Historical Memory and Brand Preference

Abstract

We study how the historical memories of war affect consumer choices of brands from different country-of-origins in the context of the Chinese automotive market. Our research design exploits two natural experiments: (i) the Imperial Japanese Army's Continental Cross-Through Operation in 1944 in Guangxi of China that created local variations in historical memories, and (ii) the China-Japan conflict over the sovereignty disputes in 2012 that activated the memories. We find that, after the 2012 conflict, sales of Japanese cars dropped 8.5% more, while sales of Chinese brands increased 8.9% more, in invaded counties than in neighboring non-invaded counties, despite similar pre-trends. The effects persisted for more than 24 months. The heterogeneous effects show rich managerial implications: the effects are stronger for higher-priced and larger cars, as well as more recognizably Japanese or Chinese brands. Creating local independent brands help foreign brands to take advantage of the memory effect. We also explore the mechanism and find supporting evidence for intergenerational transmission of memories and local protest as mechanisms of the memory effects.

Keywords: Country of Origin, Brand, Economic History, Political Economy, China

JEL Classification: D73, P16, H70, L62