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DETERMINANTS OF STUDENTS’ LOYALTY IN THE MALAYSIAN PRIVATE HIGHER EDUCATION INDUSTRY LEE LAI MENG DOCTOR OF BUSINESS ADMINISTRATION UNIVERSITI UTARA MALAYSIA November 2017 DETERMINANTS OF STUDENTS’ LOYALTY IN THE MALAYSIAN PRIVATE HIGHER EDUCATION INDUSTRY By LEE LAI MENG Thesis Submitted to Othman Yeop Abdullah Graduate School of Business, Universiti Utara Malaysia, in Fulfillment of the Requirement for the Degree of Doctor of Business Administration i CERTIFICATION OF THESIS WORK ii iii PERMISSION TO USE In presenting this dissertation/project paper in partial fulfillment of the requirements for a Post Graduate degree from the Universiti Utara Malaysia (UUM), I agree that the Library of this university may make it freely available for inspection. I further agree that permission for copying this dissertation/project paper in any manner, in whole or in part, for scholarly purposes may be granted by my supervisor(s) or in their absence, by the Dean of Othman Yeop Abdullah Graduate School of Business where I did my dissertation/project paper. It is understood that any copying or publication or use of this dissertation/project paper parts of it for financial gain shall not be allowed without my written permission. It is also understood that due recognition shall be given to me and to the UUM in any scholarly use which may be made of any material in my dissertation/project paper. Request for permission to copy or to make other use of materials in this dissertation/project paper in whole or in part should be addressed to: Dean of Othman Yeop Abdullah Graduate School of Business Universiti Utara Malaysia 06010 UUM Sintok Kedah DarulAman iv ABSTRACT The competitive private higher education industry in Malaysia indicates that the profitability and the viability of private higher education institutions (Private HEIs) are compromised by uncertain levels of students’ loyalty. The objectives of this study were fourfold: (a) to determine the level of students’ loyalty in Private HEIs in Malaysia, (b) to determine the relationships between service quality (academic quality, program quality and administrative quality), reputation (university management and academic and media reputation), relationship benefits and students’ loyalty, (c) to determine the significant effects of the independent variables on students’ loyalty and lastly, (d) to determine the mediating effects of satisfaction on these relationships. This quantitative cross sectional study used the proportionate stratified sampling design. 400 students from various Private HEIs participated in this study. The data was collected via a personally administered questionnaire and was analysed using various statistical techniques such as correlation, multiple regression and mediation analyses. This study found that the loyalty levels of students in Malaysian Private HEIs are moderate. All the independent variables have positive relationships with students’ loyalty. Empirical evidence concludes that administrative quality, university management and relationship benefits have significant effects on students’ loyalty, whilst academic quality, program quality and academic and media reputation did not. Satisfaction was found to mediate the relationship between all the independent variables and students’ loyalty. The main significance of this study is the empirical confirmation of the positive direct effect of relationship benefits on students’ loyalty and the mediating effect of satisfaction on this relationship in the Malaysian private higher education context. The findings in this study can be used by managers of Private HEIs in Malaysia for managing their students’ loyalty. Keywords: service quality, reputation, relationship benefits, satisfaction, student loyalty. v ABSTRAK Industri pendidikan tinggi swasta yang kompetitif di Malaysia menunjukkan bahawa keuntungan dan daya maju institusi pengajian tinggi swasta (IPTS) dikompromikan oleh tahap kesetiaan pelajar yang tidak menentu. Terdapat empat objektif yang dikemukakan dalam kajian ini. Objektif yang pertama adalah untuk menentukan tahap kesetiaan pelajar IPTS di Malaysia. Manakaka, objektif yang kedua pula adalah untuk menentukan hubungan antara kualiti perkhidmatan, iaitu kualiti akademik, kualiti program dan kualiti pentadbiran. Juga dari segi reputasi iaitu pengurusan universiti dan reputasi akademik dan media, serta faedah hubungan dan kesetiaan pelajar. Objektif yang ketiga adalah untuk mengetahui kesan signifikan pemboleh ubah bebas ke atas kesetiaan pelajar dan objektif yang terakhir adalah untuk menentukan kesan pengantara kepuasan ke atas hubungan-hubungan ini. Kajian ini telah menggunakan keratan rentas kuantitatif dengan mengaplikasi reka bentuk pensampelan berstrata mengikut nisbah. Seramai 400 orang pelajar daripada pelbagai IPTS telah mengambil bahagian dalam kajian ini. Data dikumpul melalui kaedah soal selidik yang ditadbir secara peribadi dan telah dianalisa dengan menggunakan pelbagai teknik statistik seperti korelasi, regresi berganda dan analisis pengantaraan. Kajian ini mendapati bahawa tahap kesetiaan pelajar IPTS di Malaysia adalah sederhana. Kesemua pemboleh ubah bebas mempunyai hubungan yang positif dengan kesetiaan pelajar. Bukti empirikal menyimpulkan bahawa kualiti pentadbiran, pengurusan universiti dan faedah hubungan mempunyai kesan signifikan ke atas kesetiaan pelajar. Sementara itu, kualiti akademik, kualiti program dan reputasi akademik dan media tidak mempunyai kesan yang signifikan. Manakala kepuasan pula didapati menjadi pengantara dalam hubungan antara pemboleh ubah bebas dengan kesetiaan pelajar. Kepentingan utama kajian ini adalah pengesahan empirikal terhadap kesan positif faedah hubungan kepada kesetiaan pelajar dan pengesahan kesan pengantara kepuasan ke atas hubungan ini dalam konteks pendidikan swasta di Malaysia. Penemuan dalam kajian ini boleh digunakan oleh pengurus- pengurus IPTS di Malaysia untuk mengurus kesetiaan pelajar mereka. Kata kunci: kualiti perkhidmatan, reputasi, faedah hubungan, kepuasan, kesetiaan pelajar. vi ACKNOWLEDGMENT “An education which does not cultivate the will is an education that depraves the mind” Anatole France This thesis owes its existence to the help, support and encouragement from several people. First and foremost, I would like to thank my supervisor, Dr Jasmani Binti Mohd. Yunus, for her professional guidance in helping me to bring this research to fruition. Her support and suggestions have been invaluable towards the development of this thesis Secondly, I would like to acknowledge all the professional and knowledgeable lecturers of Othman Yeop Abdullah Graduate School of Business, whom I had the opportunity and honour to be taught by during my DBA journey. I am grateful to my colleagues at the Faculty of Arts and Social Sciences, Universiti Tunku Abdul Rahman, Kampar campus, for their advice, support and motivation throughout my 4 years of studies. I am thankful for my fellow DBA course mates who have shared their friendships and knowledge with me throughout our studies. They were fundamental in supporting me during difficult and stressful moments. We were constantly encouraging each other to finish our individual academic journeys, and its’ culmination, the thesis. Finally, my deepest gratitude goes to my husband, Hock Hin, and son, Wei Jian, for without their unflagging love, unconditional support, encouragement and understanding, this academic journey could not be completed. vii TABLE OF CONTENTS TITLE PAGE i CERTIFICATION OF THESIS WORK ii PERMISSION TO USE iv ABSTRACT v ABSTRAK vi ACKNOWLEDGMENT vii TABLE OF CONTENTS viii LIST OF TABLES xii LIST OF FIGURES xiv LIST OF ABBREVIATIONS xv LIST OF APPENDICES xvi CHAPTER 1 INTRODUCTION 1.0 Background of the study 1 1.1 Problem statement 6 1.2 Research questions 15 1.3 Research objectives 16 1.4 Significance of the study 16 1.5 Scope of the study 20 1.6 Definitions of key terms 21 1.7 Organization of the thesis 23 CHAPTER 2 LITERATURE REVIEW 2.0 Introduction 25 2.1 Student loyalty 25 2.1.1 The importance of student loyalty 26 2.1.2 Defining loyalty 29 2.1.3 Loyalty dimensions 34 2.1.4 The model of loyalty 35 2.1.5 Determinants of student loyalty 37 2.2 Service quality 44 2.2.1 Relationship between service quality and loyalty 48 2.3 Reputation 56 2.3.1 Relationship between reputation and loyalty 61 2.4 Relationship benefits 67 2.4.1 Relationship between relationship benefits and loyalty 70 2.5 Satisfaction 79 2.5.1 Relationships between satisfaction, service quality, 81 reputation, relationship benefits and loyalty 2.5.1.1 Relationship between satisfaction and loyalty 81 2.5.1.2 Relationships between satisfaction, service quality and 83 loyalty 2.5.1.3 Relationships between satisfaction, reputation and loyalty 84 viii 2.5.1.4 Relationships between satisfaction, relationship benefits and 86 loyalty 2.5.1.5 Summary of relationships between satisfaction, service 87 quality, reputation, relationship benefits and loyalty 2.6 Underpinning theory 88 2.7 Summary of the chapter 91 CHAPTER 3 METHODOLOGY 3.0 Introduction 92 3.1 Research framework 92 3.2 Hypotheses development 94 3.2.1 The relationships between service quality,