: Attitude is positively related to the intention to purchase counterfeit products. Subjective norm is the perceived social pressure felt by individuals to comply with others expectations about engaging in the behavior. If social expectations are encouraging about one s buying counterfeits, the individual should, then, be more likely to do so. H2: Subjective norm is positively related to the intention to purchase counterfeit products. Perceived behavioral control is the extent to which a person feels capable of engaging in the behavior. It implies the degree to which a person has control over the behavior and the confidence about being able to perform the behavior. The more the control an individual feels about making purchase of counterfeit products, the more likely he or she will want to do so. H3: Perceived behavioral control is positively related to the intention to purchase counterfeit products. Lastly, the researcher introduced business ethic component into the model. As hypothesized, individuals who hold higher level of moral concept will be less likely to do unethical behaviors. Business ethical awareness will discourage individuals to buy counterfeit products. H4: Business ethics is positively related to the intention to purchase counterfeit products. 123

6 Figure 1: Purchase Intention Model Research Methodology The study employed self-administered, web-based questionnaire survey to collect data from respondents. Using a convenience sampling technique, the researcher obtained completed questionnaires from 317 Thai and 281 Singaporean respondents. The study adapted Chang s (1998, p. 1828) survey on purchase intention of unethical goods. Fourteen measured variables were used to reflect the components in the models of TPB. Moral perception towards business ethics was measured using 30-item (five factors) Neumann and Reichel s (1987) ATBEQ scale (Bageac, Furrer & Reynaud, 2011, p. 395). Findings 1. Descriptive Results The researcher acquired samples of 317 Thai and 281 Singaporean respondents, represented by approximately similar proportions of demographics characteristics. The two respondent groups are predominantly working adults (age between years old), single, working in the government and private sectors and with working experience over 5 years. Nonetheless, in comparison to Singaporean counterpart, Thai respondents are largely males, bachelor 124

7 degree graduates and have been shopping for counterfeit products for up to 20 years. Meanwhile, Singaporean respondents comprise a greater proportion of females, master level graduates and have mostly been shopping for counterfeits for a shorter period of 5-10 years. Table 1: Descriptive Statistics Demographics/ Sample (1) (2) Demographics/ Sample (1) (2) Gender Occupation Male 53.0% 48.0% Student 4.7% 2.1% Female 47.0% 52.0% Housewife 13.9% 14.9% Total 100% 100% Unemployed 5.0% - Age (years) Self-employed 15.1% 16.0% % 14.2% Government 25.2% 23.1% % 35.9% Private Company 34.7% 39.9% % 37.0% Freelance 1.4% 4.0% Over % 12.9% Total 100% 100% Total 100% 100% Working Experience (years) Marital Status Fewer than 1 2.2% 2.1% Single 56.2% 66.9% 1 to 5 5.0% 7.1% Married 43.8% 31.3% 5 to % 26.7% Divorced 0.0% 1.8% 10 to % 23.5% Total 100% 100% 15 to % 19.6% Education Level Over % 21.0% Vocational or lower 10.7% 3.6% Total 100% 100% Bachelor 46.4% 37.4% Counterfeit Shopping Experience (years) Master 34.7% 48.0% Fewer than 1-3.6% Higher than Master 8.2% 11.0% 1 to % 21.4% Total 100% 100% 5 to % 32.7% Notes: (1) = Thai sample 10 to % 17.8% (2) = Singaporean sample 15 to % 14.9% Over % 9.6% Total 100% 100% 2. Scale Reliability and Factor Analysis The measurement instrument was tested to show satisfactory reliability (Cronbach s alpha > 0.7) and factor loadings above 0.7. The items in both scales were loaded into distinct 125

8 components as suggested by the literature. Further, all variance extracted estimates are larger than the corresponding squared interconstruct correlation estimates (SIC). The proposed CFA model demonstrates discriminant validity (AVE > 0.7). Table 2: Confirmatory Factor Loadings, Reliability and Validity Factor Loadings Item Reliabilities Factor Loadings Item Reliabilities Attitudes (ATT): Alpha=0.956, AVE=0.794 Intention (INT): Alpha = 0.969, AVE =0.912 ATT_ INT_ ATT_ INT_ ATT_ Ethics (BE): Alpha = 0.728, AVE =0.596 ATT_ Machia ATT_ Objectivism ATT_ Relativism Subjective Norm (SN): Alpha=0.933, AVE=0.825 Darwinism SN_ Legalism SN_ Discriminant Validity (IC/ SIC) SN_ ATT<-->PBC / Control (PBC): Alpha=0.965, AVE=0.866 ATT<-->SN 0.781/ PBC_ PBC<-->SN / PBC_ PBC<-->BE / PBC_ SN<-->BE 0.245/ ATT<-->BE 0.227/ Structural Model Assessment SEM path analysis in both samples affirms reasonable goodness-of-fit indices to support that the model fits the data well. In Thai sample, attitude ( =0.408, p<0.01) and subjective norm ( =0.708, p<0.01) are statistically significant and positive. In contrast, perceived behavioural control and business ethic are not shown to be significant direct predictors of purchase intention. The result specifies the indirect impact of subjective norm on behavioral intention through attitude to be significant ( =1.435, p<0.01). In Singaporean sample, the direct paths of attitude ( =0.398, p<0.01), subjective norm ( =0.455, p<0.01) and business ethic ( = , p<0.01) on intention are positive and significant. Therefore, H1, H2 and partial H4 are supported. Additionally, while the indirect effects of subjective norm through attitude are found to be present in both Thai ( =0.635, p<0.01) and Singaporean samples ( =0.511, 126

9 p<0.01), that of perceived behavioral control through attitude ( =0.594, p<0.01) on behavioral intention is observed to be significant in the Singaporean sample only. Table 3: Structural Model Assessment Hypothesized Estimate Other Estimate Relationships (1) (2) Relationships (1) (2) H1: ATT INT 0.408** 0.398** ATT<-->PBC ** H2: SN INT 0.704** 0.455** ATT<-->SN 0.635** 0.511** H3: PBC INT PBC<-->SN H4: BE INT PBC<-->BE 0.225** Model Fit Indices SN<-->BE RMSEA ATT<-->BE GFI AGFI IFI Chi-square CFI Degrees of freedom Notes: (1) = Thai sample, (2) = Singaporean sample Discussions 1. Direct Paths The overall results of structural equation modeling show that attitude and subjective norm are important constructs in explaining consumer s intention to purchase counterfeits. Notwithstanding, the study indicates that subjective norm is the most important predictor of purchase intention in both groups of respondents. This is in contrast with the results of Chang (1998, p. 1831) and Penz and Stöttinger (2005, p. 572) which specified perceived behavioral control to be the main determinant for unethical behavioral intention. Further, attitude was previously shown to be the strongest predictive power in the model investigating online counterfeit purchase among Thai respondents (Jirotmontree, 2011, p. 12) In many cases, people buy counterfeits for symbolic self-extension (Eisend & Schuchert- Güler, 2006, p. 14) to associate with expensive authentic branded goods. Those individuals often need to form new positive attitude to rise above the counterfeit s unfavorable connotations. The more people comply with such cognitive dissonance which makes them feel less burden and guilt, the easier it is for them to purchase counterfeit products. Further, the impact of subjective norm represents direct social pressure which encourages such 127

10 behavior to be performed. The results suggest that the decision to purchase and use counterfeit goods in both samples is prominently affected by social pressure and perceptions of others. It has been noted that consumers may buy counterfeits to show that they belong in a particular social group (Eisend & Schuchert-Güler, 2006, p. 14). In addition, rampant counterfeit consumption in Thailand and Singapore represents social acceptance of such behavior. Increasingly, people view it a common practice to purchase and use illegal counterfeits with little unfavorable nuance attached to it. However, business ethic consideration is observed to be present among Singaporean respondents only. The notion of morality impacts upon individual s decision to engage in socially disapproved behavior (Henle, Giacalone & Jukiewicz, 2005, p. 219), acting as a negative force upon unethical behavioral intention. Looking at the demographic profile, Singaporean respondents have shown to experience less counterfeiting involvement and belong to a higher education group. They, thus, have better knowledge and awareness about ethical responsibilities toward society. In addition, IIPA (2012, p. 314) reported less severe counterfeiting situation in the country as compared to that in Thailand. Unlike Thai respondents, Singaporeans reflect upon ethical deliberations when making decisions to purchase illegal counterfeits. 2. Indirect Paths Subjective norm not only appear to directly influence behavioral intention in both study samples, it exerts indirect social pressure on attitude as well. This can be interpreted as ingroup conformity which induces one s attitude to view counterfeiting as favorable or otherwise. After all, the desire to gain acceptance to certain particular social group has been shown to be one of the motives why many consumers buy counterfeits (Eisend & Schuchert- Güler, 2006, p. 14). Notably, the study has shown that the impressions of significant others toward one s behavior matter in shaping the attitude and hence the decisions of the individuals to shop for counterfeit products. Subsequently, the study observes the indirect impact of perceived behavioral control through attitude on behavioral intention in Singaporean sample only. This implies the significance of perception on the control over the behavior and the confidence in purchasing counterfeit goods in the country. Singapore has comparatively more stringent measures regarding product counterfeiting. The degree of ease to access illegal products can somewhat put weights on one s attitude of consumption. In 128

11 contrast, Thai consumers are exposed to less controlled counterfeit laws and open to a wider access of unauthorized sales of counterfeits (IIPA, 2012, p ). Recommendations The study has sufficiently confirmed the appropriateness of TPB model in explaining intention to perform unethical behavior in both Thai and Singaporean samples. It is noted that intention to perform unethical acts is primarily influenced by individual s compliance (attitude) and opinions of others about the action (subjective norm). Despite similar Asian culture and proximity, business ethical consideration, however, is observed among Singaporean respondents in making decisions to purchase illegal counterfeits. This, hence, opens venues for future studies to investigate specific cultural dimensions (Hofstede, 1991, p ) to explain the observed individual differences. Additionally, the results imply the role of ethical judgment to be represented through the prediction of behavioral intention. It is of substantial importance in future understanding of the role of specific determinants in ethical consumer decision making. With the growing impact of ethical issues on consumers, business and politics, the applications in the area of counterfeiting will be far-reaching. References Ajzen, Icek and Martin, Fishbein. (1980). Understanding Attitudes and Predicting Social Behavior. Prentice Hall, Englewood Cliffs, New Jersey. Ajzen, Icek. (1991). The Theory of Planned Behavior. Organizational Behavior and Human Decision Processes, 50, Bageac, Daniel, Furrer, Olivier & Reynaud, Emmanuelle. (2011). Management Students' Attitudes Toward Business Ethics: A Comparison Between France and Romania. Journal of Business Ethics, 98(3), Chang, Man Kit. (1998). Predicting Unethical Behavior: A Comparison of the Ttheory of Reasoned Action and the Theory of Planned Behavior. Journal of Business Ethics, 17, Cheng, Shih-I, Fu, Hwai-Hui & Tu, Le Thi Cam. (2011). Examining Customer Purchase Intentions for Counterfeit Products Based on a Modified Theory of Planned Behavior. International Journal of Humanities and Social Science, 1(10), August, Choe, K. L. & Lau, T.C. (2010). Attitude towards business ethics: Examining the influence of religiosity, gender and education levels. International Journal of Marketing Studies, 2(1),

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