Does franchisor ethical value really lead to improvements in financial and non-financial performance?

Abstract

PurposeAlthough ethical management would seem to be a core responsibility in today’s business climate, empirical research and practical applications in the hospitality industry remain scarce. Hence, the aim of this study is to examine the influences of ethical value and corporate philanthropy on the foodservice industry in South Korea.Design/methodology/approachFrequency, reliability, confirmatory factor, correlation and structural equation modeling analyses were used.FindingsThe results indicate that, overall, ethical value directly influences corporate philanthropy and two aspects of organizational commitment (i.e. continuous and affective). Corporate philanthropy, in turn, positively relates to organizational commitment dimensions as well as financial and non-financial performance. Affective and continuous commitments lead to improvements in both financial and non-financial performance.Practical implicationsThe strategic importance of ethical value and the following philanthropic activities in the foodservices is demonstrated from the findings of this research.Originality/valueThe current study is the first to develop and test an empirical model which accounts for the effects of ethical value on both financial and non-financial performances in the franchisor–franchisee relationship.