Heroes Rise in Tough Times: The Role of Ethical Idealism, Empathy, and Firm Responses to the COVID-19 Pandemic

Abstract

During crises, hospitality firms practice a range of coping strategies such as laying-off or furloughing employees to cope with financial pressure (denying strategy) to cutting CEOs’ salaries to maintain jobs for employees (rebuilding strategy). While firms are still managing the effects of the pandemic, it is unclear how consumers judge how firms respond to crises. This study applies signaling theory to investigate how consumers’ ethical idealism influences customers emotional and behavioral responses of firm crisis responses. Study 1 conducts a 2 (crisis response: denying vs. rebuilding) × 2 ethical idealism (low vs. high) quasi between-subjects design experiment to examine the two-way interaction effects on purchase intention, brand support, and positive word of mouth. Study 2 examines the effect of empathy as a key mediator, using a moderated mediation model. Study 1 results show that although negative intentions were not observed toward denying strategies, consumers’ purchase intention, brand support, and positive word-of-mouth were elevated when rebuilding strategies are employed among consumers with high ethical idealism. Study 2 results find that consumers with high ethical idealism are more empathetic to the companies’ rebuilding responses, thus greater behavioral intentions were witnessed.