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

Journal of Business Ethics 175 (1):95-116 (2020)
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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 affects industry trust through consumer legitimacy judgement. Moreover, the PNM-CLJ-industry trust relationship is stronger during industry-wide crises compared with crises that involve only one firm, and this relationship is not dependent on the frequency of crises. 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.

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