The effects of implicit firm theory on customer engagement and firm-related judgments

Purpose This paper aims to introduce the implicit firm theory, distinguishing between the belief that firms can (incremental firm theory) or cannot (entity firm theory) readily change in response to marketplace demands. It is proposed and shown, that firm theory beliefs influence customer-engagement attitudes and intentions. Design/methodology/approach Study 1 tests the relationship between firm theory, self-theory and knowledge-sharing attitudes. Study 2a tests differences between incremental and entity firm theorists in response to firm failure. Study 2b examines the relationship between firm theory and blame attributions on post-failure loyalty. Study 3 explores the effect of firm theory on perceptions of control and blame attributions following repeated firm failures. Findings Study 1 shows firm theory influences consumer knowledge-sharing attitudes beyond the effect of self-theory. Study 2a shows incremental firm theorists are more likely to remain loyal to a firm following failure and less likely to share negative word-of-mouth. Study 2b shows that blame attributions mediate the relationship between firm theory and loyalty intentions, with incremental theorists ascribing less blame. Study 3 shows incremental firm theorists significantly increase blame following multiple failures, while entity firm theorists do not. Research limitations/implications Results are based on scenario-based surveys and experimental methods; their applicability in more complex real-world customer-firm relationships warrants additional study. Practical implications Firms should account for a customer's firm theory in their communications, emphasizing situational factors to reduce post-failure blame among incremental firm theorists. Originality/value Establishes that consumers hold beliefs regarding the malleability of firm traits, which influence their firm engagement intentions.