The role of product quality cues in firm performance: Evidence from the U.S. auto industry

The current study highlights the importance of cues for quality at the product level on firm performance. Utilizing data from the U.S. auto industry, our results demonstrate that product cues with the highest positive evaluations have a greater impact on improving firm performance due to their ability to showcase the firm’s utmost capability. We also find that the consistency of the highest-rated product cue over time corroborates the credibility of the signal. Furthermore, our research reveals that the effect of consistency of the highest product cue over time, which enhances firm performance, becomes more pronounced when the auto firm is suffering from a poor reputation. These findings suggest that determining how quality evaluations are distributed across the product line is of paramount importance. This determination may enable firms suffering from a poor reputation to allocate their resources asymmetrically, focusing on products with the highest ratings to enhance their overall performance.