Service Failures and Recovery Strategies from the Service Provider Perspective

Abstract

Most of existing literature pertaining to service failures and recovery strategies, while aiming at helping service providers determine their best recovery strategies, focuses on how customers respond to service failures. The real determinants of the strategies for those providers per se are seldom dealt with. This study proposes a framework linking service failure types and recovery strategies, and examines the moderated effects of buyer-seller relationships and the dependence structure from the service provider perspective. The analytical sample comprises 134 service failure encounters in Taiwan's semiconductor industry. Empirical results show that a service provider's recovery strategy decision is affected by the service failure type, and moderated by the dependence structure, but not by buyer-seller relationships. These results extend the theory of service failure and recovery strategy. This study also provides managers with insights on how to deal with different types of service failure, how to allocate organizational resources, and how to improve their performance when deciding which recovery strategy to adopt.