Understanding the Dynamics of Spillover Effects of a Focal-brand Crisis on Non-focal Brands and Their Organizational Resilience Building

Brands not only encounter internal crises, but also are impacted by crises occurring in other brands, i.e., the spillover effect of a brand crisis. The gradual frequency of a brand experiencing the spillover effects from another brand’s crisis has attracted increasing attention from both scholars and practitioners. Although existing research has explored how a brand (focal brand) crisis spills over to other brands (non-focal brands), the spillover effect is generally regarded as negative to non-focal brands. Little attention has been paid to exploring and examining how non-focal brands’ perception of the spillover effects of a focal-brand crisis develops. Furthermore, how non-focal brands respond to the focal-brand crisis through its organizational resilience building and how effective such resilience- building is to the non-focal brands’ performance during and after the crisis is largely unknown OR unexplored. To fill these knowledge gaps, this research examines the dynamic nature of spillover effects of a brand crisis and the process through which non- focal brands build organizational resilience in response to the crisis.

Taking a process perspective and drawing upon attribution theory and organizational resilience, I employ a mixed-methods design incorporating both multiple-case studies and experiments in this thesis. The context of the research is the electric vehicle (EV) sector in China. As an example of a focal-brand crisis, I focus on the major product-harm crisis of Tesla EVs that took place in China in 2019. Four other brands from the Chinese EV sector have been chosen as research cases. The multiple-case study findings reveal a process through which non-focal brands make sense of and attribute the focal brand crisis, shape perceptions of the spillover effects on themselves and build organizational resilience in response. The research findings reveal that spillover effects are dynamic, are both negative and positive, with immediate vs. emerging effects. The spillover effects on non-focal brands are shaped by contingency factors including internal organizational and external environmental factors. Driven by the attribution decision and perception of spillover effects, non-focal brands activate their coping and adaptation capabilities to build organizational resilience. They focus on short-term problem-solving to combat the present focal-brand crisis as well as enhancing long-term competitiveness with the aim of building to be resilience against future crises.

An experiment study was designed and operationalized to examine the effectiveness of non-focal brands’ resilience building to mitigate the spillover effects of the focal-brand crisis on non-focal brands’ performance. This study used consumer brand trust as the indicator of brand performance. The findings provide evidence that a focal-brand crisis could negatively impact the consumer trust of non-focal brands, and non-focal brands engaging in building organizational resilience with both short-term and long-term focus as responses could not only reduce the negative influence from the focal-brand crisis but also improve long-term consumer brand trust.

This research provides significant theoretical contributions and practical implications. It takes a non-focal brand perspective to understand brand crisis and its spillover effect, which broadens the scope of knowledge of spillover effects of brand crisis. This research contributes to spillover effect theories by adopting a dynamic approach to empirically investigate the evolving nature of spillover effects. Further, this research provides empirical evidence as a basis for theory building through the application of capability- building perspective in examining organizational resilience. Finally, this research effectively adopts a mixed-methods design to unpack the complexity of the research phenomenon and capture a complete process from non-focal brands’ sense-making, interpreting, attributing, and responding to a focal-brand crisis.

The findings of this research provide organizations with useful insights of how spillover effects develop over time and are influenced by contextual factors. Organizations should be sensitive to environmental factors as well as the emerging nature of spillover effects to assess the impact of a focal-brand crisis more accurately on themselves and be more strategic in building organizational resilience for short-term and long-term purposes. Given the findings that consumer trust on non-focal brands declines when a focal-brand crisis occurs, and cannot be restored when consumers are aware of the non-focal brands’ efforts in being resilient, organizations need to demonstrate their resilience building in marketing communications with consumers during and after the focal-brand crisis.