Corporate Social Responsibility and Brand Equity in Industrial Marketing

Although both corporate social responsibility and brand equity have been extensively studied in marketing research, there are very little about the relationships between these two important concepts in industrial marketing. The purpose of this research is to empirically test the relationship between corporate social responsibility in five dimensions and brand equity.for this purpose a structured questionnaire was developed to collect data and totaling 101 questionnaires of Industrial corporate managers were analyzed. The conceptual model was tested using structural equation modeling. Our findings show social performance has a positive effect on brand equity. So managers can increase brand equity by using corporate social responsibility as a strategic tool for positioning differentiation. Introduction Corporate social responsibility (CSR) is receiving increasing attention, especially in recent decades. For example, more than 50 percent of global executives identify CSR as their top priority (The Economist,2008). The implementation of a CSR policy may generate a trusting relation-ship between the company and stakeholders that causes stakeholders to become committed to the organization through actions such as customer loyalty, stockholder capital investments, and supplier in-vestments (Garbarino & Johnson, 1999; Maignan & Ferrell, 2004; Sen, Bhattacharya, & Korschun, 2006). CSR refers to a company’s activities and status related to its perceived societal or stakeholder obligations (Brown and Dacin, 1997). Underlying the interest and concern for CSR is the fact that firms do not operate in a vacuum. Rather they can be viewed as “open systems” dependent on some actors and influential to others. Through exchanging output with the environment, for example the customers, companies impact and transform society. In order to survive and prosper, sufficient resources must be retained to at least cover costs, and excess profit is considered advantageous. In other words they must be effective. Firms, in this way, work diligently at attaining their goals. Their activities are planned and conducted by motivated actors with self-interests. Literature suggests that CSR actions can lead to reputational advantages (e.g. Fombrun and Shanley, 1990; Orlitzkyet al., 2003), not much has been done to International Journal of Academic Research in Business and Social Sciences September 2013, Vol. 3, No. 9 ISSN: 2222-6990 274 www.hrmars. com/journals study the effects of CSR on brand equity. Brand equity entails “the additional value that accrues to a firm because of the presence of the brand name that would not accrue to an equivalent unbranded product” (Keller and Lehmann, 2006, p. 745). Despite the interrelation between reputation and brand, the two concepts are not synonymous. Reputation centers primarily on the company, whereas brand is customer-oriented (Ettenson and Knowles, 2008). Reputation may create a favorable context for product evaluation but is not a sufficient condition for brand value enhancement. A dearth of empirical support exists for the proposition that CSP improves brand equity (Brady, 2003; Middlemiss, 2003). The key research question in this study concerns the investigation into the effects of CSR practices with different stakeholders on BE in industrial marketing, with an emphasis on the role played by credible CSR initiatives. We first investigate whether CSR efforts impact BE. Second, we aim to assess which CSR efforts have the strongest effects on BE. In order to achieve the above-mentioned objective, this paper is organised into five sections. The first section presents a theoretical foundation for this study by reviewing the extant literature on CSR, particularly in the context of marketing and brand equity. The second section describes methodological approach and measurement techniques. In the third section, the results are outlined. The fourth section provides a discussion of the findings along with the subsequent implications. The last section identifies the limitations of this study and the areas for future research. Corporate Social Responsibility (CSR) in marketing context The National Association of Marketing Teachers, a predecessor of the American Marketing Association (AMA) adopted the first official definition of marketing in 1935. AMA adopted the definition in 1948, and again in 1960 when the association revisited the definition and decided not to change it. This original definition stood for 50 years, until it was revised in 1985 to: Marketing is the process of planning and executing conception, pricing, promotion and distribution of goods, ideas and services to create exchanges that satisfy individual and organizational goals. This definition views marketing as a transaction between the provider and the receiver of the product, where the provider satisfies the goals of the receiver and obtains some type of compensation in return. The definition emphasizes the four components of the marketing mix (the four Ps). It should be noted that the definition goes beyond commercial transactions and includes for example politics (where the product is a political candidate or political platform rather than goods and services) and charities (where a sense of purpose or doing-right is received in exchange for monetary contributions). The 1985 definition remained unchanged for nearly 20 years, until it was changed in August 2004 to: Marketing is an organizational function and a set of processes for creating, communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. The change of definition reflects a shift in perspective in several ways. The new definition signifies a move from transaction orientation to emphasis on value for the customer, which implies a focus on end-result instead of exchange. The new definition is also more focused in the sense that it targets the customer and highlights that marketing should be customer-centric rather than focus on brand/product or any of the other components of the marketing mix. In International Journal of Academic Research in Business and Social Sciences September 2013, Vol. 3, No. 9 ISSN: 2222-6990 275 www.hrmars. com/journals addition, the introduction of stakeholders implies a shift from a dyadic perspective (i.e. organization and individual) to a triadic perspective (i.e. organization, customers and other external stakeholders) ( Terje ,2008). The concept of CSR is blurred, fuzzy (Lantos, 2001) and characterized by three major challenges. Firstly, the definition and dimensions of CSR vary. In a marketing context there is still no clear definition of what social responsibility of marketing is (Carrigan and Attalla, 2001). Lack of definition implies that investigation of CSR in marketing easily holds a myopic view with a focus on limited dimensions of CSR (Maignan and Ferrell, 2004). Different conceptual entities restrict comparison and integration of definitions. Whereas some scholars focus on businesses in general, others apply the individual firm or the decision maker as unit of analysis. Some are normative while others hold an instrumental perspective focusing on benefits (Maignan and Ferrell, 2004). Furthermore there is a tendency to focus on very limited aspects and dimensions of CSR in empirical studies of CSR (Maignanet al., 2005). This perspective thus represents a shift from what Armstrong (1977) refers to as the manager’s “stockholder role” to a “stakeholder role”, with implications for the likelihood of irresponsible acts. The legitimacy of social responsibility is a second challenge when applying the marketing context. Its legitimacy is highly debatable when, for example, publicly held companies undertake “social responsible” activities that might restrict profits (Lantos, 2001), and disagreement in how social responsibility is actually achieved (Carrigan and Attalla, 2001). Crook (2005) argues that governments, which are accountable to all citizens, are the proper guardians of the public interest, while the proper business of business is business. His argument is that managers, acting in their professional capacity, are not competent to concern themselves with the public good. They lack the democratic credentials and their day jobs should leave them no time to even think about it. Finally, the corporate benefit of CSR can be questioned, which is both affected and affects the precision of the construct. Studies of CSR reveal little about implementation and likely benefits of CSR (Maignan et al., 2005). Some even claim that most customers pay little heed to ethical considerations in their purchase decision-making behavior (Carrigan and Attalla, 2001), and raise the dilemma that customers of today seem to reward unethical behavior and penalize ethical business behavior (Titus and Bradford, 1996; Carrigan and Attalla, 2001). The CSR construct embraces two dimensions of decision making, responsible and irresponsible acts. The seminal work of Armstrong (1977) introduces “social irresponsibility” as a more useful mode of addressing “social responsibility”. The vast majority of studies, however, apply corporate social responsibility (CSR) in addressing both responsibility and its negation. The CSR construct includes at least three aspects of the relationship between the company and the society: How the conduct of business reflects ethical considerations, how the business operations affect the environment, and finally, the extent to which the operations interfere with established social and human rights (Vaaland and Heide, 2005). Lantos (2001, 2002) suggests three archetypes of CSRs namely, ethical, altruistic and strategic. Ethical CSR constitutes a minimum level of responsibility to society, and implies that the company avoids harm or social injuries even to exceed the formal legal duties if necessary. Altruistic CSR corresponds with Carroll’s (2000) philanthropic responsibi