Purpose -The purpose of this paper is to provide experimental evidence supporting the view that internal service quality has a direct effect on external service quality. Design/methodology/approach -The study focuses on the restaurant industry in Greece. Waiters are considered as internal customers and kitchen personnel as internal suppliers. Inferential analysis included factor analysis on individual waiter and customer data as well as canonical correlation analysis on a restaurant level. Findings -Factor analysis of external service quality revealed six factors including product, organizational image, safety and choice, empathy, reliability as well as responsiveness. Internal service quality factors, additional to those found in external service quality research, included professionalism and internet. Canonical correlation revealed that the internal service quality dimensions of safety, reliability and internet exert a direct positive influence on the external service quality dimensions of organizational image, empathy and responsiveness. Originality/value -The paper shows that service firms should focus on internal service quality in order to improve external service quality.

Two implications of Herzberg's Two-Factor theory were derived and tested empirically, using data obtained from 287 people employed by twenty hotels in Greece. The results supported the hypothesis that when the organization does not allow workers the opportunity to satisfy most of their needs, hygiene factors become powerful sources of motivation, leading to improved performance and thus to productivity. On the other hand, very little contribution to productivity is due to motivators. The findings were interpreted in terms of the employment conditions in Greek hotel industry.

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