Driving Customer Retention and Purchase Decisions: A Two-Wave Time-Lagged Study on Organizational Capabilities, Perceived Fairness, and Diminishing Returns

Purpose: This study explores the nonlinear influences of three organizational capabilities, including Cultural Adaptability (CA), Service Efficiency (SE), and Brand Commitment (BC), on Perceived Fairness (PF) and their subsequent effects on Customer Retention (CR) and Purchase Decision (PD). It also analyses the moderating effect of Perceived Social Norms (PSN) in this context. Design/Methodology/Approach: A two-wave time-lagged design was used to increase temporal precedence and reduce common-method bias, and 500 consumers in China and Pakistan were sampled. The hypothesized curvilinear associations were tested using Structural Equation Modeling (SEM). Findings: CA, SE, and BC have a positive influence on PF, though their relationships follow an inverted U-shaped pattern. PF shows positive correlations with CR and PD, and PSN enhances the relationship between PF and customer outcomes. Originality: The research adds value to Social Exchange Theory and Commitment–Trust Theory by demonstrating that organizational capabilities may yield diminishing returns of fairness and thus disproves the more-is-better linear relationships in customer relationship management.