Do Service Guarantees Guarantee Greater Market Value?
April 9, 2014 Editor 0
Service guarantees are an important feature of many service offerings because consumers recognize greater risk associated with the purchase of services than with the purchase of goods. Despite substantial service guarantee research in the past two decades though, no extant study has examined the return on service guarantee investments. To fill this gap, the authors examine the effect of a service guarantee on a firm’s market value by identifying new service guarantee announcements, then using these announcements as events in an event study. The results show that simply offering a service guarantee does not result in greater market value, as measured by a change in stock market returns, for the offering firm. Instead, the market value of a service guarantee depends on its scope and the process required to invoke the guarantee. In particular, service guarantees that are specific in scope or automatically invoked lead to significantly greater market value than unconditional or customer-invoked guarantees, respectively. In addition, these differences are moderated by firm size. From a theoretical point of view, this study extends signaling theory to explain the differential effects of service guarantees, depending on their design.
- Customer Integration in Service Innovation: An Exploratory Study
- Translating biotechnology to knowledge-based innovation, peace, and development? Deploy a Science Peace Corps–an open letter to world leaders.
- Building Business Models
- 27 options to find revenues for your new idea
- A New Model to Chip Away at the Infrastructure Financing Gap: Brazil Leads the Way
- Ancient wisdom boosts sustainability of biotech cotton
Subscribe to our stories
- SL Crowd Green Solutions September 21, 2020
- Digital transformation in the banking sector: surveys exploration and analytics August 3, 2020
- Why Let Others Disrupt You? Take the Smart Self-Disruption Journey! August 3, 2020
- 5 Tips for Crowdfunding During the Pandemic August 3, 2020
- innovation + africa; +639 new citations August 3, 2020