Wage Inequality: Its Impact on Customer Satisfaction and Firm Performance

Abstract

This article adopts a marketing perspective to examine how wage inequality between top managers and their employees may have customer-related consequences (i.e., customer-directed effort, customer-directed opportunism, and customer-oriented culture) that affect customer satisfaction and firm performance. Surprisingly, marketing scholars and practitioners have largely neglected this pressing societal issue. The authors collect a cross-industry, multisource data set, including responses by top-level managers and objective data on wage inequality and firm performance from 106 business-to-business-focused firms (Study 1). In addition, they analyze multisource longitudinal panel data covering 521 firm-year observations for business-to-consumer-focused firms (Study 2). The results consistently reveal that wage inequality harms customer satisfaction. This relationship is mediated by customer-directed opportunism and customer-oriented culture but not customer-directed effort. Moreover, while wage inequality has a positive direct effect on short-term firm profitability, this effect is dampened by the negative indirect effect through customer-related consequences and customer satisfaction. Importantly, the positive direct effect of wage inequality on short-term profitability vanishes in the long run. But the adverse effect through customer satisfaction persists, leading to a nonsignificant total effect on long-term profitability. These findings may guide researchers, managers, shareholders, and policy makers in dealing with the challenge of rising wage inequality.

The value relevance of digital marketing capabilities to firm performance

“…This may be because marketing capabilities affect more directly accounting-based performance measures than market-based performance measures (Katsikeas et al, 2016 ). The reason for this is that accounting-based performance measures are more closely related to the internal functioning of a firm, whereas market-based performance measures rely on external investors’ preferences and expectations of a firm’s value (Bamberger et al, 2021 ). Taken together, our results are largely robust to different firm profitability measures, providing additional empirical support for our findings (see Web Appendix E).…”

Employee Motivation, Job Satisfaction, Customer Satisfaction, and Firm Performance: The Moderating Role of Employee Empowerment

“…The items of Job Satisfaction were adopted from Al-dalahmeh et al (2018), Hanaysha and Tahir (2016). The items of customer satisfaction were adopted from Bamberger et al (2021), Eneizan et al (2021). The items of firm performance were adopted from Al-dalahmeh et al (2018).…”

Being creative under the Covid-19 pandemic crisis: the role of effective inter-organizational relationship management

“…A crisis situation, such as the Covid-19 pandemic, provides fertile ground for cultivating opportunism in business relationships, because: (a) deteriorating market conditions provide possible excuses for violating promises made during the pre-crisis period; (b) the high volatility, unpredictability, and complexity of the new situation can attribute failure to fulfil promises to an inability, rather than reneging; and (c) business partners deriving power from the crisis may exercise this power to take advantage of the less powerful member (Conway et al, 2014;Ju et al, 2014;Sarbin, 1994). Partners behaving in an opportunistic manner violate relational norms and deliver lower relational value than promised and expected (Bamberger et al, 2021;Um and Kim, 2018). As such, exposure to opportunism is associated with various negative feelings, such as disappointment, exploitation, and devastation, which are expected to reduce satisfaction, because it increases the cost of doing business with the partner, while at the same time reducing the benefits derived due to deteriorating performance (Høgevold et al, 2020;Glavee-Geo et al, 2021).…”