Consumer Response To Corporate Social Responsibility
Consumer Response to Corporate SocialResponsibility (CSR) in ChinaThesisDepartment of Business StudiesUppsala UniversitySpring Semester of 2017Date of Submission:2017-08-07Lili ChangJiaqi Cheng1Supervisor: James Sallis
AbstractBackground:With the development of multinational companies (MNCs),corporate social responsibility (CSR) has become a very importantcomponent of corporate activities. However, the commitment toCSR in China has been very low. Chinese consumers are becomingless willing to accept different treatment from MNCs, but there hasbeen little study of CSR problems in the Chinese market or theresponse of Chinese consumer.Purpose:This study provides preliminary evidence that consumer responseabout the CSR behavior of multinational corporation aredetermined by three factors, perceived CSR, trust of CSR, andawareness of CSR, and addresses how these different factorsinfluence Chinese consumer response in terms of CorporateEvaluation and Purchase Intention. Additionally, this workanalyzes the relationship between consumer demographics andconsumer response to CSR.MethodIn order to identify and measure the effects of CSR behavior onconsumer response, the first step was to construct a model and usequalitative research to test it. Next, quantitative research with largescale data was used in a cross-sectional design. An online surveywas created for data collection. After data collection, statistical dataanalysis was performed using the software program SPSS.FindingsThe results show that trust of CSR and awareness of CSR has asignificant influence on Chinese consumer response. PerceivedCSR has a significant influence on Chinese consumer response tocorporate evaluation but not on Purchase Intention. In addition, thedata did not reveal a relationship between consumer demographicsand consumer response to CSR.2
Key Words:Corporate social responsibility (CSR), perceived CSR, trust of CSR,awareness of CSR, consumer response, corporate evaluation,purchase intention3
Content1. Introduction . 61.1 Research Purpose . 71.2 Research Question . 81.3 Contribution . 82. Literature Review. 92.1 CSR Concept and development . 92.2 CSR and stakeholder—consumer . 112.3 Constructs of Conceptual Model . 122.3.1 Perceived CSR . 132.3.2 Trust of CSR . 132.3.3 Awareness of CSR . 142.3.4 Consumer response to CSR . 152.3.5 Consumer Demographics . 172.4 Hypotheses and Research model . 172.4.1 Hypotheses Summary . 172.4.2 Research Model . 193. Methodology . 203.1 Research Design. 203.2 Research Context . 203.3 Step 1: Qualitative Research . 203.3.1 Sampling . 213.4 Step 2: Quantitative Research . 213.4.1 Sampling . 213.4.2 Measurements . 223.5 Choice of Statistical Tests . 264. Results and Analysis . 274.1 Result of Qualitative research . 274.1.1 Perceived CSR . 274.1.2 Awareness of CSR . 274.1.3 Trust of CSR . 284.1.4 Corporate Evaluations . 284.1.5 Purchase Intention . 284.2 Consumer Characteristics . 284.2.1 Age . 294.2.2 Gender . 294.2.3 Income (Yuan/Month) . 294.2.4 Education . 294.3 Reliability Analysis . 304.4 Factor Analysis. 314.5 Hypotheses Testing . 324.5.1 Linear Regression . 334
4.5.2 Linear Multiple Regression. 344.6 Summary of Results . 375. Discussion . 395.1 Perceived CSR and Consumer Response . 395.2 Trust of CSR and Consumer Response . 405.3 Awareness of CSR and Consumer Response . 405.4 Consumer Demographics and Consumer Response . 416. Conclusion . 426.1 Summary . 426.2 Managerial Implications . 426.3 Limitations . 436.4. Suggestions for Future Research . 44Reference . 45Appendix 1Interview (English). 51Appendix 2Interview (Chinese) . 53Appendix 3 Questionnaire (English) . 55Appendix 3 Questionnaire (Chinese) . 575
1. IntroductionStudies of Corporate Society Responsibility (CSR) have increased substantially inrecent years (Parminder, 2013). Some studies have focused on the CSR activities ofcompanies in developing and/or developed markets. Most CSR activities are related tosustainability, environment, safety, and gender issues.Safety is a very important characteristic of a corporation’s products. Companies withan excellent record on safety issues enjoy a strong advantage when compared to theircompetitors (Benoit, 2013). Recently IKEA, a Swedish Multinational Corporation(MNC) well known for designing furniture, has received negative attention in the globalnews due to product safety concerns, affecting its reputation and legitimacy in theglobal market. IKEA announced a recall of 29 million chests and dressers in the UnitedStates after at least six toddlers were crushed to death in tip-over accidents. However,it refused to recall “life-threatening drawers” in China, and insisted that its productssold in China met local regulations (Mcphate, 2016). This situation led to dissatisfactionamong consumers, who complained through social media. IKEA finally recalled 1.7million chests and dressers in China, only after significant public criticism online andin the government-controlled Chinese media.The outcry from Chinese consumers about IKEA’s actions in China was largely theresult of increased Chinese consumer awareness of IKEA’s CSR activities. IKEAstrives to maintain a high level of commitment to CSR in the global market, and thecompany’s stated mission is to make products with minimum impact on theenvironment that are manufactured in a socially responsible way (Ikea, 2017). However,in the Chinese market, IKEA’s commitments to CSR have been low, as evidenced bythe reluctance to do the same product recall that they did in the United States. There isevidence of similar practices among many foreign MNCs in China. Many MNCslowered their environmental, labor, and ethical standards for operation in the Chinesemarket, taking advantage of less stringent regulations. There were little marketconsequences of this behavior, however, since the CSR awareness of Chineseconsumers was previously quite limited. Thus, ethical behavior of many MNCs andtheir business practices has become the center of debate and controversy in China (Tangand Li, 2009).6
Nowadays, China is the largest and the fastest growing emerging economy in the world(Luo and Park, 2001). For this reason, more and more MNCs are interested in enteringthis new and large market. The recent shifts in the behavior and purchase response ofconsumers in China and throughout Asia have been noticed by MNCs (Tian et al., 2011).The awareness of consumer CSR is a new and increasing phenomenon in Asiaespecially in China (Nielsen, 2014).The IKEA scandal shows that issues of low CSR in China continue to be a seriousproblem. As one of the most important stakeholders in the economy, consumers usetheir preferences and attitudes to guide multinational companies to better fulfill theircorporate social responsibility. Therefore, to increase market share in China andminimize the negative impacts caused by the scandal, it is expected that IKEA will workto improve its CSR strategy.1.1 Research PurposeCurrently, consumers are generally aware of a company’s CSR behavior and its impacton environment and the community. Consumers can react to this behavior by eitherrewarding or punishing firms by either choosing and buying their products or avoidingtheir products in China (Mohr et al., 2001). To investigate the extent of this consumerreaction, the goal of our research was to explore how consumers respond to CSR inChina. Previous studies on consumers and CSR have had a Western context, and fewstudies have analyzed CSR activities in an emerging economy such as China. Motivatedby the IKEA scandal, we argue that Chinese people should pay attention to the CSR ofMNCs, but in contrast to CSR strategies of MNCs used in Western countries, CSR inChina has tended to be limited to philanthropy and short-term projects.According to Tian et al. (2011), Chinese consumer purchase response are positivelyinfluenced by the good CSR behavior of an MNC. CSR’s impact on consumer’sintention decreased when there was a problem or poor performance of a product (Augeret al., 2008). These studies provided preliminary evidence that the response ofconsumer to CSR behavior of MNCs are determined by three factors perception,awareness, and trust. Therefore, this study tries to address the mechanisms by whichthese three factors influence Chinese consumer response.7
Overall, this research explores how consumers respond to Corporate SocialResponsibility (CSR) in China. The focus is on the consumer response, considered apositive driving force on CSR. The work presented in this thesis could helpmultinational companies to more fully understand consumer response, guiding effortsto improve corporate trust and brand image in the new market of China.1.2 Research QuestionAs described above, the purpose of this study was to explore the relationship betweenconsumer perception about CSR activities and corporation evaluation and PurchaseIntention in China. The thesis seeks to answer the following research questions:1. What are the main CSR factors influencing Chinese Consumer’s response?2. How do these factors influence consumer’s response?1.3 ContributionCSR is practiced more widely in Western Countries compared to China. The thesis willhelp MNCs understand the effects of these factors on the consumer response of Chineseconsumers to CSR initiatives. Moreover, it also will provide strategic guidance toMNCs to effectively execute CSR programs in China. Furthermore, the results provideMNCs managers with a strategy to improve their handling of corporation-consumerrelationships and CSR-related partnership initiatives in the Chinese market.8
2. Literature ReviewThis chapter describes Corporate Social Responsibility (CSR), Consumer purchaseresponse, awareness of CSR, trust of CSR, Corporate Evaluation, and ConsumerPurchase Intention. It also describes our research model based on perceived CSRTheory. Finally, hypotheses are presented as part of the theoretical foundation for thestudy.2.1 CSR Concept and developmentThe Corporate Social Responsibility (CSR) concept was first defined by Bowen in 1953.It refers as the obligations of business to pursue those policies, to make those decisionsor to follow those lines of action which are desirable in terms of the objectives andvalues of our society (Bowen, 1953). A corporation can do well by doing good if it willstrategically implement CSR (Falck and Heblich, 2007). CSR can result in benefits suchas enhanced perception of the corporation, management of risk, increasing the numberof loyalty-based consumers based on distinctive ethical values, and implementingpolicies related to standard and safety policies (Kanji and Chopra, 2010).From the early stage of the development of the CSR concept, there was significantinterest from academics, the media, and investors. According to Friedman (1970), theonly responsibility of business is to utilize its resources and abilities to increase profitsfor shareholders without breaking the law. Baron (2001) pointed out that CSR may beconsidered a profit-maximizing corporation strategy that can also be looked upon asbeing socially responsible.A major question for business development has been whether corporate decision makersshould be concerned with issues other than profitability (Mohr et al., 2001). There is agrowing body of research attempting to define the consequences and benefits for acompany to be socially responsible. The most widely accepted definition of CSR isCarroll’s four-pyramid model (1979), illustrated in Figure 1.9
Figure 1: The pyramid of corporate social responsibility (Carroll, 1991)Carroll’s four-pyramid model includes four different responsibilities, Philanthropic,Ethical, Legal, and Economic (see Figure 1). Economic responsibilities are to producegood quality products and provide excellent service to consumers. The corporation isalso expected to follow laws and regulations and assume legal responsibility. Ethicalresponsibilities include the basic concerns of society and stakeholders like safety andprotecting the environment. Philanthropic responsibilities embody corporate actionsthat can be considered a response to social expectations, where businesses providehuman welfare activities and contribute to social programs (Carroll, 1991). Of these,economic and legal responsibilities are the minimal level of CSR that must be carriedout by corporations, but ethical responsibilities often play a key role in corporatemanagement. Additionally, Porter and Kramer (2002) propose that philanthropy canoften be the most cost-efficient way for a corporation to improve its competitive power.Therefore, our study will focus on discussing CSR practices at the philanthropic andethical level of responsibilities.The importance of CSR may be high on business agendas, and almost every bigorganization communicates their CSR via their homepage in the form of sustainability10
reports. However, the role of CSR is increasingly debated especially considering thecurrent economic development (Brown and Fraser, 2006). Questions remain however,how well companies manage to achieve the promised CSR activities (Thoger et al.,2013).2.2 CSR and stakeholder—consumerA corporation that is socially responsible should meet the concerns and demands oftheir stakeholders (Donaldson and Preston, 1995; Maignan et al., 1999) who could beaffected either directly or indirectly by the activities of the corporation in terms ofconsumers, merchandisers, shareholders, and regulators (Freeman, 1984). As illustratedin the IKEA example and considering previous studies, we view the consumer as a CSRstakeholder. Next, we will discuss stakeholder theory and how it connects to consumerpurchase response.The discussion and definition of stakeholders began with Freeman (1984). Accordingto Freeman, “a stakeholder is an individual or a group which gets affected or can affectthe accomplishments of an organization’s objectives,” (Freeman, 1999, p.233).Freeman’s stakeholder theory points out that a corporation is not only responsible to itsstakeholders, but also to all kinds of stakeholders in society. Consumers are givenparticular attention, since their reactions have an important relationship withcorporation’s managerial decision-making (Brown and Dacin, 1997). In other words,stakeholders’ interest in the consumer is a key factor which is taken into considerationwhen running corporations.When studying CSR, it is essential to identify responsibilities and the parties who aregoing to assume those responsibilities (Clarkson, 1995). In stakeholder theory,corporate social responsibility is further clarified, but includes enterprise socialresponsibility assessment, making measurement possible. As consumers are animportant business-related stakeholder group, their preferences and behavior candirectly influence the development of an enterprise.As defined earlier, CSR is a corporate behavior that aims to positively influenceconsumers as stakeholders. Important stakeholders also impact the corporation’s CSR.For instance, consumers who buy products create pressure leading the corporation to11
pay attention to social issues (Gilbert and Rasche, 2007). Thus, stakeholder theory islogically connected with CSR (Friedman, 1970).2.3 Constructs of Conceptual ModelAccording to information processing theory (IPT), consumer’s processing of CSRinformation includes four stages: paying attention to CSR information, judging thesincerity of CSR action, reasoning or associating CSR information with companies andtheir products, and reacting by making purchasing decisions (Miller, 1994). Previousstudies (Tian et al., 2011) have validated the Perceived CSR model as a robustframework to understand CSR activities and consumer response.pay attetion toCSRinformation:Perceived CSRJudging theCSR :Awareness ofCSRAssociatingCSRinformation:Trust of CSRMakingBehaviorresponse :Corporate:CEPIFigure 2. CSR information processing theory modelCSR and consumer relationship studies typically include five important variables:Perceived CSR, Awareness of CSR, Trust of CSR, Corporation Evaluation (CE), andPurchase Intention (PI). Corporation Evaluation (CE) and Purchase Intention (PI) arethe most popular dependent variables, and they are generally influenced by consumersperceived level (Becker-Olsen et al., 2006). Consumer satisfaction, trust, andcommitment influence consumer perception of CSR activities. In this thesis, awarenessand trust are important indicators of consumer perception, and serve as the foundationfor perceived CSR activities (Lee and Shin, 2010). Trust and Awareness of CSR werealso used to illustrate consumer perception by Dutta and Singh (2013), and the resultsshow that consumers are willing to pay more to corporations that are more engaged inCSR activities. Trust is widely used to measure consumer’s perception and scholarshave identified trust as one of the most important mediators of the consumercorporation relationship (Esch et al., 2006). Finally, CE and PI are the most studieddependent variables, and are greatly influenced by consumer trust and awareness(Becker et al., 2006).12
In the following sections, we will expand our discussion about the relationship betweenconsumer response and consumer perception of CSR. A specific model and hypothesesare also developed in the following sections.2.3.1 Perceived CSRConsumer perceived CSR is defined as “the ability of the consumers to differentiatebetween corporate economic responsibilities on the one hand and corporate legal,ethical, philanthropic responsibilities on the other” (Maignan, 2001, p.65). CSRinitiatives affect consumer attitudes and responses (Brown and Dacin, 1997). Thepositive responses and perception of consumers appear to increase the benefit ofadopting CSR initiatives (Lichtenstein, et al., 2004). Therefore, studying consumerperception can improve our understanding of how consumers perceive CSR activitiesand how that further increases their purchase intention. For consumer perception, themost widely used factors are consumer trust and awareness (Lee and Shin, 2010).Therefore, reasonable hypotheses are:H1-a) A higher level of consumer perceived CSR leads to a higher level of corporateevaluation.H1-b) A higher level of consumer perceived CSR leads to a higher level of purchaseintention.2.3.2 Trust of CSRTrust is defined as the perception of a service provider’s confidentiality, honesty,integrity, and high ethical standards (Coulter and Coulter, 2002). According to Morganand Hunt, trust and commitment play a key role in improving stakeholder relationshipsand in building long-term cooperation. Affect-based trust is one individual’s degree ofconfidence in a partner on the basis of a feeling or an emotional state (Mcallister, 1995).Affect-based trust is often based on a strong trust relationship between the consumerand a corporation and may be altered by CSR, since CSR often plays on emotionalaspects in the consumer’s relationship. Consumers’ trust of CSR is generally defined asconsumers’ expectations that the corporation, as a sponsor of a CSR program, is willingto keep promises and to fulfill obligations with honesty, goodwill, and nonopportunistic motives (Blomqvist, 1997). A consumer’s trust or attribution of a firm’sCSR practices is one of the most immediate consequences of a corporation’s social13
performance (Pivato et al., 2008), and significantly affects consumer response to CSR(Aqueveque, 2005). Therefore, trust in the CSR of a corporation can enhance therelationship between consumer and corporation, and lead to positive consumerpurchase behavior.Piercy and Lane (2009) addressed the idea that if a corporation actively takes part insocial activities, consumers will increase their trust of that corporation. The corporationcould not focus solely on their own benefits and ignore philanthropic efforts, as theseactivities may generate negative influence. Trust plays an intermediate role betweenCSR activities and purchase intention (Zhu et al., 2013). Consumer trust in thecredibility of a corporation’s CSR activities can also influence consumer response indetermining how to evaluate the corporation, based on the corporation’s image andpurchase intention (Mohr and Webb, 2005, Yoon et al., 2006). A higher trust canpromote the strong purchase intention of a product (Lee et al., 2012).The emphasis consumers give to the transparency of CSR activities may also beimportant, and models suggest that trust of CSR will have a positive relationship withPurchase Intention (PI) and Corporate Evaluation (CE). Therefore, it may be said that:H2-a) A higher level of consumer trust of CSR leads to a higher level of corporateevaluation.H2-b) A higher level of consumer trust of CSR leads to a higher level of purchaseintention.H3 A higher level of consumer perceived CSR leads to a higher level of consumer trustof CSR.2.3.3 Awareness of CSRConsumer awareness of CSR describes whether consumers are aware of CSR activities(Pomering and Dolniar, 2009). Consumer awareness of CSR activities is defined as theunderstanding of a corporation’s CSR activities by consumers, which includesconsumers’ ability to determine if a corporation is conducting CSR initiatives(Öberseder et al., 2013). Consumers will make purchase decisions based on theirrational analysis about the corporation and product (Hill et al., 1997). If consumers havea positive perception of CSR activities, their evaluation of the image of the corporation14
will improve. However, evidence shows that consumers generally have a low level ofawareness about CSR initiatives (Pomering and Dolnicar 2009). It is relatively hard toachieve an effect from CSR awareness on evaluation and purchase intention if it is oftennot recognized. Consumer recognition of CSR activities will at least partly depend onthe intensity of CSR information the consumer receives.In our conceptual model, consumer awareness of CSR is an exogenous constructsusceptible to the political traditions, cultural, and economic development in a certainsociety, and likely varies from country to country (Singh et al., 2008). In China, theCSR concept is still in the early stage (Gao, 2008), and many consumers are not awareof CSR, especially at the ethical and philanthropic level (Bala and Yeung, 2009). Thelack of awareness may limit consumer sensitivity to CSR and explain why CSR mightnot be considered when appraising a corporation and its products (Maignan, 2001). Incontrast, the higher the awareness of CSR, the better consumers understand CSRactivities (Lee and Shin, 2010).Thus, consumers with a higher level of awareness or concern of CSR are more likelyto show positive attitudes to the sponsoring firm and its products, and a higher level ofpurchase intention (Lee and Shin, 2010). Therefore, it may be said that:H4-a) A higher level of consumer awareness of CSR leads to a higher corporateevaluation.H4-b) A higher level of consumer awareness of CSR leads to a higher purchaseintention.2.3.4 Consumer response to CSRThe analysis of consumer response to corporation CSR initiatives has producedconflicting results. Some reports show a positive correlation, but find no relationship.To determine the relationship of CSR behavior of firm with consumers, we will reviewprevious literature on consumer response to CSR.Past studies of consumer response and CSR focus on perceived reaction and behaviorresponse (Bhattacharya and Sen, 2004). Perceived reaction is the internal response ofconsumers, and is mainly concerned about how CSR behavior affects consumer15
perception of the state and attitude of a corporation, also described as consumer’scorporate evaluation. The earliest perception studies are from Brown and Dacin (1997),who point out that perception will influence the evaluation of corporation and productquality from the view of the consumer.Behavioral responses are external responses of consumers, and mainly include theimpact of CSR actions on consumer buying behavior, such as consumer purchasingintention, buying loyalty, and the level of premium consumers are willing to pay.Consumers may have a higher potential to accept service and purchase products from asocially responsible firm (Daub and Ergenzinger, 2005). Again, findings in the extantliterature are mixed. To explore the relation between CSR behavior of firm andconsumers, we focus on consumer purchase intention and corporate evaluation.Concept of Consumer’s Purchase intentionAccording to Espejel et al. (2008), purchase intention is the result of consumers’attitudes or beliefs, and a prediction of subsequent behavior regarding a future purchase.The positive attitudes of consumers towards a corporation’s reputation, image, andproduct evaluation can be influenced by CSR activities (Brown and Dacin, 1997). Manystudies have shown that there is a positive relationship between a business’s CSRprogram and consumer’s attitudes towards that organization and its products (Brownand Dacin, 1997). Research also shows that CSR will directly affect consumer’sintentions to purchase products (Sen and Bhattacharya, 2001).Ethical consumers may like to support corporate CSR activities. These consumers havea greater willingness to pay for the “luxury
corporate social responsibility (CSR) has become a very important component of corporate activities. However, the commitment to CSR in China has been very low. Chinese consumers are becoming less willing to accept different treatment from MNCs, but there has been little study of CSR prob
Chapter 2: Social License Chapter 3: CSR Motives Chapter 4: Laws of CSR Chapter 5: Role of Private Companies . Chapter10: Corporate Social Entrepreneur Chapter11: Business Ethics Chapter12: Corporate Governance . Chapter 1 Introduction of CSR Corporate social responsibility Corporate social responsibility (CSR, also called corporate .
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H1. There is a relationship between level of corporate social disclosure and ROE, OM. 1.5. Paper structure 1 The definition of level of corporate social disclosure is the level of company's performance on the corporate social responsibility according to sentences mentioned about corporate social responsibility in company's annual reports.
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