Home Country Bias and Majority Outgroup Consumption: Evidence From the Introduction of Islamic Banking in Mauritius
In this paper, we investigate the home country bias and liability of foreignness regarding financial services products to address the question: "What factors would induce a Hindu or Christian utilize newly introduced Islamic Banking products when conventional banking products are already available?" Specifically, we examine the impact of the introduction of a religion based banking system, Islamic banking, into a culturally heterogeneous country. Specifically, this paper examines branding efforts of banks surrounding the adoption of Islamic Banking (IB) services, where Muslims are a minority out group and there are substantial diverse populations of many faiths. We contribute to three distinct bodies of literature: first, we assess whether the concept of "liability of foreignness" applies to financial services products within a country related to religious orientation. Second, we examine the role of financial services marketing in overcoming any liabilities of "foreignness" (related to cultural or psychic distance) related to investment in newly introduced financial products. Third, we add to the literature related to the adoption of Islamic Banking system products and services. We argue that a liability of foreignness existed for IB products upon introduction in Mauritius. Yet, this cultural bias can be overcome through effective financial services marketing, as uunderstanding and awareness of IB concepts is the most important predictor of adoption of IB products for both Muslims and non Muslims. Our findings yield information for wealth managers seeking to overcome the liability of foreignness and home country bias, where the bias is towards one's prevailing faith.