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Management DecisionEmerald Article: Understanding the influence of corporate socialresponsibility on corporate identity, image, and firm performance

Sebastian Arendt, Malte Brettel

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To cite this document: Sebastian Arendt, Malte Brettel, (2010),"Understanding the influence of corporate social responsibility on

orporate identity, image, and firm performance", Management Decision, Vol. 48 Iss: 10 pp. 1469 - 1492

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Diogo Hildebrand, Sankar Sen, C.B. Bhattacharya, (2011),"Corporate social responsibility: a corporate marketing perspective",

European Journal of Marketing, Vol. 45 Iss: 9 pp. 1353 - 1364

ttp://dx.doi.org/10.1108/03090561111151790

eremy Galbreath, (2009),"Building corporate social responsibility into strategy", European Business Review, Vol. 21 Iss: 2 pp.

09 - 127

ttp://dx.doi.org/10.1108/09555340910940123

Todd Green, John Peloza, (2011),"How does corporate social responsibility create value for consumers?", Journal of Consumer

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ttp://dx.doi.org/10.1108/07363761111101949

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Understanding the influence ofcorporate social responsibility on

corporate identity, image, andfirm performance

Sebastian Arendt and Malte BrettelCenter for Entrepreneurship, RWTH Aachen University, Aachen, Germany

Abstract

Purpose The aim of this paper is to examine the effects of corporate social responsibility (CSR) oncorporate identity, image and firm performance in a multi-industry setting, in order to supportevidence that the effects of CSR differ in different industry settings.

Design/methodology/approach The study, based on pre-existing CSR scales, was tested usingdata collected from a sample of 389 European companies. Hypotheses are based on the examination ofthe moderating effects of CSR using a group comparison method.

Findings Contingency models show that CSR triggers the corporate-image-building process andthat its relationship to company success varies significantly based on company size, industry andmarketing budget.

Research limitations/implications This research was conducted within a specific region in theEU and as such these findings may or may not be generalized to other regions like Asia or the USA. Inaddition, the secondary data of the study did not include stakeholders other than customers andsuppliers, suggesting that further analysis of the model should be made using data from additionalstakeholders.

Practical implications Previous research has shown mixed results from companies efforts in thefield of CSR. This paper triggers practitioners discussion about the ability to pursue CSR, depending

on their size, industry, and marketing budget, and helps them to set the right focus for their CSRefforts.

Originality/value The study enriches the body of empirical research on CSR and provides supportfor research investigating under which conditions CSR is most effective. It is the first to analyzesamples from different industries in this context.

Keywords Social responsibility, Philanthropy, Corporate identity, Corporate image

Paper type Research paper

1. IntroductionWith estimated spending on charitable giving reaching $310 billion in the US alone(Giving USA Foundation, 2008), corporate social responsibility (CSR) has become amainstream topic, rising to a corporate priority in management and marketing(Franklin, 2008). The question of how CSR affects customers and other stakeholdersperceptions and how it affects the companys reputation, corporate identity, image, andorganizational success has become one of the key topics at the intersection ofsustainability and marketing research (Bhattacharya et al., 2009; Sen et al., 2006; Smith,2003).

While the creation of a strong reputation and image has been recognized as animportant factor in the success or failure of virtually all major organizations for sometime (Worcester, 2009; see special issue ofManagement Decision 2009 for an overview),

The current issue and full text archive of this journal is available at

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CSR has only recently been acknowledged as one of the most important factors indetermining corporate reputation (Worcester, 2009). While a strong corporatereputation can provide a competitive advantage (Balmer, 2009), stakeholders arebecoming skeptical about firms reasons for engaging in CSR (Vlachos et al., 2009),

making it more difficult for researchers and practitioners to understand the specificconsequences and effects of engaging in CSR activities (Maignan and Ralston, 2002).From a stakeholder perspective, CSR can be seen as a support to worthy causes, but itcan also be seen as a marketing practice with the purpose of increasing visibility ratherthan of create social impact (Luo and Bhattacharya, 2006). Stakeholders wonderwhether the CSR is really altruistic or just another marketing ploy to increase profits,albeit indirectly.

To address these inconclusive perspectives on CSR, we investigate the role of CSRin the corporate-identity-building process of a company, arguing that corporateidentity management as an organizational marketing process is more effective in termsof stakeholders perception of corporate image attractiveness and identification whenCIM is augmented by strong CSR. This study follows previous research on stakeholderidentification (Sen et al., 2006; Bhattacharya et al., 2009) and CSR (Thompson et al.,2010; Lichtenstein et al., 2004) and advances knowledge based on a fit-analysis of thespecific conditions (i.e. CSR and different industry settings, company sizes, marketingbudgets) under which CSR is particularly instrumental to corporate imageattractiveness, stakeholder-company identification, and firm performance.

While multiple studies draw the link between favorable corporate identity andsuperior business performance (Margulies, 1977; Brown, 1995; Bharadwaj and Menon,1993), the unequivocally positive effects of CSR in academic research are at odds withthe evidence in the real-world marketplace (Sen et al., 2006; for an overview seeStanwick and Stanwick, 1998). Thus, despite the growing body of literature, there is apaucity of empirical research that examines the effect of CSR on companies corporate

image and stakeholder identification, as well as company success (Brown and Dacin,1997; Sen and Bhattacharya, 2001; Drumwright, 1996). In addition, there remains asignificant gap in the testing and application of the relationship between corporateimage, company performance and CSR in multi-industry contexts, such as forcompanies of different sizes, from different industries, and with different marketingbudgets (Dutton et al., 1994; Vlachos et al., 2009). Researchers and practitioners tend topromote the one best CSR approach for a standardized organization, regardless of size,special industry characteristics and marketing budget the last of which is equallyimportant as we go through an expanded period of recession and slow economicgrowth.

Our study expands existing research in three ways: first, we address the gap inprevious research regarding the effects of CSR on the relationships between corporate

identity, image, identification, and company success (Chahal and Sharma, 2006; Jahdiand Acikdilli, 2009; Smith, 2003). Second, we answer the call for empirical research bySen et al. (2006) and Sen and Bhattacharya (2001), for which a clear understanding ofCSR in the corporate identity-management process and its impact on companyperformance is a key prerequisite. Since CSR clearly has the potential to benefit thefirm in myriad ways, Sen et al. (2006) called for future research [to] investigate thecontingent conditions under which these internal outcomes and behavioral intentionsmay be differentially affected by CSR initiatives (Sen et al., 2006, p. 164). Third, by

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including variables such as industry, company size, and marketing spending, thisstudy is the first to assess CSR and corporate marketing issues in a multi-industrysetting, which supports executives need for tailor-made, cost-effective CSR (Warhurst,2008).

2. Conceptual background2.1 CSR and marketingCSR is regarded as a means for improving the quality of life or well-being of society(i.e. the philanthropic dimension of CSR, see Carroll, 1991, p. 42) and obeying societyscodification of right and wrong (i.e. the legal dimension of CSR, see Carroll, 1991, p. 42).Based on their review of the recent status of the theory of CSR applied to the marketingcontext, Vaaland et al. (2008) define CSR as management of stakeholder concern forresponsible and irresponsible acts related to environmental, ethical and socialphenomena in a way that creates corporate benefit (Vaaland et al., 2008, p. 931). Ourresearch follows the more specific conceptualization of CSR by Lichtenstein et al.

(2004), who define CSR as a firms commitment to contributing parts of its profits tononprofit organizations and charitable causes.In marketing research, CSR is seen as a standardized concept that is applied and

communicated rigorously across industries and company sizes (Maignan and Ferrell,2004). However, this broad conceptualization of CSR often breeds public cynicism andsuspicion (Porter and Kramer, 2007) with consumers suspecting firms ofgreenwashing (Reuters, 2008) and questioning firms underlying motives (Ellenet al., 2006). Although some research indicates that communicating about CSRactivities does not necessarily reflect positively on a company (Sen and Bhattacharya,2001), others support the approach of cause-related marketing as a means to improvecorporate performance and simultaneously help worthy causes based oncompassionate grounds (Varadarajan and Menon, 1988). However, adopting such

policies requires communication with the stakeholders, not only to convince them thatthe company is serious about its CSR strategies, but also to ensure that those strategiescontribute to the corporate image and brand equity (Jahdi and Acikdilli, 2009). Sinceempirical research has found links between CSR and corporate identity, CSR has beenincluded in excellence models impacting company reputation and corporate image(Cornelius et al., 2007). More companies than ever are attempting to leverage CSRassociations, with CSR reports filling web pages and brochures (Snider et al., 2003),although, not surprisingly, with mixed success in improving firms reputations andfinancial success in the marketplace (Sen et al., 2006).

Despite fast-growing research in the field of CSR and its measurable output oncompany performance, inconsistencies remain related to how and under whichconditions CSR leads to improved performance and competitive advantages (Vlachos

et al., 2009; Zairi and Peters, 2002). Table I depicts an overview of current empiricalresearch in the field of CSR, CIM, and firm performance.

2.2 Corporate identity managementA sizable body of research, including research and publications from the field ofvisual/graphic design, organizational studies, and marketing addresses the topic ofcorporate identity, image, and branding of business organizations (for comprehensiveliterature overviews see Brown et al., 2006). Balmer (2008) discusses five principal


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Variables

Authors

Sub

ject

Methodology

Independent

Dep

endent

Moderating

Luoand

Bhattacharya

(2009)

Corporatesocial

performanceand

com

panyrisk

Secondaryda

ta

CSR

Firm-idiosyncraticrisk

Advertising,R&D

Vlachosetal.(2009)RelationshipCSRand

consumeractions

Fielddata

(consumers)

Consumerperceptionsof

CSRactions

Rep

eatpatronage/

recommendation

inte

ntions

Consumertru

st,service

quality

Worcester(2009)

Corporateresponsibility,

corp

orateimage

Descriptive

statistics

N/A

N/A

N/A

Aragon-Correaand

Rubio-Lopez(2007)

Proactiveenvironmental

stra

tegiesandorg.

capabilities

Secondaryda

ta

Organizationalresources

andcapabilities

Proactivecorporate

env

ironmentalstrategy,

com

petitiveadvantage

N/A

Corneliusetal.

(2007)

CSR

,CIinbusiness

schools

Websitecontent

analysis

Ethicsteaching,ethical

behavior

Com

municationand

visualidentity,

behavior,

corporateculture,market

conditions

N/A

Luoand

Bhattacharya

(2006)

CSR

andthemediating

role

ofcustomer

satisfaction

Secondaryda

ta

CSR

Marketvalue

Customersatisfaction,

corporateability

Lichtensteinetal.

(2004)

Con

sumerreactionsto

CSR

activities

Fielddata

(consumers)

CSRperceptions

Cus

tomerdonations,

corporatebenefits,

C-C

identification

N/A

Senand

Bhattacharya

(2001)

Con

sumerreactionsto

CSR

activities

Fielddata(M

BA

students)

Newproductquality

information

Pur

chaseintention,

com

panyevaluation

CSRinformation,

CSR

support,CSR

domain,C

SR

beliefs

McWilliamsand

Siegel(2000)

CSR

andperformance

Secondaryda

ta

CSR

Corporatesocial/financial

performance

Size,risk,

ind

ustry

(continued)

Table I.Literature overview:empirical research CSR,CIM, and firmperformance

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Variables

Authors

Sub

ject

Methodology

Independent

Dep

endent

Moderating

Handelmanand

Arnold(1999)

Marketingactionsand

socialdimensions

Experimental

Levelsofinstitutional

actions

Eco

nomicperformance

CSR

Maignanetal.

(1999)

Roleofcorporate

citiz

enship

Fielddata

(marketing

executives)

Corporatecitizenship

Bus

inessperformance

Employeecommitment,

customerloyalty

Singhapakdietal.

(1999)

Perceivedrelevanceof

CSR

tomarketing

man

agers

Fielddata

(marketing

professionals)

Organizational/personal

factors

Beh

avioralintentions

Perceivedmo

ralintensity,

personalmoral

philosophies

Teohetal.(1999)

Legislative/shareholder

pressureonperformance

Secondaryda

ta

Sociallyactivist

investment

Institutional

shareholding,company

valuation

N/A

Karake(1998)

CSR

,companyreputation

index,returnonequity

Fielddata,

secondarydata

CSR

Com

panyreputation

index,returnonequity

N/A

Stanwickand

Stanwick(1998)

Relationshipsingle

factorsoncorporatesocial

performance

Secondaryda

ta

Sizeofthefirm,

levelof

profitability,emission

amount

Corporatesocial

performance

N/A

BrownandDacin

(1997)

Con

sumerreactionsto

CSR

activities

Fielddata

(consumers)

CSR

Corporate/product

evaluation

N/A

Posnikoff(1997)

Effe

ctofCSR

announcementsonfirms

retu

rns

Secondaryda

ta

PublicCSR

announcements

Abnormalcompany

retu

rns

N/A

Table I.


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schools of thought relating to identity and identification which are characterized ascorporate identity, communicated corporate identification, stakeholder corporateidentification, stakeholder cultural identification, and envisioned identities andidentifications. Corporate identity deals with the impressions, image, and personality

that an organization presents to its stakeholders (Schmitt and Pan, 1994), in order todifferentiate itself and create a unique position in the environment in which it operates(Simoes and Dibb, 2008). The objective of corporate identity management (CIM) is toestablish a favorable reputation with an organizations stakeholders, which thestakeholders then translate into a propensity to buy the organizations product orservices, to work for the organization or to invest in it (Balmer, 1995; van Riel, 1995).While the identity of a company may vary across stakeholder groups, Simoes et al.(2005) suggest that there is a common internal platform for identity management thatreflects consistent messages about the organization so that a reputable corporate imageis transmitted across audiences. Since the notion of corporate identity is linked to arange of related concepts that we refer to as external determinants of corporate imagesuch as reputation and branding, for our purpose CIM comprises the internal efforts by

which a company works to identify itself (Kotler, 1997).

2.3 External corporate image and stakeholder identificationWhile CIM focuses on the aspects of how a firm manages its identity, managers andacademics are also concerned with how external stakeholders view the corporation,variously defined in the theoretical literature as corporate associations (Ellen et al., 2006),corporate identification (Bhattacharya and Sen, 2003), corporate brand (Ind, 2000),corporate reputation (Weiss et al., 1999), and corporate image (Zinkhan et al., 2001).Based on an organizations unique characteristics (Esch et al., 2004), the corporate imageor brand is the net result of all experiences, impressions, beliefs, feelings, and knowledgethat people have acquired related to a company (Worcester, 2009). We define corporate

image attractiveness as the attractiveness of the corporate image as perceived by itsvarious audiences (Bhattacharya and Sen, 2003) and stakeholder-company identificationas the degree to which stakeholders feel a sense of connection to a company (Einwiller,2006).

We chose a CIM model based on Simoes et al. (2005) and Balmer (2008) as part of ourtheoretical framework. An internally controlled reputation-building process is aprerequisite for acquiring a favorable corporate image (Fombrun, 1996; Simoes andDibb, 2008). Therefore, drawing on the CIM model, we argue that an internallycontrolled and managed corporate identity directly affects corporate imageattractiveness and stakeholder-identification, and thus stakeholders perceptions ofthe corporation.

3. Derivation of hypothesesDespite the apparent potential of CSR to drive company-favoring outcomes, likeimproved corporate image attractiveness, stakeholder-company identification, orperformance, the impact of CSR is anything but guaranteed. According toBhattacharya et al. (2009):

It is becoming increasingly clear that in order to explain and predict the outcomes of CSRactivity with any degree of certainty, we need a more precise understanding of the underlyingprocesses that drive those returns (Bhattacharya et al., 2009, p. 258).

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Extant theory premises indicate that CSR may serve as a moderator of the link betweenperformance driver and performance outcome (Vlachos et al., 2009; e.g. Handelman andArnold, 1999) and that corporate image affects organizational performance (Fombrunand Shanley, 1990) in terms of increased customer loyalty and consumption

(Bhattacharya and Sen, 2003). Table II depicts an overview of the current stage ofempirical research in this field. There is also evidence to support the notion that acorporate reputation that is perceived as attractive by its stakeholders gives anorganization a competitive advantage (for an overview see van Riel and Balmer, 1997).

Therefore, our overall premise is that, in a multi-industry sample[1], CSR has apositive impact on corporate identity initiatives and their effect on the corporate imageattractiveness and stakeholder-company identification, supporting the current state ofmarketing research (Neville et al., 2005). Figure 1 summarizes our complete researchmodel. Based on the mixed results of performance-driver and performance-outcome-relationship in the field of CSR stated above, we hypothesize that in amulti-industry sample, CSR initiatives have a positive moderating effect on therelationships of CIM to corporate image attractiveness and stakeholder-companyidentification, but no impact on the company success measures of performance orcompetitive advantage:

H1a. CSR initiatives have a positive moderating effect on the relationships of CIMto corporate image attractiveness and stakeholder-company identification.

While there is vast agreement on the positive effects of CSR on image andidentification, positive effects of CSR on financial performance in academic researchare somewhat at odds with the evidence in the real-world marketplace (Sen et al., 2006;for an overview see Stanwick and Stanwick, 1998). We therefore follow:

H1b. CSR initiatives have no impact on company success measures.

We refine H1 by arguing that the moderating results of CSR must be assessed in termsof different industry settings, company sizes, and marketing budgets in order toexplore how CSRs effects on image, identification, and performance differs based onthese categories.

Studies of corporate identity signify the important role that the nature of theindustry plays in shaping an organizations identity (Melewar and Jenkins, 2002),because the ability to promote a corporate identity differs across industries (Alessandriand Alessandri, 2004). This is also true for CSR activities, where research shows thatthe service sector tends to show more positive effects from CSR activities (Calabreseand Lancioni, 2008), than product-based industries do (Jackson and Parsa, 2009). Thus,we hypothesize that the strengthening effects of CSR on CIM and the corporate imageand their effect on company success differ based on the organization is product- or

service-based:

H2. CSR initiatives have a stronger positive impact on CIM and company successin service rather than product-based industries.

Brand management findings also reveal significant differences between small andlarge organizations along nine out of ten brand management and identity dimensions(Berthon et al., 2008). Furthermore, in the field of business ethics, researchersacknowledge that the CSR programs of other company types are not properly


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Indicator loadings and construct reliability for reflective constructs Loading

Construct: MVD Mission and value dissemination (based on Simoes et al., 2005)There is total agreement on our mission across all levels and business areas 0.73

All employees are committed to achieving the companys goals 0.65There is a clear concept of who we are and where we are going 0.79Companys values and mission are regularly communicated to employees 0.80Employees view themselves as partners in charting the direction of the company 0.61We do have a well-defined mission 0.80Managers periodically discuss corporate mission and values 0.69All employees are aware of the relevant values 0.81Cronbachs Alpha 0.91AVE 0.60

Construct: CII Consistent image implementation (based on Simoes et al., 2005)Our company name is part of our image 0.57Our corporate symbols (logo, slogan, colors/visual style, signage) are constituents of ourimage 0.62Much of our marketing is geared to projecting a specific image 0.68Our employees and staff understand symbols (or visual branding) of our company 0.74Employees are dressed in a manner to project the company image 0.66Merchandising and brochures are an important part of our company marketing 0.60Cronbachs Alpha 0.81AVE 0.53

Construct: VII Visual identity implementation (based on Simoes et al., 2005)Our company name is part of our image 0.62Our corporate symbols are constituents of our image 0.76Much of our marketing is geared to projecting a specific image 0.90Our employees and staff understand symbols (or visual branding) of our company 0.69Cronbachs Alpha 0.81AVE 0.65

Construct: corporate image attractiveness (based on Bhattacharya et al., 2003)I like what company x stands for, Company x has an attractive identity 0.74I recognize myself in company x, My sense of who I am matches my sense of company x 0.73Company x has a distinctive identity, Company x stands out from its competitors 0.60Company x is a first-class, high-quality company 0.83I feel like I know very well what this company stands for 0.78Its difficult to get a clear sense of what this company stands for from its actions 0.52Cronbachs Alpha 0.87AVE 0.59

Construct: stakeholder company identification (based on Bhattacharya et al., 2003)I think about the company x often 0.69

My interactions with company x make me an important player in the organization 0.50I am loyal to the products company x makes 0.64I often talk favorably about company x and its products to my friends and colleagues 0.80I try to get my friends and family to buy company xs products 0.82I forgive company x when it makes mistakes 0.82I feel I have a right to tell company x what it should do 0.71Cronbachs Alpha 0.84AVE 0.51

(continued)

Table II.Measurement scales

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benchmarked against those of large multinational firms (Spence and Rutherfoord,2003). Small firms are likely to be owner managed, which provides greater scope forindividual beliefs and moral decision-making than larger firms are likely todemonstrate. For most small and medium enterprises (SMEs), CSR is a norm to actupon rather than a corporate strategy based on tools, programs, and initiatives (Spenceand Rutherfoord, 2003). Studies that are focused on CSR and sustainability issues,cannot generalize their findings to both large and small firms, since they tend tounderestimate the differences in the relationships smaller companies have withstakeholders from those of larger organizations (Fassin, 2008; Graafland et al., 2003;

Jenkins, 2009). Therefore, we hypothesize, that the strengthening effects of CSR on CIMand the corporate image and their effect on company success differ based on whetherthe organization size is large or small:

H3. CSR initiatives have a stronger positive impact on CIM and company successin smaller rather than in larger firms.

In addition to the effects of organizational size and industry type, the size of thecorporate marketing budget is central to questions related to the strengthening effects

Indicator loadings and construct reliability for reflective constructs Loading

Construct: Performance (based on Brettel 2005)In the last three years, in comparison with our most important competitors, we are

satisfied with. . .

. . . the achieved customer satisfaction 0.76

. . . the value enhancement for our customers 0.70

. . . with the level of customer loyalty 0.71

. . . with the number of new customers 0.70

. . . with the growth of our company 0.64

. . . with the success of our products and services 0.71

. . . with the forecast of operating results in the next couple of years 0.73Cronbachs Alpha 0.86AVE 0.58

Construct: competitive advantage (based on Brettel, 2005)We have strategic advantages in comparison with our competitors 0.30We have a high market share 0.50

Our EBIT is higher than the industry average 0.93Our ROI is higher than the industry average 0.95Our average operating margin is higher than the industry average 0.96We are in total more successful than the competition 0.73Cronbachs Alpha 0.89AVE 0.64

Construct: corporate social responsibility (based on Lichtenstein 2004)Company x is committed to using a portion of its profits to help nonprofits 0.71Company x gives back to the communities in which it does business 0.76Company x integrates charitable contributions into its business activities 0.77Company x is involved in corporate giving 0.73Cronbachs Alpha 0.84AVE 0.66 Table II.


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of CSR on CIM and its effect on corporate image attractiveness, stakeholder-companyidentification, and performance. The literature shows significant moderating effects offinancial resources on the effectiveness of corporate communications effectiveness andcorporate identity (Dolphin, 2003). The financial resources available for marketing cansubstantially influence a firms corporate identity activities and may act as amoderator between the corporate identity and corporate brand relationships(Alessandri and Alessandri, 2004). Firms with excess resources are more likely toinvest them in marketing (Shoham and Feigenbaum, 1999) and marketing is often the

first line that a financially strapped firm cuts. Therefore, CSR efforts may beconsidered a luxury such that only financially robust companies see themselves as ableto afford them. This reasoning suggests that in a firm with limited financial resources,CSR as an investment may act as a moderator in strengthening the effects of CIMinitiatives and its outcomes. Therefore, we hypothesize that CSR also strengthens theimpact of CIM on the corporate image and its effect on company success, when thecorporate marketing budget is rather small than large:

H4. CSR initiatives have a stronger positive impact on CIM and company successfor smaller rather than larger corporate marketing budgets.

4. Methodology

4.1 Sampling frame and data collection procedureThe studys hypotheses were tested using data collected from a survey of 4,000companies that are members of the German and Austrian Chamber for Industry andCommerce. We collected information from an online and offline questionnaire that wassent to the CEOs of the corresponding companies because of their overview of thecorporate identity and CSR decisions as well as the success measures. Between Augustand October 2009, we received 381 qualified answers. The sample comprises a goodratio between business-to-business and business-to-consumer firms with a mixed

Figure 1.Overview of the researchmodel

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industry background in product- and service-based industries (see Table III for adetailed composition of our sample). The development of the survey instrument startedwith in-depth face-to-face interviews with marketing experts in large and mediumsized enterprises. This phase involved semi-structured discussions that were largely

exploratory in nature and designed to supplement the existing literature inconstructing the draft questionnaire. We then asked a group of academics to reviewthe draft questionnaire to identify questions for which there was a source of possiblebias. Through this feedback, we eliminated or modified some of the initial surveyitems, and added others to the revised instrument. Figure 2 summarizes the empiricalresearch process used.

4.2 Tests for potential biasesA comparison of differences in the mean values of the responding and non-respondingcompanies based on sales revenues, company age, number of employees, andperformance did not reveal any significant non-response bias. The sample consisted ofrespondents who were likely to be knowledgeable about the issues under study, since

69 percent of respondents were managing directors, 21 percent were senior executives,and 10 percent marketing managers or other. For the dependent variables of corporateimage attractiveness and stakeholder-company identification, multiple informantshave been used (Kumar et al., 1993). We collected customer and supplier surveys at 80of the 381 companies to check the validity of external corporate image attractiveness

%

Firm size (number of employees),5 115-25 3025-50 21

50-100 16100-300 13300-500 4.500 5

IndustryProduction 45Service 55

Corporate marketing spend (% of sales),1 71-2 283-5 14

5-10 2410-15 1515-30 9.30 3

Position of respondentsManaging director 69Senior management 21Other 10

Table III.Composition of sample


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and stakeholder-company identification; T-tests on these constructs showed that thereis no significant difference at the 0.05 level between the responses from corporate CEOsand those from customers and suppliers. For the inner aspects of corporate identity, werelied on data from a single survey respondent from each company, so we took specialsteps in the design of our questionnaire to minimize the possibility of common methodvariance (Podsakoff et al., 2003). First, we used multiple-item scales to measure ourconstructs and scattered questions pertaining to the independent and dependentvariables throughout the questionnaire. Second, we conducted Harmans single-factortest and found that no single factor or a general factor accounted for the majority of thevariance in the measures (Podsakoff and Organ, 1986). Third, we analyzed the effectsof a single unmeasured latent method factor added to our measurement model byloading all items originating from the same informant onto both the method variableand its respective latent variable (Podsakoff et al., 2003). We then compared the

Figure 2.Empirical researchprocess

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standardized parameter estimates with and without the method variable and foundthat the significance of the substantive relationship was not affected. According to ourresults, common method bias is not a concern.

4.3 MeasuresWe followed Churchill (1979) in developing our measurement instrument based onestablished reflective constructs whenever possible and used seven-point Likert scales.CSR, as a moderating construct, following Lichtenstein et al. (2004).

The second-order construct of CIM follows the guidelines of organizational andmarketing research, including ideas from graphic design (visual identityimplementation), organizational studies (mission and value dissemination), andmarketing perspectives (consistent image implementation) (Simoes et al., 2005).

To measure the companies image attractiveness and stakeholder-company identity,we drew on the items of Bhattacharya and Sen (2003), condensing them into twoseparate reflective constructs. Therefore, corporate image attractiveness depends on

how similar the firm is to stakeholders own identity (identity similarity), itsdifferentiation from its competitors (identity distinctiveness), its prestige (item identityprestige), its attractiveness as an identity per se (item identity attractiveness), theperception related to how well the companys identity is known, and the firms overallfit (item identity knowledge and identity coherence). Similarly, stakeholders are morelikely to perceive a companys image as attractive when they perceive it to betrustworthy (item identity trustworthiness). A comprehensive analysis ofconsumer-company identification, focusing on its constituents and consequences,served as a template for the reflective measurement of stakeholder-companyidentification that highlighted the items of embeddedness, salience, product loyalty,company promotion, customer recruitment, resilience to negative information, and astrong claim on the company.

Company success is a complex and multidimensional construct that is difficult toassess (Dess and Robinson, 1984). Therefore, we decided to measure firm success asboth firm performance and competitive advantage so we could show the effects ofcorporate image attractiveness and stakeholder-company identification on companysuccess more specifically. Firm performance was measured using six items related tothe respondents impression of company success relative to its largest competitors (asubjective performance measure, see Brettel et al., 2005, based on Pelham (1999) andDeshpande et al. (1993)), while the construct of competitive advantage builds onSchilke, 2007). The interpretation of subjective, relative performance data is easier andmore accurate across diverse context factors, such as across industries (Covin andSlevin, 1989), and several studies illustrate the high correlation between subjective andobjective performance indicators (e.g. Chandler and Hanks, 1993; Dess and Robinson,

1984). Table II displays the measurement scales described above.

4.4 Estimation approachFor data analysis we chose structural equation modeling (SEM, Fornell and Bookstein,1982), specifically AMOS 17.0, an implementation of a covariance-based approach,since it clearly outperforms variance-based approaches in terms of parameterconsistency and accuracy and enables us to assess the overall model quality (Reinartzet al., 2009; Joreskog, 1973, 1979). We examined the moderating effects of CSR using a


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group comparison approach and estimated a SEM for each group and then tested thedifferences in path coefficients for significance that would suggest the presence of amoderating effect.

5. Results5.1 Evaluation of measurement resultsWe assessed the reliability and validity of the measurement model using calculationsof Cronbachs alpha (threshold 0.7) between 0 .81 and 0.91 and AVE(threshold 0.5) between 0.51 and 0.66 (see Table IV for the correlations andsummary statistics), indicating satisfactory reliability on the construct level (DeVellis,2003). Complementing the expert interviews, we analyzed the discriminant validity foritems and constructs and found that it exists on the construct level, since everyconstruct shares more variance with its measures than with other constructs, and onthe item level, since all items share more variance with their own constructs than withany other construct. The model quality assessment indicates a very good fit of themodel. Results reveal a chi-square/df value of 2.046, CFI of 0.900, TLI of 0.894, SRMR of0.070 and an RMSEA of 0.052 (Hu et al., 1992; Hu, 1999). Based on this result, weproceed with hypothesis testing.

5.2 Structural model and moderation analysesFor the multi-industry sample, the individual path estimates show mixed results forH1. H1a is not accepted since CSR activities have a strengthening moderating effect onthe relationship between CIM and corporate image attractiveness but not on therelationship between CIM and company-stakeholder identification. H1b is acceptedsince there is no strengthening CSR effect on the link between CIM and companysuccess measures. In a multi-industry sample, CSR strengthens the effect of CIM oncorporate image attractiveness without showing an ongoing effect on company

performance or companys competitive advantage. This result underscores the currentstate of marketing research, which is turning to the notion of corporate reputation as

CorrelationsVariables 1 2 3 4 5 6 7 8 9

1. MVB 0.782. CII 0.63 0.733. VII 0.01 0.03 0.814. CIM 0.05 0.08 0.36 0.625. CIA 20.01 0.01 0.37 0.19 0.776. SCI 0.13 0.10 0.08 0.11 0.36 0.717. Perf. 0.19 0.16 0.07 0.23 0.20 0.47 0.76

8. Comp. Adv. 0.22 0.22 0.20 0.29 0.24 0.61 0.5 0.809. CSR 0.22 0.14 0.24 0.25 0.15 0.18 0.24 0.25 0.81

Summary statisticsM 5.2 5.4 5.7 NA 5.8 4.6 5.2 4.6 3.8SD 1.2 1.1 1.2 NA 0.8 1.1 1.0 1.2 1.7

Note: Square root of average variance extracted (AVE) specified on diagonal in italic and correlationson off-diagonal

Table IV.Correlations andsummary statistics

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the vehicle through which socially responsible initiatives prove to be worthwhile forbusinesses (Neville et al., 2005). A positive reputation affects customers buyingintentions and, in the context of CSR, positive reputation results in marginally higherprice-earning ratios (Little and Little, 2000).

Table IV depicts the results for the more fine-grained group comparisons. Theoverall sample was grouped into three subsamples according to the organizations size,its industry focus, and corporate marketing budget. After we conducted median-splits,these samples were again grouped into two subsamples, one with high CSRengagement and one with low CSR engagement.

Looking into different industries, findings support H2 and the different effects ofCSR for product- and service-based companies. In the service industry, CSRstrengthens the impact of stakeholder-company identification on performance,whereas in product-based industries, CSR strengthens the effect of corporate imageattractiveness on competitive advantage. This means that CSR affects companiessuccess in both types of industry, via increased image attractiveness (product-basedindustries) or stakeholder-company identification (service-based industries).

As for the moderating aspect of company size, findings are in agreement with H3.For smaller companies, CSR strengthens the effect of stakeholder-company oncompetitive advantage, and for larger companies CSR strengthens the impact of CIMon corporate image attractiveness and stakeholder-company identification, but doesnot affect the companys success measures.

While CSR seems to have no effect in the case of high marketing budgets, findingsare in line withH4 in the case of low marketing budgets. As a moderator, CSR supportsCIM and its effect on stakeholder-company identification so it can help companies withtighter marketing budgets increase marketing success. By contrast, organizations withlarger marketing budgets should not focus on CSR to achieve marketing goals (Baroneet al., 2000), but only as a means to long-run sustainability (Porter and Kramer, 2007).

The results of hypothesis testing are presented in Table V.

6. Discussion6.1 Theoretical implicationsOur work extends both the research stream on CIM in general and research on the roleof CSR at the interface of marketing and firm performance in particular. Moreprecisely, we underscore the relevance of CIM in achieving high levels of corporateimage attractiveness, thereby showing CIMs ability to generate a competitiveadvantage and increase overall company performance. This study adds to theunderstanding of how and when CSR affects corporate image attractiveness,company-stakeholder identification and organizational success by showing that CSReffects on the relationship between CIM, external image and identity, and firm

performance differ based on firm size, industry, and marketing budgets which seem tofunction as boundary conditions of the moderation effect. Our results reveal that thesimple moderation effect (in a generalized industry sample) is significant for the linkbetween CIM and image attractiveness, which supports the current state ofsustainability marketing research; however, once special industry settings areintroduced to the framework, CSR tends to strengthen only some links to performancemeasures for small and large organizations, product and service organizations, andorganizations with high and low marketing budgets. As such, the key contribution of


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Path coefficientsHypotheses Path CSR high CSR low Difference

Results of hypothesis testing H1: CSR as moderatorH1a Corporate identity management! Corporate image

attractiveness 0.423 * * * 0.171 * * * 0.252 *

Corporate identity management! Stakeholder-company-identification 0.512 * * * 0.212 * * * 0.300

H1b Corporate image attractiveness! performance 0.559 * * * 0.420 * * * 0.139Corporate image attractiveness! Competitiveadvantage 0.468 * * * 0.444 * * * 0.024Stakeholder-company identification! Performance 0.291 * * * 0.309 * * * 20.018Stakeholder-company identification! Competitiveadvantage 0.135 0.267 * * * 20.132

Results of hypotheses testing H2-H4: comparison of size, industry, marketing spend samples with CSRas moderator

Product industry

H2 Corporate identity management! Corporate imageattractiveness 0.360 * * * 0.423 * * * 20.063Corporate identity management! Stakeholder-company-identification 0.357 * * * 0.396 * * * 20.039Corporate image attractiveness! performance 0.596 * * * 0.455 * * * 0.141Corporate image attractiveness! Competitiveadvantage 0.802 * * * 0.668 * * * 0.134 * *

Stakeholder-company identification! Performance 0.139 * * * 0.148 * * * 20.009Stakeholder-company identification! Competitiveadvantage 0.067 0.056 0.011

Service industryH2 Corporate identity management! Corporate image

attractiveness 0.370 * * * 0.320 * * * 0.050Corporate identity management! Stakeholder-company-identification 0.318 * * * 0.141 0.177Corporate image attractiveness! performance 0.845 * * * 0.803 * * * 0.042Corporate image attractiveness! Competitiveadvantage 0.083 0.020 0.063Stakeholder-company identification! Performance 0.650 * * * 0.364 * * * 0.286 * *

Stakeholder-company identification! Competitiveadvantage 0.397 * * * 0.478 * * * 20.081

Small company sizeH3 Corporate identity management! Corporate image

attractiveness 0.422 * * * 0.483 * * * 20.061Corporate identity management! Stakeholder-

company-identification 0.362 * * * 0.348 * * * 0.014Corporate image attractiveness! performance 0.801 * * * 0.724 * * * 0.077Corporate image attractiveness! Competitiveadvantage 0.490 * * * 0.746 * * * 20.256Stakeholder-company identification! Performance 0.206 * * * 0.300 * * * 20.94Stakeholder-company identification! Competitiveadvantage 0.623 * * * 0.010 0.613 * *

(continued)

Table V.CSR and size, industry,marketing spend asmoderators

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our work is the identification of industry and marketing characteristics that alter theeffect of CSR as a facilitator of the direct links described above.

6.2 Managerial implicationsCSR is extremely useful in corporate identity-building because of its ability tofacilitate corporate image attractiveness and thereby increase competitive advantageand overall company performance. Counter to recent anecdotal evidence from topmanagement in the US and Europe, results from our empirical study show that thestrengthening effect of CSR activities fosters significantly different outcomes indifferent industry settings, company sizes and marketing budgets. CEOs and

Path coefficientsHypotheses Path CSR high CSR low Difference

Large company sizeH3 Corporate identity management! Corporate image

attractiveness 0.464 * * * 0.191 * * * 0.273 * *

Corporate identity management! Stakeholder-company-identification 0.290 * * * 0.132 * * * 0.158 * *

Corporate image attractiveness! performance 0.922 * * * 0.728 * * * 0.194Corporate image attractiveness! Competitiveadvantage 0.175 0.545 * * * 20.370Stakeholder-company identification! Performance 0.005 0.350 * * * 20.345Stakeholder-company identification! Competitiveadvantage 0.111 0.046 0.065

Low marketing spend

H4 Corporate identity management! Corporate imageattractiveness 0.338 * * * 0.268 * * * 0.070Corporate identity management! Stakeholder-company-identification 0.305 * * * 0.104 0.201 * *

Corporate image attractiveness! performance 0.725 * * * 0.641 * * * 0.084Corporate image attractiveness! Competitiveadvantage 0.357 * * * 0.433 20.076Stakeholder-company identification! Performance 0.116 * * * 0.220 * * * 20.104Stakeholder-company identification! Competitiveadvantage 0.301 * * * 0.471 * * * 20.0170

High marketing spendH4 Corporate identity management! Corporate image

attractiveness 0.337 * * * 0.465 * * * 20.128Corporate identity management! Stakeholder-company-identification 0.351 * * * 0.498 * * * 20.147

Corporate image attractiveness! performance 0.778 * * * 0.693 * * * 0.085Corporate image attractiveness! Competitiveadvantage 0.337 * * * 0.176 0.161Stakeholder-company identification! Performance 0.098 0.179 * * * 20.081Stakeholder-company identification! Competitiveadvantage 0.302 * * * 0.182 0.120

Notes: *p , 0.05; * *p , 0.01; * * *p , 0.001 Table V.


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marketing managers should recognize that the outcome of CSR investments aredependent on the respective industry and organizational setting they are facing. Theimplications are that organizations in certain settings will be engaging moreactively in CSR and ethical programs to ensure effectiveness of their CIM efforts.

Larger, product based companys should keep in mind that CSR will help them toincrease their image attractiveness, and as such are able to endorse image-buildingmarketing activities. For smaller and especially service-based companies, CSRunderpins the identification of stakeholders with the respective company. As such,marketing managers can facilitate CSR activities in order to engage closer withimportant stakeholders, such as customers. These findings tend to support currentmanagement advice in the field of the service industry, where CSR initiatives shouldnot be used as a tool solely to improve the brand equity rather than to improverelationships with main stakeholders, since a boomerang effect is produced wherebythe stakeholders pinpoint the CSR initiatives as one of the main reasons for theirdiscontent with the service company (Calabrese and Lancioni, 2008, p. 107). ForSMEs, stakeholders are often embedded within the companys social capital (Perrini,2006). CSR thus proves to be as much or even more important for smallercompanies, not as a mean of cause-related marketing but as a way of generating acompetitive advantage in the marketplace.

Regarding the size of the corporate marketing budget, CSR seems to especiallysupport the effectiveness of smaller available budgets. In lean times, marketers have tomake the most of limited resources (Halsall and Singer, 2003). As we go through thecurrent expanded period of recession and slow economic growth, organizations mustlearn to do more with less. In the field of marketing this means working withsignificantly lower corporate marketing and branding budgets (CMO Council, 2009).CSR approaches function well in small corporate marketing budgets, so managers canrestructure their marketing spending without diminishing their corporate brands

presence for key stakeholders.

7. Limitations and avenues for further researchThe present research should be evaluated in light of its limitations, which point topotential avenues for future research: first, given the nature of influencemechanisms, other variables should be considered as boundary conditions of thelink and influences of CSR and marketing. Previous research on CSR has pointedout that corporations need to distinguish among ethical, altruistic and strategicforms of CSR (Lantos, 2001); for example, ethical CSR, grounded in the concept ofethical duties and responsibilities of a company, is rather mandatory and thereforemight not increase corporate image attractiveness and identification significantly.Second, since the present study focuses on the stakeholder view of the corporation,

the next logical step may be to investigate differences and similarities of CSReffectiveness in various stakeholder groups such as investors and employees, toexamine the specific relations between CSR approaches and stakeholder reactions(Bhattacharya et al., 2009). Third, the literature indicates that there are likely to bedifferences between the self-perception of company identity by the CEO andmarketing managers compared to the views of their major stakeholders. Futurestudies could investigate how CSR and its effects are perceived by the companyitself compared to the view of external stakeholders.

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The purpose of this research was to shed light on the important mechanism at theinterface of marketing and CSR. We hope our study will incent future research thatfurther contributes to the understanding of the role of CSR.

Note

1. Multi-industry includes larger as well as smaller organizations, high and low marketingspending, service-based as well as product-based industries.

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Further reading

Chandon, J.L., Chtourou, M.S. and Fortin, D.R. (2003), Effects of configuration and exposurelevels on responses to web advertisements, Journal of Advertising Research, Vol. 43,pp. 217-29.

Hu, L.-T. and Peter, M. (1999), Cutoff criteria for fit indices in covariance structure analysis:conventional criteria versus new alternatives, Structural Equation Modeling:

A Multidisciplinary Journal, Vol. 6, pp. 1-55.

Sekaran, U. and Bougie, R. (2009), Research Methods for Business: A Skill Building Approach,John Wiley & Sons, Chichester.

Corresponding authorSebastian Arendt can be contacted at: [email protected]

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