Corporate social responsibility employee commitment and organizational performance in banking industry in thai nguyen province

This study intends to clarify some following objectives: 1 Describe the nature, characteristics and role of social responsibility, employee commitment and employee’s evaluation about org

CORPORATE SOCIAL RESPONSIBILITY, EMPLOYEE

COMMITMENT AND ORGANIZATIONAL PERFORMANCE IN BANKING INDUSTRY IN THAI NGUYEN PROVINCE

A DISSERTATION PAPER

Presented to School of Graduate Studies Central Philippine University, Philippines

In Collaboration with Thai Nguyen University, Vietnam

To the leadership of International Cooperation Center for Training and Study Abroad and their staff for their enthusiasm to support executive for the participants completed the study program;

To Thai Nguyen University of Economics and Business Administration and Central Philippine University for the help that I receive to finish my dissertation;

To my family and friends for their love and support in one way or another, and

to all who have contributed to make this study a success

NGUYEN HONG HAI

Xin được cảm ơn lãnh đạo và nhân viên Trung tâm Hợp tác quốc tế về Đào tạo

và Du học đã nhiệt tình giúp đỡ tác giả trong việc hoàn thành chương trinh đào tạo;

Xin được cảm ơn Trường ĐH Kinh tế và Quản trị Kinh doanh và Đại học Central Philipine tron việc hỗ trợ tác giá hoàn thành Luận án này;

Xin được gửi lời cảm ơn chân thành đến gia đình và bạn bè đã giúp đỡ, hỗ trợ

và động viện tác giả để tác giả có thẻ vượt qua khó khan mà hoàn thành luận án này

NGUYỄN HỒNG HẢI

DECLARATION

I certify that this is my own research The data stated in the thesis is true, all

citations are indicated origin The research results of the dissertation were published in

the scientific journal not identical with any other works

The author of the thesis

NGUYEN HONG HAI

LỜI CẢM ĐOAN

Tôi cam kết đây là nghiên cứu của riêng tôi Các dữ liệu nêu trong luận án là trung thực, tất cả các trích dẫn được chỉ định nguồn gốc Các kết quả nghiên cứu của luận án đã được công bố trên tạp chí khoa học không giống với bất kỳ công trình nào khác

Tác giả luận án

NGUYỄN HỒNG HẢI

TABLE OF CONTENTS

ACKNOWLEDGEMENT i

LỜI CẢM ƠN ii

DECLARATION iii

LỜI CẢM ĐOAN iv

TABLE OF CONTENTS v

LIST OF TABLES viii

LIST OF FIGURES x

CHAPTER I THE PROBLEM AND ITS SETTING 1

1.1 Background and Rationale of the Study 1

1.2 Objectives 3

1.3 Hypotheses 4

1.4 Theoretical Framework 5

1.4.1 Stakeholder Theory 6

1.4.2 Process Theories 7

1.4.3 Expectancy Theory 8

1.4.4 Equity Theory 9

1.5 Conceptual Framework 11

1.6 The Operational Definitions 14

1.6.1 Corporate Social Responsibility 14

1.6.2 Employee Commitment 16

1.6.3 Organizational Performance 18

1.7 Significance of the Study 19

1.8 Scope and Delimitation 19

1.9 Organization of the Dissertation 20

CHAPTER II LITERATURE REVIEW 21

2.1 Related Literature Review 21

2.1.1 Corporate Social Responsibility 21

2.1.2 Employee Commitment 28

2.1.3 Organizational Performance 35

2.1.4 Corporate Social Responsibility and Employee Commitment 40

2.1.5 Corporate Social Responsibility, Employee Commitment and Organizational Performance 45

2.2 Empirical related studies 50

2.2.1 Identification of Gaps in Current Literature 58

2.2.2 Summary of the chapter 59

CHAPTER III METHODOLOGY 60

3.1 Research Design 60

3.2 Population, Sample Size and Sampling Technique 62

3.3 Research Instruments 63

3.4 Data Gathering Procedures 65

3.5 Data Processing and Data Analysis 67

3.5.1 Descriptive Statistics 67

3.5.2 Purification Process 67

3.5.3 Testing the Hypothesizes 72

3.6 Results of Scale Purification 72

3.6.1 The Scale Purification for Corporate Social Responsibility 73

3.6.2 The Scale Purification for Employee’s Commitment 76

3.6.3 The Scale Purification for Employee’s Perception about Organizational Performance 79

3.6.4 Scale Purification after Exploratory Factor Analysis 80

CHAPTER IV DATA PRESENTATION, ANALYSIS AND

INTERPRETATION 81

4.1 Measurement Model 81

4.1.1 CFA for Corporate Social Responsibility to Society Scale 81

4.1.2 CFA for Corporate Social Responsibility to Environment 82

4.1.3 CFA for Employee’s Affective Commitment 83

4.1.4 CFA for Employee’s Affective Commitment 85

4.1.5 CFA for Employee’s Normative Commitment 86

4.1.6 CFA for Organizational Performance 88

4.2 Convergent and Discriminant Validity of Scale 90

4.3 Hypothesis Testing 92

CHAPTER V.SUMMARY, CONCLUSIONS AND RECOMMENDATIONS 97

5.1 Summary 97

5.2 Findings 98

5.3 Conclusion 100

5.4 Recommendation 102

5.4.1 Completing the system of regulatory documents, guiding the implementation of CSR 102

5.4.2 Enhance the application of standards related to CSR 103

5.4.3 Training, raising awareness and ability of employees on CSR at banks 103

5.4.4 Establishment of funds for CSR programs 104

5.5 Limitations of the study and scope for future research 104

REFERENCES 105

APPENDIX 1 109

LIST OF TABLES

Table 1.1 The Scale for Measure Social Responsibility for Society 15

Table 1.2 The Scale for Measure Social Responsibility for Environment 15

Table 1.3 The Scale for Measure Affective Commitment 16

Table 1.4 The Scale for Measure Continuance Commitment 17

Table 1.5 The Scale for Measure Affective Commitment 17

Table 1.6 The Scale for Organizational Performance 18

Table 3.1 Number of Respondents for each Bank Branch 66

Table 3.2 Exploratory Factor Analysis of SRS for Society Scale 74

Table 3.3 Item-Total Statistics of SRS for Society 74

Table 3.4 Exploratory Factor Analysis of Social Responsibility for Environment Scale75 Table 3.5 Item-Total Statistics for Social Responsibility for Environment Scale 75

Table 3.6 Exploratory Factor Analysis of Affective Commitment Scale 76

Table 3.7 Item-Total Statistics for Affective Commitment Scale 77

Table 3.8 Exploratory Factor Analysis of Continuance Commitment Scale 77

Table 3.9 Item-Total Statistics Continuance Commitment Scale 78

Table 3.10 Exploratory Factor Analysis of Normative Commitment Scale 78

Table 3.11 Item-Total Statistics Normative Commitment Scale 79

Table 3.12 Exploratory Factor Analysis of Organizational Performance Scale 79

Table 3.13 Item-Total Statistics Organizational Performance Scale 80

Table 3.14 Number of Item after Exploratory Factor Analysis 80

Table 4.1 Confirmatory Factor Analysis Results for Social Responsibility for Society Scale 82 Table 4.2 Confirmatory Factor Analysis Results for Social Responsibility for Society

Table 4.3 Confirmatory Factor Analysis Results for EAC Scale 84

Table 4.4 Confirmatory Factor Analysis Results for ECC Scale 86

Table 4.5 Confirmatory Factor Analysis Results for ENC Scale 87

Table 4.6 Confirmatory Factor Analysis Results for OP Scale 88

Table 4.7 Final Measurement Model Results 90

Table 4.8 Construct Correlation Matrix 92

Table 4.9 Summary of Hypothesis-Testing Results 95

LIST OF FIGURES

Figure 1.1 Overview of the Integrative Model of CSR influence on Employees and

Organizational Performance 6

Figure 1.2 Conceptual Framework 12

Figure 1.3 Research Model 13

Figure 3.1 Research Procedures 62

Figure 4.1 The Results of Structural Equations Modeling 93

One of factors that affect service quality is employee commitment When employees with high commitment with company, they will provide better services to customers Most of banking institutions in Thai Nguyen province do not realize this relationship

Social responsibility (SR) directed towards employees can be perceived positively by both prospective employees and a wider audience, including actual employees Indeed, Riordan, Gatewood & Bill (1997) used external corporate image

as a proxy for social performance, and found that employee‘s perceptions of corporate image can positively influence job satisfaction, and negatively influence turnover and turnover intentions Recently, researchers have investigating how social responsibility may influence incumbent employees (Brammer et al, 2007) It is clearly that social responsibility influence employee commitment and then employee commitment affects organizational performance Furthermore, Viljo Lindsten (2018)

found that society and companies’ stakeholders have recognized the importance of social responsibility and they demand companies to be more socially responsible in their daily operations There are only very few companies left that do not have any CSR strategy or that do not at least claim to be operating or be trying to operate in a responsible way

According to Kokomo () seventy percent of small and medium-sized U.S companies experience negative performance because of leaders’ lack of knowledge

of corporate social responsibility (CSR) program implementation CSR implementation is complex and requires organizational resources such as expertise, personnel, time, and money Implementing CSR programs is challenging for many leaders and leaders of financial services firms do not have a clear understanding of how to make CSR implementation successful Furthermore, the low in level of employee’s commitment leads to low quality services and low level of performance (Bishop & Scott, 1997) In some other companies that do not pay attention to social responsibility, the rate of employee job turnover intention increases Many employees do not intend to work for company for long time In bank industry, some bank branches with social relation activities receive the high level of employees’ commitment to work for these bank branches for long time Therefore, these bank branches receive higher performance In contradiction, bank branches with low level

of social relation activities seem to get more turnover intention from employees and low level of performance

In Vietnam, there is a big literature gap in the corporate social responsibility in general and relationships among these factors in banking sector in specific

Therefore, the findings of this study will make significant contributions to the fields

of social responsibility, organizational and employee behavior

This study contributes to theoretical knowledge on the influence of social responsibility on employee commitment, and organizational performance The role of social responsibility in this context is as yet unknown Furthermore, there is no study about social responsibility, employee commitment, and organizational performance has been conducted in Vietnam context, especially in Thai Nguyen context Taking into consideration the ever-increasing globalization of business, there is a greater need to broaden the study of organizationally important phenomena

1.2 Objectives

This study examines the impact of corporate social responsibility on employee commitment and organizational performance in perspective of employees in banking industry in Thai Nguyen province

More specifically, when employees perceive that their banks undertake social responsibility higher, they show higher level of commitment Therefore, the higher levels of employee’s commitment can positively affect employee’s evaluation about organizational performance in employee perspective This study intends to clarify some following objectives:

1) Describe the nature, characteristics and role of social responsibility, employee commitment and employee’s evaluation about organizational performance

in employees’ perspective in businesses

2) Identify the relationship between corporate social responsibility and employee commitment in banking industry in Thai Nguyen province

3) Identify the effect of corporate social responsibility on employee’s evaluation about organizational performance in employee’s perspective through affecting employee commitment in banking industry in Thai Nguyen province

4) Propose some managerial implications for bank branches in Thai Nguyen province improve the performance through improve the high commitment of employees by taking part more on social responsibility activities

1.3 Hypotheses

When employees perceive highly the social responsibility of companies, they may feel highly engagement with company to establish better results Employees believe in company, they will keep their commitments with company They think that they have responsibility to keep company’s commitment with customers and other stakeholders Employees’ commitment increases service quality that company offer customers Service quality depends largely on employees’ attitudes and responsibility From above discussion, the following hypotheses were proposed:

H1: There is a positive relationship between employees’ perception of corporate social responsibility for society and employee’s affective commitment

H2: There is a positive relationship between employees’ perception of corporate social responsibility for society and employee’s normative commitment

H3: There is a positive relationship between employees’ perception of corporate social responsibility for society and employee’s continuance commitment

When employees perceive company’s moral actions with environment, they also engage in commitment H4: There is a positive relationship between employees’ perception of corporate social responsibility for environment and employee’s affective commitment

H5: There is a positive relationship between employee’s perception of

corporate social responsibility for environment and normative commitment

H6: There is a positive relationship between employees’ perception of corporate social responsibility for environment and employee’s continuance commitment

Committed employees give a big contribution to organizations because they perform and behave on achieving organizations’ goals Furthermore, workers who are committed to their organization are happy to be members of it, believe in and feel good about the organization and what it stands for, and intend to do what is good for the organization (George and Jones, 1996) In turn, the increase in job quality of employees leads to the improvement in organizational performance Therefore, employees will evaluate highly organizational performance

H7: There is a positive relationship between employee’s affective commitment and employee’s perception of organizational performance

H8: There is a positive relationship between employee’s normative commitment and employee’s perception of organizational performance

H9: There is a positive relationship between employees’ continuance

commitment and employee’s perception of organizational performance

1.4 Theoretical Framework

Corporate Social Responsibility can be explained by several theories The content theories seek to investigate the factors that control and organize human behavior These theories focus on the needs and values that motivate individuals and enhance their satisfaction and performance Schermerhorn et al (2011) suggests that the content theories “focus primarily on individual needs- physiological or psychological deficiencies that we feel a compulsion to reduce or eliminate The content theories try to explain work behaviors based on path-ways to need

satisfaction and on blocked needs” Consequently, they are often regarded as static theories because they look at only one point in time and do not predict behavior Therefore, their use is limited to understanding the factors that motivate people in their working environment

This study based on the model of Gond et al (2011) about the influence of corporate social responsibility and employees’ behavior and attitude This following model shows that when companies conduct social responsibility activities, employees may perceive these actions The change in perception of employees induce the change in their behavior and attitudes with their work, and then improve the organizational performance The overview of the Integrative Model of CSR influence

on Employees and Organizational Performance is presented in 1.1

Figure 1.1 Overview of the Integrative Model of CSR influence on Employees

and Organizational Performance

This model is also supported by following theories:

1.4.1 Stakeholder Theory

Freeman defined stakeholder as any group or individual who can affect or is affected by the achievements of the organization’s objectives These stakeholders are linked to an organization in many different ways while some linkages will be more

CSR

actions

Employee Perception

of CSR

Organizationa

l - Level Mechanisms

of CSR influence on Employees

Employees attitudes

Corporate Performance

important than others Nonetheless, customers and employees represent the two most important stakeholders (Dowling, 2001) because work is the central part of the social, cultural and economic life to most people Employment provides income to sustain a person’s lifestyle and this income was generated from the customers Therefore, managing the expectation of these two groups is the central of any organization

Stakeholder Theory is a theory of organizational management and business ethics that addresses morals and values in managing an organization Morality and values form the basic characteristics of organizational management In other words, Stakeholder Theory is used as a strategic management method based on ethical principles to fulfill stakeholder expectation (i.e employees and customers) and avoid possible pressures from the stakeholder to create a better society The fact that enterprise stakeholder relationships are getting more and more complex leads to the acknowledgement of Stakeholder Theory as a management model to a great extent (Oruc & Sarikaya, 2011)

The content theories described above have been widely criticized for being static a descriptive, and being lacking for empirical support (Bowen, Cattell, Distiller, & Edwards, 2008) Thompson and McHugh (2002) add to the shortcomings

of these theories that they do not explain the direction of the motivation process and how it is shaped They focus on how individual behavior is energized, directed, maintained, and stopped (Ivancevich, 2010) This section examines two of the most prominent and widely known process theories: expectancy theory and equity theory

1.4.3 Expectancy Theory

The theory explains that motivation is a conscious process, and individuals choose which activities to put their effort into to achieve desired outcomes Thus, human behavior towards motivation is shaped by preference and possibility of the desired outcomes Consequently, individuals were motivated when they believe their behavior will result in outcomes or reward them value (Spector, 2003)

The Expectancy Theory stems from the much earlier work of Edward Tolman

in 1932, who promoted the idea that the relationship between stimulus and response

is mediated by un-observable variables or cognitions (Levy, 2006) However, it was not until the 1960s when Vroom (1964) developed what has been called the

“Expectancy Theory” which views motivation as a meta-mathematical function of three types of cognitions (Spector, 2003)

Since its development in 1964, the “Expectancy Theory” has been widely used

in the organizational behavior literature to explain the human behavior in organizations (Spector, 2003) Buchanan and Huczynski (2004) suggest that Expectancy Theory’s strength over other content theories lies in the notion that it takes into consideration the individual differences in behavior and motivation

Expectancy Theory is based on a combination of three conditions, namely instrumentality, valence, and expectancy Instrumentality refers to the belief held by

an individual that a given behavior will result in a desired outcome Valence is the value of this outcome as seen by the individual Expectancy is about the likelihood or subjective probability that an individual has about his/her ability to perform a given behavior (Ivancevich, 2010)

Porter and Lawler (1968) refined and extended Vroom’s expectancy theory by developing an expectancy model of motivation focused on identifying the source of individual’s expectancies and valences and linking an individual’s effort with his level of job satisfaction (Kreitner & Kinicki, 2009)

1.4.4 Equity Theory

In seminal work entitled “Inequity in Social Exchange”, Adams (1965) posited that “inequity occurs when a person thinks that the ratio of his outcomes to inputs and the ratio of other’s outcomes to other’s inputs are unequal” Consequently, equity takes place when an individual’s outcome to input ratio equals another’s outcome to input Output refer to rewards, privileges, or anything of personal value that an individual gets from his/her job, such as pay, fringe benefits, training, and status

The way that individuals measure justice and fairness is at the heart of equity theory This theory is usually applied in work contexts to explain how an individual’s motivation is influenced by his/her perception of how fairly he/she is treated in social exchanges at work (Ivancevich, 2010) Different equity theorists argue that individuals at work must be rewarded according to their actual contribution, implying that those who contribute more at work deserve to have more rewards or privileges than those who contribute less (Deutsch, 1985)

On the other hand, the individual characteristics brought by an individual to

the job, include skills, experience, and the work itself Inequity is a psychological state that arises from individuals’ comparisons to others in the workplace (Spector, 2003) Inequity implies that someone receives more than another; inequity in the workplace can be defined into positive and negative inequity Positive inequity occurs when an individual’s output/input ratio is more than another’s output/input ratio Negative equity occurs when an individual’s output/input ratio is more than another’s output/input ratio (Adams, 1965)

Corporate Social Responsibility scholars have used self-regulation theory to analyze the conditions necessary for securing successful implementation of Corporate Social Responsibility practices (e.g Albareda, 2008; Christmann and Taylor, 2006; Hart, 2010; King & Toffel, 2009; Lenox, 2006; Utting, 2005) Some authors dispute the potential of Corporate Social Responsibility self-regulatory tools, such as ICMS, to effectively control for-profit organizations (Cragg, 2005) They suggest that companies will not put the collective interest above their own and will behave opportunistically when adopting these measures (Hardin, 1971; Maitland, 1985) They further assert that freeriding, i.e non-conformance with the tools’ requirements, is unavoidable (Maitland, 1985) According to this analysis, companies are not sure if posing stricter rules on their operations will mean that they will gain an advantage or a disadvantage towards their competitors In this context, they choose to free-ride and not implement substantially the self-regulatory measures (Lenway & Rehbein, 1991)

Integrative theory looks at how business integrates social demands, arguing that business depends on society for its existence, continuity and growth Social

demands are generally considered to be the way in which society interacts with business and gives it a certain legitimacy and prestige As a consequence, corporate management should take into account social demands, and integrate them in such a way that the business operates in accordance with social values

1.5 Conceptual Framework

From theoretical framework, this study intends to theorize and test a model on the impact of Corporate Social Responsibility on Employee Commitment, and Service Performance in banks in Thai Nguyen Province of Vietnam

Employees’ perception of corporate social responsibility is the starting point

of this study Different corporate social responsibility may affect employees’ different attitudes and behavior Employees perceive the corporate social responsibility higher, they may change their attitudes with work and that leads to the improvement of organizational performance

Using process theory, a type of scientific observation, individuals measure how events in a specific process lead to an outcome According to this theory, when a company wants to reproduce an outcome, the company must duplicate the process used to derive this objective When it comes to motivation, process theory provides a means to explain how the needs of workers change

Equity Theory within Process Theory measures work motivation by the amount of skills an employee possesses and the efforts of the employer When an employee feels that she and her employer have made equal investments in each other, she is more likely to feel motivated Investments on an employer’s behalf can include worker benefits, salaries and promotions The Equity Theory measures an

employee’s perception of workplace fairness and inequalities and looks at how each factor can cause an employee to adjust her behavior When an employee feels a work situation is unfair, she may reduce her productivity level, feel she is entitled to a high compensation or look for work elsewhere Figure 1.2 presents the proposed conceptual framework

The previous studies suggested that if an organization practices higher responsibility with society and environment then their employees will have higher commitment in affective, normative as well as continuance As a result, the organizational performance will be higher

Figure 1.2 Conceptual Framework

AS can be seen from figure 1.2, positively perceived social responsibility will have a direct positive effect on employees’ commitment If a company’s employees perceive that company has a good image or responsibility with community, then the employees’ commitment ratings are high, performance increase There is a positive relationship between social responsibility of an organization and employee commitment

2 Normative commitment

3 Continuance Commitment

Employees’ Evaluation of Organizational Performance

+ Organizational Performance

Independent

Variables

Mediating Variables

Dependent Variables

Using the Expectancy Theory within Process Theory helps explain how particular efforts link to the desires for specific outcomes as they monitor the success

of an outcome The Expectancy Theory uses the assumption that employers try to predict outcomes and create perceived expectations about future events that are realistic Therefore, if an outcome looks feasible and an employee knows how to achieve it, he will feel motivated to use the information known to make the predicted outcomes become a reality

Figure 1.3 Research Model

Three variables within the Expectancy Theory can affect Process Theory and worker motivation – valence, instrumentality and expectancy Valence focuses on the outcome or reward an employee anticipates Instrumentality is an employee’s belief that repeating specific actions will help him achieve the result desired Expectancy refers to an employee’s belief in his own capabilities Therefore, an employee finds job satisfaction and motivations from his job performance Next, the model proposes that employee commitment will have a positive effect on firms’ performance When

Affective Commitment

Social

Responsibility

Environment

employees have high commitment with work and with company, their firm performance will increase

From the conceptual framework, a research model is proposed as can be seen

in figure 1.3

1.6 The Operational Definitions

1.6.1 Corporate Social Responsibility

Corporate social responsibility (CSR) can be broadly defined as corporate actions addressing issues which are beyond the scope of its narrow economic, technical and legal requirements (Aguilera et al., 2007; Carroll, 2008) According to Barnett (2007: 798-801) CSR is a form of corporate investment characterized by a dual orientation towards the improvement of social welfare and of stakeholder relations Numerous studies have focused externally, looking at the influence of CSR

on prospective employees, these works, which tend to be based on signaling theory (Spence, 1973) and social identity theory (Ashforth & Mael, 1989), suggest that a corporation‘s socially responsible practices send a positive signal to potential workers To measure corporate social responsibility, the level of perception of social responsibility about society and environment were used with 7-point scale from

“strongly disagree to strongly agree” Four items were used to measure employees’ perception of social responsibility about society are presented in table 1.1

Table 1.1 The Scale for Measure Social Responsibility for Society

SRS1 Considering the employees is a high

priority at this bank

Turker, 2009a

SRS2 Considering to the well-being of

customers is a high priority at this bank

Turker, 2009a

SRS3 Contributing to the well-being of

suppliers is a high priority at this bank

Turker, 2009a

SRS4 Contributing to the well-being of the

community is a high priority at this bank

Turker, 2009a Four items were used to measure employees’ perception of social responsibility for environment as followings:

Table 1.2 The Scale for Measure Social Responsibility for Environment

SRE1 Environmental issues are integral to the

strategy of this bank

Turker, 2009a

SRE2 Addressing environmental issues is

integral to the daily operations of this bank

Turker, 2009a

SRE3 This bank takes great care that our work

does not hurt the environment

Turker, 2009a

SRE4

This bank achieves its short-term goals while staying focused on its impact on the environment

Turker, 2009a

1.6.2 Employee Commitment

Dorgan (1994) defines commitment as the enhanced functional and operational performance, including quality as the main principal Meyer and Allen (1991) classify employee commitment into three groups namely: (a) Affective Commitment; (b) Continuance Commitment; and (c) Normative Commitment Employees who have a strong affective commitment continue to do work with the organization because they want to do so Employees with continuance commitment remain with the organization because they need to do so Employees with a high level of normative commitment stay

To measure affective commitment, five items were used with 7-point scale as followings:

Table 1.3 The Scale for Measure Affective Commitment

Porter et al., 1974

EAC2 I enjoy discussing this bank with

outsiders

Porter et al., 1974

EAC3 I do feel like "part of the family" at this

bank

Porter et al., 1974 EAC4 I do feel a strong sense of belonging to

this bank

Porter et al., 1974

EAC5 I do feel emotionally attached to this

bank

Porter et al., 1974

To measure continuance commitment, five items were used with 7-point scale

as followings:

Table 1.4 The Scale for Measure Continuance Commitment

ECC1 It would be very difficult for me to leave

this bank right now - even if I wanted to

Porter et al., 1974

ECC2

One of the major reasons that I continue

to work for this bank is that leaving would require considerable personal sacrifice - another bank may not match the overall benefits that I have here

Porter et al., 1974

ECC3

One of the few serious consequences of leaving this bank is the scarcity of available alternatives

Porter et al., 1974

ECC4

I am not afraid what might happen if I quit my job without having another one lined up

Porter et al., 1974

ECC5 At this point, remaining with this bank is

a matter of necessity as much as desire

Porter et al., 1974

To measure normative commitment, five items were used with 7-point scale as followings:

Table 1.5 The Scale for Measure Affective Commitment

ENC1 I believe that these days, people move

from one bank to another too frequently

Porter et al., 1974

ENC2

One of the major reasons that I continue working for this bank is that I believe that loyalty is important and thus I feel a sense of moral obligation to remain here

Porter et al., 1974

ENC3

If I got another offer for a better job elsewhere I would not feel it was right to leave this bank

Porter et al., 1974

ENC4 I believe that a person must always be

loyal to his / her organization

Porter et al., 1974 ENC5

Things were better in the old days when people stayed with one organization for most of their careers

Porter et al., 1974

1.6.3 Organizational Performance

Organizational performance is defined as the attained outcome of actions with the skills of employees who perform in some situation (Prasetya & Kato, 2011) Good performance is step towards the achievement of organizational aims Hence more struggles is required to improve the organizational performance Organizational performance may be evaluated by some quantitative criteria such as rate of return on sales or rate of return on assets Organizational performance also can be evaluated by some qualitative criteria such as customer satisfaction, service quality, or the evaluation of working condition in general To measure organizational performance, the employee’s evaluation of organizational performance was used To measure employees’ evaluation of organizational performance, four items were used with 7-point scale as in table 1.6

Table 1.6 The Scale for Organizational Performance

Saidu,

2011

OP3 I can confidently say that customers

who my bank serve always happy

Saidu,

2011

OP4 I can be sure that service quality my

bank offer is good

Saidu,

2011

1.7 Significance of the Study

- This study helps author improve the ability to do the research and improve the knowledge about corporate social responsibility and its influence

- Through doing this study, the research results may help banks’ managers understand deeply the role of social responsibility with their performance

- The finding from this research may propose some useful solutions for leaders of banks to accelerate their employee’s responsibility in providing the services and doing organizational commitment with customers

- Through providing better services to customers, banks may maintain its competitive advantages with other bank branches

- From this study, some Thai Nguyen governors may implement some policies to encourage firms taking part in social responsibility activities, and improve the competitive ability of banking system in Thai Nguyen province

1.8 Scope and Delimitation

- Content Scope: This study will focus on identifying the effects of social

responsibility on employee commitment and service performance of service firms in Thai Nguyen Province

- Time Scope: The secondary data was collected from statistical records from

2012-2015

- Space Scope: The field of Banking was chosen because banking services are

quite typical in Thai Nguyen province

1.9 Organization of the Dissertation

This thesis consists of five chapters The first chapter presents the back ground and rationale of the study The Theoretical framework on corporate social responsibility is presented and a conceptional framework is proposed Operational definition of terms are presented Chapter two reviews the literature and empirical studies related to the topic Chapter three presents the research design, research instrument, sampling method Data collection and data analysis then presented finally, this chapter presents testing of the tool for reliability

CHAPTER II

LITERATURE REVIEW 2.1 Related Literature Review

2.1.1 Corporate Social Responsibility

Corporate Social Responsibility (CSR) is about understanding and managing the relationship between our trading operations and the economy, environment and communities within which we operate (Scott, 2007) Morrisons claim that its CSR focus is on “managing the social, ethical and environmental issues that are material to our commercial performance, through a program of continuous improvement” (Morrisons, 2005) The notion of corporate social responsibility (CSR) is related to ethical and moral issues concerning corporate decision-making and behavior Knowing if a company should undertake particular activities or refrain from doing so because they are beneficial or harmful to society is a central question CSR is nowadays related to issues such as environmental protection, health and safety at work, relations with local communities and relations with consumers (Branco and Delgado, 2011) CSR is the concept used most widely to address the relationships between business and society However, recently some concepts have been proposed

to conceptualize business and society relations, such as corporate sustainability and corporate citizenship (Branco and Delgado, 2011)

The term Corporate Social Responsibility (CSR) is a derived term from another well-known traditional term in the accounting literature: corporate sustainability According to Zink (2008) Corporate Social responsibility is a business approach that creates long-term shareholder value by embracing opportunities and

managing risks deriving from economic, environmental and social developments.” Corporate sustainability (CSU) and Corporate social responsibility (CSR) are interrelated concepts and are both applicable in organizations that consider the social and environmental consequences of their business activities

The term corporate social responsibility officially appeared over 50 years ago, when Bowen published his book entitled ”Social responsibility of business” (Social Responsibilities of the Businessmen) (1953 ) for the purpose of propaganda and calls for management does not harm the rights and interests of others, call the charity in order to compensate for losses due to damage businesses to society

However, since then, the term corporate social responsibility is to be understood in different ways Some people defined “social responsibility implies improving corporate behavior to a level consistent with the norms, values and social expectations are common” Some others understand the “social responsibility of enterprises, including social expectations about the economy, law, morality and charity for organizations at a certain time” (Archie B Carroll, 1979)

Currently, there are two points of views about the corporate social responsibility of enterprises The first view is that businesses do not have any responsibility towards society which is only responsible to shareholders and employees of the business, and the state should be responsible to society; responsible businesses through the payment of taxes to the state On the contrary, other opinion is that, as one of the actors of the market economy, businesses have used the resources

of the society, the exploitation of natural resources and in that process; they cause further damage to the natural environment So, beside the paying for taxes, corporate

social responsibility should be also attack with environment, communities, employees

Corporate social responsibility (CSR) is not a new concept, it has been debated in management literature for more than half a century (Bowen, 1953; Davis, 1973) But Recent years have seen the concept of CSR gains prominence among academics from a wide range of disciplines (Dentchev, 2005) Myriad stakeholders such as government agencies, non-governmental organizations (NGOs), employees, investment firms and the general public seek information concerning company policy

on governance, environmental issues, social programs and community involvement (Dawkins and Lewis, 2003) Delivering this information becomes integral to mitigating risks associated with CSR-related issues, inclusion in indexes and the satisfaction of behavioral standards Companies must not only adopt CSR as part of their mission, they must also communicate CSR to stakeholders (Brønn and Vironi, 2001) Piacentini et al (2000) defined it as; CSR is the voluntary assumption by companies of responsibilities beyond purely economic and legal responsibilities

In the year 1953, Howard Bowen published his book “Social Responsibilities

of the Businessman” The book includes a definition of social responsibility A major idea is that the CSR can be determined by the consequences of the company’s activities on the stakeholders (Ackerman, Bauer 1977) In the 1970s mainly in the USA and in the United Nations (UN) the first discussions about corporate social responsibility and defining its content took place and later an ethical codex and business standards for corporations on an international level were created The European Union discussed the corporate responsibility concept in the second half of the 1990s

The analysis of the literature in the field of Corporate Social Responsibility, undoubtedly, indicates the essence of this concept, being deeply rooted in broadly understood, intensely progressive relationships with stakeholders in the area of management of business entities (Lee, Park, Rapert and Newman, 2012) Building sustainable and positive relationships with all the interested parties, connected with management of economic activities, constitutes the starting point for running a business ethically and paying attention to the social and ecological environment (Du, Bhattacharya and Sen, 2010) Corporate Social Responsibility is not only legal or economic responsibility, borne by an enterprise, but also the involvement in activities due to which social wealth is protected and duplicated as the value serving the improvement in the quality of life of its clients, employees and shareholders (Deng, Kang and Low, 2013) Corporate Social Responsibility is defined on the basis of the law of the European Union as a concept according to which enterprises voluntarily take into consideration social and ecological aspects in their commercial activities and in relationships with stakeholders (Green Paper, 2010)

In the discourse on CSR, a wide variety of connotations and definitions exist, ranging from corporate philanthropic activities to the strategic repositioning of enterprises in society (Nijhof and Jeurissen, 2010) The term CSR is used to describe how businesses implement the broad societal responsibility of going beyond economic criteria (Khojastehpour & Johns, 2014) CSR comprises a number of corporate activities that focus on the welfare of stakeholder groups, including society and the natural environment (Sprinkle and Maines, 2010) Indeed, CSR is a broad concept that covers a range of environmental, social, and ethical responsibilities, and there have been numerous definitions in the literature over the years (Polonsky and Jevons, 2009)

Various authors indicate a number of reasons underlying organizations’ motivations for undertaking socially responsible activities Sprinkle and Maines (2010) claim that organizations may engage in CSR activities for 4 reasons: organizations may have altruistic intentions; they may use CSR activities as “window dressing” to appease various stakeholder groups; for potential benefits of recruitment, motivation and retaining of employees; for customer-related motivations as CSR may entice consumers to buy organization’s products and services

Weber (2008) indicates five key areas where CSR creates positive relations This also show 5 reasons for CSR: positive effect on organization’s image and reputation; positive effect on employee motivation, retention and recruitment; cost savings; revenue increases from higher sales and market share; and CSR-related risk reduction or management Polonsky and Jevons (2009) found that possible reasons to organizations of being socially responsible include: improved financial performance; contribution to market value; a more general positive impact on societal stakeholders;

a connection with consumers; and improved product quality Authors also claim that there are even internal reasons such as: increased employee commitment and reduced employee turnover; not to mention improved society overall In addition, according

to Bhattacharya & Sen (2004), CSR activities generate more immediate outcomes such as word-of-mouth; resilience to negative company information; and consumers’ awareness, attitudes and attributions about why companies are engaging in CSR initiatives

According to Habek and Wolniak (2015), today, we can observe a growing number of companies, which prepare CSR or similar reports, but the quality of

disclosed information varies Recently, through various technologies, disclosure of these reports has become simpler and public interest in social responsibility is constantly increasing, and as a result, problem in the quality of information provided

by a socially responsible company has risen The quality of CSR reporting depends from the ways that the information is disclosed Although it is a welcome gesture, when in some cases companies behave socially responsibly and they decide to inform stakeholders, they often focus on volume rather than quality Ellen, Webb, and Mohr (2006) point out that fit between corporate CSR initiatives and core business will affect consumer attribution Gu and Morrison (2009) indicate that different type of CSR initiatives (commitment, timing, and fit) will influence consumer CSR association through consumer attribution and consequence expectation However, Nan and Heo (2007) assert that in comparison with low-fit CSR activities, high-fit will not have positive influence on consumers’ attitude toward enterprise, advertisement, or brand Therefore, the current study assumes that in addition to fit and commitment, communication strategies may have influences on consumers (Becker-Olsen et al., 2006; Groza, Pronschinske, and Walker, 2011; Wagner et al., 2009)

Many Korean companies participate in CSR to meet global standards, but its history isn’t sufficient Since a benevolent attitude was emphasized in CSR in the

1950 - 60s, companies, which provide product with competitive price, were respected In the 1970s, companies, which contribute to the national economic development by increasing exports, have been recognized as a good company, and some companies established foundation involuntarily for quasi-tax In the 1980s, the period of democratization, CSR has been increasing from focusing on scholarship

foundation to focusing on welfare because it was to deal with social pressures Since the 1990s, growing concern about social issues, the importance of CSR was recognized After the financial crisis in 1997, CSR begun to organize systematically, however, in the early 2000s, CSR was perceived as the discretionary contribution of excess resources, which considered as a peripheral issue when strategizing However,

in the 2000s, companies are pursuing various CSR activities such as cause-related marketing, NGO partnerships, and the establishment of foundation to meet global standards With globalization, the perception of CSR has been changed, and Korean companies actively participate in CSR (Lee, 2002; FKI, 2008)

In Vietnam, in recent years, people often use the definition of the economic development group’s private World Bank on the corporate social responsibility Accordingly, the ”social responsibility of enterprises (Corporate Social Responsibility - CSR) is the commitment of business to contribute to the sustainable economic development, through the activities to improve the quality of life of workers and members of their families, communities and society, in a way beneficial

to both business as well as the overall development of the society” (Doanh, 2009)

In other words, businesses want sustainable development must always abide

by the standards of environmental protection, gender equality, labor safety, labor rights, equal pay, training and staff development members and community development Corporate Social responsibility is shown in a concrete way on the elements, the face, such as: 1 Environmental protection; 2 Contribution to the social community; 3 Make good responsibility with suppliers; 4 To ensure the interests and safety of consumers; 5 Good relations with employees; and 6 Ensure benefits

for shareholders and employees in the enterprise In particular, the first four elements shown responsibility outside of the enterprise, while last two factors carry responsibility inside, internal business Of course, the division of responsibility for external and internal responsibilities relative sense only and cannot say any more important responsibilities liability

2.1.2 Employee Commitment

Employee commitment is relative to the workers’ attachment to or participation in the organizations in which they employed Employee commitment is significant since it determines whether employees are likely to leave their jobs or improve performance Numerous studies have related to employee commitment Mowday, Steers, and Porter (1979) emphasized concepts they referred to as attitudinal commitment and behavioral commitment Another concept introduced by Meyer and Allen (1991) is the most recognized among employee commitment theories In this approach, employee commitment has three multidimensional components namely: affective commitment, continuance commitment, and normative commitment

It is not surprising that fit, particularly person–organization (P–O) fit, has been identified as a potentially important factor in the development and maintenance of employee commitment to organizations (Meyer and Allen, 1997; Mowday, Porter, and Steers, 1982) Recent meta-analytic reviews of research conducted to test this proposition provide what appears to be strong supporting evidence (Kristof-Brown et al., 2005; Verquer, Beehr, and Wagner, 2003) The employee commitment approach can be conceptualized as an individual-level behavioral theory of worker motivation

(Allen and Meyer, 1990) as well as an organizational-level behavioral model of employee commitment initiatives influencing the effectiveness of quality management (Bou and Beltran, 2005) Traditionally, individual-level employee commitment has been divided into three areas: affective commitment which refers to employees’ emotional attachment to, identification with, and involvement in the organization; continuance commitment referring to commitment based on the costs that employees associate with leaving the organization; and normative commitment which refers to employees’ feelings of obligation to remain with the organization (Allen and Meyer, 1990, 1993) The three components have proven empirically distinguishable in studies most often conducted with healthcare employees, which were usually nurses (Herscovitch and Meyer, 2002; Meyer et al., 1990; Meyer et al., 1993)

Affective commitment, which relates to emotional attachment, is normally linked to a favorable working environment and relationships with the other employees Allen and Meyer (1990) identified three dimensions of organizational commitment: affective commitment (feelings-based), normative commitment (obligation-based), and continuance commitment (cost based) Affective commitment, the most studied dimension, is defined as “an emotional attachment to, identification with, and involvement in, an organization” (Allen and Meyer, 1990, p.1) Normative commitment, on the other hand, is related to obligation: employees may feel they owe the organization for being given a job when they need it most Finally, continuance commitment relates to such terms of employment as job contracts, which may make leaving the current job very costly or troublesome (Mullins, 2001) Normative and continuance commitments are both considered as