Trust Erosion During Industry-Wide Crises: The Central Role of Consumer Legitimacy Judgement

Shijiao Chen (), Jing A. Zhang (), Hongzhi Gao (), Zhilin Yang () and Damien Mather ()
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Shijiao Chen: Macquarie University
Jing A. Zhang: University of Otago
Hongzhi Gao: Victoria University of Wellington
Zhilin Yang: City University of Hong Kong
Damien Mather: University of Otago

Journal of Business Ethics, 2022, vol. 175, issue 1, No 8, 95-116

Abstract: Abstract Widespread unethical corporate misconduct in an industry triggers industry-wide crises. This research investigates how industry misconduct affects consumers’ trust in the industry, by incorporating insights from a micro-level psychological aspect of institutions. The conceptual framework proposes that consumer legitimacy judgement lies at the core of industry trust, following an industry-wide crisis. The results demonstrate that perception of normalisation of misconduct (PNM) affects industry trust through consumer legitimacy judgement (CLJ) (Study 1). Moreover, the PNM-CLJ-industry trust relationship is stronger during industry-wide crises compared with crises that involve only one firm (Study 2), and this relationship is not dependent on the frequency of crises (Study 3). This research contributes to the knowledge of product-harm crisis by deepening understanding of the trust erosion mechanism during industry-wide crises, with a focus on legitimacy judgement. The findings have implications for prevention of industry-wide crises and for boosting ethically desirable business activities.

Keywords: Industry-wide crisis; Industry trust; Consumer legitimacy judgement; Corporate misconduct; Institutions (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s10551-020-04588-0

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