The purpose of this paper is to investigate the effect of outsourcing and offshoring on brand loyalty in a service recovery context. In addition, the effect that consumer ethnocentrism has on these relationships is examined.
An experiment was designed using a series of service recovery scenarios that manipulated whether the recovery effort was conducted by an in-house/outsourced or local/offshored party.
The study shows that while outsourcing service recovery within the home country has no effect on loyalty, outsourcing to an offshore location does. In addition, the effect of offshoring of loyalty is greater for consumers who hold ethnocentric tendencies.
This research suggests the need to consider the delivery channel of service recovery to recover a service failure and retain customer loyalty. The results show that outsourcing within a local country may be effective, but the risks associated with offshoring are much greater.
Despite previous attempts to understand outsourcing and offshoring in a range of service scenarios, their role in service recovery is not well understood. Similarly, the impact that ethnocentrism might have on this process is overlooked. This paper therefore responds to calls within business theory, practice and consults for further study in this under-researched area.
