Does Company Size Shape Product Quality Inferences? Larger Companies Make Better High-Tech Products, but Smaller Companies Make Better Low-Tech Products

Abstract

Companies vary on oft-publicized size metrics (number of employees, revenue). Do consumers prefer otherwise identical products made by larger or smaller companies? The answer hinges on whether consumers perceive the products as low-tech or high-tech. This prediction stems from a novel framework charting two lay theories regarding key resources companies utilize to provide value to consumers: employees and finances. In the intrinsic motivation lay theory, consumers believe that employees of larger (vs. smaller) companies are less intrinsically motivated. In the financial resources lay theory, consumers believe that larger (vs. smaller) companies have greater capacity to fund research and development. Critically, product type (low-tech vs. high-tech) differentially affects the accessibility of these two lay theories: For low-tech (vs. high-tech) products, the intrinsic motivation lay theory is more accessible, driving quality evaluations and choice in favor of smaller companies. For high-tech (vs. low-tech) products, the financial resources lay theory is more accessible, driving quality evaluations and choice in favor of larger companies. This research advances theory by reconciling conflicting findings regarding product quality inferences from company size metrics, with guidance for marketers to improve quality evaluations and choice shares by strategically supporting or challenging lay theories and shifting perceptions of company size or product type.