Does service innovation reduce customer defection intentions among disappointed customers? A latent growth modeling approach in the hotel sector

Despite the importance of service innovation research, it remains unclear how service innovation paradoxically induces customer defections during service failures. Using a three time-lag interval design, our findings show that customers’ negative responses to hotel betrayals outweigh their positive responses to service innovations. Thus, we demonstrate that service innovation does not always positively impact organizational performance. Similar outcomes arise when examining the insignificance of static online reviews and review change rates. We find that while customers experiencing hotel service failures are likelier to end their relationships with said hotels as their negative perceptions increase, their experiences are unaffected by the rate at which the hotel implements service innovations. Finally, online reviews directly and indirectly affect defection intentions in service failure contexts, especially when time is a factor. • A dynamic mechanism of service innovation does not involve hotel betrayal and online reviews. • The dynamic mechanism is only embodied in customer defection intentions. • Betrayal played an important role in mediating the relationship between service innovation and customer defection intentions. • Customer perception of hotel betrayal indirectly affected customer defection intentions through online reviews.