Frontline Human Capital and Consumer Dissatisfaction: Evidence from the U.S. Airline Industry
Abstract
Drawing on a decade-long panel dataset on the U.S. airline industry, we find an inverted U-shaped relationship between frontline human capital expenses and consumer dissatisfaction. As an organization’s frontline human capital expenses grow, consumer dissatisfaction initially increases until a threshold is crossed, after which greater frontline human capital expenses lead to fewer subsequent consumer complaints. Our analysis also finds that when experienced frontline workers leave the organization, it results in an increase in dissatisfaction among customers. Our study also informs how changes in frontline human capital expenses are associated with changes in complementary strategies and circumstances. Specifically, we find that greater investments in frontline workers leads to fewer consumer complaints when an organization has a differentiated business model, lower advertising expenditures, and after an exogenous event that negatively affects the focal industry, such as 9/11.
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