US consumer reactions to China Shuanghui acquisition of Smithfield Foods and its neural basis

Abstract: The $4.7 billion acquisition of Smithfield Foods by China’s Shuanghui International (now WH Group) marks the largest Chinese takeover of a US company in history. Using electroencephalography along with an incentive compatible willingness‐to‐pay (WTP) elicitation mechanism, our study provides neural based evidence that the Shuanghui–Smithfield acquisition lowered consumers’ preference for the Smithfield brand, but increased it for the Chinese brand. Consumers’ neural preference for American brands increased after learning about the acquisition, implying a positive spillover effect to US brands in the US market. We also find that, after learning that an item is a product of the United States, consumers’ neural preference decreased although their willingness‐to‐pay increased, consistent with some empirical reports that many US consumers prefer to purchase cheaper products made abroad rather than products of the United States with higher prices.