UNDERSTANDING E-SERVICE FAILURES: FORMATION, IMPACT AND RECOVERY by Chee-Wee Tan B.Sc. National University of Singapore, Singapore, 2001 M.Sc. National University of Singapore, Singapore, 2004 A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY in The Faculty of Graduate Studies (Business Administration) THE UNIVERSITY OF BRITISH COLUMBIA (Vancouver) July 2011 © Chee-Wee Tan, 2011 ABSTRACT E-service failure has been the bane of e-commerce by compelling consumers to either abandon transactions entirely or to switch to traditional brick-and-mortar establishments. More often than not, it is not the manifestation of e-service failure that drives away consumers, but rather, the absence or inadequacies of service recovery solutions that led to undeserved anger and frustration. Yet, despite the ‘dangers’ posed by e-service failures, there has not been a study to-date that systematically investigates how perceptions of failure emerge within an online transactional environment and what can be done to address these sources of potential consumer disappointments. Drawing on the Expectation Disconfirmation Theory (EDT) and the Counterfactual Thinking Perspective, this study synthesizes contemporary literature to arrive at separate typologies of e-service failure and recovery. Then, an integrated theory of e-service failure and recovery is constructed together with testable hypotheses. To empirically validate the model, two studies have been conducted and their designs elaborated. Essentially, findings from the two studies serve to inform both academics and practitioners on: (1) how consumer perceptions of different types of e-service failure manifest on e-commerce websites; (2) the impact of these perceptual failures on consumers’ expectations about transactional outcome, process and cost, as well as; (3) what kind of e-service recovery technology would be beneficial in alleviating negative failure consequences. ii PREFACE This research was approved by the University of British Columbia Behavioral Research Ethics Board (certificate number H10-00051). iii TABLE OF CONTENTS Abstract ................................................................................................................................................. ii Preface .................................................................................................................................................. iii Table of Contents ................................................................................................................................. iv List of Tables ....................................................................................................................................... vii List of Figures ...................................................................................................................................... ix Acknowledgements ............................................................................................................................... x Chapter 1 – Introduction ..................................................................................................................... 1 1.1 Motivation and Research Objectives ...................................................................................... 1 1.2 Guiding Framework ................................................................................................................ 5 1.3 Dissertation Structure ............................................................................................................ 8 Chapter 2 – An Expectancy Perspective of E-Service Failure ....................................................... 10 2.1 E‐Service Failure: A Review of Alternate Frameworks ......................................................... 11 2.2 A System‐Oriented Typology of E‐Service Failures ............................................................... 15 2.2.1 Informational Failures .................................................................................................. 19 2.2.2 Functional Failures ....................................................................................................... 20 2.2.3 System Failures ............................................................................................................ 23 2.2.4 A System-Oriented Typology of E-Service Failures .................................................... 25 2.3 Summary ............................................................................................................................... 26 Chapter 3 – An Exploratory Study of E-Service Failure Causes (1st Study) ................................ 27 3.1 Questionnaire Development ................................................................................................ 28 3.2 Data Collection ..................................................................................................................... 30 3.3 Data Analysis ........................................................................................................................ 32 3.3.1 Analytical Procedures ................................................................................................... 33 3.3.2 Findings from Framework Comparison ....................................................................... 35 iv 3.4 Discussion ............................................................................................................................. 37 3.4.1 Implications for Research ............................................................................................. 37 3.4.2 Implications for Practice ............................................................................................... 38 3.4.3 Limitations .................................................................................................................... 39 3.4.4 Summary ....................................................................................................................... 40 Chapter 4 – A Counterfactual Thinking Perspective of E-Service Recovery ............................... 41 4.1 A Proposed Typology of E‐Service Recovery ........................................................................ 42 4.2 Summary ............................................................................................................................... 48 Chapter 5 – An Integrated Theory of E-Service Failure and Recovery ........................................ 49 5.1 An Expectation Disconfirmation Perspective of E‐Service Failure Consequences ............... 50 5.1.1 Consequences of Informational Failures ...................................................................... 53 5.1.2 Consequences of Functional Failures ........................................................................... 53 5.1.3 Consequences of System Failures ................................................................................ 54 5.2 A Counterfactual Thinking Perspective of E‐Service Recovery Effectiveness ...................... 55 5.2.1 Moderating Effect of Compensatory Recovery Technology ........................................ 57 5.2.2 Moderating Effect of Response Sensitivity Recovery Technology .............................. 58 5.2.3 Moderating Effect of Affinity Recovery Technology .................................................. 59 5.3 Summary ............................................................................................................................... 60 Chapter 6 – An Experimental Study of E-Service Failure and Recovery (2ND Study) ................. 61 6.1 Experimental Design ............................................................................................................. 61 6.1.1 A General Overview of Experimental Procedures ....................................................... 63 6.1.2 Manipulations of E‐Service Failures ............................................................................. 69 6.1.3 Manipulations of E‐Service Recoveries ........................................................................ 74 6.1.4 Measurement and Survey Questionnaires ................................................................... 80 6.2 Data Analysis ........................................................................................................................ 84 v 6.2.1 Manipulations of E‐Service Failures ............................................................................. 88 6.2.2 Manipulations of E‐Service Recoveries ........................................................................ 91 6.2.3 Hypotheses Testing ...................................................................................................... 97 6.3 Discussion ........................................................................................................................... 109 6.3.1 Implications for Research ........................................................................................... 112 6.3.2 Implications for Practice ............................................................................................. 113 6.3.3 Limitations .................................................................................................................. 114 6.3.4 Summary ..................................................................................................................... 115 Chapter 7 – Conclusion and Discussion ........................................................................................