Corporate Social Responsibility, Customer Satisfaction, and Market

Corporate Social Responsibility, Customer Satisfaction, and Market Value Author(s): Xueming Luo and C. B. Bhattacharya Source: Journal of Marketing, Vol. 70, No. 4 (Oct., 2006), pp. 1-18 Published by: American Marketing Association Stable URL: http://www.jstor.org/stable/30162111 . Accessed: 02/12/2013 12:43 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp . JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. . American Marketing Association is collaborating with JSTOR to digitize, preserve and extend access to Journal of Marketing. http://www.jstor.org This content downloaded from 152.3.152.120 on Mon, 2 Dec 2013 12:43:33 PM All use subject to JSTOR Terms and Conditions Xueming Luo & C.B. Bhattacharya Social Responsibility, Corporate CustomerSatisfaction, and Market Value Althoughprior research has addressed the influenceof corporate social responsibility(CSR) on perceived customerresponses, itis notclear whetherCSR affectsmarketvalue of the firm.This studydevelops and tests a which predictsthat (1) customersatisfactionpartiallymediates the relationshipbetween conceptual framework, CSR and firmmarketvalue (i.e., Tobin'sq and stock return),(2) corporateabilities(innovativenesscapabilityand productquality)moderate the financialreturnsto CSR, and (3) these moderated relationshipsare mediated by customersatisfaction.Based on a large-scale secondary data set, the resultsshow supportforthis framework. Notably,the authorsfindthatinfirmswithlow innovativenesscapability,CSR actuallyreduces customersatisfaction levels and, throughthe lowered satisfaction,harms marketvalue. The uncovered mediated and asymmetrically moderatedresultsofferimportant implicationsformarketing theoryand practice. In today's competitivemarketenvironment, corporate social responsibility (CSR) representsa high-profile notionthathas strategic to manycompanies. importance As manyas 90% of theFortune500 companiesnow have (KotlerandLee 2004; Lichtenstein, explicitCSR initiatives and Bridgette2004). Accordingto a recent Drumwright, (Berner2005, p. 72), large specialreportin BusinessWeek in CSR initiainvestments companiesdisclosedsubstantial tives(i.e.,Target'sdonationof$107.8 millionin CSR represents3.6% of itspretaxprofits, GeneralMotors'sdonation of $51.2 millionrepresents 2.7% of itspretaxprofits, GeneralMills's donationof$60.3 millionrepresents 3.2% ofits Merck'sdonationof $921 millionrepresents pretaxprofits, 11.3% of its pretaxprofits,and HospitalCorporation of America'sdonationof $926 millionrepresents 43.3% ofits amountsto pretaxprofits).By dedicatingever-increasing cash donations, in-kindcontributions, cause marketing, and employeevolunteerism programs, companiesare actingon thepremisethatCSR is notmerelythe"rightthingto do" butalso "thesmartthingto do" (Smith2003,p. 52). Importantly, along withincreasingmedia coverageof CSR issues,companiesthemselvesare also takingdirect and visiblestepsto communicate theirCSR initiatives to ofMarketXuemingLuo is AssistantProfessorofMarketing, Department ofTexas at Arlington ing,University (e-mail:luoxm@uta.edu).C.B. Bhatof Marketing, tacharyais Associate Professorof Marketing, Department School of Management,Boston University (e-mail:cb@bu.edu). The authors thankBiao He, KhurramAnsari,ThitikarnRasrivisuth,and XiaochuYu fortheirassistance withdata collectionand analysis.They also thankthe anonymousJMreviewers, GuidoBerens,DonaldLichtenand seminarparticipants at the University of stein,Fernado Jaramilo, Texas at Arlington fortheirconstructive and insightful commentson previous versionsofthisarticle. Toreadorcontribute toreader andauthor onthisarticle, visit dialogue htfp://www marketingpower. com/jmblog. 0 2006,American Association Marketing ISSN:0022-2429 1547-7185 (print), (electronic) variousstakeholders, A decade ago, includingconsumers. observed that witha social (1996) Drumwright advertising dimensionwas on therise. The trendseems to continue. Many companies,includingthe likes of Targetand WalMart,have fundedlargenationalad campaignspromoting theirgood works.The October2005 issue ofInStylemagazine alone carriedmore than25 "cause" advertisements. Indeed,consumersseem to be takingnotice;whereasin 1993,only26% of people surveyed by Cone Communicationscould namea companyas a strongcorporate citizen, to as as 80% by 2004, thepercentage (Berner surged high 2005). in part,bythismounting ofCSR Motivated, importance in practice,severalmarketing studieshavefoundthatsocial havea significant influence on sevresponsibility programs eral customer-related outcomes (Bhattacharyaand Sen on thebasis of lab experiments, 2004). More specifically, CSR is reported to affect, eitherdirectly or indirectly, consumerproductresponses(Brown1998; Brownand Dacin identification 1997), customer-company (Sen and Bhattacharya2001), customerdonationsto nonprofit organizations(Lichtenstein, and Bridgette 2004), and, Drumwright, more recently, customers'productattitude(Berens,Van and Van Riel, Bruggen2005). thisstreamofresearchhas contributed a great Although deal of insight,thereis still a limitedunderstanding of whetherand how CSR affectsfinancialoutcomesof the suchas itsmarket value.Yetitis important to evaluate firm, CSR's impacton marketvalue (i.e., stock-basedfirmperbecause a firm'sfinancialhealthis theultimate formance) testforthe success or failureof any strategicinitiative. studiesand anecdotalexamples Moreover,priorlaboratory are yet to be complemented witha large-scaleanalysis usingsecondarydata. Indeed,Brownand Dacin (1997, p. call forresearchon "how societallyoriented 80) urgently activities mightbringaboutpositiveoutcomesforthefirm." this, Berens,Van Riel, and Van Bruggen(2005) Echoing 1 This content downloaded from 152.3.152.120 on Mon, 2 Dec 2013 12:43:33 PM All use subject to JSTOR Terms and Conditions Journal of Marketing Vol.70 (October 2006),1-18 linkCSR call forresearchefforts thatdirectly energetically to stockmarket performance. the Our researchrespondsto thiscall by investigating a and firm market value with between CSR longitulinkage dinal,archivaldataset.In keepingwithcontingent linkages between CSR and consumer responses that prior and Sen researchersarticulated(see, e.g., Bhattacharya do not a unconditional relationwe 2004), predict simple, This is firms between and market value. because CSR ship are not the same in executing,supporting, and exploiting in themarketplace CSR initiatives (Brown1998; Sen and 2001). Specifically, companiesmaygenerate Bhattacharya andnegative)market different (i.e.,positive,nonsignificant, For example, returns fromCSR underdifferent conditions. Starbucks'ssuperiorbrandequityand its successfulCSR withthecharity initiatives agencyCARE aredue,at leastin to its skills,and superior product quality,innovative part, satisfaction overtime. abilitytoobtainandsustaincustomer in negaIn contrast, find that CSR results companies many tivefinancialreturns becauseof theaddedcostsof making attention contributions andthediverted extensivecharitable fromimproving productqualitythatwould have allowed themto bettersatisfycustomerneedsand wants(McGuire, Sundgren,and Schneeweis 1988; Sen and Bhattacharya 2001). Thus,theresearchquestionsin thisstudyare as folresultin do CSR initiatives lows: (1) Underwhatconditions and (2) Does customersatpositivefinancialperformance? betweenCSR and firm isfactionmatterin therelationship performance? To addressthesequestions,we developand testa conceptualmodel thatproposesthatCSR initiativesenable whichin turn firmsto builda base of satisfiedcustomers, we preto marketvalue.Specifically, contributes positively dictthatcustomersatisfaction partiallymediatestherelationshipbetweenCSR and marketvalue.Althoughextant has addressedthedirectimpactof cusliterature marketing value (e.g., Anderon firmshareholder tomersatisfaction et al. 2006), Fornell and 2004; son,Fornell, Mazvancheryl in thefinancial role of customersatisfaction themediating of CSR has been ignored.In this study,we contribution theorize this role and arguethatbuildingcusexplicitly mechatomersatisfaction partof theunderlying represents nism throughwhich the financialpromisesof CSR are capitalized. under conditions we exploretheboundary Furthermore, whichfirmsmayderivepositiveor negativemarketvalue fromCSR. Drawingon varioustheoretical bases,we argue abilities(i.e., thatfirmsthathavebetterinside-out corporate to beginwithtendto productqualityand innovativeness) initiavaluefromoutside-in strategic generatemoremarket firmsthatexhibit tives(i.e., CSR programs).Conversely, abilitiesmayfindthatCSR actuallyharms poorercorporate customersatisfaction and,becauseof theloweredsatisfaction,decreasesstockperformance. datasetsthatcompriseratBased on multiplesecondary show supportforthe the results of large companies, ings -> firmmarketvalue causal CSR -3 customersatisfaction of linkage.In addition,we findthata propercombination abilitiescan and internal externalCSR initiatives corporate returns. lead to synergistic However,thedata also reveala previouslyneglected"dark side" of CSR. That is, CSR levelsin firmswith actuallyreducescustomersatisfaction low innovativeness capabilityand, throughthis negative harms firm market value.The uncoveredmediated impact, and asymmetrically moderatedresultssuggest a more nuancedunderstanding of thefinancialreturns to CSR for andmarketing bothpractitioners researchers. Conceptual Frameworkand Hypotheses CSR and MarketValue Broadlydefined,CSR is a company'sactivitiesand status relatedto its perceivedsocietalor stakeholder obligations (Brown and Dacin 1997; Sen and Bhattacharya2001; andMenon1988).Althoughstudiesin strategy Varadarajan and financehave exploredthe relationship betweenCSR actionsand firmperformance, empiricalevidenceto date has been ratherconflicting(for a review,see Orlitzky, Schmidt,and Rynes 2003; Pava and Krausz 1996). For example,the returnsto CSR are foundto be positivein some studies(e.g., Fombrunand Shanley1990; Soloman and Hansen 1985) but negativein others(e.g., Aupperle, Carroll, and Hatfield 1985; McGuire, Sundgren,and Schneeweis1988). Thus, Margolisand Walsh (2003, p. 277) conclude thatthe relationshipsbetweenCSR and aredecisively"mixed." financial performance fortheseconflicting Thereareat leasttwoexplanations First,existingstudieshavelargelyrelatedCSR to findings. firmprofitability (i.e., accounting-based backward-looking firmmaron investment) butnotto forward-looking return howketvalue (i.e., stock-based Tobin'sq). Theoretically, from(and perhapsmore ever,marketvalue is different because "accounting than)returnon investment important and examinehistoricalperformeasuresare retrospective mance.In contrast, the marketvalue of firmshingeson and sustainabilityof profits,or the growthprospects in expectedperformance the future"(Rust,Lemon, and Zeithaml2004, p. 79). Second,theequivocallinkbetween CSR and firmperformance maybe due, in part,to extant finance literature and havinglargelyomittedthe strategy conditionsthatmay processesor contingency underlying (Sen and Bhatexplaintherangeof observedrelationships 2001). tacharya We preciselyexaminethese researchissues in this as we showin Figure1, ourframework study.In particular, betweenCSR and firmmarproposesthattherelationship linkof cusketvalueis betterunderstood bythemediating In recenttimes,scholars(e.g.,Anderson, tomersatisfaction. 2004; Fornellet al. 2006) have Fornell,and Mazvancheryl betweencustomer the positiverelationship demonstrated and marketvalue. We build on thisliterature satisfaction and institutional theoryto proposethatCSR is a driverof and thattheCSR-firmmarketvalue customersatisfaction linkageexists(at leastpartially)becauseof theunderlying In addition,drawing customer satisfaction. processthrough and associations on workin thearea of corporateidentity a firm'scorpothat we Brown and Dacin 1997), posit (e.g., rateabilities(i.e., productqualityand innovativeness capa- 21 Journal ofMarketing, October2006 This content downloaded from 152.3.152.120 on Mon, 2 Dec 2013 12:43:33 PM All use subject to JSTOR Terms and Conditions FIGURE 1 Conceptual Framework CSR x Corporate Ability H4 (CorporateAbility .Productquality .Innovativeness capability CSR H3 Customer Satisfaction (CS) H1 H2 CS Market Value ,Tobin'sq 'Stock return CS Notes: Bolded paths are hypothesizedrelationships.Unbolded paths have been studied previously(e.g., Anderson,Fornell,and Mazvancheryl and Hauser 1996; Mithas,Krishnan,and Fornell2005b). Dashed 2004; Anderson,Fornell,and Rust 1997; Fornellet al. 2006; Griffin paths indicatethatthe depicted relationshipsare partiallymediated by customersatisfaction. ofvarious stakeholder that commembers moderate therelationship between CSRandmarket potential groups bility) medi- panies inthisway,suchgeneralvalue.Finally, thatcustomer satisfaction needtoconsider. Viewed weexpect tobe moresatisfied these moderated izedcustomers arelikely ates,atleastpartially, relationships. byproducts andservices that firms (versus socially socially responsible CSR and Customer Satisfaction offer. irresponsible counterparts) a favorable cona strong record ofCSRcreates as an overall evaluation Customer satisfaction is defined Second, evaluations ofand boostsconsumers' andconsumption textthatpositively basedonthecustomer's totalpurchase thefirm andDacin1997;Giirhantoward witha goodor service overtime(Anderson, attitude (Brown experience Batra and Canli and Sen Fornell In the marand 2004; 2001).Specifi2004; Bhattacharya Fornell, Mazvancheryl 1992). identification recent works on customer satisfaction has been customer-company literature, recognized cally, keting that and Sen of et al. as an important 2003, 2004) suggest CSRinitia(Bhattacharya (Fornell part corporate strategy element of that can tives constitute a firm and and a driver of key corporate identity 2006) long-term profitability key induce toidentify a senseofconcustomers market value(Gruca andRego2005). (i.e.,develop leadtogreater cus- nection)with the company.Indeed,Lichtenstein, a firm's CSRinitiatives Whyshould andBridgette to tomer satisfaction? Atleastthree research streams (2004,p. 17)notethat"a way Drumwright, point forcompanies to that initiatives create benefits CSR and sucha link:First, both institutional appears (Scott1987) theory identification with the be consumers' and Ferrell stakeholder Ferrell, 2005) corporabyincreasing (Maignan, theory forthecompany." Notsurprisingly, that a company's actions tothemultidimen-tion... [and]support suggest appeal customers aremorelikely tobe satisfied witha aneconomic but identified oftheconsumer asnotonly sionality being firm's and alsoa member ofa family, and Rao, 1995; (Hanofferings (e.g.,Bhattacharya, Glynn community,country andSen2003). on this,Dauband Bhattacharya delman andArnold 1999).Building ustorelate CSR Thethird literature stream that enables custheterm"generalized (2005)propose Ergenzinger the antecedents of custo customer satisfaction examines are not customers who tomer" todenote who only people For value is a but also actual or tomer satisfaction. careabouttheconsumption key example, perceived experience ValueI 3 Customer and Market Social Responsibility, Satisfaction, Corporate This content downloaded from 152.3.152.120 on Mon, 2 Dec 2013 12:43:33 PM All use subject to JSTOR Terms and Conditions thathas beenempirically antecedent showntopromotecustomersatisfaction (Fornellet al. 1996; Mithas,Krishnan, andFornell2005b).In ourcontext, all else beingequal,customerslikely derivebetterperceivedvalue and, consefroma productthatis madebya highersatisfaction quently, socially responsiblecompany(i.e., added value through good social causes). Furthermore, engagingin CSR may allowfirms tounderstand theirgeneralized customers better and thusimprovetheircustomer-specific knowledge(Sen and Bhattacharya2001). Because improvingcustomer knowledgerepresentsanotherantecedentthathas been foundto enhancecustomer satisfaction et al. (Jayachandran and Fornell we believe that 2005; Mithas,Krishnan, 2005a), customer satisfaction. CSR initiatives mayhelppromote All else thatareviewedmorefavorably Hl: beingequal,firms for theirCSR initiativesenjoy greatercustomer satisfaction. The Mediating Role of Customer Satisfaction The existingmarketing literature showsaccumulating evion firmmarofcustomer satisfaction dencefortheinfluence customers tend ketvalue.For example,firmswithsatisfied to enjoygreatercustomerloyalty(e.g., Boltonand Drew 1991;Oliver1980),positivewordofmouth(Szymanskiand to pay premium Henard2001), and customer'swillingness and Koschate, prices(Homburg, Hoyer2005), all of which can increasea firm'smarketvalue. Indeed,severalstudies findthatfirmswithhigherlevels of customersatisfaction are able to achievehigherlevelsof cash flows(e.g., Gruca and Rego 2005; Fornell1992; Mittalet al. 2005) and less maroffuture cash flows,thusleadingto superior volatility ketvalue(e.g.,Anderson, Fornell,andMazvancheryl 2004; andFahey1998). Fornellet al. 2006; Srivastava, Shervani, In linkingthisevidencefortheinfluenceof customer on firmmarketvalue withourfirsthypothesis satisfaction a mediating roleof on theinfluence ofCSR on satisfaction, customersatisfactionin the CSR-performancelinkage customer mightlogicallybe expected.Thatis, CSR affects in market value. In other which turn affects satisfaction, the mediational customer satisfaction words, represents pathwaythroughwhichCSR actionsaffectfirmmarket value. routes"by which However,theremaybe "noncustomer CSR affectsmarketvalue. For example,both textbooks (e.g.,KotlerandLee 2004; Pava andKrausz1996) and academic articles(e.g., Godfrey2005; Margolisand Walsh 2003) havepointedto theimpactofCSR on multiplestakeholders,such as employeesand investorsas well as consumers.In particular, positive"moralcapital"as a resultof CSR (Godfrey2005, p. 777) could directlyaffectmarket In value by improving employeemoraleand productivity. addition,CSR createspublicgoodwill(Houstonand Johnson 2000; McGuire, Sundgren,and Schneeweis 1988), which providesan "insurance-like" protectionto shareholder wealth. As a consequence, puttingthe pieces role of customer we predicta partiallymediating together, value. on theimpactofCSR on market satisfaction thatareviewedmorefavorably H2:Allelsebeingequal,firms fortheir market CSR initiatives value,anda enjoyhigher firm's customer satisfaction levelat leastpartially mediatesthisinfluence ofCSR onmarket value. The Moderating Role of Corporate Abilities In thissection,we arguethattherelationship betweenCSR and firmmarketvalue maynotbe universally positivebut rather on several Thatis, a conditions. contingent boundary or be positive negativerelationship may observed,dependabilities.In general,corporate ingon thelevelsofcorporate abilitiesreferto variouselementsof a firm'sexpertiseand such as theabilityto improvethequalityof competency, and the abilityto generatenew existingproducts/services products/services innovatively (GatignonandXuereb1997; Rust, Moorman, and Dickson 2002; Zeithaml 2000). Accordingto Brownand Dacin (1997), a company'sCSR and corporateabilitiesbothinfluencecustomers'perceptionsof thecompany'sproducts. We expectthatfirmswithlow levelsof corporate abilities(i.e., low levelsofinnovativeness capabilitiesandproduct quality)generatenegativemarketvalue fromCSR for severalreasons.On thebasisofinstitutional Handeltheory, man and Arnold(1999) contendthatcompaniesshould engagein CSR withgood causes (forthesocial aspectof and,at thesametime,providea good product legitimation) the Thus,it is likely (for pragmaticaspectof legitimation). thatCSR initiatives failto generatea favorable impactifthe firmis perceivedas less innovativeand as offering poorqualityproducts(i.e., due to a lack of pragmatic legitimation; see DiMaggio and Powell 1983). Indeed, Sen and (2001) show thatCSR initiatives may even Bhattacharya backfirewithreducedpurchaseintentand negativeperceptionsif consumers believethatCSR investments are at the expenseof developingcorporateabilities,such as product "mis(i.e.,investments qualityandinnovativeness represent on thepartof thefirmwithlow levelsof guidedpriorities" consumersmaymake corporateabilities).More important, detrimental attributions and negative regardinga firm's firm or low-product-quality motivesifa low-innovativeness This in social would ultimately responsibility. engages resultin an unattractive and,thus,negaidentity corporate tivemarket returns byvirtueofnegativewordofmouthand customer detrimental (Brown1998;Varadarajan complaints andMenon1988).1 we predictthatfirmswithhighlevels of Conversely, corporateabilitiesgeneratepositivemarketvalue from CSR. Such firmstendto possesbettercorporate imageand identitieswithwhichconsumerswantto more attractive in roleofcorporate lourfocushereis onthemoderating ability linkrather thanon thedirect theCSR-performance relationship Thatis,wedo notinvestigate between CSR andcorporate ability. and to innovativeness affects oris related whether CSR directly constructs) (i.e., giventhe ability-related product quality corporate andDacin(1997,p. literature. Ontheonehand,Brown conflicting that"CSR associations are often 68, emphasis added)contend in producing unrelated to thecompany's abilities goodsandseris vices."Ontheother innovation hand,itis possiblethata firm's and CSR oriented responsible packaging), (e.g.,environmentally CSR initiatives mayaffect product-quality perceptions. ofMarketing, October2006 4I Journal This content downloaded from 152.3.152.120 on Mon, 2 Dec 2013 12:43:33 PM All use subject to JSTOR Terms and Conditions and Sen 2003). Whencoupledwith (Bhattacharya identify high corporateabilities,a firm'sCSR actionsare more idenandconsumer likelyto generatefavorableattributions tification.This would ultimatelypromoteperformanceenhancingbehaviors,such as customerloyalty(Bhattacharyaand Sen 2004). Indeed,ifa firmcan accommodate setsof and meetdifferent and otherstakeholders customers not social and norms(e.g., pragmatic norms)by merely butalso developingstrongcorpoCSR initiatives executing rateabilitiesto supportand exploittheseCSR actions,it is institutional in a betterpositionto win thesocial contract, consumers' and moral supportfor legitimacy, allegiance, and Arnold Handelman the organization 1999, p. 34; (cf. thesebeneficialeffects Scott1987).Takentogether, suggest withhighlevelsof return to CSR forfirms a positivemarket we proposean asymmetric corporateabilities.Therefore, of effect corporateabilitieson theassociation moderating value. betweenCSR andfirmmarket tiveMedia Reporting(CMR), and CenterforResearchin SecurityPrices(CRSP). Measuring CSR of firms' One approachto measuringmarketperceptions is torelyon theamountofCSR investments CSR initiatives to shareholders. disclosedin firms'annualreports However, doubtsaboutthevalidityof the thereare manyimportant announcedCSR investments, despitethe seemingattractivenessof thisapproach.For example,thereis a lack of consensuson whatshouldbe included(orexcluded)inCSR investments Schmidt, (Margolisand Walsh2003; Orlitzky, and Rynes2003; Tsoutsoura2004). Few companieshave audited or validated theirannouncedCSR investments mayoverreport externally bythirdparties.Thus,somefirms forimpression CSR investments (i.e.,exaggermanagement CSR ating theirgiving). Other firmsmay underreport becausetheymayregardCSR investments investments only and services cash or in-kind as donated (excluding products innovativeand abilities(i.e.,product H3:Corporate quality and theiremploythatbenefittheenvironment investments CSR between therelationship moderate nesscapability) for willbe negative value.The relationship andmarket ees). Furthermore, althoughsome externalsources(e.g., for butwillbe positive abilities firms withlowcorporate 100 best corporate citizens by Business Ethics, abilities. firms withhighcorporate Initiativereports)may Social Responsibility csrwire.com, the nature trackcompanies'CSR investments objectively, for the same firmcan and amountof CSR investments The Mediating Role of Customer Satisfaction in fromone sourceto another(Berner changedramatically the Moderated Relationships Fombrum and 2005; Shanley1990; Margolisand Walsh bywhich Finally,as we haveargued,partofthemechanism 2003). CSR actionsinfluencea firm'smarketvalue is customer Therefore,we turnto subjectivemeasuresof CSR. satisfaction. Thus,it is conceivablethatthepositiveimpact Althoughsome studiesuse small-scalesurveydata witha of CSR on firmswithhigh levels of corporateabilities limitedsetof firms(e.g., Christmann 2000), priorresearch whichthen enhancesthe level of customersatisfaction, the use of a more large-scalesurcomprehensive, suggests leads to enhancedmarketvalue (Anderson,Fornell,and measure CSR from FAMA set to data available vey 2004; BrownandDacin 1997;Sen andBhatMazvancheryl Schneeweis and 1988). More specifi(McGuire,Sundgren, 2001). tacharya in States' most admiredcorporathe United cally, ranking abilforfirmsthatarelow in corporate On thecontrary, tionseach year,FAMA polls morethan10,000 financial in prodnorcompetent innovative ity(i.e., theyare neither from analysts,seniorexecutives,and Wall Streetinvestors uctquality),CSR actionsmaynotbe able to generatemuch morethan580 largecompanies(see Fortune2005,p. 68). institutional identification, customer-company legitimacy, FAMA collectsratings For each firm-year observation, satisfaction or customer (Scott1987). As a result,CSR iniof CSR thathave been made on an intervalscale ranging value resultsandmarket tiativesmayrelatelittleto financial a from0 to 10,with10 as thehighest;theratingsrepresent andFor(e.g.,MargolisandWalsh2003; Mithas,Krishnan, in a given competing companies comparison among major nell 2005b) in firmswithlow levels of corporateabilities. and strategy Studiesin bothmarketing (e.g.,Fomindustry. Thus: brum and Shanley 1990; Houston and Johnson2000; mediates McGuire,Sundgren, H4:A firm's at leastpartially customer satisfaction and Schneeweis1988) have reported abilithemoderated CSR, among corporate relationship evidenceof reliability and validityof thisdata source.In ties(i.e.,product capability), particular,McGuire,Schneeweis,and Branch (1990, p. qualityandinnovativeness andmarket value. is one of themostcompre170) note,"Fortunereputation availhensiveand widelycirculatedsurveysof attributes are comable. Boththequalityand numberof respondents Data and Variable Construction parableor superiorto the `expertpanels' usuallygathered forsuchpurposes." HoustonandJohnson datathatwe colIn thissection,we describethesecondary (2000,p. 12) also it as the "best data We also presenttheconstruclectedto testthehypotheses. secondary" source. acknowledge Priorresearchhas shownthatthereis a reverse-causality tionof thevariables,suchas CSR, corporateabilities,cusconcernbetweenCSR and financialperformance and marketvalue.In Table 1, we report tomersatisfaction, (e.g., and data sources.We colthe variables,theirdefinitions, McGuire, Sundgren,and Schneeweis 1988). That is, a firm'sCSR affects itsfuture and a firm'shislecteddata forthepubliclytradedFortune500 companies performance, itscurrent CSR of financial contributes to frommultiplearchivalsources: COMPUSTAT, Fortune performance tory We accommodatethisconcernby usingthe involvement. America's Most Admired Corporations(FAMA), the In Index (ACSI), CompetiAmericanCustomerSatisfaction approachthatRobertsand Dowling(2002) recommend. !5 Value andMarket Customer SocialResponsibility, Satisfaction, Corporate This content downloaded from 152.3.152.120 on Mon, 2 Dec 2013 12:43:33 PM All use subject to JSTOR Terms and Conditions TABLE 1 Variables and Data Sources Measures Definitions; Variables Data Types SecondaryData Sources FAMA Interval from0 to 10 CSR Broadlydefinedas a company'sactivities and statusrelatedto itsperceivedsocietal latentvariable orstakeholder obligations; indicated byCSR scores in2001 (publishedin2002),2002 (publishedin 2003),and 2003 (publishedin2004). Customer satisfaction ofthe Definedas an overallevaluation or experienceofproducts postconsumption latent servicesinthemindsofcustomers; satisfaction variableindicated bycustomer scores in2002,2003,and 2004. ACSI from0 to 100 Interval Productquality orthe condition Definedas theminimum thata firm ofproduct attributes threshold itsproducts or mustmeetwhenoffering latent serviceincompetitive markets; of variableindicated byquality scores in2001,2002, products/services and 2003. FAMA Interval from 0 to 10 Innovativeness capability to applyitsinternal Definedas a firm's ability stockto producenew knowledge and newproducts/services, technology, latentvariableindicated othernewfronts; scores in byqualityofproducts/services 2001, 2002, and 2003. FAMA from0 to 10 Interval Tobin'sq market Stockprice-basedmeasureoffirm value;observedvariablebased on the averageofTobin'sq in2002,2003,and 2004. CRSP COMPUSTAT Ratio Stockreturn market Stockprice-basedmeasureoffirm value;observedvariablebased on the in2002,2003,and averageofstockreturn CRSP COMPUSTAT Ratio 2004. firm financial CSRscores weregress peragainst particular, four in the on assets formance [ROA]) (return years prior measure asthefinal ofthisregression andsavetheresidual from financial isindependent thisresidual ofCSR.Because biasis no longera thereverse-causality performance, concern. ofChoandPucik(2005),weused thework Following in2001,2002,and2003 ofCSRforeachfirm theratings and in 2004,duetoa one-year 2003, 2002, (butpublished conofthelatent indicators as three in separate lag print) items measurement ofusing ofCSR.2Thisapproach struct in the is alsowidely timeframes withdifferent applied and Atuahene-Gima Li and 2001) personal(e.g., strategy and 2Choand Pucik(2005) findstrongsupport (construct from Fortune forusingmultiyear criterion-related ratings validity) variable. latent oftheunderlying as indicators McGuire, magazine CSR andSchneeweis (1988)also employsingle-year Sundgren, ofCSR. Fortune as themeasure from ratings streams literature andpsychology 1982; (Bluedorn selling etal. 1990;NeteJohnston and Hair 1997; Boles,Johnston, andPullig Maxham, 2005). meyer, MeasuringCorporateAbilities as a unidimenabilities Wedo notviewcorporate simply twospecific weconsider sionalconstruct. Instead, corpoandinnovativeness rateabilities: capability quality product andDickson andXuereb Moorman, 1997;Rust, (Gatignon and innovativeness both 2002;Zeithaml 2000).Inourview, ofcorporate thedimensions canrepresent quality product andDacin(1997)propose. thatBrown Although ability the to "exploit" refers to a firm's ability quality product and inthemarketplace ofproducts (Cho already capabilities a Pucik2005;March1991),innovativeness represents in terms newmarket to"explore" firm's possibilities ability newproducts ofdeveloping 1997; (KimandMauborgne commitment andCooper1991).In addition, Kleinschmidt a is essential forkeeping ofexisting tothequality products innovation is whereas current customers firm's happy, October2006 ofMarketing, 6 /Journal This content downloaded from 152.3.152.120 on Mon, 2 Dec 2013 12:43:33 PM All use subject to JSTOR Terms and Conditions essentialforreachingnew customerbases and cateringto customer needs. ever-changing Formally, productqualitycan be definedas theminiof productattributes thata mumconditionor thethreshold in firmmust meet when offeringits products/services and Dickson markets(Rust,Moorman, 2002; competitive and Berry Vargoand Lusch 2004; Zeithaml,Parasuraman, thata firm'sabilityto 1990). Priorstudieshaveestablished a qualityis criticalforits provide superiorproduct/service survival and success long-term (e.g., Buzzell, Gale, and Sultan1975; Mittalet al. 2005; Rust,Moorman,and Dickson 2002). In a similarfashionto CSR, we measureproductquality FAMA by ratingsin 2001, 2002, and 2003 (publishedin indicators. 2002, 2003, and 2004) as theunderlying Again, because of thereversecausalitybetweenfinancialperformance and FAMA ratings,we controlfor this bias and obtainclean measuresforproductqualityand innovativenesscapability thesameresidualapproachas byemploying in thecase ofCSR (e.g.,RobertsandDowling2002). Innovativeness capabilityis a firm'sabilityto applyits new internal knowledgestockto producenew technology, and othernew fronts(Drucker1993; products/services, and Hauser 1996). Accordingto exploration learnGriffin is also criticalforthe ingtheory(March1991),innovation becausedynamicmarsurvivalandsuccessoforganizations ketsconstantly shakeout theplayersthatlack capabilities to explorenewmarketopportunities (Gatignonand Xuereb 1997; Schumpeter1934). Similarto productquality,we measurethelatentvariableof a firm'sinnovativeness capabilityby usingitsFortuneratingsin 2001, 2002, and 2003 fromFAMA (publishedin 2002, 2003, and 2004) as three thisconstruct. Priorresearch separateindicators underlying has employedthisdatasourceto measurecompanies'innovativeness capability(Cho andPucik2005). Measuring Customer Satisfaction We used theACSI databaseto measurecustomersatisfaction.In themarketing theACSI has been shown literature, to be a reliablesourceof measuring customersatisfaction. Severalstudiesemploythisdatabaseto assess overallcustomer satisfactionof total purchase and consumption experienceat the firmlevel (e.g., Anderson,Fornell,and 2004; Fornellet al. 2006; Grucaand Rego Mazvancheryl 2005; Mithas,Krishnan,and Fornell2005b; Mittalet al. 2005). The NationalQualityResearchCenterat theUniversityof Michigandevelopedand maintainstheACSI data set.It has datafornearly200 Fortunelargecompaniesthat span all major economicsectorsand constitute approximately43% of the U.S. economy.To obtainACSI data, more than 50,000 householdconsumers(actual product basis. users)of theselargefirmsare polledon a quarterly Each valid respondenthas passed screeningquestions relatedto predefined purchaseand consumption periods. TheACSI uses an interval scalerangingfrom0 to 100,with 100 as thehighestlevelofcustomer satisfaction. Based on multi-item, multiconstruct theACSI criteria, is a reliabledatasourcebecauseitemploysthesamesurvey randomsampling,and estimation questionnaire, modeling acrossfirmsand years(Fornellet al. 1996; Fornellet al. and Fornell2005b).A comprehen2006; Mithas,Krishnan, of thissatisfaction sive testof the validityand reliability measurecan be foundin theworkofFornellandcolleagues (1996). Parallel to CSR, innovativenesscapability,and as a latent productquality,we treatcustomersatisfaction variableand measureit using its ACSI ratingsin 2002, 2003,and 2004 as threeseparateindicators. Measuring Market Value We havetwoseparatemeasuresof marketvalue at thefirm level acrossyears:Tobin'sq and stockreturn. We follow studies and Grewal 2004; Rao, (Lee priormarketing Agarwal, and Dahlhoff2004) to calculateTobin's q foreach In addition, observation.3 Jacobsonand firm-year following colleagues(i.e.,AakerandJacobson1994,2001; Mizikand Jacobson2003), we derivethe measureof stock return usingtheCOMPUSTAT and CRSP databases.4Ratherthan usinga simpleyear-endstockprice,we use a moreconservative measureof stockprice-thatis, theaverageofthe end of thefourquartersof stockprices-whencalculating Tobin'sq and stockreturn (Lee and Grewal2004). We then use thederivedthree-year average(2002, 2003, and 2004) ofTobin'sq andstockreturn as observedmeasuresformarket value. Comparedwith marketvalue, the predicting variablesof CSR, innovativeness capability,and product qualitywereall laggedby one yearto be morepreciseon thespecificdirection ofcausalityandtoreducethepossibilbias (Murthi,Srinivasan,and Kalyaity of endogeneity naram1996; Rust,Moorman,an Dickson2002). Measuring Control Variables We obtainedthedataforcontrolvariablessuchas researchfirmsize, competition (R&D) intensity, and-development and from ROA and we obtained COMPUSTAT, intensity, thedataforadvertising from CMR. More specifiintensity R&D is the ratio of R&D cally, intensity spendingto total assets.We controlfortheinfluenceof R&D expenditures on performance because a firm'sR&D intensity enhances innovation activitiesand investors' evaluationsof thefirm (Chauvin and Hirschey 1993; Gruca and Rego 2005; and Schneeweis1988). McGuire,Sundgren, is theratioofreported Advertising intensity advertising spendingto totalassets.Because COMPUSTAT has many we use missingdatapointsforfirmadvertising expenditure, andDahlhoff a detailed 3Rao,Agarwal, (2004,p. 130)provide function on howto deriveTobin'sq. Thatis, q = (sharepricex number ofcommon stockoutstanding + liquidating valueofthe - short-term firm's stock+ short-term liabilities assets+ preferred bookvalueoflong-term valueoftotalassets. debt)/book 4Inparticular, AakerandJacobson (2001,p. 489)andMizikand Jacobson a detailed function onhowtocal(2003,p. 71) suggest = (current culatestockreturn. Thatis, stockreturn year'sshare - previofcommon stockoutstanding + dividends pricex number ous year'ssharepricex number ofcommon stockoutstanding)/ (previousyear's share price x numberof commonstock outstanding). Cornorate SocialResnonsibility. Customer andMarket Value 17 Satisfaction, This content downloaded from 152.3.152.120 on Mon, 2 Dec 2013 12:43:33 PM All use subject to JSTOR Terms and Conditions the CMR database for advertising-spending data (Rao, Agarwal,and Dahlhoff2004). We controlfortheinfluence ofadvertising on performance becauseintense expenditures brandequity,and customer awareness, advertising promotes sales revenues(e.g., Josephand Richardson2002; Morgan andRego 2006). Firmsize is thelog ofnumberofemployees. We control fortheinfluence of firmsize becauselargefirmsmayhave more resourcesand thus enjoy economiesof scale, but whenseeksmallfirms flexibility mayhavehigherstrategic rents (Dutta,Narasimhan,and Rajiv ing entrepreneurial and Dahihoff 1999;Rao, Agarwal, 2004). Strategicfocusis thenumberof businesssegmentsin which the firmoperates (Rao, Agarwal, and Dahlhoff 2004). This variableis available directlyfromthe menu choice at the Compact Disclosure (CD-ROM), which ofan definesitas "thenumberofuniquebusinesssegments We controlforthisinfluence because individualcompany." Thatis, morediversified of possiblediversification effects. rate and exhibit firmsmay have a fasterasset turnover firmsmay economiesof scope.However,highlydiversified marketlack focus in the highlysegmented, competitive returns and and thus (Fombrum place experiencenegative Gruca and 1990; 2005). Shanley Rego We measurecompetition intensity byusingtheHerfindahl concentration index,derivedfromCOMPUSTAT.Followingpriorwork(Gruca and Rego 2005; Mithas,Krishnan, and Fornell2005a), we calculatethis concentration level of Standard indexat theprimaryfour-digit industry codes (whichhas beenreplacedby Industrial Classification the NorthAmericanIndustryClassificationSystem)for We use thiscovariateto control each firm-year observation. level(Rao,Agarwal,and forimpactofindustry competition Dahlhoff2004). ofROA in predictFinally,we controlfortheinfluence ing stock returnand Tobin's q (Chauvin and Hirschey we measureROA as theratioof net 1993). In particular, itemsto book value of total income afterextraordinary We used theaverageof from derived COMPUSTAT. assets, the 2002, 2003, and 2004 data pointsas the measureof ROA. We includeROA as a covariatevariablebecause of on the stockmarket the impactof financialinformation (ChauvinandHirschey1993;EricksonandJacobson1992). forall variablesin statistics Table 2 presentsthesummary thisstudy. controls,in lightof our Despitehavingthesestringent a lingeringissue is whetherthere moderation hypotheses, differences betweenfirmsthatare are systematic industry and ratedhighon productquality(and/orinnovativeness) of thetopand thosethatareratedlow.A close examination bottomfirmson the dimensionsof productqualityand innovativeness allaysthisconcern.We findthatboththetop and and thebottomfirmsin termsof theirinnovativeness suchas ofindustries, productqualityratingscovera variety More specifically, retail,services,and manufacturing. top innovativenessfirmsincludeApple, Google, Procter& Gamble,FedEx, Nike, and Target,amongothers;bottom innovativenessfirmsinclude UnitedAirlines,Dillard's, Kmart,and QwestCommunications, amongothers,accordin 2005. In other data to Fortune's large-scalesurvey ing words, neitherthe low-innovativenessnor the highinnovativeness firmsare dominatedby particular industry types. Merged Final Data Set We mergeddata fromthesedifferent archivalsourcesand obtainedunbalancedpaneltime-series, cross-sectional data of 452 firms observations across 113 consisting firm-year forthe 2001-2004 periods.However,one year'sdata are lostbecausewe employedthelaggingprocess(2001-2003 forCSR, productquality,and innovativeness; 2002-2004 forcustomersatisfaction, Tobin's q, and stockreturn)to reducetheendogeneity bias and reverse-causality concerns describedpreviously. Thus,we wereable to use 339 data Thismergeddatasetincludes pointsforhypotheses testing. individual firms in various industries,ranging from durables(e.g., automobiles, householdappliances,personal to nondurables athleticshoes; computers), (e.g., cigarettes; toretail(e.g., services,suchas airlines, hotels,andutilities), stores,discountstores,supermarkets), department among FAMA has ratingsofCSR, innovativeness others.Although and productqualityforapproximately 580 firms capability, (Cho andPucik2005; Fortune2005) andACSI has dataon 190 firms/brands (Fornellet al. 1996; Forapproximately nell et al. 2006; Grucaand Rego 2005; Morganand Rego 2006), we werenotable to obtaina largersampleof firms in the mergedfinaldata set. This is because manyfirms in the includedin Fortune'ssource are not represented ACSI sourceand becausethesame firmmayhave several brandsin theACSI (Anderson, Fornell,and Mazvancheryl We also tried to search otherrelevantsecondary 2004). sources (Standard& Poor's industryreports,company annualreports, CompactDisclosure,andMoody'sreport)to our finaldata set spanningtheperiodfrom cross-validate 2001 to 2004. Note thatCOMPUSTAT does not have completedata pointsforall variables.For example,because COMPUStheirR&D investTATdoes notrequirecompaniesto report ments(volunteered responsesonly;see JosephandRichardfor son2002),we foundthatmorethan40% ofobservations thecontrolvariableof R&D are missingacrosstheyears. forthecovariwe controlled Beforetestingthehypotheses, atesusingthesameapproachappliedin priorstudies(e.g., and Gruen2005; Pan, Ratchford, Ahearne,Bhattacharya, we rana linearregression and Shankar2002). In particular, and industry-level) as withall controlvariables(firm-level and Tobin's as the variables dependent q independent residualsfromthis variable.We saved theunstandardized forTobin'sq andthenusedthemas thesurrogate regression models We also applied in all structural (SEMs). equation forstockreturn. thisapproachto obtainthesurrogates Analysesand Results Measurement Model Results Followingtheworkof Andersonand Gerbing(1988), we factoranalysis (CFA) to test the employconfirmatory of showthat the measures. Overallmodelstatistics validity thechi-squareforthemodelis 90.73 (d.f.= 48, p > .05), October2006 81 Journal ofMarketina. This content downloaded from 152.3.152.120 on Mon, 2 Dec 2013 12:43:33 PM All use subject to JSTOR Terms and Conditions 12 1.00 11 1.00 -.02 .01 1.00 -.03 10 9 .08 1.00 -.04 -.03 8 .06 .09 1.00 -.02 -.05 7 .10 .04.11 1.00 -.03 -.04 6 .28** .08.06.07 1.00 -.03 -.05 5 2 .33"" .42** .11" .10.09 1.00 -.07 -.08 Variables of 4 .19"" .10.14* .02.02.05 1.00 -.00 -.05 TABLE Statistics 3 .20** .11.01.04.04 .81"" .13* 1.00 -.02 -.04 2 Descriptive .22** .18** .17"" .07.05.02 .02.22** .18** 1.00 1 -.03 .19"" .78** .13* .14" .06.03.05 .20** .72** 1.00 -.03 -.04 .46.08.07.90 .13 SD .958.77 1.68 9.87 1.10 1.35 1.42 .07 .29.06.04 M 6.03 6.06 1.82 5.97 4.16 2.87 3.68 79.06 asset) of intensityintensity satisfaction (log focus quality q return intensity size capability .01. .05. ROA Strategic Competition R&D Firm Innovativeness Product Stock CSR Customer Advertising Tobin's < < 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.11.12. *p**D Variables Value/9 andMarket Customer SocialResponsibility, Satisfaction, Corporate This content downloaded from 152.3.152.120 on Mon, 2 Dec 2013 12:43:33 PM All use subject to JSTOR Terms and Conditions andthecomparative fitindex(CFI),goodness-of-fit index callysignificant, in support ofH. WeassessthesignifiSEMpathestimates a boot(GFI), and rootmeansquareerrorof approximationcanceofthereported through with1000resamples. AstheCFI,GFI, (RMSEA)aresatisfactory (.94,.92,and.06,respectively). strapping approach Aswereport inTable3,theCFAresults lendsomesup- andRMSEAindicate, Model1fits thedatawell. fortheconvergent forallthemeasures because thatCSR wouldpositively a influence port validity H2 predicted allestimated ofindicators fortheunderlying con- firm's market valueandthatcustomer satisfaction would loadings = 6.53,p < .05). structs aresignificant t-value mediate thisinfluence. To establish theexistence ofthis (i.e.,smallest Cronbach's of the constructs exceeded the .7 threshmediation four conditions should hold et effect, (Andrews alpha old (Nunnally of The minimum these al. The variable should 1978). 2004):(1) (CSR) reliability predictor signifimeasures In addition, is .85,as we reported. theaverage cantly influence themediator variable satisfac(customer variance extracted theconstructs exceeds the tion);(2) themediator should influence the (AVE)across significantly .5 benchmark Fornell Larcker and As Table 3 variable the (see 1981). (market value);(3) predictor (CSR) dependent thesmallest AVEoftheconstructs is .72.Thedata variableshouldsignificantly influence thedependent shows, alsosupported discriminant ofthemeasures. We variable we control forthe (market value);and(4) after validity of examined measures the constrained model mediator variable the ofthe (customer satisfaction),impact pairs using ina series andunconstrained model ofchi-square difference predictor on the variable (CSR) (market value) dependent tests andGerbing consis- shouldno longer be significant or (Anderson 1988).Thetestresults (forfullmediation) for of the unconindicated that each should be reduced in constructs, (for mediation) (Baron tently pair strengthpartial strained models fitthedatabetter thantheir constrained andKenny 1986, p. 1177). In addition, discriminant As Table4 shows,Model1 meetsthefirsttwo counterparts, suggesting validity. theestimated AVEofeachmeasure wecompared with the conditions. Thatis, CSR affects customer satisfaction. correlation between-measure and Furthermore, satisfaction affects both Tobin's squared pairs(Fornell significantly q Larcker1981).In all cases,we foundthattheAVEs andstock which is consistent with studies return, existing exceeded thesquared further the (Anderson, andMazvancheryl correlations, Fornell, 2004;Boltonand confirming discriminant oftheconstructs. Drew1991;Fornell etal.2006).Model2 qualifies thethird validity thepredictor variable of CSR affects market condition; Results forthe MediatingRole of Customer valueinterms ofTobin's andstockreturn. As Table4 q Satisfaction Model2 doesnotinclude themediator ofcustomer shows, andappears tofitthedatareasonably satisfaction well.The In testing themediating roleofcustomer we satisfaction, condition holds iftheeffects ofCSRonmarket value thepossible biasofmea- fourth usedSEMtoconsider explicitly orlesssignificant after themediator of error Consistent with theproce- become surement onpath estimates. insignificant satisfaction is included. Model3 results inpsychology dures (no1997)andmarketing customer (e.g.,Holmbeck modelin Table4) showthattheinclusion of etal.2004;Handelman andArnold 1999;Selnes mediation (Andrews satisfaction diminishes thestrength oftheeffect of formeasure- customer andSallis2003),ourSEMsnotonlyaccount Themain market value. effects ofCSRonboth ment error butalsoallowfora comprehensive testofthe CSRonfirm return arenolonger tomediation, andmediated Tobin's related Thus, moderation, q andstock significant.5 hypotheses moderation. Table4 reports theresults oftheSEMs.Hi predicted 5Wealsoemployed leastsquarestotestthemediation ordinary thatCSR wouldpositively affect customer satisfaction. hypotheses. Theresults areconsistent andsuggest support strong is statisti- forthemediation results ofCSR.However, becauseSEM offers at thisprediction, andtheresult Model1 examines TABLE 3 Results of the CFA Construct CSR Innovativeness (IN) capability Productquality(PQ) Customersatisfaction (CS) Items FactorLoading t-Value CSR -->CSR01 CSR ---> CSR02 CSR ---> CSR03 .69 .71 .75 13.43 13.55 13.54 IN -->IN01 IN-->INO2 IN-> INO3 .67 .68 .62 11.10 11.16 9.98 PQ -> PQ01 PQ -> P002 PQ ---> P003 .78 .83 .80 13.39 13.92 13.51 CS -->CS02 CS -->CS03 CS -->CSO4 .50 .48 .46 7.21 6.92 6.53 AVE CR .75 .90 .74 .87 .76 .91 .72 .85 Notes: Allt-valuesare significant(p < .05); X2= 90.73 (d.f.= 48, p > .05), CFI = .94, GFI = .92, and RMSEA = .06. CR = constructreliability. 10/Journal ofMarketing, October2006 This content downloaded from 152.3.152.120 on Mon, 2 Dec 2013 12:43:33 PM All use subject to JSTOR Terms and Conditions TABLE 4 SEM Results for Mediation Effects SEM Estimates ModelSpecifications Model1 Model2 Model3 Model4 x2 362.10 112.82 391.58 345.05 Full Mediation: Model 1 d.f. 101 59 96 97 X2diff (d.f.diff) Comparedbase 29.48**(5)a 17.05**(4)b GFI RMSEA .94 .92 .91 .96 92 .91 .89 .94 .05 .07 .07 .04 PV -->DV: Model2 Nonmediation: Model3 .14* .10 .17** .14* .20** .09 .10 .14* .09 .15* CSR -> T0 IN -> T0 PQ -> TQ CSR x IN -> TQ CSR x PQ -)) TQ CSR -> CS IN-> CS PQ -> CS CSR x IN -> CS CSR x PQ -->CS CFI .23** .20** .28** .12* .18** .13* .08 .11* .10 .18** .25** .22** R2 CS TQ SR .34 .46 .38 .11* .12* .13* .23** .19"" .26"" .14* .18"" CSR SR IN-> SR PQ -> SR CSR x IN -> SR CSR x PQ -> SR CS -> TQ CS -> SR Partial Mediation: Model4 .41 .34 .08 .07 .09 .07 .12* .11" .23** .21** .22** .19** .32 .45 .37 .48 .39 *p < .05, one-tailedtest. **p< .01, one-tailedtest. aThe resultsof the differencebetween Model 1 and Model 3. bThe resultsof the differencebetween Model 1 and Model 4. Notes: CS = customersatisfaction,IN = innovativenesscapability,PQ = productquality,TQ = Tobin'sq, and SR = stock return.Model 2 (PV ---> DV) does not include the mediator of customer satisfaction.Model 3 (nonmediationeffects) includes the mediator of customer satisfaction. customer satisfaction seemsto mediate fullythedirect Results forthe Moderating Role of Corporate ofCSR onfirm market value(though itdoesnot Abilities impact mediate the interaction effects between CSR and fully that suchas innovativeness abilities, H3predicted corporate on abilities market as we detail As value, next). corporate and wouldmoderate theimpact capability product quality, forH2, which ofCSR onmarket such,thedataprovidestrong support value.Table5 reports thehierarchical thatCSR wouldincrease a firm's predicted long-term SEM results related tomoderation effects. the Following financial the mediator of customer workofAikenandWest performance through we mean-centered the (1991), satisfaction.6 and product-quality CSR, innovativeness capability, variables before the interaction andthen terms, generating weaddedtheinteraction terms from hierarchicallyModel2 3.7Theresults inTable5 show that theinteraction leasta weaktestofcausalpathways andeasilycompares different toModel rivalmodels, butordinary leastsquares doesnotaccount formeasurement we report theresults basedon theSEMs forall error, inthisstudy. hypotheses 6Wealso testedthehypotheses withsingle-year itemsforthe and dependent variables(ratherthanthereported predicting items).The resultsare similarin multiple-years-based separate andfurther thehypotheses. pattern support biaswas nota severeproblem. Thehighest 7Multicollinearity variance inflation factor was3.06,andthelargest condition index was3.51.Notethatina mean-centered interaction-effects model, theestimated ofoneindependent coefficient is obtained variable under theassumption ofthemeanvalueofother variables. Moreoftheinteractions terms forCSR, innovativeness over,theentry Social Responsibility, Customer and Market Value/11 Satisfaction, Corporate This content downloaded from 152.3.152.120 on Mon, 2 Dec 2013 12:43:33 PM All use subject to JSTOR Terms and Conditions TABLE5 Hierarchical SEM Results SEM Estimates RivalModels Model1 Model2 Model3 d.f. x2 15.83 177.09 112.82 5 40 59 (d.f.diff) X2diff 96.99**(54)a 64.27**(19)b Comparedbase CFI GFI RMSEA .90 .91 .92 .86 .89 .91 .08 .07 .07 DirectEffects: Model 1 DirectEffects: Model2 ModeratedEffects: Model3 CSR ---> TQ IN ---> TQ PQ -->TQ CSR x IN---> TQ CSR x PQ ---> IQ .14* .12* .11* .17** .14* .10 .17** .14* .20"* CSR -4 SR IN-> SR PQ -, SR CSR x IN-->SR CSR x PQ -->SR .12* .13* .08 .10 .13* .08 .11* .10 .18** .30 .28 .35 .29 .41 .34 R2 TQ SR *p < .05, one-tailedtest. **p< .01, one-tailedtest. aThe resultsof the differencebetween Model 1 and Model 3. bThe resultsof the differencebetween Model 2 and Model 3. Notes: CS = customersatisfaction,IN = innovativenesscapability,PQ = productquality,TQ = Tobin'sq, and SR = stock return. ofCSR x product term affects both ticalapproach. itis similar tothefourcondiquality significantly Essentially, and the Tobin's stock term of interaction tions of mediation we described butitrequires return, q though previously, x CSRx innovativeness affects Tobin's the interactions items innovativeness (CSR capability only q. entering capaTofacilitate theinterpretation ofthemoderating andCSR x product rather thanthemain effects, bility quality) therelationship between CSR effect of CSR. Morespecifically, to establish mediated 2,PanelA,illustrates Figure andTobin's withloworhighinnovativenessmoderation, four conditions must be met: (1) The q forfirms specific andWest1991,pp.12-14).Figure interaction variables and 2, (seeAiken (CSRx innovativeness capability capability that firms with lowinnovativeness PanelA,suggests should influence the capa- CSRx product quality) significantly bilities market valuefrom should CSR,whereas mediator (customer satisfaction); (2) themediator generate negative firms withhighinnovativeness market significantly influence thedependent variable (market generate positive valuefrom CSR.However, variables 2, PanelB, showsthat value);(3) theinteraction (CSRx innovativeness Figure andCSRx product firms withhighproduct should though quality generate positive capability quality) significantly thedependent market valuefrom CSR (theupward-sloping variable line),firms influence (market value);and(4) interms after lowproduct seemnottobepenalized wecontrol satiswith forthemediator variable (customer quality ofgenerating market valuefrom CSR(therather flatline). faction), theimpact oftheinteraction variables (CSR x x for we innoAssuch, wefind when use innovativeness and onthe CSR overall, support H3 product capability quality) vativeness as the measure of variable should be no abilities, value) (market capability corporate dependent longer sigforH3when orreduced butwefind weuseproduct nificant instrength (forfullmediation) (forparonly partial support ofcorporate asthemeasure tialmediation) abilities. andKenny 1986,p. 1179).Follow(Baron quality in this studies both advice, (Shinand ing prior strategy Results fortheMediatingRole of Customer Zhou2003)andmarketing Handelet al. 2004; (Andrews Satisfactionin theModeratedRelationships manandArnold have tested 1999) combining hypotheses andmoderation. thatcustomer satisfaction the mediation wouldmediate H4predicted thesecond when Because andthird conditions aremet, inH3.Although moderated a testofthiscomrelationships need check for the first and we to ofmediation andmoderation is somewhat bination testing H1-H3, only compliconditions. Thesignificant from these interacBaron andKenny a prac- fourth cated, paths (1986,p. 1179)recommend tionterms tosatisfaction inModel1 (Table4) suggest that the first condition In is also met. the addition, entering and more varicapability, product quality explained significantly mediator of customer satisfaction indeeddecreases the anceofmarket themaineffects, valuebeyond adding6% more forTobin'sq and5% morevariance variance forstockreturn. ofthese interaction terms from Model2 toModel3 impact 12/Journal ofMarketing, October2006 This content downloaded from 152.3.152.120 on Mon, 2 Dec 2013 12:43:33 PM All use subject to JSTOR Terms and Conditions FIGURE 2 The Moderated Effectof CSR on MarketValue A: The ModeratingRole of InnovativenessCapacity Tobin's q 3.10 .30 2 4 6 8 CSR capability Highinnovativeness Lowinnovativeness capability B: The ModeratingRole of ProductQuality Tobin's q 3.10 .30 2 4 6 8 CSR Rival Models and AlternativeExplanations andruledoutseveral Weconducted additional analyses Becausethe aforementioned competing explanations. wefitseveral additional results mediation, suggest partial effects SEMswith different mediation (step-by-step partial of individual thepredictive adding/removing pathsfrom ofCSR,innovativeness, andproduct tothe variables quality ofTobin's Thepath variables return). predicted q andstock ofthebest-fit in estimates mediation modelappear partial 3 andinthelastcolumn (Model4) inTable4. An Figure of Figure3 suggests examination threeinsights. First, the main effect ofCSRis fully mediated although bycustomer CSRhasaninteraction effect with satisfaction, productquality that isnotfully, butrather mediated by partially, customer satisfaction thisinteraction effect words, (inother between CSR andproduct influences qualitydirectly Tobin's and stock a firm's Second, return). q product quality andinnovativeness bothhavedirect andindirect (through customer influence onTobin's satisfaction) q performance, which isconsistent literature with Narasimhan, (Dutta, prior andRajiv1999;Fornell et al. 1996;Rao,Agarwal, and Dahlhoff we can several alternative Third, 2004). reject theconjectures thattheimpact of explanations, including on market value is mediated satisproduct quality fully by faction andthatinnovativeness influences capability only firm butnotintermediate suchas outcomes, performance customer satisfaction. rivalmodels. we ruledoutseveral For Furthermore, as wereport inTable4,ourSEMresults example, suggest that thepartial-mediation SEM(Model thedatabetter 4) fits = 29.48, thanthefull-mediation SEM (Model1; x2diff = 5, p < .05) andthatthefull-mediation SEM fitsthe d.f.diff = data betterthanthenonmediation SEM (Model 3; x2diff = criterion forSEM com17.05,d.f.diff4, p < .05). Another parisonis the numberof significant parameters (Morgan and Hunt1994; Selnes and Sallis 2003). We findthatthe rivalmodelswithfullmediationand nonmediation generated fewersignificant pathestimates.Thus,our hypothesizedpartial-mediation modelfitsthedatabetterthancomin models terms of boththerelativepredictive peting power of theoverallmodeland therelativenumberof significant pathestimates. Highproduct quality Lowproduct quality Discussion in Table 4. In particular, theimpactof CSR x innovativenesscapability onTobin's q is nolonger significant, sugfullmediation return, (thisis notthecaseforstock gesting inwhich thecoefficients inbothModel2 andModel3 are In theimpact ofCSR x product addition, insignificant). on both Tobin's and stock return is diminished quality q still mediation. (but significant), Thus, indicating partial these results that themoderation inH3 suggest relationships areonly mediated customer in satisfaction, partially by supofH4.8 port 8NotethatBaron and Kenny(1986, p. 1179) label the we testedas "mediated whichmeans moderation," relationships How is CSR relatedto firmmarket value,andwhydo CSR initiatives resultin financialgainsforsomefirmsbutlosses for others?Our studysuggeststhatthe answerto these market valuepartially questionsis twofold:(1) CSR affects the mediator of customer and (2) satisfaction, through returns toCSRcanbeboth andnegative positive depending thatcontrolling themediator makestheinfluences of CSR x innovativeness andCSR x product capability qualityno longer or less significant. Thisis different from"moderated significant in whichthemoderators shouldalso moderate the mediation," (BaronandKenny1986,p. 1179). mediator-performance linkage A pictorialillustration of the differences betweenmediated moderation andmoderated mediation intheworkof canbe found andArnold Handelman (1999,p. 38). Social Responsibility, Customer and Market Value/13 Satisfaction, Corporate This content downloaded from 152.3.152.120 on Mon, 2 Dec 2013 12:43:33 PM All use subject to JSTOR Terms and Conditions FIGURE 3 SEM Results of Best-Fit Partial Mediation Model Product Quality .26"" Innovativeness Capability .12* .11* 19"" .23 CSR 22** MarketValue .Tobin'sq .13* Customer Satisfaction .19* .18"' MarketValue .Stockreturn .11* CSR x Product Quality .1 CSR x Innovativeness Capability *p < .05, one-tailedtest. **p< .01, one-tailedtest. Notes: Bolded paths are hypothesizedrelationships.Dashed paths are supportedpartialmediationresults.We assessed the significanceof all SEM path coefficients througha bootstrappingapproach with1000 resamples. therelative, inanidealway(i.e.,byuncovering Basedona com- spending abilities. onthelevels ofa firm's corporate of and that cusour results show data CSR, incremental, set, advertising, impact synergistic secondary prehensive market and R&D on a firm's in the a role tomer satisfaction value). relationship plays significant coma proper market valueandthat between CSRandfirm abili- Implications forMarketingTheory andproduct-related ofbothCSRinitiatives bination forboth Although haveimplications Theseresults tiesis important. tocustomer CSRhasbeenlinked (e.g., responses and theory practice. marketing Dacin Brown and and Sen Brown 1998; 2004; Bhattacharya we notethat 1997), theimplications, Beforepresenting therelatoexplore thiswasthefirst marketing study lim- tionship measure ofCSRisanimportant FAMA's survey-based extends value.Ourwork between CSRandmarket in the"Dataand theresearch ofthisarticle. As we detailed itation ofCSRfrom stream ontheoutcomes perceived areonepossible customer theFAMAratings Variables" section, labexperiments basedonhypothetical responses restrict ouranalysis toward and thus ofCSR information source secreturns basedonlarge-scale eventual financial inourfind- ondary confidence Toinspire andconclusion. answer to thecallsfor a direct data.It provides greater and efforts toreplicate should alsoattempt research linkCSRtoa firm's stock that ings,further (Berens, performance ofCSR.For VanRiel,andVanBruggen measures ouranalysis with alternative extend 2006; 2005;LuoandDonthu with Rust,Lemon,andZeithaml onCSRinitiatives direct measuring spending example, 2004).Indeed,Brownand across Dacin(1997,p.68)notethat of CSR monetary a large-scale record but "wedoallgoodthings,... expenses from firms outofit."Thefindings ifwegetanything (ifobtained third-party agencies wedon'tknow reliably many andWalsh seeMargolis orfirms' ownreporting; influence ofCSRona firm's tothesignificant 2003;Orl- pertaining andRynes valueof attest tothefinancial return 2003;Tsoutsoura Schmidt, 2004)would Tobin's itzky, q andstock and suchas advertising future marketinitiatives. as strategic CSRprograms Thus, putCSR on parwithmeasures ofthebenea wider ofthisdirect examine A clearadvantage should R&Dinvestments. approach ingresearch spectrum outcomes to from and fitsofCSR,ranging would beabletocompare researchers isthat perception-based marketing financial returns. archive-based returns to thesedifferent contrast thefinancial typesof 14/Journal October2006 ofMarketing, This content downloaded from 152.3.152.120 on Mon, 2 Dec 2013 12:43:33 PM All use subject to JSTOR Terms and Conditions A moreimportant of thisresearchis that contribution a routethroughwhichCSR is relatedto a we identified firm'smarketvalue. Our resultsof thesignificant CSR -> marketvalue causal chainsuggest customersatisfaction thata firm'sCSR helpsbuilda satisfied customer base and thatcustomersatisfaction partiallymediatesthe financial to CSR. Thismediating roleofcustomer satisfaction returns fortwo reasons.First,it extendstheCSR litis important a previouslyignoredoutcome(i.e., eratureby uncovering of CSR. Althoughpriorworkhas customersatisfaction) notedthatCSR shouldaffectvariouskindsof consumer has notyetbeen explicitly responses,customersatisfaction examinedas one suchoutcome.Second,it also extendsthe researchstreamon customersatisfaction (Anderson,Forand Fornell nell, 2004; 1992) by uncovering Mazvancheryl the antecedents(i.e., CSR) of customersatisfaction. Althoughan emergingresearchstrandhas examinedthe outcomesof customersatisfaction (Anderson,Fornell,and Anderson 2004; Fornell,andRust1997;ForMazvancheryl nellet al. 2006; Mittalet al. 2005), efforts haverarelybeen undertaken toexaminefactors thatincreaseordecreasecustomersatisfaction. from Overall,thischainedrelationship to a firm'smarketvalue sugCSR to customersatisfaction satisfaction one of geststhatachievingcustomer represents theunderlying whichthefinancial pathways through potentialof CSR is realizedand capitalized.The notionthatthe extentto whichCSR is beneficialto thefirmis determined by how muchCSR buildsa satisfiedcustomerbase points further researchin a moreprecisedirection whenevaluating theultimate financial impactofCSR. our findingssuggestthatthe financial Furthermore, returns to CSR are notthe same,butratherare different, acrossfirmswithdifferent internal situations. In particular, our findingthatthepositivefinancialreturns to CSR are in firms with indicates that amplified higherproductquality a propermixorcombination ofexternal CSR initiatives and internalcorporateabilitieslikelygeneratesand sustains financialvalue for the firm.In this sense, we provide view.Thatis, in empiricalevidencefortheresource-based of the resource-based view support (Barney1986; Penrose and 1959; Wernerfelt 1984) marketingcapability(Day we findthata 1994; Vorhiesand Morgan2005) literature, firm'ssustainablecompetitiveadvantagesindeed result froma complementary "bundle"of valuableinternal(corand external assets.Thus, (CSR initiatives) porateabilities) further researchis encouraged to go beyondthesimple,universaleffects of CSR and explorecontextual situations that moderate theassociationsbetweenCSR andmarket value. researchhas beenenthusiasFinally,existingmarketing tic aboutthepositivebenefits of CSR, butunfortunately, it has potentialnegativeoutcomes(foran exception,see Sen and Bhattacharya 2001). Our researchindicatesthatCSR canharbora darkside.Thatis, in firms thatareless innovativein nature, CSR maydecreasecustomer satisfaction levels and ultimately reducethefirm'sfinancialreturns. This findingof the negative returnsto CSR in the lowinnovativeness conditioncan be understood fromtheperspectiveof competitive signalingtheory(Caves and Porter 1977; Stigler1961). In particular, thistheoryholdsthatlow (high)innovativenesscompetency in firmsmayserveas a cue ofinferior to corporatestakeholders, thus (superior)competitiveness future to financial signalingweaker(stronger) performance investors inthemarketplace. In thelightofsignaling theory, we conjecture thatthoughCSR mayhelpfirmsobtaininstitutionallegitimacy(i.e., by being sociallyresponsiveand firmsthatare less innovative in meetingcussupportive), tomerneedsmaysenda negativesignalof incorrect stratein themarketthat gic choiceand misguidedfirmpriorities contaminates and degradesthislegitimacy (DiMaggio and Powell 1983; Scott 1987). The resulting costs of signaled in themarketmayoutweighthebenenoncompetitiveness fitsof CSR and thuslead to negativemarketvalue. Conin firmswith ceivably,consumers mayviewCSR activities low assetspecificity as opportunistic and (i.e., manipulative with which causes misleading disguisedsellingpurposes), CSR to backfireand leads to consumerboycotts(Sen and 2001; Smith2003). It is also possible that Bhattacharya firmsthatare low in corporate abilitieslikelyinvestin less influential and pure cost-addingCSR activities,such as cash donations.In contrast, firmsthatarehighin corporate abilitiesimplement "smarter" CSR strategies thatare relaand thus more finantivelyidiosyncratic generate long-term cial benefits. We call forfurther of investigation possible oftheobservedasymmetric returns to CSR. explanations Implications forMarketingPractice Marketers haveponderedwhether companiesshouldtakea morestrategic tackon CSR andhow"doinggood"can contribute totheirbottomline(BrownandDacin 1997;Sen and issues thathave 2001). These are important Bhattacharya becauseprudent strongmanagerialimplications practitioners face toughchoicesin allocatingtheirlimitedresources andin prioritizing different initiatives. strategic Evenevangelists suchas Nardelli executive officer [chief of HomeDepot]stopshortof sayingthatcompanies shoulddivert from other tosupmoney strategic priorities likeHomeDepotand port[CSR]. But at corporations [General Electric], goodworksarebeingbredintoBig Business.`It'sjusttheright thingto do,'saysNardelli. GoodPR?Sure.Moneywellspent? Thegoodwill refund couldbe inthemail.(Grow, andLee 2005,p. 78) Hamm, Our findingthatCSR contributes positivelyto market valuesuggeststhatmanagerscan obtaincompetitive advanand more financial benefits in tages reap by investing CSR. To be morespecific,we calculatedthatfora typicalcomvalueofapproxpanyin oursamplewithan averagemarket imately$48 billion,one unitincreaseofCSR ratingswould resultin approximately on average $17 millionmoreprofits in subsequentyears,a substantialincrease of financial returns. Indeed,companiesshouldrealize thatCSR initiatives can represent a robustpublicrelationsstrategy, particularly in the current marketenvironment in whichstakeholders, suchas customers (and employees),mayhavestrongsocial concerns.Creativeexecutivesat Home Depot, IBM, WalMart,GeneralElectric,and Cisco are engagingin "smarter checks(Berner2005, corporate giving"thanmerelywriting p. 68). Forexample,HomeDepotdonated2 millionhoursto SocialResponsibility, Customer andMarket Value 115 Satisfaction, Corporate This content downloaded from 152.3.152.120 on Mon, 2 Dec 2013 12:43:33 PM All use subject to JSTOR Terms and Conditions varioustypesof community services,and IBM gave away morethan100 specializedbusinessapplications (i.e., translationserverschangingEnglishe-mailsintoSpanishmesschoolsand community sages) in heavilyLatino-populated oftheCSR portfolios ofsomeof groups.Closerexamination thetop-andbottom-rated firms in termsofCSR shedsadditionallighton how managersmay derivepositivemarket returnsfromCSR and/oravoid negativereturns. That is, manyof thefirmsat thetopof theCSR heap (e.g., United Parcel Service,Alcoa, VerizonCommunications) seem to have integrated CSR tightly withtheirbusinessstrategies. Forexample,thesefirms investin a hostofemployee-related such as education and safety, thatengender ideninitiatives, tification and instillprideamongemployees,all of which influence customer satisfaction andmarket value.Moreover, in which thesefirmshaveemployeevolunteerism programs the are visible contributors to local communities. employees Thishelpscapturecustomers' favorable attention. In contrast, firmsatthebottomoftheCSR heap,suchas Motors,seemtobe perceivedas Toys`R' Us andMitsubishi of dint workersand/orcon"irresponsible" by mistreating defect information. Such cealingproduct negativeactions tendto receivemediacoveragein today'sscrutiny-intensive withourresults,theseexamworld.Viewedin conjunction ples suggestthatmanagersshouldnotonly"gettheirhouse in order"to avoidnegativereturns to CSR butalso adoptan integrated, strategicperspectiveand allocateresourcesto Afterall, CSR programsforsuperiormarketperformance. "itis no longeran option[forcompanies]to siton thesidelines"(Grow,Hamm,andLee 2005,p. 77; Smith2003). Our findings thatCSR increasescustomersatisfaction, which in turnleads to positive financialreturns,may In of whyCSR matters. improvemanagers'understanding marketers particular, may have alreadyknownthatCSR suchas publicgoodhelpspromoteexternalsocialbenefits, willoutsidethefirm(HoustonandJohnson 2000; McGuire, and Schneeweis1988),whichcan polisha firm's Sundgren, REFERENCES InforDavidandRobert Jacobson Aaker, (1994),"TheFinancial mation Content of Perceived Journal ofMarketing Quality," 31 (May),191-201. Research, ofBrandAttiand(2001),"TheValueRelevance Journalof Marketing tudein High-Technology Markets," 485-93. 38 (November), Research, andThomasGruen(2005), C.B. Bhattacharya, Ahearne, Michael, IdentiofCustomer-Company "Antecedents andConsequences Role of Jourfication: the Marketing," Relationship Expanding nalofApplied 90 (3), 574-85. Psychology, G. West(1991),Multiple Aiken,LeonaandStephen Regression: Interactions. ThousandOaks,CA: and Testing Interpreting SagePublications. andSanalK. Mazvancheryl Anderson, EugeneW.,ClaesFornell, andShareholder Satisfaction Value,"Jour(2004),"Customer 172-85. nalofMarketing, 68 (October), SatisfacandRolandT. Rust(1997),"Customer , , Between and Profitability: Differences tion,Productivity, GoodsandServices," Science,16(2), 129-45. Marketing JamesC. andDavidW. Gerbing Anderson, (1988),"Structural inPractice: A ReviewandRecommended Modeling Equation 103(3),411-23. Bulletin, Psychological Approach," Two-Step in thepresenceof corporatescandalsor regulareputation In addition, CSR can boostinternal toryscrutiny. employee moraleand commitment withinthe firm(Godfrey2005; more McGuire,Schneeweis,and Branch1990) and attract to "marry theirwork capable,youngtalentswho aretrying and nonworklives" (Grow,Hamm, and Lee 2005; for detailedbenefitsof CSR and cause-related see marketing, and Menon 1988,p. 60). Importantly, we sugVaradarajan also gestan additionalinsightto managers:CSR initiatives influencecustomers'satisfaction levels,whichultimately lead to highermarket returns. To managers, thismeansthat is satisfaction an intermediate building important step in CSR into financial converting gains. oftheboundary conditions ofthe However,ourfindings returns to CSR suggestthatmanagersshouldnotignorethe inherent trapsand pitfallsof CSR. For example,we show thatfirmsarenotalwaysable to benefitfromCSR actions. Whencompaniesare notinnovative, our findings indicate thatCSR actuallydecreasestheirmarket return. Thus,CSR seemsto be a double-edged without sword; propersupport of corporateabilities,such as innovativeness, CSR can be to firmperformance. harmful Indeed,when"doingbetterat and Sen 2004,p. 9), itis impordoinggood" (Bhattacharya tantformanagersto considerCSR initiatives in thelightof thefirm'scorporateabilities.In particular, less innovative companiesmaybe betterofffinancially by avoidingCSR actions.Managersshouldunderstand thata misalignment of CSR withinternalfactorscan be detrimental and lead to decreasedmarketvalue.As a consequence,marketers need to examinecarefully theorganizational contextin totality beforeimplementing CSR initiatives. In conclusion,thisresearchsuggestsa morenuanced of themarket returns to CSR initiatives. Our understanding findingsseem to indicatethat"doinggood" has complicatedimplications and thatcustomersatisfaction plays an role in therelationship betweenCSR important mediating andfirmmarket value. J.Craig,Richard ScotBurton, PaulMoberg, Andrews, Netemeyer, and AnnChristainsen Adolescent (2004), "Understanding toSmoke:AnExamination ofRelationships Intentions Among Prior TrialBehaviors, andAntitobacco CamSocialInfluences, 68 (July), 110-23. Journal ofMarketing, paignAdvertising," andJ.Hatfield, K., A. Carroll, (1985),"AnEmpirical Aupperle, Examination of theRelationship BetweenCorporate Social and Profitability," Academy of Management Responsibility 28 (2),446-63. Journal, FactorMarkets: Expectations, JayB. (1986),"Strategic Barney, Science,32 (10), Luck,andBusinessStrategy," Management 1231-41. Baron,ReubenM. andDavidA. Kenny(1986),"TheModeratorMediatorVariableDistinctionin Social Psychological and Statistical ConsideraResearch:Conceptual, Strategic, andSocialPsychology, 51 (6), Journal tions," ofPersonality 1173-82. C.B., Hayagreeva Rao, and MaryAnn Glynn Bhattacharya, AnInvestitheBondofIdentification: (1995),"Understanding ArtMuseum JourMembers," Among gationofItsCorrelates nalofMarketing, 59 (October), 46-57. andSankarSen(2003),"Consumer-Company Identification:A Framework forUnderstanding Consumers' Relation- ofMarketing, 16l Journal October2006 This content downloaded from 152.3.152.120 on Mon, 2 Dec 2013 12:43:33 PM All use subject to JSTOR Terms and Conditions Journalof Marketing, 67 (April), MichaelD. Johnson, , shipswithCompanies," Cha, EugeneW.Anderson, Jaesung 76-88. andBarbara Customer Satisfac(1996),"TheAmerican Bryant andatDoingGood,"CalitionIndex:Description, andImplications," (2004),"DoingBetter Journal Findings, 47 (1),9-24. 60 (October), Review, 7-18. forniaManagement ofMarketing, H. vanBruggen Berens, Guido,Cees B.M. vanRiel,andGerrit andDavidF.Larcker Structural (1981),"Evaluating EquaAssociationsand ConsumerProduct tionModelswithUnobservable (2005), "Corporate Variables andMeasurement TheModerating Role of Corporate BrandDomiJournal Responses: 19(February), 39-50. Error," Research, ofMarketing Journal 69 (July), 35-18. nance," SunilMithas, ofMarketing, Forrest V.Morgeson , III,andM.S.Krishnan Robert(2005),"Smarter BusinessBerner, Corporate Giving," and Stock Prices:High (2006), "CustomerSatisfaction Week, (November 28),68-76. LowRisk," Journal 3-14. Returns, 70,(January), ofMarketing, Allen(1982),"AUnified ModelofTurnover from Bluedorn, Fortune OrgaMostAdmired (2005),"America's (March Companies," HumanRelations, 35 (February), 135-53. nizations," 7), 68. andJoseph F. HairJr.(1997), Boles,James S.,MarkW.Johnston, Hubert andJean-Marc Xuereb OrienGatignon, (1997),"Strategic "RoleStress,Work-Family and Emotional Conflict Exhaustation oftheFirmandNewProduct Journal Performance," of tion:Inter-Relationships andEffects on SomeWork-Related 34 (February), 77-90. Research, Marketing Journal Consequences," ofPersonal Selling& SalesManagePaulC. (2005),"TheRelationship BetweenCorporate Godfrey, ment,l7(1),17-28. and Shareholder Wealth:A RiskManagement Philanthropy Bolton,RuthN. and JamesH. Drew(1991),"A Longitudinal 30 (4),777-98. Review, Perspective," Academy ofManagement oftheImpactofServiceChanges onCustomer AttiAnalysis Abbieand J.R.Hauser(1996),"Integrating R&D and Griffin, Journal 55 (January), 1-9. tudes," ofMarketing, A ReviewandAnalysis oftheLiterature," Journal Marketing: Associations in Marketing: Brown,TomJ. (1998),"Corporate Product Innovation 13(3),191-215. of Management, Antecedents and Consequences,"CorporateReputation Grow, Brian,SteveHamm,andLouiseLee (2005),"TheDebate Review, 1(3), 215-33. OverDoingGood,"BusinessWeek, 15),76-78. (August andPeterA. Dacin(1997),"TheCompany andtheProdThomasS. andLopoL. Rego(2005),"Customer SatisfacGruca, uct: CorporateAssociationsand ConsumerProduct CashFlow,andShareholder Journal tion, Value," of Marketing, Journal 61 (January), 68-84. Responses," ofMarketing, 69 (July), 115-30. Buzzell,RobertD., BradleyT. Gale, and RalphG.M. Sultan andRajeevBatra(2004),"WhenCorporate Gurhan-Canli, Zeynep Share:A KeytoProfitability," Harvard Busi(1975),"Market Affects Product Evaluations: TheModerating Roleof Image nessReview, 53 (1),97-106. Perceived Journal 41 (May), Risk," Research, of Marketing R.E. and Michael E. Porter "From Barriers to Caves, (1977), Entry 197-205. Journal 91 (2), Barriers," Mobility Quarterly ofEconomics, J.Arnold Handelman, (1999),"TheRoleof JayM. andStephen 421-34. Actions with a Social Dimension: Marketing Appealsto the KeithW.andMarkHirschey R&D Chauvin, (1993),"Advertising, Institutional Journal 63 (July), Environment," of Marketing, andtheMarket Valueof theFirm," Financial Expenditures, 33-48. 22 128-40. Management,(Winter), (1997),"Toward Grayson Terminological, Conceptual, P.(2000),"Effects of`BestPractices' ofEnvironmen- Holmbeck, Christmann, andStatistical intheStudyofMediators andModeraClarity talManagement onCostAdvantage: TheRoleofCompiementors:Examples from theChild-Clinical andPediatric Psychol43 (4),663-80. Assets," Journal, tary Academy ofManagement Journal andClinicalPsycholLiteratures," ogy of Consulting andVladimir Pucik(2005),"Relationship Between Cho,Hee-Jae ogy,65 (4),599-610. and Market Innovativeness, Quality,Growth, Profitability, Nicole Koschate,and WayneD. Hoyer Christian, Homburg, 26 (6),555-75. Value," Journal, Strategic Management "Do Satisfied Customers of (2005), ReallyPayMore?A Study Claus-Heinrich and Rudolf Daub, (2005),"Enabling Ergenzinger Between Customer Satisfaction andWillingSustainable a NewMulti-Disciplinary theRelationship Management Through nesstoPay,"Journal 69 (April), 84-97. ofMarketing, ofCustomer Journal Satisfaction," Concept European ofMarMark and Shane Johnson ConHouston, (2000), "Buyer-Supplier 39 998-1012. (9-10), keting, tracts VersusJoint Ventures: Determinants andConsequences ofMarket-Driven Day,George(1994),"TheCapabilities OrganiofTransaction Journal 37 Structure," Research, ofMarketing Journal 58 (October), 37-52. zations," ofMarketing, 1-15. (February), DiMaggio,P.J.andW.W.Powell(1983),"TheIronCageRevisand Satish,Subhash.Sharma,PeterKaufman, Jayachandran, ited:Instructional andCollective in Isomorphism Rationality Pushkala Raman(2005),"TheRoleofRelational Information American 48 (2), Fields," Organizational Review, Sociological Processes andTechnology UseinCustomer Man17-60. Relationship Journal 69 (October), 177-92. PeterF. (1993), Post-Capitalist agement," ofMarketing, Drucker, Society.New York: A. Parasuraman, andWilliam Johnston, Mark,CharlesFutrell, HarperCollins. Black "A Assessment of the Minette E. (1996),"Company (1990), with a Longitudinal Impactof Drumwright, Advertising Selected onSalespeople's Influences SocialDimension: TheRoleofNoneconomic JourOrganizational OrganizaCriteria," tionalCommitment nalofMarketing, Journal 60 (October), 71-87. DuringEarlyEmployment," of 27 (August), 333-44. Om Narasimhan, and Surendra Research, Dutta,Shantanu, Marketing Rajiv(1999), KissanandVernon J.Richardson "SuccessinHigh-Technology Markets: Is Marketing Joseph, (2002),"FreeCashFlow, CapabilMethodof Advertising Science,18(4),547-68. AgencyCosts,and theAffordability ityCritical?" Marketing Journal 66 (January), Jacobson 94-107. Erickson, Budgeting," GaryandRobert (1.992),"Gaining ofMarketing, ComparativeAdvantage The Kim,W.C. and R. Mauborgne The (1997),"ValueInnovation: ThroughDiscretionary Expenditures: Returns to R&D andAdvertising," Harvard Business 75 Science,38 Strategic LogicofHighGrowth," Review, Management 1264-79. (1),102-12. (September), Charles andMarkShanley Kleinschmidt E.J.andR.G.Cooper(1991),"TheImpact Fombrun, ofProd(1990),"What'sina Name? uctInnovativeness onPerformance," Journal InnoReputation Buildingand Corporate Strategy," Academyof ofProduct 33 (2),233-58. vation 8 (4),240-51. Journal, Management Management, Claes(1992),"ANational Customer Satisfaction BaromeFornell, SocialResponsiKotler, PhilipandNancyLee (2004),Corporate ter:TheSwedishExperience," Journal 6 (Januand Your ofMarketing, bility:Doing theMostGoodfor YourCompany Cause.NewYork:John ary),1-21. Wiley& Sons. Social Responsibility, Customer and Market Value117 Corporate Satisfaction, This content downloaded from 152.3.152.120 on Mon, 2 Dec 2013 12:43:33 PM All use subject to JSTOR Terms and Conditions to encesinE-tailer ServiceQuality?" Journal Lee, RubyandRajdeepGrewal(2004),"Strategic Responses oftheAcademy of NewTechnologies andTheirImpacton FirmPerformance," 30 (4),433-45. Science, Marketing Journal 68 (October), 157-71. Social Pava,Moses L. and JoshuaKrausz(1996), Corporate ofMarketing, andKwakuAtuahene-Gima Innovaand FinancialPerformance: TheParadoxof Li,Haiyang (2001),"Product Responsibility tionStrategy andthePerformance ofNewTechnology Ventures CT: Quorum SocialCost.Westport, Books. 44 (6),1123-34. inChina," EdithT. (1959),TheTheory Journal, Penrose, Academy ofManagement oftheGrowth oftheFirm. E. Drumwright, andBridgette DonaldR., Minette Oxford: BasilBlackwell. Lichtenstein, ofCorporate M. Braig(2004),"TheEffect SocialResponsibil- Rao,Vithala, and DeniseDahlhoff (2004), ManojK. Agarwal, Donations to Corporate-Supported "HowIs Manifest RelatedtotheIntangible ityon Customer NonprofBranding Strategy 68 (October), 16-32. Valueofa Corporation?" Journal 68 (October), its,"Journal ofMarketing, ofMarketing, andNaveenDonthu Credibil126-41. Luo,Xueming (2006),"Marketing's ofMarketing Communication Roberts, PeterandGrahame ity:A Longitudinal Investigation Dowling(2002),"Corporate ReputaandShareholder tionandSustained Journal 70 Financial Value," Performance," ofMarketing, Productivity Superior Strategic 70-91. 23 (2), 1077-1093. Journal, (October), Management and LindaFerrell(2005),"A A. Zeithaml Rust,Roland,Katherine Lemon,andValarie (2004), Maignan,Isabelle,O.C. Ferrell, in onMarketing: Stakeholder ModelforImplementing SocialResponsibility "Return UsingCustomer EquitytoFocusMar39 (9-10), Journal 109-124. 68 (January), ofMarketing, Marketing," EuropeanJournalof Marketing, keting Strategy," andPeterR. Dickson(2002),"GetChristine 956-77. Moorman, , in Organizaon Quality: andExploitation CostReduction, Revenue March,J.G.(1991),"Exploration tingReturn Expansion, 2 (1),71-87. orBoth?"Journal 66 (October), 7-24. tionalLearning," Science, Organization ofMarketing, D. andJamesP. Walsh(2003),"Misery Loves J.A.(1934),TheTheory Joshua ofEconomic Development. Schumpeter, Margolis, AdminMA:Harvard SocialInitiatives Press. Rethinking byBusiness," University Companies: Cambridge, ScienceQuarterly, 38 (3),268-305. istrative Scott,W. Richard(1987), "TheAdolescenceof Institutional and Ben Branch(1990), Administrative ScienceQuarterly, 32 (December), McGuire,Jean,ThomasSchneeweis, Theory," A CauseorResultofFirmPer493-511. ofFirmQuality: "Perceptions Journal formance," Selnes,FredandJamesSallis (2003),"Promoting (1),167-80. ofManagement,16 Relationship 67 (July), Journal 80-95. AlisonSundgren, andThomasSchneeweis (1988),"Cor, ofMarketing, Learning," andFirmFinancial SocialResponsibility Performance," Sen,SankarandC.B. Bhattacharya (2001),"Does DoingGood porate Consumer Reactions toCorpoJournal, 31(4), 854-72. Academy ofManagement AlwaysLeadtoDoingBetter? of 38 rateSocialResponsibility," Journal andClaesFomell(2005a),"Effect Research, Mithas, S., M.S. Krishnan, ofMarketing onCustomer Satisfaction: Investments Information (May),225-44. Technology LeaderJaeandJing Zhou(2003),"Transformational andEvidence," Shin,Shung working paper,RossSchoolofBusiTheory and Creativity: EvidencefromKorea," ofMichigan. ness,University ship,Conservation, Rela46 (6),703-714. and, Journal, (2005b),"WhyDo Customer , , Academy ofManagement N. Affect Customer SatisfacSmith, (2003), Craig Management "CorporateSocial Responsibility: tionship Applications 45 (4), Whether or How?"California 201-209. tion?"Journal 69 (October), Review, Management ofMarketing, and Eugene 52-76. Mittal,Vikas,AkinSayrak,PanduTadikamalla, andtheLong-Term FinanAnderson Soloman,R. and K. Hansen(1985),It's GoodBusiness.New (2005),"DualEmphasis York:Atheneum. cial ImpactofCustomer Science,24 Satisfaction," Marketing andLiamFahey(1998), Shervani, Srivastava, (4),544-55. Tasadduq Rajendra, AssetsandShareholder Value:A Framework OffBetween "Market-Based Jacobson Mizik,NatalieandRobert (2003),"Trading 2-18. 62 (January), TheFinancial forAnalysis," Journal ValueCreation andValueAppropriation: ofMarketing, ImpliG.J.(1961),"TheEconomics ofInformation," Journal Journal ofShifts inStrategic cations of ofMarketing, Stigler, Emphasis," 69 (3), 104-122. Political 63-76. 67 (January), Economy, SatisDavidM. andDavidHenard NeilA. andLopoLeottedo Rego(2006),"TheValueof (2001),"Customer Szymanski, Morgan, Journal oftheEmpirical faction: A Meta-Analysis inPredicting Business Metrics Different Customer andLoyalty Evidence," 29 (Winter),16-35. Science, Science, Performance," oftheAcademy ofMarketing Marketing forthcoming. SocialResponsibility Tsoutsoura, (2004),"Corporate Margarita Morgan,RobertM. and Shelby D. Hunt (1994), "The andFinancial ofRelationship JourCommitment-Trust Performance," working paper,Haas Schoolof Marketing," Theory ofCalifornia, 20-38. nalofMarketing, 58 (July), Business, Berkeley. University P. RajanandAnilMenon(1988),"Cause-Related andGurumurthy Murthi, B.P.S.,KannanSrinivasan, Kalyanaram Varadarajan, andCorpoofMarketing A Coalignment andUnobserved forObserved Strategy (1996),"Controlling Marketing: Managerial 58-74. ratePhilanthropy," Journal 52 (July) Market ShareAdvantages," First-Mover SkillsinDetermining ofMarketing, to a L. andRobertF. Lusch(2004),"Evolving 329-37. 33 (August), Journal Research, Vargo,Stephen ofMarketing 68 Journal NewDominant Richard G., JamesG. MaxhamIII, andChrisPullig ofMarketing, LogicforMarketing," Netemeyer, 1-17. Interface: LinkstoJob intheWork-Family (2005),"Conflicts (January), and CusServiceEmployee Vorhies, Performance, (2005),`Benchmarking Stress,Customer DouglasW.andNeilA. Morgan AdvanforSustainable 69 (April), Journalof Marketing, tomerPurchaseIntent," Competitive Marketing Capabilities 80-94. 69 (January), Journal 130-43. ofMarketing, tage," ViewoftheFirm," 2ded.NewYork: JumC. (1978),Psychometric Wernerfelt, (1984),"AResource-Based Birger Theory, Nunnally, 5 (2),171-80. McGraw-Hill. Journal, Management Strategic andthe A. (2000),"Service Valarie ModeloftheAntecedents Zeithaml, L. (1980),"ACognitive Richard Oliver, Quality, Profitability, WhatWeKnowandWhatWe Worth ofCustomers: Economic Journal ofSatisfaction andConsequences Decisions," ofMarNeedtoLearn," Journal 17(November), 460-69. Science, Research, ofMarketing oftheAcademy keting "Cor28 67-85. and L. Sara Frank Schmidt, Marc, (1), (2003), Rynes Orlitzky, L. Berry A. Parasuraman, andLeonard A Meta-Analysis," , Performance: (1990),Delivering porateSocialandFinancial andExpecService:Balancing Customer 24 (3),403-441. Studies, Quality Perceptions Organization tations. andVenkatesh Shankar NewYork:TheFreePress. Pan,Xing,BrianRatchford, (2002),"Can PriceDispersion in OnlineMarkets Be Explained byDifferofMarketing, 181Journal October2006 This content downloaded from 152.3.152.120 on Mon, 2 Dec 2013 12:43:33 PM All use subject to JSTOR Terms and Conditions

Corporate Social Responsibility, Customer Satisfaction, and Market

Related documents

Products

Support

Corporate Social Responsibility, Customer Satisfaction, and Market

Related documents

Add this document to collection(s)

Add this document to saved

Suggest us how to improve StudyLib