Influence of Firm’s Recovery Endeavors upon Privacy Breach on Online Customer Behavior Forthcoming Journal of Management Information Systems

The soaring number of privacy breaches has spurred affected firms to learn how to effectively recover damaged customer relationship. In this study we develop and test a model that explains how online customer behavior is influenced by firm’s recovery endeavors upon privacy breaches. Drawing on a service recovery perspective, we integrate the notions of justice perceptions and psychological responses into a theoretical framework. The proposed model was tested against data collected from 1,007 online customers based on a hypothetical scenario. Results show that three types of justice perceptions, i.e., distributive, procedural, and interactional justice, jointly affect psychological responses, i.e., perceived breach and feelings of violation. In addition, psychological responses were shown to be important in shaping post-incident outcomes such as post-word of mouth and post-likelihood of switching. Overall, this study gives researchers and practitioners a useful conceptual tool for analyzing the effectiveness of organizational practices in recovering customer relationship after privacy breaches.