Consumers’ Responses to Corporate Normalised Misconduct During an Industry-Wide Crisis: An Investigation in the Chinese Dairy Industry

Abstract

Industry-wide crises are rooted in institutional problems and can cause large-scale negative consequences. This study investigates consumer responses during industry-wide crises by considering micro-level psychological aspects of institutions – the processes in which individual consumers perceive, judge and respond to the affected industry as an institutional entity. Specifically, it examines how consumers’ perceptions of the normative and regulatory environments of the affected industry influence their purchase intentions through legitimacy judgement. A consumer survey (n = 534) was conducted after an industry-wide crisis in the Chinese dairy market. The results show that a high degree of perceived normalised misconduct and insufficient governmental regulation propel consumers to form negative legitimacy judgements of institutions and decrease their purchase intentions. This study is one of the first to provide an integrative framework for understanding consumer psychological mechanisms during industry-wide crises. It contributes to integrating the perspectives of consumers’ micro-level psychological mechanisms with views from macro-institutional environments. The research provides implications for managing industry misconduct and industry-wide crises.