Political Discriminatory Product Differentiation: An Investigation into Airlines’ Route Map Treatment of Taiwan

Abstract

The discriminatory behavior and actions of firms are commonly viewed through the lens of internal human resource management—such as hiring and payroll practices. Recent research highlights a more discrete form of discrimination that presents itself through product design. Discriminatory product differentiation is a competitive strategy in which a firm will design its product to appeal to certain internal and external stakeholders, even at the expense of losing a subsegment of potential customers and profitability. This paper explores the theory of discriminatory product differentiation by examining international airlines’ responses to the political dispute over Taiwan’s diplomatic status via their airline route map design. This paper also examines how an airline's membership in an international air alliance (i.e., SkyTeam, Oneworld, or Star Alliance) may have a moderating effect on this relationship. The results of this study provide a further understanding of how firms compete abroad alone and in groups. Additionally, it provides a further understanding of how international firms and alliances respond to international political disputes threatening their business interests. The broader impact of this study is to provide further insight into the dynamics surrounding international business practices and public policy.