The Role of Country of Origin and Quality in Supplier Selection

Abstract

The study examines the role of perceived quality and the country-of-origin (`Made in' effect) in corporate sourcing decisions. While the literature has mostly focused on the dimensions of conformance and performance quality, less attention has been paid to how perceived quality -- particularly the product's place of origin -- influences optimal supplier selection. To address this, we model the impact of country of origin on perceived quality within the supplier-selection decision. The analytical results and numerical simulations indicate that the stronger the positive perception of the country of origin and the lower the price sensitivity, the more advantageous it is to source from local suppliers, whereas intense competition may push firms toward offshore sourcing. At the same time, if the partial derivative of the demand function with respect to price and quality is negative -- meaning that buyers become more price-sensitive at higher shares of local sourcing -- it may be optimal to adopt a dual sourcing strategy. Our findings contribute to the supply chain management and supplier-selection literature that integrates the made-in effect into sourcing decisions.