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Journal of International Business Studies, 1–27
& 2010 Academy of International Business All rights reserved 0047-2506

www.jibs.net
First- and second-order effects of consumers’

institutional logics on firm–consumer
relationships: A cross-market
comparative analysis
Jagdip Singh1, Abstract

Consumers’ conceptions of a market’s institutional logic affect mechanisms
Patrick Lentz2 and of firm–consumer relationships, but are generally neglected in comparative
Edwin J Nijssen3 studies of international marketing. This study bridges institutional and relation-
ship marketing theories to examine two questions: do consumers hold
1
Weatherhead School of Management, Case meaningful mental models of a market’s institutional logics, and do these
Western Reserve University, Cleveland, USA; mental models explain differentiated patterns of market relationships across
2
Department of Marketing, University of international contexts? Building on contract-relational duality, we develop
Dortmund, Dortmund, Germany; 3Department
a market-level construct for capturing consumers’ socially constructed mental
of Technology Management, Eindhoven
University of Technology, Eindhoven, the models for the institutional logics of market action. We theorize that differences
Netherlands in consumers’ institutional logics will influence both their evaluation of a firm’s
capabilities (first-order effect) and the degree to which they reward a firm
Correspondence: EJ Nijssen, Department of through their commitment (second-order effect). These bridging predictions
Technology Management, Eindhoven are tested using data from the insurance industry across three international
University of Technology, PO Box 513, 5600 markets. Our results show that the German insurance market is located in the
MB Eindhoven, the Netherlands. relatively high contracts–low relational quadrant, whereas the US and Dutch
Tel: þ 31 (0)40 2472170;
markets are both located in the relatively low contracts – high relational
Fax: þ 31 (0)40 2468054;
E-mail: e.j.nijssen@tue.nl
quadrant. Our results also suggest that consumer commitment conforms to a
principle of alignment such that commitment accrues to providers who align
their capabilities with consumers’ prevalent institutional logics of the market,
and penalizes those who deviate from it.
Journal of International Business Studies (2010) 1–27. doi:10.1057/jibs.2009.101
Keywords: institutional theory; relationship marketing; cross-cultural analysis; compa-

rative analysis
INTRODUCTION
Understanding similarities and differences in mechanisms of
firm–consumer relationships is of fundamental interest for inter-
national marketing researchers and practitioners alike. Researchers
seek differentiating ‘‘patterns of exchange’’ that characterize
comparative marketing systems, while practitioners drive for
‘‘discretionary decision-making’’ that exploit disparate patterns
for strategic advantages in global markets (Iyer, 1997: 552).
Received: 22 August 2008
Revised: 29 August 2009
Two dominant, but distinct, streams of research have emerged to
Accepted: 3 September 2009 illuminate mechanisms of firm–consumer relationships across
Online publication date: 11 February 2010 markets. The institutional perspective emphasizes the embedded
Consumers’ institutional logics Jagdip Singh et al
2
view of market exchanges, and theorizes the role of firms across international markets. We refer to
‘‘constitutive norms’’ of the marketplace (Grewal & predictions from our theorizing as bridging hypo-
Dharwadkar, 2002; Scott, 2001). In viewing institu- theses. We anticipate influences both on consu-
tional fields as social structures with isomorphic mers’ evaluation of a firm’s capabilities and on
force, this perspective acknowledges but subordi- the degree to which they reward a firm through
nates the role of strategic action in individual firm– their commitment, which we refer to as first- and
consumer relationships. By contrast, relationship second-order effects respectively. Past research has
marketing theory focuses on ongoing market focused on describing rather than theorizing and
exchanges to identify firms’ capabilities critical to explaining variability across international markets.
earning consumers’ commitment (Morgan & Hunt, For instance, Wulf, Odekerken-Schröder, and Iaco-
1994; Sirdeshmukh, Singh, & Sabol, 2002). Con- bucci (2001) examine the mechanisms of relation-
sistent with its emphasis on managerial agency, this ship commitment across three international
approach accepts cross-market variability, but mar- markets (Belgium, the Netherlands, and the US),
ginalizes the role of the larger context in which but posit no a priori hypotheses for the variability in
exchanges develop and evolve. Both perspectives modeled relationships. In their analysis, these
can claim support within their literatures (Kostova authors find significant variability for almost every
& Roth, 2002; Palmatier, Dant, Grewal, & Evans, path in their model across the three markets (their
2006). However, few studies have attempted to Table 4: 43). Our study addresses this gap, and
bridge these differing perspectives. Thus the con- develops a priori institutional-theory-based predic-
cerns raised over a decade ago by Iyer (1997: 553) tions to account for the variability in exchange
that theories of international marketing ‘‘have y relationships across market contexts.
failed to deal adequately with y the fundamental Third, we operationalize consumers’ conceptions
nature of market [exchange] relations’’ and limit of institutional logics, theorized as a market-level
our understanding of ‘‘buyer behavior under gen- construct – consumers’ institutional logics of market
eralized [institutional] contexts’’ continue to persist action (CILMA) – and examine its potential to
today. capture variability in institutional environments of
We aim to bridge the institutional and relation- the insurance industry for three contrasting markets
ship marketing perspectives, and make three spe- (Germany, the Netherlands, and the US). We also
cific contributions. First, we emphasize and develop examine the incremental contribution of the CIL-
consumers’ conception of a market’s institutional MA construct to explain variability in exchange-level
environment. Thus far, research grounded in insti- mechanisms of relationship marketing (i.e., firm–
tutional theory has tended to focus either on consumer relationships) while remaining sensitive
managerial conceptions of institutional environ- to alternative explanations rooted in cultural differ-
ments (Porac, Thomas, & Baden-Fuller, 1989; ences. We specifically control for cultural variability
Prahalad & Bettis, 1986) or on inter-firm relation- due to masculinity and uncertainty avoidance –
ships (business-to-business, B2B) (Grewal & Dhar- dimensions most closely related to contract-rela-
wadkar, 2002; Heide & Wathne, 2006), largely tional duality.
ignoring the consumers’ perspective in business- The paper is organized as follows. First, we review
to-customer (B2C) relationships (Brief & Bazerman, the institutional perspective to establish that con-
2003). Our study addresses this imbalance. We sumers, like managers, are also likely to develop
utilize institutional theory ideas of contract- a shared mental model of a market’s institutional
relational duality to conceptualize consumers’ logics. Thereafter, we develop and define the
shared and socially constructed mental models for CILMA construct to capture consumers’ concep-
the institutional ‘‘logics’’ of the marketplace. We tions of institutional logics, and outline its simila-
thus offer a more socialized view of ongoing firm– rities and differences with respect to extant cultural
consumer relationships. By focusing on the con- constructs. Next, we review the relationship mar-
sumer perspective, we affirm that consumers are keting perspective on ongoing firm–consumer
critical market actors who shape and sustain relationships, and theorize the incremental con-
ongoing market relationships through their com- tribution of the CILMA construct by developing
mitment to maintain (or terminate) exchanges. bridging hypotheses of first- and second-order
Second, we theorize how consumers’ institutional effects. Following this, we report on the empirical
logics impact on mechanisms of consumer com- study involving the insurance market in three
mitment in ongoing relationships with individual nations, organized in two subsections: the first
Journal of International Business Studies

3
relating to CILMA’s construct validity, and the important step’’ for replacing the ‘‘black box of
second to testing the bridging hypotheses. Finally, rationality assumption used in economics and
we discuss our findings, and derive the theoretical rational choice models.’’
and managerial implications. Past research has generally neglected consumers’
mental models of a market’s institutional logics.
INSTITUTIONAL PERSPECTIVE ON This possibly reflects a misconception that com-
CONSUMERS’ LOGICS OF MARKET EXCHANGES munication across consumers is too diffused,
Institutional theory, generally viewed as one of the fragmented and infrequent to support meaningful
leading perspectives for analysis of market action mental models. However, sufficient evidence exists
and evolution, draws on three central premises to suggest that consumers (1) are motivated
(Heugens & Lander, 2009; Lawrence & Suddaby, to engage in social learning and construct such
2006). First, institutional theorists emphasize the models, and (2) use them to navigate their action
role of institutional fields as established and for productive market exchanges (Mantzavinos
prevalent social rules and norms structuring social et al., 2004). For example, research on lay theories
interactions among market actors with economic suggests that, especially in uncertain environ-
objectives, thereby rejecting the atomistic and ments, consumers actively learn from self, and
‘‘undersocialized’’ view of neoclassical economics vicariously from others’ market experiences to
and rational choice theorists (Heugens & Lander, develop and share naı̈ve theories (Molden &
2009; Hodgson, 2006). Second, the institutional Dweck, 2006). Moreover, modern technologies are
view conceives ‘‘logics’’ as socially constructed rapidly enabling forums for social learning. This
mental models that groups of individuals hold as includes online communities, consumer blogs and
shared cognitions of socialized routines for action. forums, word of mouth through texting, e-mail and
As Scott (2001: 57) noted, ‘‘compliance occurs y phone, and public sources that reflect and frame
[as] routines are followed because they are taken for consumers’ market experiences and expectations.
granted as ‘the way we do these things’.’’ Third, Such shared experiences and learning promote and
institutional fields reproduce and sustain them- explain the mental models that consumers collec-
selves through instruments of socialization, includ- tively develop and share.
ing word of mouth, stories, and artifacts that
engage and socialize new members, and allow The CILMA Construct: Conceptualization and
environmental changes to be incorporated into Dimensions
pre-existing routines and patterns (Lawrence & We conceptualize CILMA as consumers’ shared
Suddaby, 2006). mental model for the institutional field of market-
Shared logics are ‘‘essential’’ to facilitate commu- place exchanges. Following Denzau and North
nication, order interactions, and promote learning (1994), we posit that these logics are typically
among market actors (Denzau & North, 1994: 4–5; organized around (1) categories that classify differ-
March & Olsen, 1998; Scott, 2001). Most markets ent types of market exchanges, and (2) concepts
are too complex for an individual to independently that characterize distinctive features of market
learn how they work, or what routines to enact for exchanges. We develop each of these ideas in turn.
successful market exchanges (Mantzavinos, North, Denzau and North (1994) note that categories are
& Shariq, 2004). Social interactions and socializa- key architectural features of individuals’ mental
tion processes help individuals learn efficiently models. Categories define boundaries separating
from the collective knowledge of institutional entities that differ in the institutional logics
logics, and store it as a shared mental model that governing their social structure. Within a category,
guides their market actions. Mental models are entities are thought to be structured with common
neither static over time nor deterministic in shap- institutional logics. Across categories, the structur-
ing the actions of market actors. Rather, these ing logics are likely to be differentiated. Categories
models are dynamically updated as individuals provide efficiency in negotiating market exchanges
learn through feedback from market exchanges, by providing a common set of expectations for a
and their normative influence waxes and wanes host of entities that are categorized similarly. For
as they compete with other cultural, social, and instance, insurance providers in a given cultural
economic forces influencing individual action. context (e.g., Germany) may be categorized
Denzau and North (1994: 5) note that under- together, indicating that market exchanges with
standing shared mental models is the ‘‘single most them are characterized by common expectations

4
regarding service interactions, pricing, product, and the monitoring and enforcing of contracts are
related features. How these common expectations critical to the instrumentality of market exchanges,
arise is probably a combination of cultural-histor- the role of contracts is often vested in agencies that
ical factors relating to the nation (e.g., regulatory transcend firms and consumers involved in market
governance in Germany) and the institutions exchanges. Typically federal, state, or regulatory
unique to the industry (e.g., professional govern- agencies fill this institutional role (Griffiths &
ance of the insurance industry). In other words, Zammuto, 2005). For instance, in some nations,
each industry is likely to be organized around regulatory agencies provide commercial firms with
distinct technologies and processes, governed by a framework of mandatory contracts for different
largely distinct regulatory codes, and to carry a levels of products and services (e.g., heating oil,
historical and cultural trace of negotiations among insurance) to consumers.
marketers and consumers. Contractually structured market exchanges are
It is therefore inappropriate to presume that intended to ensure that consumers have access to
institutional logics are common across different the products and services they need, and safeguard
industries within a nation (e.g., automobiles and their interests from the opportunistic intentions of
insurance in the US) or for similar industries across firms to restrict consumer welfare or renege on
different nations (e.g., insurance in the US and promised products or services. Contracts need not
Germany). Several studies indicate that the varia- always be mandated by regulatory agencies. Firms,
bility across industries within nations is substantial, either individually or through collective action
and comparable to cross-national variability (Dyer (e.g., associations), can offer formal contracts that
& Chu, 2000; Kostova & Roth, 2002; Makhija & detail terms of exchange with sufficient depth and
Stewart, 2002), suggesting industry as a reasonable clarity to mitigate the risk and uncertainty of
basis for categorization. market exchanges. Such contracts, however, are
Moreover, building on Denzau and North’s (1994) unlikely to have pragmatic utility unless they are
notion of concepts as basic blocks of mental models, evaluated to be fair and enforceable by a neutral
we posit that, within a category, institutional logics third party with superseding power.
will be characterized by different combinations of a Few agencies can match the state and federally
few elementary concepts. While prototypical con- supported institutions as a credible third party. In
cepts offer theoretical clarity owing to their elemen- a nation such as Germany, for instance, where
tary focus, in practice no market is likely to be formal contracts are historically preferred, the
completely defined by a single prototypical concept. insurance market is governed by Bundesanstalt für
Markets are complex contexts of exchanges that Finanz-dienstleistungsaufsicht (BaFin), a federal
require a multi-conceptual space to specify their agency for the supervision of financial services.
distinct and sometimes competing logics (Jackson & The BaFin acts on federal laws that include detailed
Deeg, 2008). legislation for insurance companies and its pro-
Within the institutional literature, two prototy- ducts/services, and monitors firms for financial
pical concepts that have received the most atten- solvency and compliance with the official guide-
tion relate to March’s distinction between the logics lines (see the Appendix for additional details).
of ‘‘instrumentalism’’ and ‘‘appropriateness’’ (Kos- An alternative mechanism for structuring market
tova & Roth, 2002; Makhija & Stewart, 2002), exchanges is the logic of appropriateness (March &
which, in turn, have their roots in the duality of Olsen, 1998), where relational codes of conduct are
contracts and relational forms of governance institutionalized to emphasize trust and reciprocity
(Macaulay, 1963). These logics provide contrasting among market actors as a basis for reducing risk
or alternative mechanisms for reducing risk and and uncertainty (Macaulay, 1963). The notion of
uncertainty in market exchanges, thereby promot- trust, central to the relational codes exemplified by
ing an orderly structure for the consummation of appropriateness logics, is market actors’ (e.g., con-
exchanges and sustenance of ongoing relationships sumers’) confident expectation that other actors
(Macaulay, 1963; March & Olsen, 1998). involved in market exchanges (e.g., firms) will curb
As per the logic of instrumentalism, market opportunism and fulfill exchange promises. When
exchanges are structured by institutions that trust is one-sided, market exchanges may not be
emphasize the rule of formal contracts in dicta- sustainable. When trust is reciprocated, such that
ting the terms of firm–consumer relationships trusted actors are committed to mutually satisfying
(Macaulay, 1963; March & Olsen, 1998). Because relationships, relational codes dominate market

5
exchanges and become institutionalized through CILMA and Culture: Points of Distinction and
scripts and routines for long-term relationships. Similarities
Formal institutional mechanisms of governance, The proposed CILMA construct is distinct from
including regulatory agencies and written con- cultural constructs available in the literature,
tracts, are avoided recognizing that such mechan- although it does share some common elements.
isms may hinder the development of trust between Hofstede (1993) defines culture as the collective
market actors (Griffiths & Zammuto, 2005). programming of the mind that distinguishes the
The relational logics have received much atten- members of one category of people from those of
tion as principles of relationship marketing in B2C another. Culture is composed of certain values,
(in addition to B2B) markets (Garbarino & Johnson, which shape behavior as well as one’s perception
1999; Morgan & Hunt, 1994; Sirdeshmukh et al., of the world. Examining this definition in light of
2002). Relationship marketing asserts that markets the proposed conceptualization of the CILMA
based on relational codes are self-reinforcing and construct suggests three points of distinction.
efficient because they obviate the need for costly First, cultural constructs reflect higher-order (i.e.,
monitoring and legal enforcement of contractual more general) programming of mental models
obligations. Relational codes commit market actors shared by all members of a cultural community,
to finding mutually acceptable solutions to pro- and are ostensibly relevant across all situations.
blems that permit the relationship to continue over For instance, uncertainty avoidance is a cultural
time (Dyer & Chu, 2000; Heide & Wathne, 2006). construct that reflects the ‘‘degree to which people
For example, in the US where relationship in a country [generally] prefer structured over
marketing has taken hold, state and federal agen- unstructured situations’’ (Hofstede, 1993: 90). By
cies set only minimum thresholds for insurance contrast, CILMA is a lower-order (i.e., less general)
products and services. Service and price levels vary logic of the mental model that is specific to market
widely across insurance providers (www.iii.org) to exchanges. Our theorizing of CILMA focuses speci-
reflect different levels of customer relationships. fically on the logics governing the social struc-
Consumer blogs emphasize the importance of ture of exchanges among market actors. The
selecting a reputable company for a long-term contract-relational duality is therefore unlikely to
relationship to secure a comprehensive coverage be relevant for non-exchange situations such as
of insurance needs (www.insurance.ca.gov). Con- interpersonal and family relationships. In this
sistent with this, professional associations such sense, CILMA is proximal to the phenomenon of
as the American Council of Life Insurers (ACLI) market exchanges, whereas cultural constructs
petition for limiting regulatory oversight, relying are located distally at a higher level of generality.
instead on self-regulation to stimulate competitive- Second, the programming implied by cultural
ness and emphasize relational modes of exchange constructs is ‘‘hardwired’’ as central to the identity
(see the Appendix for additional details). of its members (Hofstede, 1993). For instance,
Although we used the US and German insurance German people are reportedly higher in uncer-
markets as examples that evidence relational and tainty avoidance than those residing in the US,
contractual logics respectively, we emphasize that, indicating that to be an American (German) is to
in practice, institutional contexts of any market, have a general preference for less (more) structured
including the US and Germany, are likely to evi- experiences. By contrast, the CILMA construct is
dence both logics to different degrees (March & ‘‘soft-wired’’ in the sense that mental models
Olsen, 1998). For example, while the contracts develop with accumulating experience of market
logic is compatible with the historical evolution exchanges in a particular industry/market. Because
of the German insurance industry, the industry the CILMA construct is not moored to either
was deregulated in 1994 to promote competition, individual or collective identities, it is more labile
reduce regulation, and favor relational orientation and responsive to active constructions through
between providers and consumers. Likewise, in the social mechanisms by market actors.
US, where the insurance industry was deregulated Third, the focus on values vs norms or expecta-
at least a decade earlier, formal regulatory mechan- tions is another source of difference. The cultural
isms are assuming a greater role, with growing constructs tap into underlying values that define
evidence of fraudulent and opportunistic activities and characterize members of a cultural group.
of insurance providers (see the Appendix for addi- Germans are thought to prefer structure, not simply
tional details). because it enhances predictability and efficiency,

6
but because formal order and organization are is defined as ‘‘all marketing activities directed
valued and aspired attributes by its members. toward establishing and maintaining successful
Likewise, Americans are thought to value unpre- relational exchanges’’ with a firm’s customers
dictability, and disdain formal structures. This is (Morgan & Hunt, 1994: 22). It shifts the marke-
not because they would rather be inefficient and ters’ frame from a transactional to a relationship
disorganized, but in spite of it. mode, and asserts a customer-centric orientation
By contrast, the CILMA construct’s theoretical (R. L. Oliver, 1997). A customer-centric orientation
focus is on norms for market exchanges and, brings into focus the critical role of sensing the
as a result, is more closely related to expectations evolving needs and preferences of customers, and
that describe market actors’ behaviors in market making strategic decisions that enhance a firm’s
exchanges. Unlike values, such norms and beha- ability to gain customer commitment (Zeithaml,
vioral expectations are more easily observable and Berry, & Parasuraman, 1996). Committed custo-
identifiable across markets because they are more mers are motivated to maintain an ongoing
closely tied to behavior. relationship with a specific firm through future
It is also useful, however, to recognize some purchase intentions, increased share of wallet, and
similarities between cultural constructs and CILMA. positive word of mouth. A portfolio of committed
The CILMA construct is posited to set contextual consumers ensures a revenue stream essential for
contingencies for the behaviors of market actors. the sustainability of a firm’s capabilities. Sensing
Similarly, cultural constructs are thought to bound and strategizing for sustained customer commit-
the behaviors of members by what Poortinga (1992: ment are therefore key managerial responsibilities
10) has noted as ‘‘constraints that limit the for effective management of firm–consumer rela-
behavioral repertoire available to members.’’ Given tionships.
this similarity, it is tempting to view cultural con- A significant amount of work, in both national
structs and CILMA simply as competing mecha- and international contexts, supports relationship
nisms of influence. This would be inappropriate, marketing mechanisms for gaining customer com-
since CILMA is incompletely nested within the mitment (Palmatier et al., 2006). Although several
higher-order cultural constructs. Cultural factors competing theories exist (Wulf et al., 2001), most
play a role, along with a host of other category- studies appear to converge around three key
specific factors, in shaping the institutional logics mechanisms for securing customer commitment:
conceptualized as CILMA. It is appropriate to ask,
(1) transactional satisfaction;
for instance, whether the contract-relational duali-
(2) social trust; and
ty of CILMA goes beyond the structured-unstruc-
(3) economic value (to be discussed).
tured duality represented by the uncertainty
avoidance construct. Also, unlike cultural con- With a few exceptions, relationship marketing
structs, CILMA is proximal to market exchanges, studies that examine contextual influences, such
and is conceptualized with lower-order specificity as in comparative international marketing ana-
to enhance its relevance for the study of institu- lysis, tend to describe rather than theorize and
tional influence on relationship marketing mecha- explain variability across contexts (Nijssen, Singh,
nisms. We develop hypotheses for this influence Sirdeshmukh, & Holzmüller, 2003). As noted, Wulf
next. et al. (2001) examine the mechanisms of relation-
ship quality and commitment across three interna-
INSTITUTIONAL LOGICS AND FIRM– tional markets, and find significant variability
CONSUMER RELATIONSHIPS: FRAMEWORK across almost every modeled path for the three mar-
AND HYPOTHESES kets (see their Table 4: 43). Consequently, there is
sufficient evidence to suggest that exchange
Relationship Marketing and Firm–consumer mechanisms of relationship marketing vary signifi-
Relationships cantly across market contexts, but there is little
Relationship marketing has emerged as ‘‘one of theorizing to predict and explain this variability.
the dominant mantras in business strategy circles’’ We develop institutional-theory-based explana-
for understanding consumer–firm relationships tions for hypothesizing the differentiated patterns
(Palmatier et al., 2006: 136), and has been success- of firm–consumer exchange mechanisms across
fully used for comparative international marketing market contexts. Specifically, we use the CILMA
analysis (Wulf et al., 2001). Relationship marketing construct to explicate how consumers’ conceptions

7
of a market’s institutional logics influence mechan- need, desire, goal, or other pleasurable end-state
isms leading to their decisions to maintain ongoing in a specific exchange encounter with the firm
relationships with individual firms. However, we (R. L. Oliver, 1997). Consumers form expectations
first outline a model that represents the extant of future market transactions based on prior
relationship marketing literature, and does not experiences and knowledge (e.g., what do I expect
consider the role of market context (referred to as to get?) and, when these expectations are fulfilled
the ‘‘baseline’’ model). We do not posit formal or positively confirmed (did I get what I expected,
hypotheses for these well-established effects. or more?), consumers perceive their exchange
to be satisfactory, thereby building commitment
A Baseline Model of Firm–consumer Relationships (R. L. Oliver, 1997).
The central block in Figure 1 displays the baseline The social trust mechanism involves consumers’
model. The independent variables represent man- evaluation that a firm can be relied upon to deliver
agerial agency for investing in mechanisms of on its promises and curb opportunism in future
transactional satisfaction, social trust (firm and exchanges (Morgan & Hunt, 1994). Substantial
frontline employee-based trust), and economic evidence suggests that consumers reward trusted
value. Each mechanism is evaluated by consumers firms with their commitment (Palmatier et al.,
and may subsequently be reciprocated with con- 2006). Factors resulting in positive trust evalua-
sumer commitment. Because these mechanisms are tions include initiating and building long-term
well established in the literature, we provide only a consumer relationships, making idiosyncratic
brief review. investments that foster consumer trust and resolve
Consumers’ evaluation of transactional satisfac- conflicts, and developing frontline capabilities
tion involves the degree of fulfillment of some that place consumers’ interests above the firm’s
Consumers’ Institutional Logics of Market Action (CILMA)

(shared and socially constructed mental model for the social structure of marketplace exchanges)
Ongoing firm–consumer relationships

Second-order effects
First-order effects
Transaction
First-order effects
satisfaction
Firm Consumer
First-order Effects trust commitment
Frontline
First-order effects employee
trust
Economic
value
Figure 1 First- and second-order effects of consumers’ institutional logics of market action on mechanisms of ongoing firm–
consumer relationships.

8
short-term revenue goals (Palmatier et al., 2006; relationships (e.g., what should I expect?) are
Sirdeshmukh et al., 2002). Consistent with recent shaped by the mental model of the market’s
work, frontline employee and firm trust are dis- institutional field. For instance, when CILMA is
tinguished. contracts-dominated, consumers expect firms to
Finally, consumers evaluate economic value by invest in transactional capabilities. Quality norms,
considering the benefits enjoyed relative to the certifications, and other product guarantees man-
costs incurred in ongoing relationships. Several dated by formal bodies in this institutional field
studies stress the importance of understanding mitigate the need for relational trust, and shift
economic value from the consumers’ perspective the focus toward transactional satisfaction. Kollock
(Brief & Bazerman, 2003), and firms are increas- (1994) showed that when product quality is assu-
ingly focusing their efforts toward enhancing red, or where ‘‘the experimenter served as a regula-
tangible and/or intangible consumer benefits with- tory agency to insure the terms of the exchange,’’
out concomitant increases in costs (Sirdeshmukh relational trust between exchange parties was less
et al., 2002). vital, and transactional factors assumed greater
Overall, relationship marketing theory posits that importance.
each of the preceding three mechanisms directly By contrast, in relational-dominated CILMA,
affects consumer commitment. However, these consumers are likely to expect firms to invest in
effects are not necessarily linear. Recent studies capabilities that emphasize relational processes and
report curvilinear effects such that, for instance in build trust (Agustin & Singh, 2005). The limited
relational exchanges, trust has a ‘‘motivator’’ effect monitoring and safeguarding against opportunistic
(increasing exponentially) whereas transactional behavior of individual firms is likely to favor
satisfaction has a ‘‘hygiene’’ effect (decreasing consumers’ motivation to develop close relation-
exponentially or leveling off). Only the effect of ships with their providers.
economic value is reported to be linear (Agustin & Moreover, we expect higher levels of consumer
Singh, 2005). Thus, in the baseline model, we commitment in a relational CILMA. Consumer
include curvilinear effects of satisfaction and both commitment is a forward-looking indicator of con-
trust mechanisms. sumers’ intentions to maintain ongoing relation-
ships (Dyer & Chu, 2000). In contracts-dominated
Influence of CILMAs on Firm–consumer CILMA, substitutability among providers is likely
Relationships to be high because the greater emphasis on insti-
A key insight from institutional theory is the non- tutional standards for quality norms, certifications,
trivial influence of institutional logics on indivi- and product guarantees mitigates the need for
dual behavior (Scott, 2001). Such institutional consumer commitment toward any single pro-
logics are ‘‘rules of procedures that actors employ vider. By contrast, consumers in relational CILMA
flexibly and reflexively to assure themselves and are more likely to rely on close relationships to
those around them that their behavior is reason- police opportunistic firm behaviors, and to avoid
able’’ (DiMaggio & Powell, 1991: 20). costs of locating trustworthy providers. Thus we
We draw on this insight to hypothesize that posit:
consumers are likely to weight exchange mechan-
isms more favorably if they are aligned with the Hypothesis 1: Compared with contracts-domi-
dominant institutional logic prevailing in the nated CILMA, relational-dominated CILMA will
market (referred to as the principle of alignment). be associated with (a) lower levels of transactional
Two specific hypotheses are developed relating to satisfaction, and (b) higher levels of trust and
CILMA’s influence on: (1) the mean levels of consumer commitment.
consumers’ satisfaction, trust, value, and commit-
ment evaluations for the individual firm with In support of second-order effects, the principle
whom they maintain ongoing relationships (‘‘first- of alignment also identifies conditions under
order effects’’ in Figure 1); and (2) moderating the which consumers will reciprocate a firm’s invest-
effect of satisfaction and trust evaluations on ments with their commitment. When a market
consumers’ commitment (indicated by ‘‘second- is characterized by relational-dominated CILMA,
order effects’’ in Figure 1). We discuss each in turn. consumers are likely to weight the relational
In positing first-order effects, we assert that capabilities of exchanges more favorably (Nijssen
consumers’ normative expectations in market et al., 2003). Research on how consumers process

9
information about markets (e.g., brands) and Hypothesis 2b: Compared with relational-
categorize it to cope with market decisions effec- dominated CILMA, contracts-dominated CILMA
tively (e.g., brand choice) provides support for this will be associated with a relatively stronger
assertion (Bettman & Sujan, 1987). As per categor- effect of satisfaction on commitment.
ization research, consumers differentiate among
brands on key attribute(s) that are relevant and Based on the universal importance of value, we
salient for a given market. Also, once brands are do not expect the economic mechanism to be
differentiated, consumers are more sensitive to sensitive to variability in CILMA. To consumers,
variations along the attributes used for categoriza- economic value represents a superordinate goal in
tion. This increased sensitivity is found to enhance market relationships (Sirdeshmukh et al., 2002).
the weighting of the categorizing attributes in Firms lacking capabilities for providing consumer-
consumer decisions (Bettman & Sujan, 1987). perceived value will be less likely to gain consumer
Building on the preceding research, we expect commitment, regardless of differences in institu-
that consumers in relational CILMA will be likely tional logics. Consequently, while we expect eco-
to differentiate among firms based on the social nomic value to significantly influence consumer
trust mechanism. This is because a relational- commitment, we do not expect consumers’ CILMA
dominated CILMA primes consumers to attend to to have second-order effects on this influence.
the relational aspects of market exchange, making Thus:
social trust both relevant and salient. As a result,
consumers are expected to be more sensitive to Hypothesis 3: Consumers’ perceived economic
evaluations of relational trust, and to weight it value will have a significant effect on consumer
more favorably in making commitment decisions. commitment that is invariant to CILMA.
Also, the ‘‘motivator’’ role of trust is expected
to be amplified in relational CILMA (Agustin & RESEARCH DESIGN AND METHOD
Singh, 2005). Thus the influence of trust is likely to
follow an exponentially increasing pattern in Study Context
relational CILMA, consistent with the motivator We selected a single industry and three contrasting
hypothesis. national contexts to examine empirically the
Similarly, when the institutional logic emphasizes CILMA construct and the posited hypotheses. By
contracts, consumers are primed to attend to the focusing on a single industry across markets, we
transactional qualities of market relationships, aimed to provide variation in institutional fields
including the degree to which firms meet or exceed while controlling for confounding effects due to
expectations when making commitment judgments. cross-industry variation. Because services are an
As a result, transactional satisfaction assumes a more increasingly important aspect of leading econo-
salient and relevant role in differentiating firms, mies, we chose the insurance industry, particularly
while relational considerations of trust are given life, home, and automobile insurance services.
less significance. Differentiation on the basis of Health insurance was not included because the
transactional capabilities is therefore likely to selection of a healthcare provider is often at the
bolster consumers’ sensitivity to evaluations of discretion of an employer.
exchange satisfaction in making commitment deci- We used secondary data sources to identify the
sions. This implies that the influence of transaction German, US, and Dutch markets as potential
satisfaction on consumer commitment is relatively contexts that offered contrasting institutional
stronger and more salient in contracts-dominated logics for the insurance industry as well as feasi-
CILMA. Consistent with this, we expect that the bility of collecting data in a systematic and
influence of satisfaction in relational-dominated coordinated manner (to be discussed). Our selec-
contexts is likely to follow an exponentially tion of these markets does not constitute an a priori
decreasing pattern to reflect its relatively weak specification or predetermination of their location
and hygiene effect in this context. Thus: in the institutional logics space. The secondary
data are intended only to ensure that we expect
Hypothesis 2a: Compared with contracts- variability across these markets for the institutional
dominated CILMA, relational-dominated CILMA logics of the insurance industry.
will be associated with a relatively stronger effect As stated earlier, the German insurance market
of trust on commitment. is governed by BaFin, a federal agency for the

10
supervision of financial services. The BaFin acts and not specific. In sum, the secondary data suggest
on federal laws that include detailed legislation that the three countries selected offer a reasonable
for insurance companies (VAG or Versicherungs- possibility of obtaining variability in institutional
Aufsichts-Gesetz), products/services (VVG or Versi- logics for the insurance industry.
cherungs-Vertrags-Gesetz), monitoring financial
solvency of firms, and imposing penalties, includ-
Sampling Procedures
ing voiding a firm’s license in the case of non-
The CILMA construct and the firm–consumer
adherence or violations.
exchange constructs are conceptualized at the
In the US, state and federal agencies set only
group and individual levels respectively. This
minimum thresholds for insurance products and
allows data to be collected for each level either
services. Service and price levels vary widely across
from two different groups of consumers or from
insurance providers (www.iii.org), and consumer
the same consumer. Obtaining data from the
blogs emphasize the importance of selecting a
same consumer about the institutional logics and
reputable company (www.insurance.ca.gov). Con-
exchange constructs is likely to introduce same-
sistent with this, professional associations such
source bias in testing hypotheses that relate these
as the ACLI petition for limiting regulatory over-
two levels.
sight and promote self-regulation to stimulate
For instance, if the institutional logics construct
competitiveness and emphasize relational modes
were measured first, it is likely that the respon-
of exchange.
dents’ sensitivity to contractual and relational
Finally, the Dutch insurance market is rather
issues would bleed into their evaluations of
complex, with two institutions sharing governance
exchange relationships. Likewise, if the institu-
responsibilities, the De Nederlandsche Bank and
tional logics were measured subsequent to
Autoriteit Financiële Markten (AFM). While clearly
exchange relationships, respondents might have
demarcated monitoring and standard-setting
carried their evaluative frames over to assessments
responsibilities have yet to emerge, some progress
of contractual and relational logics. Thus we
has been made, with the Dutch government
preferred data from two distinct samples, with each
shifting responsibility for consumer affairs to AFM
focusing on one level of data, and subsequently
(for further details see the Appendix).
to combine them with the notion that the insti-
Next, materials from Consumer Reports-type
tutional data capture contextual characteristics
agencies, as well as typical contracts for home and
that are commonly shared across individuals that
auto insurance in the three markets, were collected.
belong to that context.
Consistent with Faems, Janssens, Madhok, and van
We refer to these two data sets as: (1) institutional
Looy (2008), who examined the length of contrac-
logics data, that is, the data set drawn from a ran-
tual documents to infer the degree to which con-
dom sample of key informants to evaluate CILMA;
tracts are important in alliance governance, we
and (2) firm–consumer relationships data, that is, the
used similar procedures to infer the importance
data set drawn from a random sample of consumers
of contracts in individual insurance markets. Our
to capture measures of their ongoing relationships
analysis indicated that typical contracts for home
with insurers. Sampling plans and field procedures
and auto insurance were relatively longer in
for both data collections were coordinated across
Germany, and substantially shorter in the US
countries to achieve equivalence in data collection,
(19–30% less) and the Netherlands (30–70% less)
measurement, survey instrument, and data hand-
respectively (see the Appendix).
ling (Easterby-Smith & Malina, 1999).
In accord with this trend, consumer organiza-
tions in Germany (e.g., Stiftung Warentest) focus
more on price comparisons. By contrast, lead- Institutional logics data. Random samples of key
ing consumer organizations in the US urge con- informants were selected from commercial lists of
sumers to consider relational issues when selecting consumers, using selection criteria to ensure
an insurance provider, noting that ‘‘it may not be experience with insurance products. The surveys
wise to jump to an unknown company to save were administered in two waves, with an overall
a few dollars’’ (www.ohioinsurance.gov, Shopper’s survey period covering 4–5 weeks. Customary
Guide, 7). Suggestions on how to select a pro- incentives were used to increase the response rate.
vider are also present in the Netherlands (e.g., In all, 1000 consumers in each of the three
Consuwijzer) but the information is usually general countries were selected as key informants for

11
participation. Informants were asked to self-select the Dutch and US data indicate a more even
for participation if they met the following criteria: distribution of gender groups (males¼55.6% and
61.4% respectively), the German data are domi-
(1) primary household responsibility for insurance
nated by males (87.2%, po0.01). Moreover, the
needs;
German respondent is likely to be older (mode X55
(2) at least 35 years old; and
years) than the Dutch or US respondents (mode¼
(3) recent contact with insurance agent/company
35–44 years, po0.01). Although the household
to report problems and/or discuss changes to a
size in the US (mode¼4) is larger than in Germany
policy.
and the Netherlands (mode¼2, po0.01), the res-
The numbers of qualified responses obtained pondents’ marital status is fairly consistent across
were: 227 in Germany, 128 in the US, and 139 in the three contexts, with the majority being marr-
the Netherlands. On average, about two-thirds ied (478%). Comparisons for education and
of all respondents were male, with an average age income are not straightforward, owing to the
of about 50 years, and 80% married. The majority necessity of using country-specific categories. How-
of the respondents had a college degree, and ever, middle- to high-income households with
an average yearly gross income of about $95,000 higher education dominate our sample, as may
in the US and $50,000 in the other two countries. be expected, based on the sampling design used.
To account for this variability in demographic
Firm–consumer relationships data. Random samples characteristics, gender, age, and income were inclu-
of consumers were selected from independent ded as control variables.
commercial lists, avoiding overlaps with those
selected for institutional logics data. The surveys Measurements
were administered in a total of three waves spread
out over a 7–10-week survey period. Several Institutional logics data. Initially, we formulated a
measures were taken to secure reasonable response set of 20 items to operationalize the CILMA
rates (e.g., reminder cards, follow-up calls, and construct. Half the items pertained to the logic of
lottery drawing), allowing for small variations in contracts, and the remaining items referred to
field methods per country. In all, 4000 consumers in relational logic. The master version of the que-
Germany, 3900 in the US, and 2850 in the stionnaire was developed in English and translated–
Netherlands were selected for participation. Res- back-translated into Dutch and German, using two
pondents were qualified to complete the survey if bilingual respondents. In addition, the German
they identified an insurance company for which version was translated into Dutch and triangulated
they had at least (1) one auto, home or life with the Dutch version derived from the English
insurance policy, and (2) one contact in the last 12 master version. Discrepancies were discussed, and
months with a frontline employee regarding their jointly resolved for comprehension consistency
policy. Non-qualifying respondents were asked to by either revising the master version or adapting
return their surveys unfilled. the translated version to accurately reflect the
Using information from responses of non-quali- intended meaning. The revised items were pretes-
fying persons and follow up phone calls, a qualifying ted using a think-aloud exercise with a sample of
rate was estimated at 47%, 55%, and 45% in 18–30 consumer informants in each country.
Germany, the US, and the Netherlands, respec- Researchers met to discuss pretest results, and
tively. A qualifying rate indicates the percentage of aimed to select items that were robust across
respondents in a random sample of population who contexts and sufficiently non-overlapping to pro-
are likely to meet the selection criteria established vide a representative coverage of construct band-
for the study (i.e., at least one policy and inter- width. Based on this, a final list of 12 items was
personal contact). Based on these qualifying rates retained (see Table 2).
and the number of responses – 504 in Germany, 365
in the US, and 316 in the Netherlands – the Firm–consumer relationships data. To capture the
estimated response rates (corrected for qualifying firm–consumer exchange constructs, we relied
rates) were 26%, 21%, and 28% for Germany, the mostly on existing scales for transactional satis-
US, and the Netherlands respectively. faction, firm and frontline employee trust, eco-
Table 1 summarizes the demographic character- nomic value and consumer commitment.
istics of the respondents, and shows that while Most measures were drawn from the marketing

12
Table 1 Demographic profile of the respondents for the firm–consumer relationships data (all numbers are in percentages)
Gender (%) Age in years (%) Educationa
Gb US NLb G US NL G US NL
Male 87.2 55.6 61.4 p34 7.0 22.7 28.2 High school 1st level 32.7 — 14.4
Female 12.8 44.4 38.6 35–44 23.0 34.3 30.1 High school 2nd level 8.7 19.3 12.0
45–54 29.4 24.4 23.0 Professional education 28.0 — 27.8
Consumers’ institutional logics

X55 40.7 18.6 18.7 Some college — 30.5 27.3
College — 30.5 14.8
Graduate school 30.6 19.8 3.8
Marital status Household size (%) Incomec (%)
G US NL No. of people G US NL G US NL
Married 81.6 82.7 78.5 1 10.2 7.4 16.7 o h12,000 5.7 — 3.1
Single 5.8 9.1 14.4 2 46.4 25.5 41.1 h12,001–24,000 33.3 — 39.8
Divorced/sep. 10.2 6.6 4.3 3 17.8 21.0 12.0 h24,001–36,000 31.2 — 34.0
Widow/widower 2.3 1.6 2.9 4 17.5 26.7 20.6 h36,001–48,000 13.2 — 13.1
Jagdip Singh et al
5 6.4 12.8 6.7 h48,001–60,000 6.9 — 6.8
46 1.7 6.6 2.9 h60,001–72,000 3.9 — —
h72,001–84,000 2.4 — —
4 h84,000 3.3 — 2.1
o $35,000 — 8.3 —
$35,001–54,999 — 30.7 —
$55,000–74,999 — 25.9 —
$75,000–94,999 — 17.6 —
$95,000–114,999 — 8.3 —
$115,000–134,999 — 2.7 —
4 $135,000 — 6.6 —
a
The category labels for education categories were modified for relevance in each cross-national context. For the Dutch data, the categories labels were: (1) mavo/havo/vwo; (2) lbo; (3) mbo;
(4) hbo; (5) universiteit; (6) higher. For the US data, the categories labels were: (1) high school; (2) some college; (3) college; (4) graduate studies; For the German data, the categories labels were:
(1) high school (1 level), (2) high school (2 level), (3) professional education, and (4) university degree.
b
G¼Germany, NL¼the Netherlands, US¼United States.
c
Similarly, because income levels and currencies vary across nations, the category labels were adjusted for relevance for each cross-national data. For the German and Dutch data, net income is used
after tax deduction, whereas for the US data, gross income before tax deduction is employed.
13
Table 2 Operational measures and reliabilities of study constructsa
Consumer institutional logics of market actions (CILMA) dimensions
Relational dimension, five-point scale, Strongly disagree–Strongly agree, RelG¼0.93, AVEG¼0.70, HVSG¼0.10, RelUS¼0.95, AVEUS¼0.78,
HVSUS¼0.39, RelNL¼0.92, AVENL¼0.68, HVSNL¼0.35.
Interactions between consumers and insurance companies and agents are generally based on y
Trusting relationships (REL1)
Terms of doing business that are satisfying for both, insurer and customer (REL2)
Working through problems in a mutually satisfying manner (REL3)
Developing a mutual understanding (REL4)
Open and honest relationships (REL5)
Maintaining a long-term working relationship (REL6)
Contracts dimension, five-point scale, Strongly disagree–Strongly agree, RelG¼0.97, AVEG¼0.83, HVSG¼0.07, RelUS¼0.95, AVEUS¼0.76,
HVSUS¼0.22, RelNL¼0.95, AVENL¼0.75, HVSNL¼0.35.
Interactions between consumers and insurance companies and agents are generally based on y
Meeting only the requirements of the policy contract (CON1)
Following written rules of contract even when solving problems (CON2)
Strictly following contract guidelines (CON3)
Contractual details (e.g., fine print) rather than working flexibly to meet customer needs (CON4)
Procedures and practices spelled out in formal agreements (CON5)
Formal requirements set by the rules of the contract (CON6)
Consumer–firm exchange constructs
Satisfaction (R. L. Oliver, 1997), ten-point scale, RelG¼0.96, AVEG¼0.90, HVSG¼0.62, RelUS¼0.96, AVEUS¼0.88, HVSUS¼0.28, RelNL¼0.95,
AVENL¼0.86, HVSNL¼0.64;
Your overall feelings of satisfaction involving the recent interactions with the issuing insurance company:
Highly satisfactory/Highly unsatisfactory (SAT1)
Very pleasant/Very unpleasant (SAT2)
Delightful/Terrible (SAT3)
Frontline employee trust (Morgan & Hunt, 1994), ten-point scale, RelG¼0.96, AVEG¼0.91, HVSG¼0.62, RelUS¼0.98, AVEUS¼0.94,
HVSUS¼0.44, RelNL¼0.96, AVENL¼0.90, HVSNL¼0.57;
I feel that the representatives (e.g., agents/employees) of this company are:
Very dependable/Very undependable (FLE1)
Of very high integrity/Of very low integrity (FLE2)
Very trustworthy/Not at all trustworthy (FLE3)
Firm trust (Morgan & Hunt, 1994), ten-point scale, RelG¼0.97, AVEG¼0.93, HVSG¼0.58, RelUS¼0.99, AVEUS¼0.97, HVSUS¼0.45, RelNL¼0.97,
AVENL¼0.92, HVSNL¼0.45;
I feel that this insurance company’s management practices are:
Very dependable/Very undependable (FIRM1)
Of very high integrity/of very low integrity (FIRM2)
Very trustworthy/Not at all trustworthy (FIRM3)
Economic value (Sirdeshmukh et al., 2002), ten-point scale, RelG¼0.97, AVEG¼0.91, HVSG¼0.46, RelUS¼0.99, AVEUS¼0.96, HVSUS¼0.45,
RelNL¼0.96, AVENL¼0.90, HVSNL¼0.57;
Considering all of the insurance benefits you receive in exchange for the prices (premiums) you pay, how would you rate this company relative to
its competitors?
Very good value/Extremely poor value (VAL1)
Very good deal/Very poor deal (VAL2)
Very worthwhile/Not at all worthwhile (VAL3)
Consumer commitment (Zeithaml et al., 1996), seven-point scale, Very unlikely–Very likely, RelG¼0.91, AVEG¼0.77, HVSG¼0.37, RelUS¼0.87,
AVEUS¼0.75, HVSUS¼0.32, RelNL¼0.89, AVENL¼0.75, HVSNL¼0.19;
How likely are you to:
Use this company for most of your future insurance needs (COM1)
Use this company the next time you need to buy insurance (COM2)
Use this company for other financial services that you may require (COM3)
a
The psychometric properties of constructs are indicated by composite reliability (Rel) and average variance extracted (AVE), as well as by highest
variance shared (HVS), as per Fornell and Larcker (1981).

14
Establishing validity of CILMA construct and locating markets in CILMA space First- and second-order effects of CILMA on
firm–consumer relationships
Translate–back-translate Initial set of 20 CILMA items Translate–back-translate

(10 each for constracts and
Established scales for firm-
relational logics)
consumer relationships
Pretestimg Pretestimg Pretestimg

using “think-alouds” using “think-alouds” using “think-alouds”
eith 18–30 consumers with 18–30 consumers with 18–30 consumers Collect
in Germany in United States in Netherlands relationship data
in United States
Match Match
samples samples
Collect Collect
relationship data relationship data
Triangulate Final set of 12 CILMA items Triangulate In Germany in Netherlands
(6 each for contracts and
relational logics)
Translated–back-translate Translated–back-translate Metric and scalar invariance

of relationship construct
items using multigroup
Collect Collect means and covariance
Collect
institutional Match institutional structure analysis (MACS)
Match institutional logics
logics data in logics data in
samples data in United samples Common
Germany Netherlands Gender,
States method bias
income and
and experience
age effects
effects
Metric and scalar invariance Test of first-order effects
of CILMA items using (H1): Do means of
multigroup means and relationship constructs vary
covariance structure predictably with institutional
analysis (MACS) Control for logics?
Control for
cultural differences due common method bias
to masculinity and and instrument out
uncertainty avoidance differences due to
overall satisfaction
Establish validity and Test of second order effects
locational map of Germany, (H2 & H3): Do relationship
Netherlands, and United mechanisms vary predictably
States in a two dimensional with institutional logics?
CILMA space
Figure 2 Analytical procedures for establishing validity of CILMA construct, locating markets in CILMA space, and testing first- and
second-order effects of CILMA on firm–consumer relationships.
literature, and evidenced acceptable psychometric The MACS provides simultaneous estimation of
properties (see Table 2). A translation–back-trans- (see left panel, Figure 2):
lation procedure and follow-up triangulation were
(1) factor loadings relating observed indicants and
used for developing a final set of context-robust
hypothesized latent factors;
operational measures for inclusion in the survey
(2) latent factor and indicator means;
instrument.
(3) constraints on factor loadings to test for mea-
surement equivalence; and
Analytical Approach (4) constraints on latent factor means to test for
Figure 2 displays the overall analytical approach, differences in factor means across groups.
which we discuss below.
We adapted the MACS procedure as suggested
by Podsakoff, MacKenzie, Lee, and Podsakoff (2003)
Institutional logics data. Initially, to test the to estimate a common method factor in each
psychometric validity of the CILMA construct, group. Moreover, we examined whether CILMA
including its dimensions of contractual and rela- dimensions are distinct from cultural disposi-
tional logics, we use a procedure outlined by tions and evaluations. Hence we measured two
Ployhart and Oswald (2004) for multiple group of Hofstede’s (1993) cultural dimensions that
mean and covariance structure analysis (MACS). were most likely to be relevant for the countries

15
considered – masculinity and uncertainty avoid- (3) individual consumers’ gender, age, and income,
ance – and included these as control variables in the as samples differ on these demographic char-
MACS analysis. Whereas the three countries are all acteristics (see Figure 2).
low on power distance, and similarly high on
For testing the second-order effects, we utilized a
individualism, Germany is relatively higher in
two-step single-indicant approach by Ping (1995),
uncertainty avoidance than the US, and the US
which controls for measurement error in curvi-
and Germany are relatively more masculine than
linear terms, and involved estimating the following
the Netherlands.
equation:
Finally, we recognize that, despite our best efforts
to select random samples with identical research pj ¼kj þ B1 x1j þ B2 x2j þ B3 x3j þ B4 x4j þ B5 x1j x1j
designs across contexts, sampled respondents þ B6 x2j x2j þ B7 x3j x3j þ B8 x5j þ B9 x6j
may differ systematically. To control for this bias
we included respondents’ overall satisfaction with þ B10 x7j þ B11 x8j þ zj
insurance providers as an instrumental variable, ð3Þ
resulting in the following estimated equations:
where p is consumer commitment construct, and
the vector n represents the exogenous variables
Z1j ¼ l1j þ g1;1 c1j þ g1;2 c2j þ g1;3 c3j þ y1j ð1Þ
such that x1 to x4 correspond to satisfaction, firm
trust, frontline employee trust, and economic
Z2j ¼ l2j þ g2;1 c2j þ g2;2 c2j þ g2;3 c3j þ y2j ð2Þ value, respectively, and their corresponding quad-
ratic terms are represented by product expressions
Here, Z1 and Z2 correspond to latent constructs for (e.g., x1 x1). In addition, x5 refers to the level of
relational and contracts logics, respectively; l consumer–firm interaction, while x6, x7 and x8
represents the latent factor means; c1 refers to represent gender, age and income, respectively,
overall satisfaction; c2 and c3 represent the cultural which are included to control for individual
dimensions of masculinity and uncertainty avoid- characteristics.
ance; and the subscript j indexes the market We analyzed all three markets in a single,
context (1¼Germany, 2¼US, 3¼the Netherlands). simultaneous analysis. For this purpose, we esti-
We selected Germany as the baseline group, con- mated factor scores for each construct, and used
straining its latent means for both dimensions (i.e., multiple group comparisons to identify patterns of
Z11 and Z21) to 0. Finally, the results of the analyses similarities and differences in estimated effects
were plotted in a two-dimensional space of rela- across markets. If the respective test for such
tional and contracts logics to facilitate interpreta- comparison was significant, we released the con-
tion and testing of first- and second-order effects (to straint, and tested for bivariate equality. Separate
be discussed). estimates were obtained for corresponding coeffi-
cients only if all tests were significant.
Firm–consumer relationships data. Initially, we used
the MACS approach to estimate the latent means RESULTS
for the exchange constructs and test for differences
in latent means across CILMAs (see right panel, Institutional Logics Data
Figure 2). To test for the first-order hypothesis,
Overall psychometrics and model fits. Tables 3 and 4
we employed the LM test for multiple-group com-
summarize the results from the MACS analysis.
parisons involving latent mean differences for the
Regardless of the model estimated, the CILMA
Netherlands and US relative to the German data.
items depict sound psychometric properties (see
For this purpose, we used the multiple-group
Table 4). All items load significantly (40.4,
structural equation modeling (SEM) procedure
po0.05) on their corresponding contracts or
outlined by Card and Little (2006), which expli-
relational factors, which, in combination with
citly addresses metric and scalar equivalence issues.
small residuals (SRMR¼0.01), provide evidence of
To control for other confounding effects and
convergent validity. Table 4 also reports the average
alternative explanations, we included:
variance extracted (AVE) and highest variance
(1) common method factor, as noted above; shared (HVS), based on the final model (Fornell &
(2) consumer experience (i.e., number of contacts Larcker, 1981). The AVE are estimated at 0.70
with the provider in the last 24 months); and (Germany), 0.78 (US), and 0.68 (the Netherlands)

16
Table 3 Model fit statistics and latent mean total effects estimates from MACS analysis of CILMA data
Model estimated: Constraints used Model fit statistics

2 2
w df Dw (Ddf) p-value for Dw2 CFI NFI TLI RMSEA (90% CI)
M1: fully unconstrained 924.9*** 615 — — 0.99 0.98 0.99 0.032 (0.028; 0.036)
M2: loadings fully constrained 970.0*** 647 45.1w (32) 0.06 0.99 0.98 0.99 0.032 (0.028; 0.036)
M3: intercepts fully constrained 1094.2*** 693 124.2*** (46) o0.01 0.99 0.98 0.99 0.034 (0.030; 0.038)
M3a: intercepts partially constrained 976.5*** 674 6.5 (27) 0.99 0.99 0.98 0.99 0.030 (0.026; 0.034)
M4: latent means fully constrained 1031.9*** 684 55.4*** (7) o0.01 0.99 0.98 0.99 0.032 (0.028; 0.036)
M4a: latent means partially constraineda 954.4*** 673 29.5 (58) 0.99 0.99 0.98 0.99 0.029 (0.025; 0.033)
a
Some loadings gave significant LM tests upon introduction of scalar constraints, which led to differences in degrees of freedom.
w
Significant at the 10% level; ***significant at the 0.1% level.
Table 4 Fit statistics, factor loadings, measurement properties and interfactor correlations of CILMA dimensions across contexts from
partially constrained multi-group confirmatory factor analysis
Itemsa Germany (high contract, US (intermediate contract, The Netherlands

low relational) high relational) (low contract,
high relational)
lb Int.c Rel.d AVE e HVS f lb Int.c Rel.d AVE e HVS f lb Int.c Rel.d AVE e HVS f
Relations 0.00g 0.93 0.70 0.10 0.85*** 0.95 0.78 0.39 0.77*** 0.92 0.68 0.35
1. REL1 1.00 0.46*** 1.00 0.46*** 1.00 0.46***
2. REL2 0.92*** 0.49*** 0.92*** 0.20* 0.92*** 0.49***
3. REL3 1.05*** 0.52*** 1.05*** 0.52*** 1.05*** 0.39***
4. REL4 1.10*** 0.45*** 1.10*** 0.45*** 0.89*** 0.45***
5. REL5 1.06*** 0.53*** 1.27*** 0.75*** 1.06*** 0.35***
6. REL6 0.86*** 0.37*** 0.86*** 0.37*** 0.73*** 0.37***
Contracts 0.00g 0.97 0.83 0.07 0.64*** 0.95 0.76 0.22 0.81*** 0.95 0.75 0.35
1. CON1 1.00 0.47*** 1.00 0.47*** 1.00 0.30***
2. CON2 1.08*** 0.45*** 1.08*** 0.45*** 1.08*** 0.45***
3. CON3 1.17*** 0.45*** 1.01*** 0.45*** 1.17*** 0.45***
4. CON4 1.13*** 0.38*** 0.90*** 0.38*** 1.13*** 0.57***
5. CON5 1.18*** 0.49*** 1.18*** 0.49*** 1.18*** 0.49***
6. CON6 1.18*** 0.44*** 1.18*** 0.62*** 1.18*** 0.44***
Masculinity 0.00g 0.80 0.67 0.07 0.92*** 0.81 0.67 0.39 0.54*** 0.80 0.67 0.06
1. MASC1 1.00 0.40*** 1.00 0.40*** 1.00 0.40***
2. MASC3 1.06*** 0.42*** 1.06*** 0.42*** 1.06*** 0.42***
Uncertainty avoid. 0.00g 0.64 0.59 0.16 0.31*** 0.79 0.65 0.14 0.60*** 0.58 0.53 0.16
1. UA1 1.00 0.27** 1.00 0.27** 1.00 0.27**
2. UA3 0.55*** 0.31*** 1.11*** 0.16* 0.55*** 0.31***
Model fit statistics: w2(673)¼954.5 (po0.001); CFI¼0.99; NFI¼0.98; TFI¼0.99; SRMR¼0.05; RMSEA (90% confidence interval)¼0.03 (0.025–0.033).
a
Complete text of item statements is in Table 2.
b
Loading estimate (t-value); all significant at p¼0.01.
c
Intercept estimate for item level/latent mean estimate for construct level.
d
Estimated composite reliability (Fornell & Larcker, 1981).
e
Average variance extracted (Fornell & Larcker, 1981).
f
Highest variance shared (Fornell & Larcker, 1981).
g
Latent means for Germany have been constrained to 0 (baseline group).
Italic loadings non-invariant across contexts.
*significant at the 5% level; **significant at the 1% level; ***significant at the 0.1% level.
for relational logics, and 0.83 (Germany), 0.76 (US), than it shares with any other construct. This
and 0.75 (the Netherlands) for contracts logics. provides support for discriminant validity.
Without exception, each construct extracts Specifically, the estimated correlations between
significantly more variance from its own items the dimensions of contracts and relational logics

17
are estimated as 0.32 (Germany), 0.62 (US), and TLI¼0.99, CFI¼0.99, RMSEA¼0.029 (90% CI: 0.025,
0.59 (the Netherlands), suggesting less than 35% 0.033)). We use this final model for latent means
shared variance. The preceding convergent and comparisons of CILMA dimensions.
discriminant validity evidence is largely
unperturbed across the different models estimated
and reported in Table 3. Latent mean comparisons (see Table 4). First, note
Next, as reported in Table 3, we tested for metric that in regard to the relational dimension, the
and scalar invariance before testing differences in latent means in the US (0.85) and the Netherlands
latent means (Card & Little, 2006; Steenkamp & (0.77) are significantly higher than the German
Baumgartner, 1998). The condition for metric latent mean set as the baseline (po0.01). Second,
invariance is met, since constraining all loadings in regard to the contracts dimension, the latent
to equal across the three market contexts yields means for the US (0.64) and the Netherlands
a non-significant change in w2 (M2: w2diff¼45.1, (0.81) are significantly lower than the German
dfdiff¼32, p¼0.06). However, the scalar invariance latent mean set as the baseline (po0.01). Third,
condition is not met, since constraining corre- the latent means differ for the Netherlands
sponding observed means to equal across contexts and US as well, such that the US is signifi-
results in a significant increase in w2 (M3: w2diff¼ cantly higher than the Netherlands on both the
124.2, dfdiff¼46, po0.01). To test for partial scalar relational and contracts dimensions (po0.05), with
invariance, we released some constraints in accord the German latent mean set as the baseline. The
with Steenkamp and Baumgartner (1998: 81) to preceding locational patterns for market con-
obtain a non-significant increase in w2 over M2 texts appear to confirm and refine our secondary-
(M3a: w2diff¼6.5, dfdiff¼27, p¼0.99). data-based analysis.
To examine whether the latent means for CILMA As displayed in Figure 3, the insurance markets
construct vary across market contexts, we com- of Germany and the US/Netherlands are cognized
pared a fully constrained model (M4) with a model by consumers to lie diametrically opposite in the
that meets metric and scalar (partial) invari- contracts–relational logics space, with Germany’s
ance condition (M3a). This comparison yields a institutional field dominated by contracts logic
significant w2, indicating that the latent means whereas the US/Netherlands is dominated by rela-
differ substantially (w2diff¼55.4, dfdiff¼7, po0.01). tional logic. Moreover, the Dutch market context
We released constraints based on Lagrange multi- is positioned lower in the quadrant from the US
plier (LM) test to obtain a final model that is (distance¼0.19), indicating that it has significan-
equivalent to model M3a (M4a: w2diff¼29.5, dfdiff¼ tly less contract focus, although both markets
58, p¼0.99) and fits the data well (w2df¼673¼954.4, are equally distant from Germany (distance¼1.12
0.8
Contract
0.6
0.4
0.2
Germany 0
d 2G,US = 1.06
-0.2
Relational
-0.4
-0.2 -0.1 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0
-0.6 U.S
d 2G,NL=1.12
2
d =0.19
-0.8 US,NL
Netherlands
-1
Figure 3 Locational map of consumers’ institutional field of Germany, the US and the Netherlands in a CILMA space defined by
contracts-relational dimensions. The ‘‘markets’’ are plotted based on latent means of CILMA dimensions after ensuring metric and
(partial) scalar invariance. The d2 values reported are Euclidean distances between markets based on their locational coordinates.

18
Table 5 Fit statistics, factor loadings, measurement properties and interfactor correlations of firm–consumer exchange data under
varying CILMA
Itemsa Germany (high contract, US (intermediate contract, The Netherlands (low contract,
low relational) high relational) high relational)
lb Int.c Rel.d AVE e HVS f Int.c Rel.d AVE e HVS f Int.c Rel.d AVE e HVS f
Satisfaction 0.00g 0.96 0.88 0.71 0.24*** 0.95 0.86 0.42 0.15*** 0.97 0.92 0.55
1. SAT1 0.96*** 0.05 0.05 0.05
2. SAT2 1.00 0.04 0.04 0.04
3. SAT3 0.90*** 0.04 0.04 0.04
FLE Trust 0.00g 0.97 0.91 0.71 0.21*** 0.98 0.95 0.56 0.06w 0.98 0.95 0.44
4. FLE1 1.00 0.02 0.02 0.02
5. FLE2 1.02*** 0.04 0.04 0.04
6. FLE3 1.02*** 0.03 0.03 0.03
Firm Trust 0.00g 0.98 0.93 0.69 0.13* 0.99 0.96 0.59 0.11* 0.98 0.95 0.55
1. FIRM1 1.00 0.11w 0.11w 0.11w
2. FIRM2 1.01*** 0.13* 0.13* 0.13*
3. FIRM3 1.02*** 0.11w 0.11w 0.11w
Value 0.00g 0.97 0.92 0.56 0.14** 0.98 0.95 0.59 0.11* 0.98 0.94 0.50
1. VAL1 1.00 0.09w 0.09w 0.09w
1. VAL2 1.02*** 0.10w 0.10w 0.10w
2. VAL3 1.00*** 0.10w 0.10w 0.10w
Commitment 0.00g 0.92 0.80 0.52 0.21*** 0.90 0.76 0.54 0.12* 0.90 0.76 0.23
1. COM1 0.98*** 0.02 0.02 0.02
1. COM2 1.00 0.01 0.01 0.01
2. COM3 0.67*** 0.02 0.02 0.02
w2(625)¼1184.3 (po0.001); CFI¼0.99; NFI¼0.98; NNFI¼0.99; SRMR¼0.04; RMSEA (90% confidence interval)¼0.03 (0.032–0.038).
a
Complete item text can be found in Table 2.
b
Loading estimate common to all countries.
c
Intercept for item level/latent mean for construct level.
d
Estimated composite reliability (Fornell & Larcker, 1981).
e
Average variance extracted (Fornell & Larcker, 1981).
f
Highest variance shared (Fornell & Larcker, 1981).
g
Latent means for Germany constrained to 0 (baseline group).
All coefficients and intercepts are statistically significant (po0.05).
w
Significant at the 10% level; *significant at the 5% level; **significant at the 1% level; ***significant at the 0.1% level.
and 1.06, respectively). For this reason, the US scalar invariance. For large sample sizes, Card and
institutional market context is identified in Table 4 Little (2006: 79) note that the MACS approach ‘‘is
as reflecting ‘‘intermediate’’ focus on contracts, likely to indicate measurement inequalities across
whereas the Netherlands is identified as relatively cultures even in the presence of substantively trivial
‘‘low’’ focus on contracts. Both institutional mar- differences.’’ To mitigate this, they recommend
ket contexts are noted as relatively high on rela- estimating directly a model that includes con-
tional logics. straints for metric and scalar invariance. Card and
Little (2006: 79) suggest that if such model
Test of Hypotheses Using Firm–consumer ‘‘exhibits adequate fit as indexed by common fit
Relationships Data indexes, then equality of measurement (i.e.,
measurement invariance) across the cultures can
Overall fit. Consistent with the approach outlined be concluded.’’ In our study, this constrained
by Card and Little (2006), we estimated a multi- model showed an acceptable fit (w2df¼625¼1184.3,
group model of customer commitment (as per NFI¼0.98, NNFI¼0.99, CFI¼0.99, SRMR¼0.04,
Figure 1) that included constraints for metric and RMSEA¼0.03 (90% CI: 0.032, 0.038)) with fit

19
Table 6 Estimated structural coefficients for firm–consumer exchange mechanisms under varying CILMA
Germany (high contract, US (intermediate contract, The Netherlands (low contract,

low relational) high relational) high relational)
Ba Ba Ba
k Intercept 0.08w 0.21*** 0.12*

x1 Satisfaction 0.21*** 0.08 0.21***
x2 Firm trust 0.24*** 0.24*** 0.24***
x3 FLE trust 0.18*** 0.18*** 0.18***
x4 Economic value 0.19*** 0.19*** 0.01
x1 x1 Satisfaction2 0.01 0.01 0.28*
x2 x2 Firm trust2 0.04 0.04 0.04
x3 x3 FLE trust2 0.00 0.07 0.31*
x5 Contact frequency 0.03 0.03 0.03
x6 Gender 0.02 0.02 0.02
x7 Age 0.00 0.00 0.00
x8 Income 0.07** 0.07** 0.07**
Model fit statistics: w2(20)¼9.1 (p¼0.98); CFI¼1.00; NFI¼0.99; NNFI¼1.00; SRMR¼0.01.
a
Estimated loading coefficient.
Italicized estimates significantly variant across contexts at po0.05.
w
Significant at the 10% level; *significant at the 5% level; **significant at the 1% level; ***significant at the 0.1% level.
indices meeting all relevant criteria (see Table 5). Second-order effects (Hypotheses 2 and 3). We pre-
Moreover, each study construct has estimated dicted that the effect of social trust on commitment
reliabilities exceeding 0.85, and an AVE greater would be stronger for relational-dominated con-
than 0.75, indicating acceptable convergent vali- texts (Hypothesis 2a), while the effect of satisfac-
dity. Finally, as summarized in Table 5, each con- tion would be stronger for the contract-dominated
struct meets Fornell and Larcker’s (1981) criterion context (Hypothesis 2b). As per Hypothesis 2a,
for discriminant validity (AVE4HVS). Overall, Table 6 shows that frontline employee trust has
the constructs indicate acceptable psychometric a significant ‘‘motivator’’ effect on consumer com-
properties. mitment in the Netherlands (B¼0.18 and 0.31
for linear and quadratic terms respectively) but
First-order effects (Hypothesis 1). The results are not in the German context (B¼0.18 and 0.00
summarized in Table 6. As per Hypothesis 1, we respectively). Likewise, firm trust has a stronger
had predicted that relational-dominated con- effect on commitment in the Netherlands (B¼0.24
texts would be associated with higher trust and and 0.14 for linear and quadratic terms respec-
commitment (Hypothesis 1b), while contracts- tively) than in the German context (B¼0.24 and
dominated contexts will evidence higher levels 0.04 for linear and quadratic terms respectively),
of satisfaction (Hypothesis 1a). Relative to the although the difference is not statistically signi-
German context, the estimated latent mean for ficant at p¼0.05. However, the estimated effects
satisfaction is significantly higher in the US context of social trust on commitment do not vary signifi-
(0.24), but lower in the Dutch context (0.15, all cantly between the German and US contexts.
comparisons po0.05). This provides mixed sup- Overall, Hypothesis 2a is supported for the Dutch
port for Hypothesis 1a. Likewise, the estimated data, but not for the US data.
latent means for commitment and trust (frontline In accord with Hypothesis 2b, Table 6 shows that
employee and firm) are significantly higher in the satisfaction has a significantly stronger effect on
US context than in the German context (0.21, 0.21 consumer commitment in the contracts-dominated
and 0.13, all po0.05). The preceding pattern of German context (B¼0.21) than in either the
latent means is not obtained for the Netherlands, relational-dominated context of US, where the
where the estimated latent means are generally corresponding effect is non-significant (B¼0.08),
lower than in Germany (0.12 (po0.1), 0.06 (ns), or that of the Netherlands, where the correspond-
and 0.11 (po0.05)). Thus our findings provide ing effect indicates a strong ‘‘hygiene’’ effect
partial support for Hypothesis 1b. (B¼0.21 and 0.28 for linear and quadratic terms

20
respectively). Thus support for Hypothesis 2b is relational-dominated US context presents an

unequivocal. intermediate position. Commitment is higher in
As per Hypothesis 3, we predicted that the effect this context than in the contracts-dominated
of economic value on consumer commitment German context for FLE trust, but the increasing
would be significant and invariant across contexts. slope shows a leveling-off effect. Likewise, for
This predicted pattern is obtained for the contracts- satisfaction, while commitment is higher in the
dominated German and relational-dominated US relational-dominated US context than in the
contexts (B¼0.19, po0.01, for both), but not contracts-dominated German context, the slope
for the Dutch data (B¼ 0.01, p40.50). Hence is significantly more positive in the latter context.
Hypothesis 3 is partly supported.
DISCUSSION AND IMPLICATIONS
Graphing differentiated patterns. Figure 4 displays Contemporary research within the relationship
the results for Hypothesis 2 to illustrate the marketing literature has tended to focus on the
differentiated pattern of effects across institutional variability in consumer commitment mechanisms
contexts. Note, for instance, that frontline em- across diverse markets, largely ignoring the role of
ployee (FLE) trust depicts a distinctive ‘‘motivator’’ institutional logics in explaining this variability
effect in the relational-dominated Netherlands, (Henisz & Swaminathan, 2008). More significantly,
whereas the effect of satisfaction in this context despite frequent calls for the adoption of a con-
follows a ‘‘hygiene’’ pattern. Moreover, consumer sumer perspective in understanding institutional
commitment is higher in the relational-dominated contexts (Brief & Bazerman, 2003), comparative
Netherlands context than in the contracts- international studies focus mainly on consumers’
dominated German context for nearly all values of marketplace attitudes and behaviors, and scarcely
FLE trust (except around the midpoint, where the examine their evaluations of institutional environ-
values are similar). ments or their implications for market relationships.
For satisfaction, the pattern is completely Our study addresses these gaps by bridging
reversed. Consumer commitment is higher in institutional and relationship marketing theories
the contracts-dominated German context than to provide insights into two questions: (1) Do
in the relational-dominated Netherlands context consumers hold meaningful mental models of a
for every value of satisfaction. The pattern for the market’s institutional logic? (2) Are these mental
1.00 1.00
)
NL
d(
0.75
ate
min
0.75 0.50
Relational-Dominated (U.S)
Do
0.25
al-
on
0.00
lati
0.50
(G)
inated
Re
Commitment
-0.25
acts-Dom
Contr
)
d (U.S -0.50
L)
0.25 inate
(N
nal-Dom
ed
tio -0.75
Rela
at
(G)
ated
in
omin
om
-1.00
cts-D
l-D
0.00 ntra
Co
na
-1.25
io
at
el
-1.50
R
-0.25 -1.75
-2.00
-1.49 -1.19 -0.89 -0.59 -0.29 -0.01 -0.31 -0.61 -0.91 -1.21 -1.51 -1.81 -1.99 -1.69 -1.39 -1.09 -0.79 -0.49 -0.19 -0.11 -0.41 -0.71 1.01 1.31 1.61 1.91
Frontline Employee Trust Satisfaction
Frontline employee trust has a “motivator” effect on consumer Satisfaction has a “hygeine” effect on consumer commitment in
commitment in relational-dominated Netherlands context but relational-dominated Netherlands context, while its effect in
only a linear effect in contracts-dominated German context. contracts-dominated German context in linear and strong. In
The relational-dominated US context depicts an intermediate relational-dominated US context, satisfaction depicts an
pattern. intermediate pattern with weak slope.
Figure 4 Varying effects of trust and satisfaction mechanisms on consumer commitment across the different CILMA.

21
models useful in explaining differentiated patterns Moreover, the locational coordinates for the three
of ongoing market relationships? markets in the contract–relational space (shown in
Figure 3) indicate that consumers’ conceptions of
Consumers’ Conceptions of Market’s Institutional institutional logics, as captured by the CILMA
Logics: Representation and Validity construct, are sufficiently fine grained to differenti-
We reasoned that consumers are motivated to ate among these markets. Specifically, the German
develop and maintain shared mental models of insurance market is located in the relatively high
a market’s institutional field because it helps them contracts – low relational quadrant, whereas the US
make sense of and cope with market relationships. and Dutch markets are both located in the
We conceptualized these shared mental models to relatively low contracts – high relational quadrant
include generalized norms of exchange practices in (see Figure 3), consistent with secondary-data-based
a given industry, and referred to them as CILMA. expectations.
Drawing on institutional theory, we proposed two Where the secondary data are coarse and equivo-
dimensions to represent CILMA: (1) contracts logic, cal, the proposed CILMA construct allows us to go
defined by the prevalence of contractual obliga- further. For instance, although the US and Dutch
tions consistent with the logics of instrumenta- insurance markets are both relational-dominated,
lism; and (2) relational logic, characterized by important differences between these markets exist.
social codes of conduct consistent with the logic These differences can be quantified by comparing
of appropriateness. their locational coordinates. The location spread
Observing that markets usually require some along the contracts dimension (0.81 vs 0.64¼
minimum level of contracts and relational logics, 0.15) is twice as large as the spread along the
we reasoned that nations do not represent mono- relational dimension (0.77 vs 0.85¼0.08) for the
lithic institutional fields to produce homogeneous Dutch and US markets, suggesting that consumers
market logics across all industries, nor are these conceive the Dutch insurance market to be pro-
logics static over time. The unique historical and portionately less focused on contracts relative to
institutional footprint of a given industry is expec- relational logics.
ted to provide a reasonable foundation for repre- As we discuss below, this distinction is useful
senting consumers’ conceptions of institutional in understanding the differential results obtained
logics that evidence coherence and are appropriate for CILMA’s influence on relationship marketing
for differentiating across markets for any given mechanisms. Nevertheless, these insights prompt
industry. Moreover, relative to cultural dualities the study of cultural, historical, and institutional
(e.g., structured–unstructured in uncertainty avoid- processes that influence and shape consumers’
ance), we theorize that the contract–relational mental models of institutional logics.
duality is a unique, lower-order representation of
consumers’ institutional logics, and is more prox- Differentiated Pattern of Relationship Marketing
imal to market relationships. Mechanisms across Markets: From Description to
Our empirical results provide support for these Explanation
theoretical assertions. The proposed CILMA con- While past research provides compelling evidence
struct achieves metric and partial scalar invariance of significant cross-market variability in relation-
for its measures in the German, US, and Dutch data ship marketing mechanisms (e.g., Wulf et al.,
utilized. This suggests that the CILMA items have 2001), a descriptive rather than an explanatory
cross-national consistency, and are appropriate for view of differentiated patterns prevails in most
comparative analysis. In addition, we find reason- studies to date. We therefore have largely robust
able evidence of CILMA’s convergent and discrimi- observational evidence of cross-market variability,
nant validity. The two dimensions share, for but weak explanations beyond post-hoc assertions.
instance, less than 35% of their variance, and signi- Our study moves the research forward by deve-
ficantly less than that with constructs related loping theoretical explanations that bridge the
to market exchanges (e.g., overall satisfaction) or relationship marketing and institutional perspec-
cultural dimensions of uncertainty avoidance and tives. Specifically, the bridging hypotheses involve
masculinity. Taken together, these results provide predictions of first- and second-order effects of
sufficient evidence to suggest that the CILMA consumers’ conceptions of institutional logics,
construct has reasonable validity and warrants represented by the CILMA construct, in explaining
consideration in future research. cross-market variability in relationship marketing

22
mechanisms. We reasoned that consumers recog- Second, the commitment mechanisms reflect the
nize and reward firms that invest resources in intermediate patterns consistent with the CILMA
relationship mechanisms that are aligned with locational coordinates of the US market. Frontline
their mental model of the market’s institutional employee trust has a more positive but exponen-
logics. Our results generally support this line tially decreasing slope relative to the German
of reasoning, although some results raise new market, but lacks the motivator effect of the Dutch
questions. market. Likewise, the influence of satisfaction on
Specifically, as displayed in Figure 4, frontline commitment is linear but weaker than the corre-
employee trust has a ‘‘motivator’’ effect on con- sponding effect in the German market, but lacking
sumer commitment in the relational-dominated the hygiene pattern of the Dutch market.
Dutch market (high relational, low contracts: see Finally, the effect of value on commitment is
Table 4), while the corresponding effect is linear robust and equivalent to the corresponding effect
and weaker for the contracts-dominated German in the German market. For the relational-domi-
market (low relational, high contract: see Table 4). nated Dutch market the value mechanism is
Consistent with this, consumers exhibit higher surprisingly non-significant, suggesting that this
levels of commitment in the relational-dominated context is strongly inclined toward the dominance
Dutch market than in the contracts-dominated of trust mechanism. Yet the relatively low latent
German market for every value of frontline employ- mean estimates of trust in the Dutch market raise
ee trust. This conforms to our anticipation that new questions. A possible explanation is that the
trust mechanisms will evidence increased salience influence of trust mechanisms is heightened when
in markets characterized by relational logics, and relational risk is high because of low levels of
suggests that trust investments in contracts-domi- contracts. The increased relational risk could render
nated logics are less effective. the economic value mechanism moot, explaining
Likewise, the satisfaction mechanism depicts a the low mean of perceived economic value in the
pattern of effects that is in direct contrast to the Dutch context. Additional research to explore these
preceding pattern for employee trust mechanism, explanations is warranted.
as anticipated by our hypothesis. The influence of The insight from the institutional explanation
satisfaction on commitment in a relational-domi- of differentiated exchange patterns across interna-
nated Dutch market is akin to a ‘‘hygiene’’ effect, tional markets lies in its potential to anticipate
while the corresponding effect in the contracts- the preceding pattern of relationship marketing
dominated German market is linear and strong. mechanisms, which varies systematically from the
Moreover, the contracts-dominated market is asso- contracts-dominated German to the relational-
ciated with higher values of consumer commitment dominated Dutch context, with an intermediate
than the relational-dominated Dutch market for pattern for the US market. Thus our study parallels
every value of satisfaction. This provides further recent work that bridges the institutional and
support of our alignment-based reasoning. resource-based theories (C. Oliver, 1997), and
As noted above, consumers in our study perceived broadens the possibilities by including the con-
the US market as relatively more contractually sumer perspective to bridge into relationship
focused than the Dutch market, while both are marketing theory.
relational-dominated. The pattern of consumer
commitment mechanisms for the US market sheds Managerial Implications
several additional insights into the bridging of Managers operating in international markets are
institutional and relationship marketing perspec- well aware that successful navigation of global
tives (see Figure 4). markets requires strategies that adapt flexibly to
First, note that the level of consumer commit- local markets while also capitalizing on global
ment is higher in the US market than in either similarities. Studies of cultural, environmental,
the German or the Dutch market. This suggests demographic and geopolitical differences across
that, at least based on our data, mixed institutional nations are motivated, in part, by providing
systems that combine relational and contract managers with navigational guides. Complement-
logics are more conducive to consumer commit- ing the broad and abstract assertions of this work,
ment than relatively ‘‘monistic’’ markets such as our study advances an institutional-theory-based
the relational-dominated Dutch and contracts- approach for differentiating industry-markets that
dominated German markets. emphasizes consumers’ perspective. As a result, it

23
offers guidelines that are more concrete and fine- it easier to select markets and economies with
grained. similar or contrasting CILMAs, and thereby facil-
Based on our theorizing and results, we recom- itating future theoretical work and managerial use.
mend that managers comprehend, measure, and Fourth, although we included uncertainty avoid-
track consumers’ institutional logics for the indus- ance and masculinity for robustness and discrimi-
try-markets they serve, and understand their stra- nant validity analyses, more elaborate cultural
tegic implications. To facilitate this, we provide controls need to be examined, and possible inter-
a validated CILMA construct that managers can actions between cultural and institutional logic
deploy, with minor refinements. This construct constructs explored. In addition, we relied on two
facilitates mapping of consumers’ mental models dimensions for capturing consumers’ institutional
in a two-dimensional institutional logics space logics. Although the CILMA construct shows sound
for comparative analyses of global markets, and psychometric properties, further refinements or
tracking its changes over time as markets converge extensions to include additional dimensions may
or diverge owing to local and global forces of be considered. Fifth, future research may explore
change. the nature and evolution of a market’s institutional
Our study also demonstrates that an under- logics in relation to network theory ideas embodied
standing of consumers’ institutional logics offers in the service-dominant logic (SDL; Vargo & Lusch,
concrete managerial guidelines for investing in 2004). This broadening brings SDL thinking closer
relationship capabilities in order to gain consumer to institutional theory, and useful connections
commitment. Our results suggest that consumer might be derived. Finally, it remains unclear
commitment conforms to a principle of alignment, whether globalization will reinforce or erase differ-
such that payoffs from a firm’s investments are entiated patterns of institutional logics across
contingent on its alignment with consumers’ international markets. This lack of clarity begs
mental models of the market’s institutional logics. additional research.
Only investments in value delivery capabilities
are universally rewarded and remain unaltered CONCLUDING NOTES
by consumers’ different institutional logics. Thus Our study is an encouraging starting point for
we recommend that international managers include understanding consumers’ conceptions of markets’
CILMA considerations in formulating strategies institutional logics, and their influence in explain-
to pinpoint levers of relationship capabilities that ing variability in differentiated patterns of relation-
are appropriate for market differentiation (e.g., ship marketing mechanisms across international
alignment) while identifying others that may be contexts. This line of research does not diminish
globalized (e.g., value). the role of managerial agency, just as it does
not presume a deterministic view of institutional
Study Limitations and Future Research influence. Rather, our study provides a founda-
Several limitations warrant consideration, and tion for a mid-range theory, bridging institutional
provide opportunities for future research. First, we and relationship marketing theories to facilitate
recognize the usual limitations of a cross-sectional systematic empirical examination of their interre-
design, despite the use of two separate samples to lationships, as advocated by Iyer (1997) and
control for possible confounding between institu- reiterated in the institutional literature (Henisz &
tional logics and firm–consumer relationships Swaminathan, 2008). In this theory, institutional
data. It is appropriate to triangulate our findings logics amplify or diminish the influence of manage-
with alternative within-subject designs, such as a rial agency in gaining consumer commitment, and
longitudinal design. Second, to the extent that the this effect is nontrivial. We hope that our work will
cross-national samples are not completely equiva- provide an impetus for additions and extensions
lent, we cannot rule out the confounding effects of that bridge institutional and relationship marketing
sampling differences, although we include gender, literatures and emphasize consumers’ perspective in
age, and income as control variables to mitigate explaining differences in firm–consumer exchange
these effects. Third, studies in other markets and mechanisms across international contexts.
economies are useful for investigating the general-
izability of the proposed CILMA dimensions. A ACKNOWLEDGEMENTS
systematic program can yield a representation of The authors thank Deepak Sirdeshmukh for his
global markets in a CILMA locational space, making assistance in data collection in the United States,

24
and thoughtful contribution to the development of Research Foundation (DFG grant no. HO 2224/1-1).
ideas at the formative stages of this paper. Financial The authors appreciate Hartmut Holzmüller’s assis-
support for data collection in the United States was tance in arranging the DFG grant, and for input in the
provided by a research grant from the Weatherhead initial stages. The paper benefitted from the construc-
School of Management, Case Western Reserve tive comments of the reviewers and the thoughtful
University. Financial support for data collection in guidance of the Area Editor during the review process,
Germany was provided by a grant from the German which is sincerely acknowledged.
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September 2009.
refrain from detailed suggestions (Menhart, Pyka,
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Vletter-van Dort, H. 2006. Wet op het financieel toezicht, wonder
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Investments in consumer relationships: A cross-country and
cross-industry exploration. Journal of Marketing, 65(4): 33–50. for instance the following excerpt from a shopper’s
Zeithaml, V. A., Berry, L. L., & Parasuraman, A. 1996. The guide developed by the State of Ohio in the US
behavioral consequences of service quality. Journal of Market- (http://www.insurance.ohio.gov/Consumer/OCS/
ing, 60(2): 31–46.
CompleteGuides/CompleteHomeGuide.pdf):
Wise shoppers look for more than price y The process of

APPENDIX choosing a proper policy for your home must take into
account many important factors. The policy offered at the
Secondary Data Analysis of Insurance Markets lowest cost may not offer the level of insurance protection
After the identification of German, US, and Dutch you need. If you have been satisfied with your company’s
insurance markets as targets of study, additional service in the past, it may not be wise to jump to an unknown

26
Table A1 Comparison of insurance contracts in Germany, the US and the Netherlands, based on page length
Country Auto insurance contract (no. of pages) Home insurance contract (no. of pages)
Ga 20 16
US 14 13
NLa 6 (slightly smaller margins) 11
DUS-G 6 (¼30% less in US than in G) 3 (¼19% less in US than in G)
DNL-G 14 (¼70% less in NL than in G) 5 (¼30% less in NL than in G)
a
G¼Germany, NL¼the Netherlands.
company to save a few dollars. If you have not been satisfied independent consumer organization also exists in
with your company, or if you are shopping for the first time, the Netherlands: Consumentenbond (http://www
ask friends and relatives for references about the service they
have received from companies they have used. (p. 10)
.consumentenbond.nl/). Like their German coun-
terpart they focus on price/content comparison,
The German federal agency Bundesanstalt für and provide suggestions for switching providers.
Finanzdienstleistungsaufsicht (BaFin) does provide Their range of studies pertaining to insurance is
consumers with information but only at a very limited.
general level (see http://www.bafin.de/cln_116/
nn_723254/DE/Verbraucher/FAQVerbraucher/Versich
erungen/versicherungen__node.html?__nnn¼true). ABOUT THE AUTHORS
In the Netherlands, Autoriteit Financiële Markten Jagdip Singh (jagdip.singh@case.edu) is H. Clark
(AFM) provides information for consumers (http:// Ford Professor of Marketing at Weatherhead School
consument.afm.nl/consumenten/producten/verze of Management, Case Western Reserve University,
kering/hoe.aspx), and has recently opened a new US, and holds a PhD in Marketing from Texas Tech
Internet site Consuwijzer (http://www.consuwijzer University. His international program of research
.nl/Ik_wil_advies_over/Geld_en_verzekeringen/Ver examines effective and enduring connections
zekeren). However, the level of information is still between organizations and their customers, espe-
basic, and thus extremely limited. cially in service industries. He also studies how
Independent consumer agencies in all three firms organize and implement change and knowl-
countries do provide consumers with detailed, edge management to balance the competing goals
additional information. For our secondary data of productivity and quality in the frontlines. Jagdip
research we focused on agencies that require mem- received the ‘‘Excellence in Reviewing’’ awards from
bership status. In the US, the Consumer Reports several journals, and has published in journals such
offers extensive comparisons and advice for as Journal of Marketing, Academy of Management
selecting insurance (www.ConsumerReports.org). Journal, Academy of Management Review, Journal of
Suggestions that can be found include, for instance, Marketing Research, Management Science, and Journal
to ‘‘call your state insurance departments to get of International Business Studies.
a measure of complaints about the carriers you’re
considering’’ and ‘‘Stick with a company that Patrick Lentz (patrick.lentz@udo.edu) is a post-
treats you well y loyalty seems to count’’ (re auto doctoral research fellow in the Department of
insurance). In Germany, Stiftung Warentest (http:// Marketing, TU Dortmund, Germany, and CEO of
www.test.de/themen/versicherung-vorsorge/) pro- the Institute of Efficient Marketing (IFEM) in
vides independent information and test results Bielefeld, Germany. His research interests focus on
for many different sorts of products and services. methodological issues in marketing research as well
The organization provides advice to consu- as customer relationship management and service
mers, such as what to do in order to obtain the marketing. He has published in the Journal of
cheapest insurance, and points out alternatives for Business Ethics, Advances in International Marketing
consumers who want to change insurance provi- and DBW – Die Betriebswirtschaft.
ders. Several studies are available (e.g., auto insur-
ance, home insurance, and personal valuables) Edwin J Nijssen (e.j.nijssen@tue.nl) is a professor
comparing price and content of the offers set of Marketing at the Innovation, Technology Entre-
forward. Relational advice is limited. A similar preneurship and Marketing group of the School

27
of Industrial Engineering, Eindhoven University international marketing. He has published in, for
of Technology, and holds a PhD from Tilburg instance, the Journal of the Academy of Marketing
University. His research interest focuses on new Science, International Journal of Research in Marketing,
product development, relationship marketing, and and Journal of Product Innovation Management.
Accepted by Daniel Bello, Area Editor, 3 September 2009. This paper has been with the authors for three revisions.

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Journal of International Business Studies, 1–27

& 2010 Academy of International Business All rights reserved 0047-2506

First- and second-order effects of consumers’

Jagdip Singh1, Abstract

Keywords: institutional theory; relationship marketing; cross-cultural analysis; compa-

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Journal of International Business Studies

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Consumers’ Institutional Logics of Market Action (CILMA)

Ongoing firm–consumer relationships

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Gender (%) Age in years (%) Educationa

Consumers’ institutional logics

Marital status Household size (%) Incomec (%)

Table 2 Operational measures and reliabilities of study constructsa

Consumer institutional logics of market actions (CILMA) dimensions

Consumer–firm exchange constructs

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Translate–back-translate Initial set of 20 CILMA items Translate–back-translate

Pretestimg Pretestimg Pretestimg

Translated–back-translate Translated–back-translate Metric and scalar invariance

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Model estimated: Constraints used Model fit statistics

Itemsa Germany (high contract, US (intermediate contract, The Netherlands

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Germany (high contract, US (intermediate contract, The Netherlands (low contract,

k Intercept 0.08w 0.21*** 0.12*

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respectively). Thus support for Hypothesis 2b is relational-dominated US context presents an

Frontline Employee Trust Satisfaction

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Journal of International Business Studies

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Wise shoppers look for more than price y The process of

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Journal of International Business Studies

Journal of International Business Studies

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