COUNTRY-LEVEL PERFORMANCE OF NEW EXPERIENCE PRODUCTS WITHIN A GLOBAL ROLLOUT: THE MODERATING EFFECTS OF ECONOMIC WEALTH AND NATIONAL CULTURE

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1 COUNTRY-LEVEL PERFORMANCE OF NEW EXPERIENCE PRODUCTS WITHIN A GLOBAL ROLLOUT: THE MODERATING EFFECTS OF ECONOMIC WEALTH AND NATIONAL CULTURE Abstract International marketing manager decisions pertaining to a new experience product s global rollout are critical to a product s country-level performance. Extending work on the lead-lag and success-breeds-success effects, we examine how the country specific factors of economic wealth and national culture influence the effects of a new experience product s global rollout decisions (i.e., the lag time from initial introduction to target country introduction and the number of countries the product was introduced prior to its introduction in the target country) on the product s country-level performance. By employing hierarchical linear modeling, the results from an examination of 259 unique movies gathered from 16 countries, corresponding to 2,523 total entries between , demonstrate significant interaction effects between a country s economic wealth and national culture with time lag and a target country s ordering on the new experience product s country-level performance. Theoretical and practical implications are discussed. Keywords: Global rollout, experience products, national culture, hierarchical linear modeling, motion picture 1

2 COUNTRY-LEVEL PERFORMANCE OF NEW EXPERIENCE PRODUCTS WITHIN A GLOBAL ROLLOUT: THE MODERATING EFFECTS OF ECONOMIC WEALTH AND NATIONAL CULTURE Global competition, driven in part by increased cross-country communication, is creating a competitive environment wherein managers are increasingly challenged to consider cross-market effects in their global product rollout decisions (Calantone and Griffith 2007; Di Benedetto 1999; Rubera, Griffith and Yalcinkaya 2012; Tellefsen and Takada 1999). Of particular note, a firm must consider how the product s time lag to the target country market (i.e., the number of days between the date in which the product was first introduced in the initial country and the date in which the product is introduced in the target country) as well as the position of the target country market within the rollout (i.e., the number of countries the product was introduced prior to its introduction in the target country) could influence the product s country-level performance. This is especially true for experience products, such as movies, music, concerts, sporting events or books, as these products are characterized by a short product life cycle and a rapid decline in revenues after introduction (Elberse and Eliashberg 2003; Krider and Weinberg 1998). Within the international marketing literature, scholars have discussed the global rollout decision as a strategic tradeoff between a simultaneous introduction (i.e., releasing the product into all markets at the same time) and a sequential introduction (i.e., releasing the product into individual markets over time) (e.g., Ganesh 1998; Harvey and Griffith 2007; Kalish, Mahajan and Muller 1995; Stremersch and Tellis 2004). On the one hand, scholars contend that while a simultaneous global product rollout allows a firm to achieve first mover advantages, it also increases coordination complexity and overall costs (e.g., Chryssochoidis and Wong 1998). Alternatively, although a sequential global product rollout allows the firm to spread product introduction costs over a longer period of time and provides time for product modifications 2

3 between market introductions, it can decrease a new product s sales, due to the introduction of competitive offerings, gray market activity or piracy (e.g., Kalish, Mahajan and Muller 1995; Stremersch and Tellis 2004; Tellis, Stremersch and Yin 2003). While scholars continue to debate the costs and benefits of each approach, in practice most global new product introductions occur in a sequential manner of varying lengths. Despite the importance of global new product rollout, and the widespread use of a sequential approach, limited empirical research has addressed this topic (Guiltinan 1999; Lee and Wong 2010). An examination of the international marketing literature reveals several notable shortcomings. First, the vast majority of prior works examining global new product rollouts have been conceptual, arguing that when firms engage in the global rollout of new products managers need to be cautious of coordination challenges (e.g., Guiltinan 1999; Vasilchenko and Morrish 2011). Second, the empirical work related to this topic area focus on single market product diffusion effects (e.g., Elberse and Eliashberg 2003; Rubera, Griffith and Yalcinkaya 2012; Stremersch and Tellis 2004; Tellis, Stremersch and Yin 2003). For instance, Elberse and Eliashberg (2003) find that a shorter time lag between domestic and foreign market introduction positively influences product performance in the lagged country. Third, with limited exception (e.g., Elberse and Eliashberg 2003), much of the diffusion literature has examined this issue within the context of durable goods, thereby leaving a lack of clarity in respect to new experience products. Fourth, research examining timing of global launch looks primarily at the delay between anticipated and actual launch timing. For example, Chryssochoidis and Wong (1998) examine international rollout timeliness by examining the delay between scheduled and actual rollout of new product across markets. As such, the extant literature presents a number of 3

4 limitations in understanding how global product rollout decisions influence country-level performance. Building on the finding of previous research in the area of global rollout and diffusion, one would expect to find a negative effect of time lag and a positive effect of ordering on product performance (Rubera, Griffith and Yalcinkaya 2012). However, of greater managerial and research interest to those engaged in the practice and study of international marketing, and yet to be empirically addressed within the context of new experience products, is when might the time lag and position effects on country-level product performance be stronger and weaker? Providing insights into this research question drives this study, allowing this work to contribute to the international marketing literature in the following two ways. First, extending the literature on the lead-lag (e.g., Ganesh and Kumar 1996; Kalish, Mahajan, and Muller 1995; Kumar and Krishnan 2002) and success-breeds-success effects (e.g., Elberse and Eliashberg 2003; Hennig- Thurau, Houston, and Walsh 2006), this work outlines how economic wealth influences the effect of the global rollout decisions of time lag from initial market and prior number of countries on a new experience product s country-level performance. Economic wealth has been found to be a key influencer in new product acceptance (Chandrasekaran and Tellis 2008; Helsen, Jedidi and DeSarbo 1993; Kumar 2014). By detailing how the economic wealth of a country market influences the effectiveness of specific global rollout decisions (i.e., lag time and position), this work extends the global rollout literature, as well as the international marketing literature related to factors that influence product performance (e.g., Griffith and Rubera 2014; Tellis, Stremersch and Yin 2003). Second, this study advances the international marketing literature by demonstrating how national culture moderates the direct effects of time lag and position within a global product 4

5 rollout. Research consistently demonstrates the influence of national culture on new product introduction and market entry (e.g., Chandrasekaran and Tellis 2008; Craig, Green and Douglas 2005; Van Everdingen, Fok and Stremersch 2009). Extending this literature, we specify how national culture elements of individualism, power distance, masculinity and uncertainty avoidance effect the influence of global rollout decisions (i.e., lag time and position) on countrylevel performance of a new experience product. In this way, we contribute to a growing literature on national cultural influences, extend theory in the international marketing domain related to global rollout and assist international marketing managers in more accurately estimating the effects on new experience product performance at the country-level. We begin by reviewing the lead-lag and success-breeds-success effects as a theoretical foundation for understanding the influence of time lag and ordering of global rollout on a new experience product s country-level performance. We then present a set of moderation hypotheses detailing the effect of a country s economic wealth and national culture on the influence of time lag and position within the global rollout on a new product s country-level performance. A method is presented and the hypotheses are tested in a dataset of 259 unique movies gathered from 16 countries, corresponding to 2,523 total entries from Next, we discuss the results, their implications for international marketing theory and practice, the limitations of the study and future directions for research. BACKGROUND LITERATURE AND HYPOTHESES Theoretical Foundation: Lead-Lag Effect and Success-Breeds-Success Effect The theoretical foundation for understanding the global rollout of a new experience product is drawn from the innovation diffusion literature. Specifically, the literature delineates the leadlag (e.g., Ganesh and Kumar 1996; Helsen, Jedidi and DeSarbo 1993; Kalish, Mahajan and 5

6 Muller 1995; Krider et al. 2005; Kumar and Krishnan 2002; Takada and Jain 1991) and successbreeds-success effects (e.g., Elberse and Eliashberg 2003; Hennig-Thurau, Houston and Walsh 2006). Taken together, the success-breeds-success and lead-lag effect provide theoretical insight into timing issues (i.e., time lag and position within the global rollout) related to the global rollout of new products. The lead-lag effect theorizes that sales in lead markets influences demand in lag markets. It argues that consumers in lag markets learn the benefits of the product from adopters in lead markets, resulting in a faster diffusion rate in the lag markets. Takada and Jain (1991), when examining consumer durables, found that lagged adoption leads to faster diffusion. This finding, consistent with Kalish, Mahajan and Muller s (1995) explanation that the potential adopters in the lag markets closely watch the introduction and the acceptance of a new product in lead markets, provides the foundational argumentation for the importance of momentum. That is to say, if the product is successful in the lead market, then a faster diffusion of the product in the lag market is likely, as lag markets are aware of the product s prior success, thereby reducing the risk of adoption associated with the product. Consistent with this, Ganesh and Kumar (1996) found that lag markets often have faster diffusion rates than lead markets. Specifically, they found that a learning effect exists across national borders, preparing the lag market by communicating the benefits of the innovation found in the lead market. While no specific theorization is presented based upon unsuccessful products, extension of the lead-lag effect would suggest that less successful products diffuse at a slower rate or fail to diffuse to later markets as the cross-market learning effect limit the product s potential success. The success-breeds-success effect theorizes that momentum generated by the success of the product in an initial market may be lost quickly. The logic underlying this effect is that initial 6

7 momentum gained creates a short-term awareness and a learning effect in cross-border markets. However, the momentum a single product generates can quickly dissipate as consumers in lag markets are exposed to information pertaining to competing products. Researchers empirically examining the success-breeds-success effect have found that a longer time lag between initial and later market introductions results in a weaker relationship between the product s performance in the initial and the later market (e.g., Elberse and Eliashberg 2003; Hennig-Thurau, Houston and Walsh 2006). Empirical support for success-breeds-success effect has been strongest for products with short product life cycles (Elberse and Eliashberg 2003). Global Rollout Decisions for New Experience Products: Time Lag and Country Ordering As noted previously, when considering a global rollout, a firm must decide as to the product s time lag to the target country market as well as the order of the target country market within the rollout. In relation to the time lag of new experience products, and more specifically to movies, prior research indicates that consumers are positively influenced by the product s prior country success (e.g., Elberse and Eliashberg 2003; Hennig-Thurau, Houston and Walsh 2006). Scholars argue that a successful movie in one market fuels positive perceptions of moviegoers in subsequent markets (where a less successful movie in an initial market leads to less positive perceptions in subsequent markets). In addition to improving the perception of customers, a product has the opportunity to set the patterns of consumer preference in other markets and hence influences diffusion (Johnson and Tellis 2008). With this said, previous research also suggests that the momentum generated in the home country dissipates quickly (i.e., success-breeds-success), leaving little room for studios to capitalize on the generated momentum (Elberse and Eliashberg 2003; Hennig-Thurau, Houston and Walsh 2006). Thus, to be able to benefit from the short-lived momentum generated in the 7

8 initial market, firms may prefer to have a shorter release time for a product between an initial country and a subsequent country. Moreover, the availability of substitutable products in the market, mostly the case with movies (one product category within the entertainment industry), largely determines the timing of product launch decision (Calantone et al. 2010; Krider and Weinberg 1998). In markets characterized by intensive competition, firms seek to aggressively engage in rapid foreign market entry to prevent competitive moves, thereby working to maximize market performance (Stremersch and Tellis 2004). For example, Calantone and Griffith (2007) argue that a rapid product rollout potentially restricts other firms from producing imitative products and reduces gray market activities. Moreover, due to the short product life cycle of experience products, market learning is limited and the concentration of marketing actions happens around the early part of release, necessitating faster rollout across markets (Elberse and Eliashberg 2003). Rapid product rollout also enables firms to quickly recover from high development cost (Golder 2000), suggestive of minimization of the time lag to enhance country-level performance. Furthermore, it can be theorized that the position of a country within a global rollouy (i.e., the number of country market introductions of the product prior to the target market) will influence the new experience product s country-level performance. A number of studies have found that preferences in the lag market may be influenced by choices of users in the lead market (Ganesh and Kumar 1996; Helsen, Jedidi and DeSarbo 1993; Kumar and Krishnan 2002; Takada and Jain 1991). It has been argued that the adoption of a new product in a lead country reduces uncertainty about the benefits of the product in the lag country. Potential adopters in a lag country observe the success of the new product in the lead country, resulting in a higher adoption rate in the lag country (or lower adoption in the lead market results in lower adoption in the lag 8

9 market). A growing number of adopters in lead markets signal the credibility of a product (Erdem, Swait, and Valenzuela 2006) and reduces the risk of adoption for potential customers in subsequent markets (Sheth 1968). The need for quality signals is heightened for new experience products since the quality of these products are more difficult to judge prior to purchase when compared to non-experience products. In line with this argumentation, research in the movie industry notes that movie goers are influenced by initial box-office information from prior countries, suggesting that they are attracted to a movie once they recognize that a considerable number of others like it, or are dissuaded from a movie if it does poorly in a prior country (Elberse and Eliashberg 2003; Litman and Ahn 1998; Neelamegham and Chinatagunta 1999). Taken together, the innovation diffusion literature denotes the importance of building momentum in an initial market that is carried over into new markets (lead-lag), and the danger of allowing too long of a time period to expire before the introduction of a product into a lag country (success-breeds-success). This suggests that country-level performance of a new experience product can be enhanced when there is a shorter time lag between the introduction of the product in the initial country market and the target country market and when the number of countries entered prior to the target country is higher. In other words, we expect a) a negative relationship between time lag and country-level performance and b) a positive relationship between number of previous countries and country-level performance While these effects are important to an international marketing manager, of potential greater interest is the consideration of how specific country factors could influence the product s country-level performance within a global rollout. 9

10 Country Factors: Economic Wealth and National Culture The extant literature (e.g., Elberse and Eliashberg 2003) denotes the importance of analyzing specific country factors to understand the introduction of new experience products into a global marketplace. Building on the literature in the areas of global rollout, innovation diffusion and international marketing, we examine the effects of economic wealth and national culture. Table 1 provides the constructs, their definition, and the hypotheses. The Moderating Effect of Economic Wealth Insert Table 1 Here A country market s economic condition has been demonstrated to be highly influential when examining new product introduction and adoption (cf., Chandrasekaran and Tellis 2008; Helsen, Jedidi, and DeSarbo 1993 Golder and Tellis 2004). Economic condition is reflected in the economic wealth of a country and is viewed via the country s gross domestic product (GDP). GDP is the value of all the goods and services produced within a country in a year, or other given period of time. GDP characterizes the standard of living of those within the country. Prior research suggests that the economic wealth of a country, as captured via GDP, has a positive effect on the diffusion of products within a market (Chandrasekaran and Tellis 2008; Golder and Tellis 2004). The underlying logic employed to explain this effect is that greater affordability in countries with higher economic wealth lessens the risk associated with new product adoption. Building on this literature, we contend that in a country with greater economic wealth the negative relationship between the time lag and a new experience product s target country-level performance will be lessened. Consumers of a wealthier country have greater disposable income than consumers of less wealthy country, which make them less hesitant to expend funds on 10

11 newly introduced products (Van Everdingen, Fok, and Stremersch 2009). When consumers have higher income and greater spending power, they can better afford the risk of adopting products where performance is uncertain (Stremersch and Tellis 2004). Furthermore, consumers in wealthier countries are more connected to the global marketplace (e.g., via communication vehicles such as the internet) and as such are more likely to have the opportunity to learn from those in other markets, thereby reducing the risk and uncertainty associated with new experience products. As such, we theorize that as country economic wealth increases, the negative relationship between time lag and country-level performance will get weaker. This suggests that a country with greater economic wealth acts as a buffer to the negative effect of time lag. - In relation to a country s position within the global rollout, we contend that the positive relationship between number of countries a product was introduced prior to the target country and country-level performance is positively moderated by the economic wealth of a country. The logic underlying this expectation is that those with greater economic wealth are more connected to the global marketplace. Through this connection consumers with greater economic wealth learn about the introduction of the product and satisfaction of other consumers with the new experience product more rapidly than those with less economic wealth, resulting higher levels of adoption of the product (Stremersch and Tellis 2004). Learning effects are heightened in relation to new experience products. As such, we contend that greater connectedness associated with higher economic wealth countries enhances the success-breeds-success effect. More formally: H1a: The negative relationship between time lag and country-level performance of a new experience product is positively moderated by economic wealth of a country. H1b: The positive relationship between numbers of counties in which a product has been introduced prior to the target country and country-level performance of a new experience product is positively moderated by economic wealth of a country. 11

12 The Moderating Effects of National Culture National culture refers to a consistency of characteristics that creates a society s profile, inclusive of norms, values and institutions. Research consistently demonstrates the influence of national culture on new product introduction and market entry (Chandrasekaran and Tellis 2008; Dwyer, Mesak, and Hsu 2005; Steenkamp, Ter Hofstede, and Wedel 1999; Van den Bulte and Stremersch 2004; Van Everdingen, Fok, and Stremersch 2009). To better understand the effects of national culture, we employ Hofstede s cultural framework (e.g., Hofstede 2001; Hofstede, Hofstede, and Minkov 2010). We adopt this framework for two reasons. First, Hofstede s valuebased orientation characterizes the attitudes and behaviors influencing purchase decisions of new products. Our arguments underscoring cross-market effects of experience product relate directly to specific Hofstede s cultural dimensions (e.g., individualism, power distance, masculinity, uncertainty avoidance). Second, Hofstede s value-based framework has been demonstrated to provide strong theoretical rationale for national culture differences in relation to diffusion and adoption of new products (e.g., Chandrasekaran and Tellis 2008; Dwyer, Mesak, and Hsu 2005; Yalcinkaya 2008). Consistent with Hofstede (2001), and previous new product research (e.g., Chandrasekaran and Tellis 2008; Dwyer, Mesak, and Hsu 2005; Griffith and Rubera 2014; Rubera, Griffith, and Yalcinkaya 2012; Stremersch and Lemmens 2009; Tellis, Stremersch, and Yin 2003), we conceptualize national culture at the nation-state level. Hofstede (2001) identify six different national cultural dimensions: individualism, power distance, masculinity, uncertainty avoidance, long-term orientation and indulgence. Although Hofstede denotes six cultural dimensions, he states that researchers should focus only the dimensions that are directly related to the phenomenon under study (Hofstede 1983). Consistent with this, parsimony, and prior research in the field of international marketing (e.g., Engelen and 12

13 Brettel 2011; Griffith and Rubera 2014; Rubera, Griffith, and Yalcinkaya 2012; Tellis, Stremersch, and Yin 2003; Özsomer 2012), we investigate the national cultural values most theoretically relevant to cross-market lead-lag and success-breeds-success effects. As such, we investigate the effects of individualism, power distance, masculinity, and uncertainty avoidance (cf., Hofstede, Hofstede, and Minkov 2010). Although long-term orientation and indulgence present an additional cultural components (which can be linked to aspect of innovation adoption, such as technological or design innovations (Griffith and Rubera 2014)), the lack of theoretical basis pertaining to diffusion or cross-market effects, and limited data availability for the countries investigated, we solely focus on Hofstede s four original dimensions in this study. The Moderating Effects of Individualism Individualism refers to the tendency for people to work alone and distance themselves from the larger social group to which they belong (Hofstede 2001). Individualistic cultures are characterized by loose ties among societal members. Members of individualist cultures value independence, self-sufficiency and individual achievement. By contrast, members of collectivist cultures are integrated into strong, cohesive groups that focus on extended family and community. Individuals in collectivist cultures value harmony and social cohesion. We suggest that the negative relationship between time lag and country-level performance will be lessened in markets with higher degrees of individualism. The logic underlying this expectation is that in more individualistic cultures consumers use new products as a means of establishing independence and personal reward (Hofstede 2001; Rubera, Griffith, and Yalcinkaya 2012). Aaker and Meheswaran (1997) indicate that new products allow adopters to differentiate themselves from others and that consumers in individualistic cultures are more likely to adopt new products as they value social differentiation and uniqueness. Hence, 13

14 consumers in individualistic societies are motivated to purchase new products early when greater emphasis is placed on uniqueness and achievement. Consistent with this line of reasoning, research has found that consumers in individualistic cultures are more innovative than consumers in collectivistic cultures (Steenkamp, Hofstede, and Wedel 1999), thereby, acceptance of new products is faster in individualistic cultures (Chandrasekaran and Tellis 2008; Yeniyurt and Townsend 2003). Consumer acceptance of new products in cultures higher in individualism will result in a lessening of the negative relationship between time lag of product introduction and a product s country-level performance as individualism increases. In relation to a country s position within the global rollout, we theorize that individualism mitigates the positive relationship between the number of prior countries the product has been introduced and its country-level performance. The diffusion rate of a new experience product is largely dependent on communication amongst consumers, captured in the lead-lag effect. Given that consumers in individualist markets focus less on others and value their freedom and independence (Hofstede 2001), they are less likely to be influenced by the opinion of others. Therefore, the acceptance of a new product by a consumer in individualistic cultures is less likely to have spillover effects leading to higher levels of diffusion and adoption of the product by others (Dwyer, Mesak, and Hsu 2005; Van den Bulte and Stremersch 2004). As experience products need greater communication, given the inability of a consumer to judge quality based upon attributes alone, we contend that as openness to communication of members of a higher individualistic culture is lower, the communication necessary for the lead-lag effect to be fully realized is lower, thereby dampening the relationship between the number of prior countries the new experience product was introduced prior to the target country and country-level performance. More formally: 14

15 H2a: H2b: The negative relationship between time lag and country-level performance of a new experience product is positively moderated by individualism. The positive relationship between prior number of countries in which a product has been introduced prior to the target country and country-level performance of a new experience product is negatively moderated by individualism. The Moderating Effects of Power Distance Power distance in a culture reflects the acceptance of inequalities and is characterized by individual sensitivity to status differences as well as by how much individuals are motivated by the need to conform to those in their status group (Hofstede 2001). Countries with high power distance traditionally have high inequalities of power, which translate into inequalities in opportunity, status, and wealth (Hofstede 2001). Hofstede (2001) argues that individuals in societies exhibiting a large degree of power distance accept a hierarchical order in which everybody has a place and which needs no further justification, whereas in societies with low power distance, individuals strive to equalize the distribution of power and demand justification for inequalities of power. We theorize that the negative relationship between time lag and the country-level performance of a product is negatively moderated by country-level power distance. The logic underlying this expectation is that better communication between different populations of the society facilitates increased knowledge about the product, leading to lower adoption risk (Chandrasekaran and Tellis 2008). In high power distance societies, hierarchy and its pervasiveness inhibits individual decision-making (Hofstede 2001), and creates distrust of others, inhibiting fast and decisive decision-making (Dawar, Parker, and Price 1996). Moreover, in high power distance cultures, the adoption of a new experience product by the powerful members of society influences the less powerful members purchase decisions, given the acceptance of hierarchical order. As such, less powerful members of a society are likely to delay their purchase 15

16 decision until the product is adopted by more powerful members, leading to a slower adoption process for a new experience product. Given the hierarchical order of the society, and the lack of communication between those of different status, the negative relationship between time lag and the country-level performance of a new experience product is heightened as country-level power distance increases. In relation to a country s position within the global rollout, we argue that the positive effect of the introduction of a product into a higher number of countries prior to the target country on country-level performance will be weaker as power distance increases. The logic underlying this derives from less information sharing among societal members due to hierarchical constraints. Social barriers in high power distance countries decrease communication and therefore increase the risk of product adoption (Hofstede 2001). Further, consumers in high power distance cultures do not necessarily adopt new experience products just because consumers in other countries adopted them (diminishing the impact of the lead-lag effect). Rather, consumers in high power distance cultures closely follow the adoption decision of more powerful members in their country (Dwyer, Mesak, and Hsu 2005; Rubera, Griffith, and Yalcinkaya 2012). As consumers in a high power distance cultural look internally as opposed to externally for information on product adoption, the effect of the success-breeds-success effect is lessened. More formally: H3a: H3b: The negative relationship between time lag and the country-level performance of a new experience product is negatively moderated by power distance. The positive relationship between prior number of countries in which a product has been introduced prior to the target country and country-level performance of a new experience product is negatively moderated by power distance. 16

17 The Moderating Effects of Masculinity Masculinity refers to a country s tendency to value goals such as recognition, competition and individual achievement over goals such as harmonious social relationships, consensus building and quality of life. In masculine countries individuals make decisions independently and admire strength and independence (Hofstede 2001). Alternatively, in feminine countries individuals prefer cooperation, modesty, caring for the weak and social welfare (Hofstede 2001). We argue that the negative relationship between time lag and the country-level performance of a new experience product is positively moderated by masculinity. The logic underlying this is that when a product is first introduced to the market, freedom to decide plays an important role for the product acceptance as new product acceptance decisions requires independent decision-making (Tellis, Stremersch, and Yin 2003). Masculine societies stress competition, ambition, wealth, and career advancement while feminine societies place greater emphasis on people, helping others, preserving the environment and equality (Van Everdingen and Waarts 2003). In masculine societies, individuals are more materialistic and admire successful achievers (Hofstede 2001). A high need for achievement necessitates having the latest and most novel product, suggesting a link with the acceptance of new things in life (Hofstede 2001). Early purchase of new products is one way for an individual to assert his or her status, showing wealth and success (Rogers 2003). As such, those in highly masculine societies look externally for ways to achieve through new products, lessening the negative influence of time lag on a new experience product s country-level performance. In relation to a country s position within the global rollout, we theorize that masculinity lessens the positive effect of the number of prior countries the product was introduced prior to the target country on country-level performance. Masculine societies value independence, which 17

18 is related to new product acceptance. Individuals in masculine societies tend not to follow groups, particularly people from other countries, preferring to make decisions independently of others (Roth 1995). The lack of need to follow groups dampens the positive effect between prior number of countries in which a product has been introduced prior to the target country and the product s country-level performance. More formally: H4a: H4b: The negative relationship between time lag and the country-level performance of a new experience product is positively moderated by masculinity. The positive relationship between prior number of countries in which a product has been introduced prior to the target country and country-level performance of a new experience product is negatively moderated by masculinity. The Moderating Effects of Uncertainty Avoidance Uncertainty avoidance refers to a society s tolerance for uncertainty and ambiguity (Hostede 2001). Individuals in countries with low uncertainty avoidance demonstrate a lower level of information search, have greater tolerance of others opinion (Van Everdingen, Fok, and Stremersch 2009) and are less resistant to change (Hofstede 2001). Hofstede (2001) argues that individuals in higher uncertainty avoidance cultures maintain rigid codes of belief and behavior and are less likely to take risks. We theorize that the negative relationship between time lag and the country-level performance of a product is negatively moderated by uncertainty avoidance. Compared with products that have previously been introduced and used by consumers, new products are both unknown and unproven, and thus their performance is more ambiguous than established products (Dwyer, Mesak, and Hsu 2005; Steenkamp, Hofstede, and Wedel 1999). Ambiguity is high with experience products due to the difficulty of quality assessment prior consumption. Hence, consumers in high uncertainty avoidance cultures are more resistant to purchase new experience products because the uncertainty surrounding a new experience product s performance makes it 18

19 difficult to judge the risk-benefit trade-off. Conversely, as consumers in low uncertainty avoidance societies are more willing to take risks and accept new concepts and ideas (Tellis, Stremersch, and Yin 2003; Townsend and Yeniyurt 2003), they are more willing to adopt new experience products. Therefore, we theorize that the negative influence of time lag on a product s country-level performance will be heightened as uncertainty avoidance increases. In relation to a country s position within the global rollout, we theorize that uncertainty avoidance positively moderates the relationship between prior number of countries into which a product was introduced prior to the target country and the new experience product s countrylevel performance. As more people adopt a new product, consumers in lag markets learn potential benefits of the product from adopters in lead markets (i.e., lead-lag effect), leading to a faster product acceptance rate in lag markets. An increasing number of scholars have suggested that positive word-of-mouth can lessen uncertainty and escalate the likelihood of adoption (e.g., Lam, Lee and Mizerski, 2009; Schumann et al. 2010). As a new experience product is released into a larger number of countries prior to the target country, product uncertainty declines, increasing adoption. As such, we contend that the positive influence of prior number of countries in which a product has been introduced prior on the target country and country-level performance of a new experience product is heightened as uncertainty avoidance increases. More formally: H5a: H5b: The negative relationship between time lag and the country-level performance of a new experience product is negatively moderated by uncertainty avoidance. The positive relationship between prior number of countries in which a product has been introduced prior to the target country and country-level performance of a new experience product is positively moderated by uncertainty avoidance. 19

20 METHOD Sample To test our hypotheses we selected the movie industry. We believe that a number of characteristics make the movie industry an ideal case for this research s empirical application. Movies have a short product life cycle, can only be judged after consumption and have a rapid decline after initial sale. Furthermore, the product s importance as a topic of investigation is exhibited by considerable academic literature on this industry (Elberse and Eliashberg 2003; Hadida 2009; Hennig-Thurau, Houston, and Heitjans 2009). We collected data for all movies released in the United States (although the United States was not necessarily the first country of introduction) during the time period 2006 through Data gathered for this study is derived from a number of sources. Data set construction began by drawing movie-by-country data from Boxofficemojo ( The data set was then complemented by data from The Numbers, IMDb, IMDbPro, and movieinsider.com. To ensure that global rollout was complete for our sample of movies, we limited the sample to those movies released in 2006 and Sixteen countries were selected based on the data availability in years 2006 and The countries included were Argentina, Australia, Bulgaria, Czech Republic, France, Germany, Hong Kong, Italy, Japan, Netherlands, New Zealand, Norway, Poland, Spain, Sweden, and United Kingdom. After omissions and duplicates were excluded, the data set consisted of 259 unique movies for a total of 2,523 entries. Of the 259 movies in the dataset, 178 movies (68.73%) were first introduced in the U.S. Measures New product country-level performance was captured via gross sales in the target country. For each of the 16 countries, gross sales figures were drawn from the Boxofficemojo.com. Movie 20

21 sales were standardized by the country s population, in order to account for differences in the potential market size across countries. Time lag was measured as the number of days between the dates in which the movie was first released in the opening country and the date in which the movie was introduced in the target country. Previous number of countries was captured by calculating the number of countries in which the movie was introduced before being released in the target country. Economic wealth was operationalized as the country s GDP, drawn from the World Fact Book and Euromonitor. National culture was operationalized using Hofstede s value approach (Hofstede 2001). Index scores for individualism, power distance, masculinity, and uncertainty avoidance for each country were drawn from Hofstede (2001). Control Variables To minimize spuriousness of results a number of control variables identified in the literature (e.g., star power, director power, sequel, production budget, genre, studio power, and distribution intensity) were included within the study. The Numbers was used as the primary source for star power and director power, and then complimented with data from IMDbPro. To operationalize star and director power, we followed the method suggested by Hennig-Thurau, Houston and Walsh (2006). Similar to their study, we only used actors/actresses and directors listed on a movie s theatrical poster. First, we drew the average gross for each star and director from The Numbers and crosschecked the accuracy from IMDbPro. For each movie, we only considered stars, who received first, second or third billing. Next, when multiple actor (or director) names were listed, an overall star power (or director) index was calculated by weighting the average gross value of the first name on the list by 1, that of the second by.75, and the third by.50 and then summing the products and dividing it by three. For movie sequels, we create a dummy variable (1= sequels and 0 = non-sequels). Sequels were gathered from movieinsider.com. 21

22 Production budget was drawn from The Numbers. Film MPAA rating was drawn from The Numbers and includes six possible rating categories: G (general audiences), PG (parental guidance suggested), PG-13 (possibly unsuitable for children less than 13 years of age), R (children not admitted unless accompanied by an adult), NC-17 (no one under 17 admitted), and NR (not rated). Film genre is a categorical variable classifying the film as Action, Comedy, Drama, Thriller, Romance, and Animation. Genre for each movie was obtained from The Numbers. For the few movies that were not listed on The Numbers, genre was obtained from IMDb. We used a dummy variable to measure studio power (i.e., 1 when the studio producing the movie was a major and 0 when it was an indie). Major studios included Warner Bros. Pictures, Paramount Pictures, 20th Century Fox, Walt Disney Pictures/Touchstone Pictures, Columbia Pictures, and Universal Pictures. Distribution intensity, namely the number of theaters in the opening week for each movie in each country, was collected from the Boxofficemojo and IMDB. We also controlled for movie sales obtained in the countries before the introduction in the target country. Analysis We employ hierarchical linear modeling (HLM), which accounts for the lack of independence across cases (Raudenbusch and Bryk 2002). This approach is consistent with similar international marketing literature (e.g., Ju, Zhou, Gao and Lu 2013; Magnusson, Westjohn and Boggs 2009; Walsh, Shiu and Hassan 2014). We adopt an incremental model-building approach, which allows sequential model testing. To estimate our models, we used Proc Mixed in SAS and employed a restricted maximum likelihood (REML) estimation method. Random or fixed effects are tested by comparing the deviance (-2 log likelihood criterion) between two nested models. We included variables at two different levels: movie (i.e., time lag, previous number of 22

23 countries, studio power, distribution intensity, star power, director power, sequel, budget, sales in the prior countries in which the movie was released, genre and rating) and country (i.e., economic wealth (EW), individualism (IND), power distance (PD), masculinity (MASC), and uncertainty avoidance (UA)), plus cross-level interaction effects. We specify our model as: Country Performanceij = k 1 k 0 MF + 01 EW + 02 INDj + 03 PDj + 03 MASCj + 04 UAj + 11 EW * Time lag + 12 EW * Number previous countries + 21 IND * Time lag + 22 IND * Number previous countries + 31 PD * Time lag + 22 PD * Number previous countries + 41 MASC * Time lag + 42 MASC * Number previous countries + 51 UA * Time lag + 52 UA * Number previous countries + u0j + rij (2) Where MF refers to the movie-level factors described above; 0j ~ N(0, 00) and rij ~ N(0, ); 00 defines the variance in market share across countries and defines the variance in market share across movies within countries. We also included dummy variables for years (which resulted to be not significant). Results We show the descriptive statistics and correlation matrix among the variables of interest in Table 2. We tested for possible multicollinearity problems. Variance inflation factors were well below 10, and the condition number was below its critical value of 30 (Belsley 1991), indicating that multicollinearity was not a serious problem. To facilitate the interpretation of the results, we mean-centered the movie-level variables around their country mean (with the exclusion of dummy variables) and centered the country-level variables at the grand mean Insert Table 2 Here

24 Results are reported in Table 3. We included predictors in a stepwise fashion first introducing movie-level (Model 2-3) then country-level effects (Model 4), and then the crosslevel effects (Model 5). In Model 1, we estimated the mean of country performance as the sum of a fixed part, which contained the grand mean 00, and a random part, which contained two random effects at the movie- and at the country-level: Country performanceij= j +rij Model 1 indicated that countries differed in their average market share ( 00 = 90.75, p<.05), and that there was variation among movies within countries ( =55.39, p<.01). The proportion of the 00 total variance that occurred across countries was 62% (calculated as 2 00 ). We added the movie-level factors in Model 2 and found that star power ( =.18, p<.01), director power ( =.57, p<.01), sequel ( = 8.17, p<.05), production budget ( =.61, p<.01), distribution intensity ( =.32, p<.01), and sales in the prior countries ( =.17, p<.01) positively influenced country-level performance. Studio power, genre and rating, however, did not have an effect on the dependent variable. The inclusion of movie-level effects explained 15.8% more in the movie s country-level performance variation within countries. In Model 3, we added the time lag between the release in the original country and the release date in the target country, as well as the number of countries in which the movie was introduced before being released in the target country. The results indicate that time lag ( = -.26, p<.01) negatively influenced a movie s country performance. Further, the number of previous countries ( =.63, p<.01) positively influenced country performance. The inclusion of these two variables explained an additional 11% of the movie s country-level performance variation within countries and an additional 9.2% of the variation across countries. 24

25 Next, we added country-level effects (Model 4). Economic wealth ( 01= 2.13, p<.01) was the only country-level variable to have a direct effect on movie s country-level performance. The inclusion of the set of country-level variables explained 35.3% of performance variance across countries. We tested the cross-level interaction effects in Model 5. This model explained 29.6% of the total variance in a movie s country-level performance. The predictors explained 72.1% of the variance in country-level performance across countries and 29.4% of the variance in countrylevel performance across movies. In support of H1a and H1b, respectively, we found that economic wealth of a country positively moderated the relationship between time lag and country-level performance ( 11=.22, p<.01) as well as the relationship between number of previous countries and country-level performance ( 12= 1.12, p<.05). Supporting H2a and H2b, respectively, the analysis revealed that individualism positively moderated the relationship between time lag and country-level performance ( 21=.02, p<.01), but negatively moderated the relationship between number of previous countries and country-level performance ( 22= -.04, p<.05). We also found that power distance negatively moderated the relationship between time lag and country-level performance ( 31= -.01, p<.01), in support of H3a. However, power distance had no effect on the relationship between number of previous countries and countrylevel performance ( 32= -.01, p>.05). Thus, H3b was not supported. Hypothesis 4a and 4b were also not supported, in that the interaction effect of masculinity between time lag and countrylevel performance was not significant ( 41=.004, p>.05), nor was the interaction effect of masculinity between number of previous countries and country-level performance ( 42= -.007, p>.05). Finally, in support of H5a and H5b, we found that uncertainty avoidance negatively moderated the relationship between time lag and country-level performance ( 51=.28, p<.01) and 25

26 that uncertainty avoidance positively moderated the relationship between number of previous countries and country-level performance ( 52=.08, p<.01) Insert Table 3 Here DISCUSSION The intent of this study was to contribute to the international marketing literature by building on the finding of previous research in the area of global rollout and diffusion to answer the research question of when might the time lag and ordering effects on a new experience product s countrylevel performance be stronger and weaker? To answer this question, we built upon the theoretical foundation of the lead-lag and success-breeds-success effects to theorize that the influence of the global product rollout decisions related to time lag as well as the country s position within a global rollout on a new experience product s country-level performance would be moderated by country-level economic wealth and national culture. The results provide new insights for academics and practitioners regarding the relationship between country-level factors and the country-level performance of a firm s new experience product (i.e., movies). Theoretical Implications The findings, extending the literature, demonstrate substantive country-level effects (i.e., economic wealth and national culture) moderating effects on the decisions of time lag and country position within a global rollout on new experience product country-level performance outcomes. For example, consistent with prior works (e.g., Stremersch and Tellis 2004; Talukdar, Sudhir, and Ainslie 2002), the results indicate that increases in country economic wealth lessens the negative relationship between time lag and country-level performance. This demonstrates that, in wealthier countries, consumers are more able to afford the product, therefore allowing a 26