The study of consumers perceptions of corporate social responsibility toward consumers trust, attiude and purchase intention evidence from vietnam

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business --- TRAN THANH DANG SON THE STUDY OF CONSUMERS’ PERCEPTIONS OF CORPORATE SOCIAL RESPONSIBILITY TOWARD CONSU

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business -

TRAN THANH DANG SON

THE STUDY OF CONSUMERS’

PERCEPTIONS OF CORPORATE SOCIAL RESPONSIBILITY TOWARD CONSUMERS’ TRUST, ATTITUDE AND PURCHASE INTENTION: EVIDENCE FROM VIETNAM

MASTER OF BUSINESS (Honours)

UNIVERSITY OF ECONOMICS HO CHI MINH CITY

International School of Business

-

TRAN THANH DANG SON

THE STUDY OF CONSUMERS’

PERCEPTIONS OF CORPORATE SOCIAL RESPONSIBILITY TOWARD CONSUMERS’ TRUST, ATTITUDE AND PURCHASE INTENTION: EVIDENCE FROM VIETNAM

ID: 22130062

MASTER OF BUSINESS (Honours)

SUPERVISOR: DR NGUYEN THI MAI TRANG

Acknowledgement

This final thesis concluded my academic study at University of Economics

Ho Chi Minh City on the International School of Business (UEH-ISB) Although it was challenging, I am grateful to have been given this opportunity to study at UEH- ISB and to conduct this final research With this work, I have gained a good knowledge of Corporate Social Responsibility (CSR), which is a new field of study Nonetheless, it has received noticeable attention from the academics and scholars for its recognized roles in the economy I hope this study will be beneficial to the companies when it comes to CSR related decisions

I offer my sincere appreciation for the invaluable learning opportunities provided by the committee during thesis process I would like to personally express

my gratitude to Dr Nguyen Thi Mai Trang who has actively guided and provided

me with valuable insights and suggestions to my dissertation Your thorough review of my dissertation has definitely made it perfect I am also deeply grateful

to my course mate Ms Nguyen Thi Ha, who is resourcefulness to me My family, especially my wife, deserves special thanks for their valueless contribution to my education, upbringing and my life in general

Tran Thanh Dang Son

This quantitative research is to examine the factors that encourage Vietnamese consumers’ purchase intention toward CSR enterprises’ products The research is to develop hypothetically suitable theoretical model that is then empirically tested through an internet survey of 224 respondents in Vietnam The respondents are chosen from diverse backgrounds Structural Equation Modeling technique is deployed in this study The results show that Vietnamese consumers’ CSR perceptions and their trust of CSR have positively relationship with their attitude toward firm and their purchasing intention toward products of enterprises that are engaged with CSR activities The research implications and recommendations provide specific discussion about findings and future research

TABLE OF CONTENTS

CHAPTER 1: INTRODUCTION 1

1.1 RESEARCH BACKGROUND 1

1.2 RESEARCH OBJECTIVE 4

1.3 SCOPE OF THE RESEARCH 5

1.4 SIGNIFICANCE OF THE STUDY 5

1.5 STRUCTURES OF THE RESEARCH 7

CHAPTER 2: LITERATURE REVIEW 8

Introduction 8

2.1 CORPORATE SOCIAL RESPONSIBILITY (“CSR”) 8

2.2 PURCHASE INTENTION 17

2.3 CONSUMERS’ PERCEPTIONS OF CSR 19

2.4 CONSUMERS’ TRUST OF CSR 22

2.5 ATTITUDE TOWARDS FIRM 24

2.6 CONSUMER DEMOGRAPHICS 25

2.7 RESEARCH MODEL 27

Summary 27

CHAPTER 3: RESEARCH METHODOLOGY 28

Introduction 28

3.1 RESEARCH DESIGN 28

3.2 MEASUREMENT SCALES 30

3.3 DATA ANALYSIS METHODOLOGY 32

Summary 36

CHAPTER 4: RESULTS OF DATA ANALYSIS 37

Introduction 37

4.1 DATA COLLECTION 37

4.2 RESPONDENTS’ DEMOGRAPHICS 38

4.3 RELIABILITY STATISTICS BY CRONBACH’S ALPHA 40

4.4 FACTOR ANALYSIS 43

4.5 CONFIRMATORY FACTOR ANALYSIS (“CFA”) 45

4.5.1 CONVERGENT VALIDITY 45

4.5.2 DISCRIMINANT VALIDITY 46

4.5.3 MODEL FIT 46

4.6 STRUCTURAL EQUATION MODELING (“SEM”) 48

4.7 EFFECTS OF DEMOGRAPHICS IN THE RESEARCH MODEL 49

Summary 51

CHAPTER 5: CONCLUSIONS, IMPLICATIONS AND LIMITATIONS 53

5.1 CONCLUSIONS 53

5.2 MANAGERIAL IMPLICATIONS 53

5.3 LIMITATIONS 56

REFERENCES 59

APPENDIX A – Questionnaires in Vietnamese 64

APPENDIX B – Questionnaires in English 68

APPENDIX C: In-Depth Interview 72

Overview of tables

Table 2.1.1 Economic and legal components of Corporate Social Responsibility (Carroll,

1991) 10

Table 2.1.2 Ethical and philanthropic components of Corporate Social Responsibility (Carroll, 1991) 10

Table 3.2 Measurement scales 30

Table 3.3 Cronbach’s Alpha 33

Table 4.1 Source of data collection 38

Table 4.2 Respondents’ characteristics 38

Table 4.3.1 Cronbach’s Alpha coefficients for each measurement scale (before eliminated item) 409

Table 4.3.2 Cronbach’s Alpha coefficients for each measurement scale (after eliminated item) 40

Table 4.4.1 KMO and Bartlett's Test 43

Table 4.4.2 Total Variance Explained 43

Table 4.4.3 Pattern Matrix 44

Table 4.5.1 Convergent Validity 45

Table 4.5.2 Discriminant Validity 46

Table 4.5.3 Key goodness-of-fit indices 46

Table 4.6.1 Unstandardized Regression Weights (SEM) 48

Table 4.6.2 Summary of hypothesis and structural equation model analysis results 51

Overview of figures

Figure 2.1 The pyramid of Corporate Social Responsibility 10

Figure 2.7 Research Model 27

Figure 3.1 Research Process 28

Figure 4.5 Confirmatory Factor Analysis (Standardize estimates) 47

Figure 4.6 Structural results (standardized estimates) 48

Gender Figure 4.7.1.1 Multi group analysis 76

Figure 4.7.1.2 Constant group analysis 76

Age Figure 4.7.2.1 Multi group analysis 77

Figure 4.7.2.2 Constant group analysis 77

Income Figure 4.7.3.1 Multi group analysis 78

Figure 4.7.3.2 Constant group analysis 78

processes, integration of ethical practices into supply chain activities, etc

According to Tian, Wang and Yang (2011), companies can derive enormous benefits when they are perceived as being socially responsible by their stakeholders Among all the stakeholders, one important group that appears to be particularly susceptible to a company’s Corporate Social Responsibility (CSR) initiatives is its consumers (Bhattacharya & Sen, 2004) The question today is no longer whether companies should incorporate CSR into their activities, but rather how they should do this Research indicates that consumers seem to care about CSR and therefore it is in the best interest of the company to do so as well (Boulstridge & Carrigan, 2000) Nevertheless, studies indicate that nowadays most consumers expect companies to go beyond delivering economic outcomes and contribute to society’s welfare, and sustainability by being socially responsible and will support them if they do so (Sen & Bhattacharya, 2001)

A growing body of academic research attests that CSR has positive influence on consumers’ evaluations and purchase intentions of company’s product

(Mohr & Webb, 2005; Sen & Bhattacharya, 2001), enhancing trust and strengthening relationship between consumers and business (Porter & Kramer, 2006) More companies are willing to increase their CSR investment and integrate

it into the long-term strategic plan to maintain or even enhance long-term market performance (Mahoney & Thorne, 2005)

The concept of Corporate Social Responsibility was first introduced widely

in Vietnam in recent years through various activities of international Governmental Organizations (NGOs) and multinational companies According to a CSR Survey conducted by SRI Vietnam (as cited in Pham, 2010), there are 90% of interviewees misunderstand the idea of CSR and related issues This survey reported that Vietnamese consumers’ perception toward CSR as well as other ethical behaviors remains virtually unknown 40% of interviewees consider CSR as

Non-a sociNon-al obligNon-ation of businesses, which mNon-ainly consists of community works Non-and events While the level of awareness about CSR of Vietnamese is still low, the suspicion of the media continues to add up to the difficulty in dealing with general public Lack of in-depth knowledge and professional research about CSR in Vietnam has led to incomplete information provided, which then turns into inaccurate news and articles that can influence consumers and governmental departments CSR programs are often cited as PR (Public Relations) activities, another communication concept in Vietnam, that is frequently misinterpreted as negative as well As a result, the main challenge is to raise the level of awareness of CSR among consumers, increase their appreciation of CSR and associate it in their choice of products to buy and to relate CSR with social concerns

On the business side, lack of resources and commitment for CSR is the major cause for the current situation Many local companies resist to change and still maintain their conventional thinking system, in which business performance is measured by simple and more visible metrics They are more driven by short term incentives to make money, therefore using CSR as a branding tool is in fact more

sensible to them Even for companies that want to pursue a longer term, more sustainable approach to CSR, finding competent staff to overlook CSR activities is also challenging In a country like Vietnam where CSR is a new concept even to people working in business, the number of people with professional training in CSR is very limited while the subject of CSR is not yet taught or even mentioned in most universities’ bachelor programs On top of that, the attitude of businesses remains as an internal barrier to practice CSR at the moment Many businesses in Vietnam believe that “CSR is only for big, multinational corporations”, or even

“CSR is a luxury of the developed world, which is not relevant in a developing country” Therefore, it is important to change their attitude from “CSR as a cost” to

“CSR as an investment” in order to see more active CSR initiatives among local business community in the near future

According to Bui (2010), in emerging countries like Vietnam, a large population is still influenced by price and quality of products when making their buying decisions However, following some serious environmental damages caused, serious food safety and health problems that Vietnamese consumers have been facing during the past few years As accentuated by Vietnam Journalist Association (2008), the most gigantic pollution scandal in Vietnam in year 2008 was the case of a company named Vedan Vietnam that dangerously polluted the local river for more than 14 years without being noticed and caught Similarly, in the same year, another company called Miwon was also caught of adversely contaminating another local river In additions, there were various cases of health safety problems in recent years such as tainted milk distribution, toxic ingredients

in consumer goods and pesticide remained in vegetables, etc These scandals have been raising a greater concern on corporate social responsibility among Vietnamese consumers, and have pushed them to reconsider the importance of environment and health factor in their purchase intention Vietnamese consumers currently begin to take actions against food safety problems while taking for granted societal and

environmental dimensions of CSR Bui (2010) said that an ethical segment of consumers has been also emerging gradually in the Vietnamese market

Nowadays, the public shows increasing interest in social responsibility of business and also reacts strongly against those that fail to do so, both foreign and local companies start paying more attention to CSR in Vietnam Nevertheless, CSR

is still a very new concept and pioneers in this area are facing numerous challenges

in executing CSR programs in Vietnam

The overall objectives of this study are to gain the understanding of the manner that consumers come up with the purchase intention for products of enterprises that are engaged with CSR activities Specifically, this study examines whether consumers’ perceptions of CSR that could cause positive impact to consumers’ trust, attitudes toward firm, and then affect to purchase intention On that purpose, this study addresses following relationships:

1 The relationship between the consumers’ perceptions of CSR and trust of CSR practices

2 The relationship between the consumers’ trust of CSR practices and attitude towards firm

3 The relationship between the consumers’ perceptions of CSR and attitude towards firm

4 The relationship between the consumers’ perceptions of CSR and purchase intention

5 The relationship between the consumers’ attitude towards firm and purchase intention

6 The effect of the consumer’s demographics on the relationship between consumers’ perceptions of CSR and purchase intention

1.3 SCOPE OF THE RESEARCH

FMCG industry has been booming, in turn, many leading players are taking part in ambitious programs to assist with community development Companies of the FMCG industry have realized the importance of CSR and have started working

on the prevention and minimization of the negative impacts by their business practices as well as the maximization of shared values for all stakeholders Nowadays, most of FMCG companies are involved in the social responsibility activities in several sectors, such as education, environment, community development, rural development, etc These CSR initiatives will create a positive image of the company and will benefit by increasing the sales (Manimalar & Sudha, 2015)

Many research focus on an important stakeholder and driver of CSR – the consumer – has been increasing (Mohr & Webb, 2005; Sen & Bhattacharya, 2001) Many studies on consumers’ attitudes on CSR and the role of CSR in the consumer’s evaluation of a company and their decisions to purchase its products are quite general (Becker-Olsen, Cudmore & Hill, 2006)

Most of studies have been done in developed countries like the United States, the United Kingdom, and Spain, and amongst the developing countries, China has been an exception in publication of studies in the field of CSR (Fatma & Rahman, 2015), but no single study was made in the FMCG industry in the context

of Vietnam There is a need to explore similar studies in Vietnam because of the cultural and social-economic development differences; the findings in one country cannot be generalized in the other country without validation Therefore, this study makes it particularly interesting and meaningful to investigate consumers’ perceptions of CSR, trust of CSR, consumers’ attitude toward firm, and purchase intention in the FMCG industry in Vietnam

Although the CSR concept is not new in Vietnam, its role and its impact on the business success and well-being of consumers have not yet attracted a great number of Vietnamese economists to get involved in such a research work Besides, in the academic and non-academic literature on CSR, studies conducted by international authors do not treat the Vietnamese case More importantly, the Vietnamese consumers' perception toward CSR as well as their ethical consumption behavior remains virtually unknown even though they have been suffering serious consequences caused by growing CSR issues during the past few years

This study examines whether consumer perceptions of CSR that could cause consumer positive trust of CSR actions, and then affect to attitude toward firm and purchase intention Therefore, it is important for managers to understand the effectiveness of their CSR activities so that they can manage the best combination

of actions that will yield the expected outcomes

Of more importance to companies conducting CSR activities is to understand how consumer perceptions of CSR and attitude toward the firms and purchase intention as the result of companies' CSR actions Our research contributes to help managers and professionals elaborate an effective integrated marketing communication strategy to meet the requirements of the emerging class

of ethical consumers and to enhance their company’s sustainable reputation

This study is structured as follows: first, relevant literature is reviewed concerning the definition of CSR and the hypotheses to test Next, the methodology adopted in the research is presented, followed by results Finally, the author discuss the findings and conclude the article by discussing managerial implications and suggesting new directions for future studies

1.5 STRUCTURES OF THE RESEARCH

This research is organized in five chapters with details as follow:

Chapter 1: Introduction This chapter has provided an introduction of the research background which includes the research objectives and scope of study

Chapter 2: Literature review A literature study is carried out to gain understanding of the main theoretical concepts related to the research and to examine to which extent existing literature already covers the subject The concept

of Corporate Social Responsibility (CSR) and the CSR activities are discussed After that, there is literature review on consumers’ perceptions of CSR, consumers’ trust of CSR, their attitudes toward firm, and their purchase intention This chapter focuses on developing the hypotheses and theoretical framework, which forms a foundation for the study

Chapter 3: Research Methodology This part includes research design, measurement scales and measurement model It also described the process of doing the research to test the hypotheses

Chapter 4: Result of data analysis This chapter is designed to present patterns of results and to analyze them for their relevance to the research hypotheses

Chapter 5: Conclusion, Managerial implications and Limitations The final chapter with conclusions and discussion of this research Furthermore, recommendations on how to use CSR actions in business strategies and the relevance of our research are outlined It then ends with the limitations of present research and recommendation for future investigation on similar topic

CHAPTER 2: LITERATURE REVIEW Introduction

This chapter explores the concept of Corporate Social Responsibility (CSR), different definitions of CSR are analyzed and different sections of CSR activities are explained in detail Then, the concepts of consumers’ perceptions of CSR, consumers’ trust of CSR, attitude toward firm and purchase intention are clearly discussed This chapter proposes that the consumers’ perceptions of CSR activities has relationship with trust of CSR, their attitude toward firm and purchase intention The basic assumption is that consumers' purchase intention are affected

by the firm’s CSR activities and the consumers’ attitude towards the company One

of the aims of this study is to explore consumer perceptions of CSR activities and the extent to which such activities influence consumer purchase intention Besides, consumer trust of CSR and consumers’ attitude toward firm were assumed to have

an effect on relationship between consumers’ perceptions of CSR and purchase intention

European Commission in year 2006 proposed a definition of CSR as “A concept whereby companies integrate social and environmental concerns in their

business operations and in their interaction with their stakeholders on a voluntary basis” The concept emphasize the importance of enterprises’ voluntary contribution, in cooperation with their stakeholders, to social and environmental issues It is claimed that through CSR, enterprises of all sizes can boost their business in a long-term run since CSR initiatives can help to build (and rebuild) trust in the focal companies, and to meet customers’ sustainable needs and expectations Since CSR implementation can reconcile economic, social and environmental ambitions, it has gradually become an important concept both globally and within the EU

The definition of CSR by the World Business Council for Sustainable Development (2000), CSR is expressed as “the commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life,

in ways that are both good for business and good for development” This position

is generally interpreted as business’ commitment to minimizing negative externalities and maximizing beneficial impacts on society (Mohr et al., 2001)

Above all definitions, Carroll’s pyramid of Corporate Social Responsibility has received the most attention In his article on Business Horizons, Carroll (1991) proposed a pyramid of corporate social responsibility that portrays its four components including economic, legal, ethical and philanthropic responsibilities as shown in figure 2.1

Figure 2.1 The pyramid of Corporate Social Responsibility

(Carroll, 1991, P.42)

Table 2.1.1 Economic and legal components of Corporate Social Responsibility (Carroll, 1991)

Economic Responsibilities

1 Profitability is the first priority

2 Maintaining a strong competitive

position is an important target

3 Efficient operation is a must

Along with economic responsibilities, firms are expected to comply with the laws and regulations imposed by the governments under which the enterprises are operating In other words, companies are not supposed to engage in illegal practices in order to generate profits, but are expected to fulfill their economic missions within the framework of the law (Carroll, 1991)

Table 2.1.2 Ethical and philanthropic components of Corporate Social Responsibility (Carroll, 1991)

Ethical Responsibilities

1 Ethical norms go beyond laws

and regulations

2 Ethical norms should be

recognized and respected

3 Ethical norms must not be

compromised in order to achieve

corporate goals

Philanthropic Responsibilities

1 Managers and employees should participate in voluntary and charitable activities in their local communities

2 Providing assistance to the local educational institutions is a good practice

3 Contributing to those projects that improve the community’s

“Quality of life” is important

Ethical responsibilities embody those practices that are approved or disapproved by the society even though they are not stated in the law This ethical aspect of CSR should direct the companies not only to avoid harm but also to do right Ethics is closely connected to values and norms formed during the development of societies and cultures

Finally, philanthropic responsibilities encompass activities in response to the expectations of society that businesses be good corporate citizens These practices may include volunteer work to promote human welfare, sponsorship to local programs, donations to public and non-profit organizations, etc

2.1.2 Approaches of CSR

Van Marrewijk (2003) acknowledges a sequence of three approaches to CSR that has been referred to by various authors in academic literature Each approach includes and transcends the previous one and tries to formulate the subject of responsibility for the organization (Van Marrewijk, 2003)

A first approach is the shareholder approach Van Marrewijk (2003) quoted Friedman (1962), who said that according to the shareholder approach “the social responsibility of business is to increase its profits” (p 96) This approach starts from profit maximization as an ultimate goal This approach states that organizations should only be concerned with CSR to the extent that it contributes

to the profit maximization goal of the business (Van Marrewijk, 2003)

A second approach is the stakeholder approach This approach indicates that

an organization should not only be accountable to its shareholders, but that it should also take into consideration the interests of all its stakeholders which might

be affected by the organization trying to achieve its objectives (Van Marrewijk, 2003)

A third and last approach is the societal approach This approach indicates that “companies are responsible to society as a whole, of which they are an integral part” (Van Marrewijk, 2003, p 97) It means that an organization should operate in

a way that serves and satisfies the needs of society

2.1.3 Types of CSR initiatives

Kotler and Lee (2005) identified six major initiatives, of which most social responsibility activities are performed: cause promotion, cause-related marketing, corporate social marketing, corporate philanthropy, community volunteering, and socially responsible business practices

Cause Promotion A goal of this initiative is to build awareness and concern

for social causes by informing the public of the facts and statistics about a cause It

tries to persuade people to donate time, donate money, donate nonmonetary resources, and participate in events Contributions or support provided to a cause are not tied to the sale of specific products Cause promotion does not intend to change people’s behaviors, related to the cause; it only calls for action related to buying certain products over others

Cause-Related Marketing “A corporation commits to making a

contribution or donating a percentage of revenues to a specific cause based on product sales Most commonly this offer is for an announced period of time and for

a specific product and a specified charity” (Kotler & Lee, 2005, p 81-82) In this CSR initiative type, the distinctive feature is the relationship with product sales A company cooperates with a non-profit organization to create a mutual relationship that intentionally provides increased product sales as well as financial support to the charity Moreover, it usually involves the marketing department because its intention is to increase sales (Kotler & Lee, 2005) However, according to Smith (2003), this initiative potentially causes a problem when customers assume that a company is engaging in this activity only to increase the company’s profits

Corporate Social Marketing According to Kotler and Lee (2005), intention to

change behavior is the focus of this initiative They refer to corporate social marketing as when “a corporation supports the development and/or implementation

of a behavior change campaign intended to improve public health, safety, the environment, or community well-being” (p 23) The distinguishing feature from cause marketing is the focus on behavior change, instead of supporting awareness, fundraising, and volunteer recruitment for a cause In addition, it tends to be a cooperation between a company and the public sector such as health department, etc Examples of this initiative are the Unilever campaign to encourage children to brush their teeth after meal, and every day before going to sleep Another example

is Co-op Mart encouraged their customers using green bag replaced for nylon bags

Corporate Philanthropy In this type of CSR initiative, a company directly

contributes to charity or causes in the form of cash, donations, and/or in-kind services This is the most traditional form of CSR Typical programs include donating cash, products, services, providing technical expertise, offering the use of equipment, and allowing the use of facilities and distribution channels Corporate philanthropy, sometimes known as community giving, community relations, corporate citizenship, or community affairs, has been strategically used to build good images for companies (Kotler & Lee, 2005) Carroll and Shabana (2010) looked at corporate philanthropy as a discretionary part of a company’s social responsibilities to respond to society’s expectation that businesses be good corporate citizens

Community Volunteering Kotler and Lee indicated community

volunteering is an initiative in which “a corporation supports and encourages employees, retail partners, and/or franchise members to volunteer their time to support local community organizations and causes” (2005, p 24) They also stated that a corporation may mandate a form of community volunteering itself or let employees choose an activity to be supported by a company in the form of getting paid time off This initiative is perceived as the most genuine and satisfying of all types of CSR Thus, this initiative can build the strongest relationship between a corporation and a community as a result of a sincere corporate spirit of doing something good for a community Community volunteering employs a real commitment and requires more effort by a corporation and its employees to actually do something rather than just write a check (Kotler & Lee, 2005)

Socially Responsible Business Practices In this initiative, “A corporation

adopts and conducts discretionary business practices and investments that support social causes to improve community well-being and protect the environment” (Kotler & Lee, 2005, p 24) The concepts of discretionary activities, community, and well-being distinguish this type of CSR initiatives from others Discretionary activities are not mandated by law They are about the morality and ethics of a

corporation Community refers to everyone who is involved with a business being refers to psychological and emotional health and safety (Kotler & Lee, 2005)

Well-2.1.4 Different views on CSR

In addition to the growth of various definitions of CSR, there are different views on the relationship between CSR and business and that there is still an on-going academic debate as to whether “corporate decision makers should be concerned with issues other than profitability” (Mohr, Webb & Harris, 2001, p 46)

Proponents of CSR

Proponents of CSR believe in several different points First argument by Davis (1973) that is in business’s long-run self-interest to be socially responsible This argument states that spending money on social programs is actually in the long-run interest of the business itself By creating a better community and a better society, through these social programs, the firm will benefit as well In that way companies create a better environment for their business

A second argument is “public image” Each individual firm aims at enhancing its own public image and hopes it leads to an increase in customers, better employees, and other benefits

Another argument is “viability of business” It is reasoned that business, as

an institution, only exits because it performs valuable services for society (Davis, 1973)

Some other reasons proposed by Davis (1973) include the role of cultural norms as well as possibility of solutions to problems transforming into profits Business operations are not detached from a set of cultural constraints in the society At the same time, business is also capable of handling and turning social problems into profitable business potentials

socio-Furthermore, prevention is better than cure and pro-acting is better than

reacting Proactively handling social problems is less costly than reacting to the problems after they have developed into bigger ones It is argued that it is actually more economical to deal with them now before they grow into bigger problems If business postpones dealing with these problems now, it might have to spend a lot more time on them in the future, which will leave less time to achieve its primary objectives

Opponents of CSR

On the contrary, opponents of CSR may have based their stance on several reasons First, business only has one function, being an economic one Therefore success will be measured by only using economic values as criteria Management’s responsibility is to maximize profit of owners or shareholders

Second, businesses are not equipped to handle social activities as they may lack social skills The outlook of business is primarily economic and so are their skills They are not trained to pursue social goals Therefore they may lack the necessary skills and perceptions do deal with social matters If they are forced to do

so, it may lead to serious consequences

Third, social responsibility dilutes business’ primary purpose, that is, economic productivity The idea here is that CSR would only distract firms from its economic role As a result, the business would perform poorly both in its economic role as in its social role CSR is assumed to decrease business productivity in the marketplace that may end up in failure to play its economic and social roles

Another argument is that social programs are costly for business and they will look for ways to recover those costs Generally the recovery of the costs will

be done by adding them to the price of the product The problem with a higher price is that business loses some competitiveness in the business environment These views are based on the opinion that social programs would add on to business cost, which eventually ends up on price increase

2.2 PURCHASE INTENTION

Purchase intentions are defined in various ways Ajzen (as cited in Rahman,

2013) defined intention as behavioral dispositions, that until there are a proper time and opportunity, will be realized in the form of action Purchase intention reflects what consumers think they will buy in future to fulfill their needs and wants The trend of consumer purchase intention is influenced by the attitudes held by consumers is concerned Strong attitude toward a product is a good predictor to determine the products that will be bought by consumers Spears and Singh (2004) defined purchase intention can be understood as the inclination of a person to engage in purchasing behavior

Eagly and Chaiken (as cited in Rahman, 2013) proposed that attitudes can be learned, therefore, feelings of favorability or unfavorability are also learned through information about the attitude object or through direct experience with the attitude object Attitude can change along with newly acquired information and/or experience According to Eagly and Chaiken (as cited in Rahman, 2013), whereas attitudes represent favorable or unfavorable evaluations of objects, intentions represent the person’s motivation in the sense of his or her effort to carry out a behavior This view reflects a closer representation to reality in which consumers may, at times, like a product but decides not to purchase it as purchasing it will cause his financial resources to decrease

The relationship between attitudes and behavior has been extensively studied over decades According to Ajzen and Fishbein's (as cited in Rahman, 2013), Theory of Reasoned Action proposed two conceptually independent determinants of intentions: (1) attitude toward the behavior refers to the degree to which a person has a favorable or unfavorable evaluation or appraisal toward behavior of interest (e.g purchasing the brand) and (2) subjective norms, refers to the perceived social pressure to perform or not to perform the behavior Extending this theory to the context of CSR initiatives and consumers, it is, therefore, logical

to propose that consumers' positive attitudes toward a firm's CSR initiatives may lead to consumers' subsequent purchase intentions As CSR initiatives are generally perceived as good deed actions by firms, subjective norms would suggest that such actions should be supported In the context of consumer responses, which support behavior would translate into, at least, higher purchase intentions In additions, since CSR initiatives are generally viewed as good deeds, there may be a normative drive to support the initiatives, which may induce motivations to support them Therefore, consumers may adopt a more generous gesture in their attitude formation Therefore, in the context of CSR-related consumption, merely acquiring

or being exposed to information about CSR initiatives by a firm without having to experience the direct benefits of the CSR to the self, may be enough to move consumers to form a strong positive attitude toward the firm and/or the action itself, which eventually predicts future purchase intentions

According to Fishbein's and Ajzen (as cited in Rahman, 2013), using the unidimensionalist view in the study of attitude, attitude is seen as being made up by affective; while cognition and conation are antecedent and consequence, respectively Cognitive refers to the belief that an individual holds about an attitude object (e.g “I believe ”); while affective refers to the resulting emotional reactions

to the attitude object (e.g “Therefore, I like ”) Conative component encompasses the intended and actual behaviors (e.g “I intend to purchase ”) Therefore, attitude

is treated as a separate construct, which may lead to subsequent behavior or behavioral intentions, for instance, purchase intentions

2.3 CONSUMERS’ PERCEPTIONS OF CSR

According to Maignan (2001), consumers’ perception of CSR refers to the ability of the consumer to ‘‘differentiate between corporate economic responsibilities on the one hand and corporate legal, ethical, and philanthropic responsibilities on the other hand’’ It deals with the importance the consumer puts

on companies that are socially responsible If the consumer considers the economic responsibilities of companies to be important, they might support the company by exercising their socially responsible consumption in favor of the company

non-As cited in Chaisurivirat (2009), CSR initiatives influence consumers’ beliefs about the company in terms of contributions to a community and trustworthiness CSR campaign can be perceived as a good strategy to build a good image for a company Being more socially responsible will provide companies with perceived goodwill and help them build long-term relationships with a community Since firms’ involvement in CSR campaigns is considered an ethically justifiable behavior (Vlachos & Tsamakos, 2011), consumers who perceive such CSR are likely to yield strong trust on the firms

As cited in Fatma, Rahman and Khan (2015), Brown and Dacin stated that a company’s socially responsible initiatives provide information about its character and values that helps in building trust in the company Hosmer (1995) stated that considering ethical principles in companies’ strategic decision-making process helped firms build trust among stakeholders In line with this view, Pivato, Misani and Tencati (2008) proposed that consumer trust in a firm’s ethical practices was one of the most immediate outcomes of the company’s social performance and significantly affected consumer actions responding to CSR CSR activities are understood as pro-social corporate endeavors that protect and improve the welfare

of society as a whole along with protecting the interest of company’s thus building trust among consumers (Sen & Bhattacharya, 2001) Consumers hold a high level

of trust for companies that are perceived socially responsible In the study of Fatma, Rahman and Khan (2015), they concluded that consumers tend to perceive socially responsible companies as more trustworthy and regard them favorably

The following hypothesis is proposed:

H1: A higher level of consumers’ perceived CSR leads to higher level of

consumers’ trust of CSR

Consumers’ perceptions of CSR mainly discusses whether consumers are perceive of CSR activities in real consumptions (Pomering & Dolnicar, 2009) Consumers’ perceptions of CSR is an exogenous construct susceptible to the political traditions, cultural, and economic development in a certain society, and it probably varies from country to country (Singh et al., 2008) In Vietnam, and many consumers are not perceive of CSR especially in the ethical and philanthropic level The lack of awareness and perceptions may become an inhibitor of consumer sensitivity to CSR On the contrary, the more the consumers are perceive of CSR, the better they understand about CSR activities (Lee & Shin, 2010); thus, those consumers with a higher level of perceptions of CSR are more likely to show positive attitudes toward the firm, and a higher level of purchase intention (Lee & Shin, 2010) Furthermore, consumers try to comprehend the firm’ motivations and interpret on the real motives behind the firm’ CSR activities (Barone, Miyazaki, & Taylor 2000; Ellen, Webb, & Mohr 2006; Herpen, Meulenberg & Pennings 2003) Therefore, studies also showed that perceptions of companies’ CSR initiatives would affect the consumers’ attitude toward firm and are relevant for consumers’ purchase intentions

The following hypothesis is proposed:

H2: A higher level of consumers’ perceived CSR leads to higher level of

consumers’ attitude toward firm

According to Tian, Wang and Yang (2011), their study had been tested that consumers who are more perceive of CSR in daily consumption will show a higher level of purchase intention under CSR stimulus, which probably means that these consumers have a better understanding of CSR activities Sen and Bhattacharya (2001) in their research has concluded that perceived CSR activities have a significant positive relationship on their purchase intention

According to Bui (2010), in the Vietnamese context, consumers seem to welcome CSR companies and clean and green products Philanthropic responsibility dimension in Carroll’s CSR pyramid is an important criterion in regard to purchasing intention by a great number of the population Although, in emerging countries like Vietnam, a large population is still influenced by price and quality of products when making their buying decisions However, serious food safety and health problems that Vietnamese consumers have been facing during the past few years (tainted milk, soybean and fish sauce, bird flu, blue ear pig disease, dry hot chilies, false jewels, etc…) have pushed them to reconsider the importance

of environment and health factor in their purchase intention In additions, in spite of their slow and weak reaction to ethical issues, Vietnamese consumers currently begin to take actions against food safety problems while taking for granted societal and environmental dimensions of CSR Bui (2010) said that an ethical segment of consumers has been also emerging gradually in the Vietnamese market They tend

to select clean food (fish sauce, soybean sauce, eggs, chicken, pork, milk, fruit and vegetable) and green products (solar water heater device, green construction material,…) and avoid products that might endanger their health

The following hypothesis is proposed:

H3: A higher level of consumers’ perceived CSR leads to higher level of

purchase intention

2.4 CONSUMERS’ TRUST OF CSR

Trust is a fundamental element in the customer-company relationship (Pivato et al., 2008) From a CSR perspective, trust has been understood as consumer expectations of socially responsible behavior from companies (Vlachos

& Tsamakos, 2011) According to Brown and Dacin (as cited in Fatma, Rahman & Khan, 2015), when consumers consider a company moral or its behavior socially responsible and trustworthy, their evaluation, attitude toward the company may tend to be positive

Consumer trust is an important issue in the marketing literature, because trust is another way of establishing long-term relationships between consumers and companies (Kayabasi & Mucan, 2015) Building a trustworthy relationship with customers is not easy Hahn and Kim (as cited in Kayabasi and Mucan, 2015) asserted that consumer trust has been acknowledged as a crucial factor for successful business trades, and in turn, the development and management of a long term customer relationship They concluded that consumer trust affects purchase intention positively in term of consumers’ perception of CSR

Previous literature recognizes trust as a prerequisite for building customer relationship and consequently facilitating purchase intention (Bhattacharya & Sen, 2004; Vlachos & Tsamakos, 2011) Hillenbrand, Money and Ghobadian (2011) used a model based on the theory of reasoned action (TRA), proposed by Fishbein and Ajzen, to explore the impact of social responsibility on consumer trust, further

on a positive attitude towards the company They found that CSR directly influences trust, attitudes, which would lead to the formation of positive purchase intention A study (Kang & Hustvedt, 2013) shows that consumers’ perception of a company’s efforts to be socially responsible by giving back to the local community plays a critical role in building consumers’ trust and positive attitude toward the company and in turn developing their intentions to purchase from the company Building the consumer-company relationship should be grounded on trust Trust is

a consumer’s belief that a company will act in the best interests of its consumers and keep what the firm promises (Chaudhuri & Holbrook, 2001) Trust built between consumers and a company significantly contributes to positive outcomes for the company such as positive attitude and loyalty toward the company, customer retention, product choices, purchase intention, willingness to act, and overall market performance For this reason, being considered a trust-worthy company by consumers is more critical than ever and companies should be focusing on what it takes to build such trust with its consumers

Consumers’ trust of CSR is generally defined as consumers’ expectation that the company, as a sponsor of CSR program, is willing to keep promise and to fulfill obligations with honesty, goodwill and non-opportunistic motives (Amoroso

& Roman, 2015) Drumwright found that even though managers described firm’s motives as mixed – serving both economic as well as social objectives – these same managers believed that consumers are simplistic in their judgments about CSR initiatives and view them as either serving economic ends or reflecting sincere social concerns A consumer’s trust of firm’s CSR practices is one of the most immediate consequences of a company’s social performance (Pivato et al., 2008), and significantly affects his or her subsequent attitudes and actions responding to CSR

Consumers who believe that company meets the legal, social and ethical norms are more likely to get satisfaction because they feel company behaves consistently with consumer's self-concept Consumers who hold these trusts and positive attitudes toward company will also be more likely to survive in a business relationship with company (Dick & Basu, 1994) Implementation of CSR programs will give non-financial rewards for company, one of which is trust Implementation

of CSR programs will certainly increase the positive consumers’ perception Positive perceptions, will increase consumer trust, which in turn will lead to positive attitudes toward company

The following hypothesis is proposed:

H4: A higher level of consumers’ trust of CSR leads to higher level of

consumers’ attitude toward firm

Many streams of research investigate the association between CSR initiatives, attitudes, and purchase intentions Mohr and Webb (2005) examined the effect of CSR activities and price on consumer evaluation and purchase intention They intended to see which of the two options: CSR activities or price - would bring greater influence on consumer evaluation and purchase intent They found that CSR actions positively influenced consumer evaluation and purchase intention

According to the research results of Rahman’s dissertation for his Degree of Doctor of Business Administration, he found that in general, consumers showed more favorable attitudes when the CSR action of a firm was directed toward local community There is a relationship between consumers' attitude toward CSR action, attitudinal change toward the firm, and behavioral intention toward the

product of the firm Consumers were found to be more willing to purchase and pay

higher price for products of a firm that was engaged in a CSR for the local community (Rahman, 2013) Sen and his colleague believe there is a positive relationship between CSR initiatives of the company and consumer attitudes toward the company and their purchase intention (Sen et al., 2006) Vahdati, Mousavi and Tajik (2015) stated that purchase intention is influenced by the perceptions of CSR and consumers’ attitude toward firm

In the study of Vietnamese consumers’ awareness and their perceptions of corporate social responsibility (CSR), as well as whether their attitude towards CSR is positive, Pham (2011)’s research results show that the awareness of

Vietnamese consumers and their purchasing decisions influence significantly on the CSR implementation as well as CSR disclosure of companies The results CSR

is familiar to consumers, and a majority of surveyors expressed their want of buying products of a company with good social responsibility practices In addition, respondents said they would make some changes in behavior for social responsibility

The following hypothesis is proposed:

H5: A higher level of consumers’ attitude toward firm leads to higher level

of purchase intention

This study examines the moderating effect of demographic characteristics on the impacts of perceptions of CSR and purchase intention One important issue should be considered by managers, when they decide to adopt CSR strategy to please consumers, is that which consumer groups will be more sensitive to CSR Some scholars have explored the demographic characteristics of consumers who respond to CSR more positively or negatively, and results show that women, higher education, and higher income groups are more supportive of firm’s CSR practices (Youn & Kim, 2008), and older consumers are more likely to favor ethical issues through purchasing (Carrigan, Szmigin & Wright, 2004)

Tian et al (2011) found that demographics, such as age, gender, income, and education and product category moderates the relationship between consumers’ perceived CSR and their responses to CSR (e.g purchase intention) Specifically, when consumers receive CSR information on a firm selling experience goods (vs search or credence goods), a higher level of perceived CSR leads to consumers’ more positive responses to CSR According to Tian et al (2011), he classified consumers into three types which were named warm type, practical-type, and

shrewd-type First, in the warm-type group, there are income and age consumers They are more likely to support CSR practices that are beneficial to society and acts out such support by consumptions Second, the practical-type group has the more young people with low income, this group does not base their purchasing on ethical and philanthropic CSR especially under low-income conditions Third, in the shrewd-type group, consumers with higher income and education, tend to respond to CSR neutrally Because they are the middle generation affected by both traditional and modern values, thus they are more likely to balance between economic and normative factors, and show a neutral attitude toward CSR in their consumption

middle-Dodd (2010) had overall concluded that gender, age and income have moderating effect on the relationship between CSR perception and purchase intention Older people and females are moderately more likely; and younger people and males are less likely to purchase products from socially responsible businesses The research also showed that consumers with higher levels of income and education exhibit more likely to purchase products from socially responsible businesses than the consumers with lower levels of income and education

In the context of Vietnam, Pham (2011) suggested that the young customers show the higher positive attitude toward CSR than the older Many of them are students and young workers with better education so they pay more attention to companies’ CSR strategies

The following hypotheses are proposed:

H6a: The impacts of consumers’ perceived CSR on purchase intention are stronger for female consumers than for male consumers

H6b: The impacts of consumers’ perceived CSR on purchase intention are stronger for older consumers than for younger consumers

H6c: The impacts of consumers’ perceived CSR on purchase intention are

stronger for higher income consumers than for lower income consumers

is crucial before further research is done Some important previous findings on the relationship have been also concluded in this chapter as well

Consumer demographics:

a Gender

b Age

c Income Perceptions

of CSR

Attitude towards firm

CHAPTER 3: RESEARCH METHODOLOGY Introduction

Chapter 3 presents research methodology to be applied in carrying out this research study, including: research design, questionnaires development, and data collection and data analysis methods

The research design included two phases The first one is implemented through qualitative research, and the second one is main survey which is implemented through quantitative research The research process is presented in Figure 3.1

Figure 3.1 Research Process

Qualitative study

Based on the previous research and the Vietnamese context, the draft questionnaires consisted of four measurement scales, which were: perception of CSR, trust of CSR, attitude toward firm and purchase intention Through the qualitative study, in-depth interview were carried out with 8 colleagues based on the draft questionnaire developed from literature review in order to modify and revise all observed items of the draft questionnaires to make improvement for the official questionnaires It was different from language and culture; so, through this stage, it was determined that which questions are suitable for the research The in-depth interview helped author finalize questionnaire that are easy for respondents to understand Furthermore, it was valuable in measuring observed variables before launching the main survey Based on the feedback of respondents, the survey questionnaires were smoothly made clearer and more understandable The questions which made respondents confused or unclear meaning were deleted

In the main survey, a convenience sampling method was used to collect data from consumers in Ho Chi Minh City and data was collected through online survey The choice of online survey was preferred for reasons of financial affordability, fast response time, control of sample, and efficient

The author decided to send 300 questionnaires Participants were recruited

by using author's personal networks of friends and acquaintances This study invited consumers within Ho Chi Minh City to help conduct the survey Of the 300 questionnaires distributed, 224 usable questionnaires were returned for a questionnaire response rate of 75% A satisfactory response rate of this survey is mainly due to the full support of my friends and networking

3.2 MEASUREMENT SCALES

Measures for most of the constructs used in this study were available in the literature, and were adapted to suit the language environment of Vietnam To develop applicable scales, in-depth interview were used to examine 8 colleagues and customers who are from 29 to 35 years-old including five bachelors, two masters of business and one doctor In-depth interview focused on how they responded to firms’ CSR performance, then evaluated their trust of CSR, attitudes towards firms, and purchase intention, to improve their readability and understanding These results were helpful in generating or revising items Some inappropriate items were reworded for appropriate in Vietnamese context

Table 3.2 Measurement scales

2 Company X behaves responsibly regarding the

environment

PCSR2

3 Company X is aware of environmental issues PCSR3

4 Company X fulfills its social responsibility PCSR4

6 Company X acts in a socially responsible way PCSR6

1 I think Company X’s socially responsible actions

sincerely aimed at contributing to society

TCSR1

2 I think Company X’s socially responsible practices

made a substantial contribution to the society

TCSR2

3 I think the Company took a lot of effort to be socially

responsible

TCSR2

3 Attitudes toward firm (adopted from Tian et al, 2011)

1 The Company is a socially responsible company ATF1

4 The Company is an honorable company that benefits

society

ATF4

4 Purchase intention (adopted from Tian et al, 2011)

1 If I am planning to buy a product of this type, I will

choose this product (from Company X)

The independent variable for this study is the consumers’ perceived CSR level Participants were first asked to read a brief, short paragraphs about the basic

information of a fictitious firm (including industry type and main products), and its positive CSR record in the beginning of each pattern of questionnaire And then asked consumers to grade the firm’s CSR performance Appendix 1 shows the CSR descriptions for the household daily consuming goods, such as detergents and shampoo, as an example

For all the dependent measures, the author used a Five-point Likert-type scale, anchored by 1 (strongly disagree) and 5 (strongly agree)

SPSS 21 and AMOS 21 were used for data analysis Confirmatory Factor Analysis (CFA) was used to validate the measures, and Structural Equation Modeling (SEM) was used to test the theoretical model

Confirmatory Factor Analysis (CFA)

When the measurement model was ensured to describe the sample data adequately (model fitting), it was more confident in findings relating to the assessment of the hypothesized structural model In additions, from the results of CFA, construct reliability and validity of measurement constructs were efficiently assessed Thus, CFA is a powerful method with fewer assumptions and offering certain advantages such as measuring the overall degree of fitness in any particular application (through Chi-square goodness of fit test) and assessing whether and how convergent and discriminate validity were achieved (through Chi-square difference test, the size of factor loading for traits and estimates for trait correlations)… in the previous step, EFA was conducted to explore the factor structure (how the factors related and grouped based on inter-variable correlation); hence, CFA was following applied to confirm the factor structure to be extracted from the EFA