Relationship between corporation social responsibility, brand equity, company reputation and customer company identification in ho chi minh city hotel industry

INTERNATIONAL SCHOOL OF BUSINESS TRAN ANH TRUC RELATIONSHIP BETWEEN CORPORATE SOCIAL RESPONSIBILITY, BRAND EQUITY, COMPANY REPUTATION, AND CUSTOMER-COMPANY IDENTIFICATION IN HO CHI MINH

INTERNATIONAL SCHOOL OF BUSINESS

TRAN ANH TRUC

RELATIONSHIP BETWEEN CORPORATE SOCIAL RESPONSIBILITY, BRAND EQUITY, COMPANY REPUTATION, AND CUSTOMER-COMPANY IDENTIFICATION IN HO CHI MINH CITY HOTEL

INDUSTRY

MASTER OF BUSINESS (Honours)

SUPERVISOR: LUU TRONG TUAN, PhD

Ho Chi Minh City - 2014

LIST OF FIGURES

LIST OF TABLES

LIST OF ABBREVIATIONS

The following table describes the significant of various abbreviations used throughout the thesis

Abbreviation Meaning

I gratefully acknowledge the constructive comments provided by Luu Trong Tuan, Phd His ideas and suggestions play an important role in my research orientation

I would like to thank my colleagues who work in hotel and travel company, who gave me much valuable advice in the early stages of this work A lot of friends of friends who help me deliver my survey And people who save time to reply my questionnaires

In addition, I want to thank you for my team at Trails of Indochina, who stood in the breach when I concentrated on research

Last but not least, my sincere thanks owe to my family who gave me good conditions to complete this work

This paper investigates relationship between four elements included corporate social responsibility (CSR), brand equity (BRE), company reputation (REP) and customer-company identification (CCI)

In terms of methodology, this research uses quantities approach and collects primary data through question survey which help determine relationship between these four variables The survey launched 105 questionnaires to clients of 14 hotels in category of 4-star and 5-star The applied measurement scales have been adopt from the one already been developed from other previous researches about corporate social responsibility, customer-company identification, company reputation, and brand equity Furthermore, this is a cross-sectional research concentrate on current status of each variable After data collected, structural equation modeling (SEM) method was used to analyze and evaluate through Analysis of Moment Structures (AMOS software)

As a result, the research found that there is positive relationship between pairs of items included corporate social responsibility and company reputation, corporate social responsibility and brand equity, brand equity and customer-company identification However the positive relationship between company reputation and customer-company identification do not exist

This matter has been investigated in several industries and countries all over the world However this time, the research delivers investigation within hotel industry in Ho Chi Minh City Start from study about CSR the research exams its relations to identity of a

proving evidence for advising hotel to concentrate in social responsibility

Keywords: Corporate social responsibility, brand equity, company reputation,

customer-company identification

Recently, hospitality contributes a lot into economic of developing countries where have advantages about tourism such as breathtaking landscape or beautiful and unique culture (Olsen, 2008) Among developing countries, Vietnam owns variety tourism sources like world natural, cultural heritages therefore hospitality industry was bloom during last

decade and occupied by many well-known international hotel groups like Intercontinental, Accord, Marriot, Starwood, Hyatt, etc due to high demand of accommodation In order to serve travellers, the number of hotel in Ho Chi Minh city also increase to more than 327 hotels in 2013 (Trip adviser – 2013) Unfortunately, Vietnamese government recently just commences managing CSR in private-sector by some single efforts like improving labor benefits or environment preservation (Fukada, 2007)

In this situation, researches that study about how helpful CSR to hotel business performance are needed in order to encouraging hotels pay attention on their social responsibility High hotel business performance is concern to hotel reputation (Chun, 2005) and hotel brand equity (Prasad and Dev, 2000) Hotel‟s benefits specifically customer-company identification which definitely contribute into improve hotel business performance (Hildebrand, 2010) Therefore, a research about the relationship between CSR, reputation, brand equity, and customer-company identification is necessary

1.2 Research aims

According to the problem statement, this research studies whether it is positive relationship from CSR to hotel reputation and hotel brand equity and from reputation and brand equity to hotel‟s customer-company identification The research aims state in

details as below

1) The positive relationship between CSR and company reputation

2) The positive relationship hotel reputation and CC Identification

3) The positive relationship between CSR and hotel brand equity

4) The positive relationship between hotel brand equity and CC identification

1.3 Research scope

This research focus on examine the positive relationship between CSR and two items included reputation and brand equity Then the positive relationship between reputation, brand equity and customer-company identification are investigated The paper investigates within hotel industry in Ho Chi Minh City only In addition, since high-end hotel always much keen to do right things about CSR (Braw, 2013), this research focuses

on hotels in high categories of 4-star and 5-star

1.4 Research contribution

In the circumstance that CSR is not much cared in Vietnam (Fukada, 2007) and hotel industry is not an exceptional, this research offer evidences about positive relationship between CSR and some items that help hotels increase their performance such as company reputation, brand equity and customer-company identification It could help future study about CSR in hotel business In terms of business, management boards of hotels in Ho Chi Minh City either have stronger supported evidences to included CSR into their business plans In large scale, the research could motivate hotels within Vietnam On the other side, the local society and environment will receive more supporting when hotels included CSR in their business activities

1.5 Research structure

This research is included five chapters:

Chapter 1 named introduction included the problem statement, research aims, research question, scope, contribution and structure of the research

Chapter 2 included literature review and hypothesis development The literature review demonstrates concept theory of corporate social responsibility, company reputation, and brand equity and customer-company identification After then, hypotheses are developed based on relationship between these concepts Finally, the conceptual model of the research is performed

Chapter 3 describes research methodology which is included information about research design, research process, method of data analysis, variables measurement scale, and the result of pilot test

Chapter 4 presents about data analysis and discussion on the results

Chapter 5 is used to drawn conclusion, limitation and recommendation

Chapter 2 LITERATURE REVIEW AND HYPOTHESIS DEVELOPMENT

2.1 Literature review

Literature review delivers general concepts about four factors included CSR, CC identification, hotel reputation, and hotel brand equity which are used for hypothesis development

2.1.1 Corporate social responsibility

Very early discuss from 1950s, literature of CSR develops into variety definition from different researchers One of the earliest one states corporate social responsibility is the desire of businessmen to drive their business policies, business decisions in lines of the objectives and values of society (Bowen, 1953) Later, one of the modern researchers argues that CSR is about the way management board manage their business processes to result in positive impact on society (Baker, 2004) According to these two definitions, the later argument about CSR much more emphasizes that business is affected to society than the society values impacts on business Among these definitions, one the most cited conceptual is from Carroll, 1991 about CSR included 4 dimensions economic, legal, ethic, and philanthropy According to Caroll, CSR firstly is profitable business to archive

it basic purpose about economy Secondly that business must be legally according to the law of countries where operated After that, acting ethically to employee, customer and communities is the third dimension Finally, philanthropy is the last dimension which is

understood as the discretionary responsibility of the company Overall, corporate social responsibility is the concern of companies about the benefits of their customer, employee, and the community CSR should be investigated via both two identifications factors included company CSR association and CSR participant (Kim, Lee, Lee & Kim, 2010) While CSR association strongly support to improve company reputation, CSR participant directly impact on customer identification

2.1.2 Customer-Company identification

Customer – Company Identification is significant and meaningful relationship between customers and a company that leads them to become champions for the product or company that help them identify one or more important self-identification of them (Bhattacharya and Sen, 2003) Most of marketers would like to study about this relationship then they will have clients become good supporters to their products (Fournier, Dobscha, and Mick, 1998)

According to Bhattacharya and Sen, in order to have this kind of relationship existed, company identity should be attracted to customer in terms of identify their self-continuity, self-distinctiveness, and self-definitional In other words company identity should include these below identity attractiveness

First is identity similarity Customers are always attracted in company which is match to their own characteristic (Pratt, 1998) For example, customers who love animals always have good impression to company which is care about animals The more customer

perceive that company identity is similar to their own sense, the more company identity is attractive to them (Bhattacharya and Sen, 2003)

Second one is identity distinctiveness People always require themselves different from the others (Tajfel, 1974) Therefore the more company identity distinguishes from the others the more it attracts customers

The third one is identity prestige People always satisfy their self-enhancement by being loyal to a company which they perceive it is prestigious (Ashforth & Mael, 1989) By this way, customer increases their self-worth Thus prestige perceived is also one of company identity attractiveness to customer (Bhattacharya and Sen, 2003)

According to Bhattacharya and Sen (2003), companies archive the below benefits as well

as risk when customers identify with them Firstly as well as the most key consequence of customer-company identification is company loyalty Clients is usually loyal to the company rather than product therefore they identify to company they will support to either currently products or the new ones Secondly is company promotion In order to show clients‟ identify to the company, they convinces other that the company as well as

their products is good These promotions occur in both physical and social form Physical promotion marks as the customer‟s owned collection of company products

Social promotion included positive word of mouth about companies and products or defending the company before attacking by the others The third benefit is customer recruitment On the other hand the positive word of mouth from companies‟ loyal

customer is useful for company to recruiting new customers Resilience to negative

information is the fourth benefits since clients who identify to company defenses wrong information in the market which harm to company image Finally, the risk of company identification is stronger claim from customer on company Customers realize that they have more power to company and reserve the right to claim the company actively and consistently when they are identify to the company

2.1.3 Reputation

Companies consider reputation as competitive advantage (Hall, 1992) or intangible asset (Grant, 1995) According to Fombrun (1996) corporate reputation is „a perceptual representation of a company‟s past actions and future prospects that describe the firm‟s appeal to all of its key constituents‟ Employee, customers, and shareholders are the most important ones among reputation‟s stakeholders Reputation reflects the way its stakeholders behave to company such as customer satisfaction, employee retention (Chun, 2005) According to (Chun 2005), the reflection has been identified via three schools of thought included evaluative, impersonal and relational Each school involves both internal (employees) and external (customers, shareholders) stakeholders but the different between them is whether stakeholder is single or group On evaluative schools, reputation is used to evaluate financial achievement of the company and key audience is shareholders or managers On the other hand, impression school concerns mainly to single stakeholders such as employees and customer Reputation reflects overall impression of a company to customer and employees In this case, reputation is not include financial status however company image or corporate identity While the first two

schools involve in single stakeholders, the third one, relational school, concerns to group

of stakeholders On the schools, reputation reflects the gaps between internal stakeholders and externals stakeholders‟ point of view as well as the link between them (Hatch &

Schultz 2001) In order to study about this link, the paper study further to elements of reputation

Reputation easily leads to confusion with corporate image since both of them included outsiders‟ view to the company (Markwick & Fill, 1997) Actually reputation included

views both from outside and inside therefore image (external element) is one of key elements of reputation together with identity (internal element) (Whetten, 1997) Study about reputation is study about these two elements and its relationship Image means

“how others see us” and identity means “how we see ourselves”

Image is overall impressions or perceptions of customers to company (Davies and Miles 1998) Bernstein (1994) states that customer perceived image should not be different from the reality of the customer‟s experience otherwise company image as well as company reputation will be broken Image could be change quickly via marketing technique like advertising, public relation while reputation need long time to build up or change both internal and external

Identity, in other words is the employees‟ perception about the company (Whetten,

1997) In other words, company identity is the way employees perceive about the company as well as the relationship between them and company image Company identity is similar to company culture somehow While identity could be changed

according to the strategy from management board, culture is not a thing that could be easily changed since it is the unique personality experiences and history of employee working within the company.

Another element has been developed from identity by Davies and Miles (1998) is desired identity It means “how we want others to see ourselves” This element involves the

relationship between company image and company identity The image of company is

designed and managed by managers Desired identity is the way managers manage company image by employee behaviors particularly the behavior of customer-facing employees (Lloyd, 1990) External stakeholders such as customer can have an image about the company related to their impression of the same internal stakeholders like employees (Kennedy, 1977) It is more important for many service businesses such as a restaurant, hotel or education institution, where customer experiences direct service

severed by employee The gap between image and identity should not exist It means the company mission and vision should be align with customer perceives or experiences If

customer‟s reality experience differs from the image that company build up, company

reputation is damaged

2.1.4 Brand equity

Brand equity is value of a brand as perceived by consumers (Balsara, 2009) A brand encompasses the name, logo, image, and perceptions that identify a product, service, or provider in the minds of customers Recently, brand is assumed as intangible asset of company and its value might exceed property value According to Aaker (1991), brand

equity is a set of assets and liabilities linked to a brand, its name and symbol that adds to

or subtracts from the value provided by a product or service to a firm and/or to that firm‟s

customers Aaker (1991) stated brand equity as five categories included perceived quality, brand loyalty, brand awareness, brand association, and other proprietary brand assets such as patents, trademarks, and channel relationships Recently, brand equity is more identified based on customer-based contexts From very first discuss about brand equity, customer-based brand equity is based on consumer knowledge, familiarity, and associations with respect to the brand (Washburn and Plank, 2002) Among five categories of Aaker, the first four elements are evaluated by customers Therefore customer-based brand equity is examined via four dimensions included brand loyalty, brand awareness, perceived quality, and brand association (Lee & Leh, 2011)

According to Aaker (1991), the first dimension, brand loyalty, occurs when clients attach

to the brand It means they are willing to pay higher for the product under this brand than other product at the same category Brand loyalty includes two categories, behavioral loyalty and cognitive loyalty (Keller, 1993) It is definite by the frequency of re-purchase (Keller, 1993) While cognitive loyalty means the commitment of purchase priority (Yoo and Donthu, 2001) Brand loyalty benefits to company a lot such as reducing marketing cost since it is cheaper to remain current customer relationship than attract new customer Furthermore, the power of word of mouth helps reduce cost and always the best marketing technique to attract new customer (Aaker, 1991)

The second dimension is brand awareness According to Aaker, it is considered as key component of brand equity and defined as an individual's ability to recall and recognize a brand In a higher development, brand awareness can reach top-of-mind level It means not only strongly brand recall but also affect customer perception and put the brand on the top when clients think about that product category The primary benefit of brand awareness is customer‟s consideration during their purchasing process Then, it could

lead to brand loyalty or event just inspire the awareness when clients talking about the brand

The third dimension, perceived quality is understood as the judgment of customer about quality of product or services (Aaker, 1996) In general, this is the core motivation for purchasing product It is difficult to measure product quality so customers are likely using those criteria such as appearance of the product (color, flavor, form, etc) and the availability of production information (Bernués et al., 2003) Or according to Aaker, the quality could be ranked based on product differentiation, price, contribution channel, and brand extension

Brand association is the last dimension brand equity Brand association expresses the meaning of product for customer (Keller, 1993) It included two attributes brand performance and brand personality (Aaker, 1996) Brand performance is product-based attribute It means customers decide to associate to the brand based on how products perform its physical functions Meanwhile the non-product-based attribute, brand personalities concern to intangible features that satisfy consumers‟ needs for personal

expression, self-esteem or social image Brand personality included the attributes of social image, perceived value (price-product balance), trustworthiness, country-of-origin (Lassar et al., 1995)

2.2 Integration of variables and hypothesis development

2.2.1 Corporate social responsibility and hotel reputation

A company who achieve socially responsibility they will have measured to some reputation levels (Fombrun, Van, 2004) Since social responsibility positively impacts on company image, one of reputation‟s element In case of hotel industry, hotel depend on

reputation to attract new customer who has not been yet experience the services (Fombrun, 1996) According to Brown and Dacin (1997), reputation is a complex of

image by marketers Reputation involve in both internal and external view (Post and Griffin 1997) Increase company reputation means increase positive view from both customer (external) and employee (internal) CSR association helps hotel create good image to customer outside and CSR participation support clarify company identity to employee Edelman (2011) states that a good reputation corporation must have profit and business purpose benefit to society Therefore there is a positive relationship between CSR and hotel reputation and the first hypothesis proposed as below:

H1: There is a positive relationship between CSR and hotel reputation

2.2.2 Hotel reputation and hotel’s customer-company identification

In terms of reputation management, while organizational management concentrates in

relationships between employees and the organization (Dutton & Dukerich 1991),

marketing management focus on relationship between customers and corporate image (Abratt, 1989) or corporate identity (Balmer 1997) Positive reputation encourages shareholders to invest into a company in which included customer loyal (Markham, 1972) On the other word, people are willing to pay for ethical products therefore customers always take priority for those hotels that own good reputation Good reputation makes customer trust on services that hotel deliver It is also the way that customer could identify their own value People who stay in high reputation and social responsible hotels are always proud of themselves There is positive relationship between hotel reputation and hotel‟s CC identification and the second hypothesis stated as below:

H2: There is a positive relationship between hotel reputation and hotel‟s

customer-company identification

2.2.3 Corporate social responsibility and hotel’s brand equity

CSR and hotel‟s brand equity have one same stakeholders is customers therefore a

relationship between these two variables is expected Consumers consider product or company that is involved people, values in programs behind the brand (Aaker, 1996) Nowadays, hotels know that CSR is related to their reputation and brand identity

(Holding and Pilling, 2006) According to Keller (2003), how strong of a brand lays how the brand reflects in customer minds and their experienced or what they learned about the brand over time Social responsibility help clients experience social meaningful services

or product and make them being proud of themselves On the other hand, corporate social responsibility impact on brand development since people is interest in what the company giving back to society (Blumenthal and Bergstrom, 2003) Overall, how strong

a hotel brand is not only depending on their services quality but also their image The more hotels are responsible for local society, the more its brand identity increase The

third hypothesis is stated as follow:

H3: There is a positive relationship between CSR and hotel‟s brand equity

2.2.4 Hotel’s brand equity and hotel’s customer-company identification

Manhaimer (2007) stated that customer loyalty is linked to brand equity Brand equity has recently been developed based on customer context in which brand equity means the value the brand bring to their customer (Aaker, 191) People tend to become customers of the brand which has similar image to theirs (Martineau, 1958) Furthermore, among CCI communicators, internal communicators which are included brand and corporate social initiative works more effectively then the external one such as media or customer (Bhattacharya and Sen, 2003) In another research Myers (2003) found that customers tend to affiliate themselves with a hotel brand based on the value of its brand because it helps them increase their personal identification Due to such significant relationship with the brand, hotels could form a unique identification between the customer and the brand

Therefore there is a positive relationship between hotel‟s brand equity and CC

identification From there, the paper creates other two hypotheses below:

H4: There is a positive relationship between hotel‟s brand equity and hotel‟s

H3+

H2+

H4+

Chapter 3 RESEARCH METHODOLOGY

This chapter describes about method used to evaluate measurement scale, examine conceptual model and test hypotheses There are four parts included research design,

3.1 Research design

This research is an inductive process which commences from existed theoretical about CSR, BRE, REP and CCI then examine the relationships between these items in hotel industry in Ho Chi Minh City therefore quantitative approach is use (Ehrenberg, 1994) Since there was not much research as well as data about CSR in Vietnam (Fudaka, 2007), the research had to analysis relationship between variables from primary data According

to that, primary data was collected via survey method, the most popular data collection method or quantitative research (Lehtonen & Pahkinen, 2004) Furthermore, this is a cross-sectional data concentrate on current status of each variable The applied measurement scales have been adopt from the one already been developed from other previous researches about CSR, CC identification, reputation, and brand equity

3.2 Research process

A quantitative research process basically included 3 steps (Hair et al, 2001) The first step called item generation At this stage, the research question comes from the gap in theoretical then study about current theoretical, creates a conceptual model which

illustrates relationship between variables, and adapts a measurement scale The next step

is quantitative pilot test in which the adapted measurement scale is examined and found the final measurement for main study Final step is included quantitative main survey, the hypothesis testing and conclusion

Figure 3.1: Research process

Item generation

Literature review

Build up a theoretical model

Adapt a draft measurement scale

Pilot test

Qualitative research:

Expert group discussion to select the suitable

items for research applies in Ho Chi Minh

City hotel industry

3.2.1 Item generation

This step starts when a research question comes then generate all existed literature to understand the sense of the question In order to study about the matter, a measurement scale is need According to Churchill (1979), the most benefit way to developing a measurement scales is learning it from existed research Firstly, 30 items are collected from previous researches (table 3.2) Then a group discussion to select the suitable items among items in the primary draft scale in new circumstance into a second draft measurement scale Since the adapted measurement scale is used in research mostly in develop country, the pilot tests started by group discussion about selected items from the original measurement scale The narrow downed list of items was carried by a group of 3 people who are director of sales and marketing manager of Trails of Indochina Travel Company, sales manager at high-end hotels in Saigon included Caravelle and Liberty group After then, the questionnaire was translated into Vietnamese by a senior customer

Mainstudy

Final test (n=105)

Alpha

SEM – Structural Equation Modeling

Conclusion

care that work in tourism industry for 10 years and also own a bachelor degree of English

3.2.2 Pilot test

The pilot test included doing primary quantitative examine the draft scale if it is reliable and value in this new circumstance Sample size is used for this pilot test is 50 (n=50) The survey are firstly carry out conveniently at the area around Dong Khoi street where locate Saigon high-end hotel and the response was collected from people who accommodated in a high-end hotel at that moment The next phase was analyzing this pilot survey by Cronbach‟s Alpha testing and exploratory factor analysis (Churchill,

1979) Due to the small sample size, the result of pilot test is a measurement scale orientated test and highly for references therefore deleted items could be consider remaining in the survey for further examine if needed

3.2.3 Main study

In the main study, a survey with 105 questionnaires was launched officially The questionnaire delivered the adapted and validated measurement scale included CSR (Lichtenstein, 2004 as cited in Kim et all (2010)), reputation (Caruana and Chircop, 2000), brand equity (Aaker, 1991), customer-company identification (Hildebrand, Fernandes, Veloso & Slongo, 2010) After then, the main scale was tested in terms of reliability and convergent and discriminant validity by Cronbach‟s Alpha and exploratory factors analysis test Confirmatory factor analysis followed in order to re-test convergent

and discriminant validity and examined if the data fit to hypothesized measurement model

The most important part in this stage is SEM-structural equation modeling Structural model was tested in order to found if the hypothesis was supported or rejected In order to expand the finding or the research, competitive model was test to explore if there was any other value relationship occurred At the end of this stage or thesis, conclusion, limitation, and implication of the research was stated

The unit of analysis in this research is hotel‟s customer Therefore questionnaire

distributes to customers who stay in hotels in Ho Chi Minh City during 6 ending months

of year 2013 The chosen hotels are four or five star which is under a brand of hotel chain Currently, there are 12 hotels which are managed by hotel chain in Ho Chi Minh City Hotels under 4 star standards are not studied in this research because of their low

concern about CSR as well as brand management Customer collected at both genders In order to save time and cost, the research applied convenience sampling method such as deliver questionnaires link to into public society net - Facebook, twitter and interview people around area of district 01 in Ho Chi Minh City After one month launched the survey link and four days interviewed at district one, there were 105 responses back in total (75 responses from the link and 30 responses from direct interviewing) and all 105 responses were accepted

3.4 Measurement Variable

After reviewing literature, the measurement scale of four variables was built based on point Likert Scale with 5- strongly agree, 4- agree, 3 – neutral, 2 – disagree and 1- strongly disagree Corporate social responsibility scale was adapted from the one of Lichtenstein et al (2004) as cited in Kim et all (2010) It includes 5 items which is measure both CSR association (3 items, CR: 0.88) and CSR participation (2 items, CR: 0.78) Since most of clients stay at hotel in Saigon, a business city, less than 4 nights, the CSR participation is not necessary in this research Secondly, reputation measurement scale was based on the 12-items scale that Caruana and Chircop develop in 2000 (Cronbach‟s Alpha: 0.91) The third variable, brand equity, was measure based on 7 items that choose from 30 items (Cronbach‟s Alpha: 0.96) developed by Aaker in 1991

5-The variable customer-company identification was measured based on 6 items that was adapted from 21 items of (Hildebrand, Fernandes, Veloso and Slongo (2010) (Cronbach‟s Alpha: 0.85)

All measures are presents in table below are borrowed and adopted from previous researches:

Table 3.1: Adopted measurement scale

used 3 items

used 6 items

Details of selected items are listed as follow:

Corporate Social Responsibility (CSR):

Reputation (REP):

REP6: The hotel has sponsoring activities

Brand Equity (BRE):

to stay at this hotel

BRE6: You are still willing to stay at the hotel even if its price is a little higher than that of its competitors

Customer-Company identification (CCI):

3.5 Method of data analysis

3.5.1 Reliability analysis by Cronbach’s Alpha

Cronbach‟s Alpha is a coefficient of internal consistency which is used to estimate

reliability of the scale According to Nunnally and Burnstein (1994), selected items should have item-total correlation more than 0.3 and Cronbach‟s Alpha higher than 0.6 All of selected then continue with exploratory factors analysis with KMO and Bartlett's

Test

3.5.2 Validity measure by exploratory factors analysis

In order to testing exploratory factor, Kaiser-Meyer-Olkin (KMO) was used to evaluate the appropriate of the factor analysis with 0.5≤KMO≤1 All items which have KMO less

than 0.5 or great then 1 were excluded from the model (Nunnally and Burnstein, 1994)

In conjunction to the total variance extracted is greater than 50%, as a result the observed variables have correlation with each other in the overall By the way, principal axis factoring with promax rotation method was used to reflect the data structure more exactly

(Gerbing & Anderson, 1988)

3.5.3 Factors consistency by confirmatory factors analysis

Confirmatory factor analysis is firstly developed by Joreskog in 1969 to replace the older validity analyzing method CFA is used to test how fit is the data to a hypothesized measurement model which is created based on previous researches While EFA examine factors validity based on data, maximize the amount of variance explained and do not

require any specific hypotheses (Suhr, 2006) CFA require research hypothesis Furthermore, CFA allow testing convergent and discriminant validity easier and less testing than other method like MTMM According to Gerbing and Anderson (1988), several statistical tests are used to determine how well the model fits to the data in CFA included Chi-Squared, df, RMSEA (Root mean square error of approximation), CFI (comparative fit index), and TLI (Tucker and Lewis index) And the evaluation criteria included: composite reliability (CR), Variance extracted (VE), unidimensionality, convergent validity and discriminant validity The measured values of these indexes are mentioned more details in next part

3.5.4 Structural equation model testing

Since SEM is enabling to test a complex of regression equation and provide model fit overall tests and individual parameter estimate tests at the same time, the conceptual model which has two mediator variables has been tested by SEM Furthermore, SEM test hypothesis with error making estimated relationships among latent variables less affected

by measurement error SEM software not only allows testing traditional model but also examining other complex relationships and models, such as confirmatory factor analysis (Hoyle, 1995) Herein are main index that used to evaluating model fit

Chi-squared test: This test examines the difference between observed and expected covariance matrices Chi-square should have p > 0.05 (Nguyen & Nguyen, 2011) and chi-square/df <3 (Hair et al, 1998) for an acceptable model fit

Other index included CFI, TLI should be higher than 0.9 (Tabachnick and Fidell, 2001) and RMSEA < 0.08 (Hair et al, 1995) for a model fit If the index equal to 1, the model is perfectly fit

3.6 Pilot test result:

The result in table 3.3 shows all of construct have Cronbach‟s Alpha higher than 0.6 and

item-total correlation higher than 0.3 (Gerbing & Anderson, 1988) Therefore all of them are selected for continue to exploratory factors analysis with KMO and Bartlett's Test After then, exploratory factors analysis was continue to examine convergent and discriminant validity The result in table 3.2 shows that all items reached KMO >0.5, total covariance extracted is 69% so all items were continue used in main survey The EFA results in table 3.3 also indicate the items exchange between variable however it was not significant notification at this stage since this EFA is an exploring test to explore

if any items should be excluded The result is that all items are accepted

Table 3.2: Cronbach‟s Alpha result for pilot test

Observed

variable

Scale Mean if Item Deleted

Scale Variance if Item Deleted

Item-Total Correlation

Cronbach's Alpha if Item Deleted

Corporate social responsibility (CSR): alpha = 0.891

15.982 18.367

.623 556

.799 809

Table 3.3: Exploratory factors analysis result for pilot test

Kaiser-Meyer-Olkin Measure of Sampling