The Impact of Firm Size and Business Strategy on Response to Service Disruptions: Evidence From the U.S. Domestic Airline Industry

Abstract

In this article, data from the U.S. domestic airline industry to examine the impact of firm size and business strategy on the effect of service disruptions (cancellations and delays) on service quality (customer dissatisfaction) is used. We test our hypotheses by fitting fixed-effects models to longitudinal data obtained from the U.S. Department of Transportation. The findings suggest that there is a significant relationship between service disruptions and service quality. The results show that both airline size and airline business strategy have moderating impacts on the relationship between service disruptions and service quality. We find the negative impacts of delays and cancellations on service quality are more pronounced for network airlines than for low-cost airlines. The impact of service disruptions on service quality is less significant for larger airlines when the rate of cancellations is low. As the rate of cancellations increases, the service quality of larger airlines is increasingly affected, and the effect is more pronounced compared to the effect on the smaller airlines, suggesting a moderating impact of firm size. Overall, our empirical results show that the relationship between service disruptions and service quality is being moderated by both a firm's size and a firm's business strategy.