An econometric analysis of the carryover effects of quality on consumer perceptions of quality

Essay I: Organizing the quality maze. Quality is a central element in many areas of academic research. Yet, in spite of{09} substantial research on quality, much confusion remains. Some of the confusion is caused by diverse literatures using different definitions, constructs, research paradigms, and objectives. Also, there is a lack of research on the broad theoretical processes, which might help us understand divergent empirical results. In this paper, we present an organizing framework for the quality literature by developing a longitudinal, process-oriented perspective of quality. We base our framework on a synthesis of more than 300 articles from economics, engineering, management, marketing, operations, and strategy. We use the findings from this body of research to develop firm-level and individual-level processes in each component of our framework. Based on our framework, we interpret existing research and discuss opportunities for future research. We conclude with a discussion of our study's managerial implications.; Essay II: Will they ever learn? Managers keep making changes in the product design and manufacturing processes to improve product quality. However, these changes do not always translate into higher consumer perceptions of quality. Although many studies have referred to the differences between quality and perceptions of quality, there is no research on their specific relationship. In this study we examine this relationship in a longitudinal econometric framework. We compile data on the objective quality and perceived quality of 241 brands in 46 product categories over a period of 12 years. Using a reduced form distributed lag model, we evaluate the short-term and long-term carryover effects of objective quality on perceived quality. On the aggregate, we find that the size of the long-term effects is more than twice the short-term effects and the carryover duration is between six and seven years. We find that there are asymmetries in carryover between increases and decreases in quality and between high reputation and low reputation brands. Further we find differences in quality carryover across various product categories and use an empirical classification approach to examine these differences. We discuss the implications of our findings on future research and management practice.