A STUDY OF THE EFFECT OF CORPORATE SOCIAL RESPONSIBILITY

(CSR) TOWARDS CONSUMER BUYING BEHAVIOR

Chow Mei Min, Yeow Jian Ai, Audrey Cheak Poh Choo, Wong Pei Wah, Yeo Chin Yang
Faculty Business and Law
MultimediaUniversity
[email protected], [email protected], [email protected], [email protected] &
[email protected]

ABSTRACT

Today, the level of awareness about corporate social responsibility(CSR) is at the rising trend. Consumers
nowadays have set a higher level of expectation towards the companies. Therefore, CSR no longer can be
negleted if the businesses would like to stay ahead from the rest. By recognizing the importance role of CSR,
many of the businesses have started to engage themselves in this activities in order to gain competitive advantage.
A great deal of research have been conducted in this area; however, limited research have been worked from
consumer’s perspective. Moreover, the level of consumers’ awareness of CSR is still maintained moderately in
Malaysia (Dusuki and Yusof, 2008). Hence the objective of this study is to examine the effect of CSR in affecting
consumer buying behavior within Malaysia context. The data was gathered from 350 respondents located in
Melaka and Kuala Lumpur. Data collection was based on voluntary and anonymity basis. The regression results
indicated that ethical responsibility and philanthropic responsibility are associated with consumer buying
behavior.

Key Words: Corporate Social Responsibility, economic responsibility, legal responsibility, ethical responsibility,
philanthropic responsibility

1. Introduction

Today, the companies are not focusing on the wealth alone; companies need to take the responsible to their
stakeholders as well (Rahim, Jalaludin and Tajuddin, nd). According to Carmen (2005), the stakeholder theory is
one of the core components to define and support the concept of CSR today. The reasons that explained about the
companies engaged in socially responsible include the following: enhance reputation, strategic competitive
advantage, cost saving, industry trends, CEO/board commitment, customer demand, social responsible
investment, top line growth, investor demand and access to capital (Blackburn, 2007). By recognizing the
importance of CSR, many of the Malaysia companies have started to apply the CSR within the company’s
policies, strategies and activities or programs toward the social and environment (Norway, 2011). According to
Siwar and Haslina (nd), CSR is a good strategy for companies to gain comparative advantages and ensure long
term business successful. A research conducted by ACCA Malaysia in 2004 showed 43% of companies had
recognized the importance of social performance but 26% of companies would consider doing that in the future
(Siwar and Haslina, nd). According to Lafferty, Barbara and Ronald (1999), consumers are likely to purchase the
products from companies that projecting positive image. If a company has a positive image and reputation, it
tends to create customers loyalty and commitment towards the company, which in turn, leads to profit
maximization. It can be concluded that CSR can create a win-win situations for both the businesses and society
around them.
Does corporate social responsibility really attract consumers to buy the company’s product or services? Is CSR
one of the major factors that affect consumer buying behavior? A great deal of research have been conducted in
this area; however, limited research have been worked from consumer’s perspective. Moreover, the level of
consumers’ awareness of CSR is still maintained moderately in Malaysia (Dusuki and Yusof, 2008). Hence the
objective of this study is to examine the effect of CSR in affecting consumer buying behavior within Malaysia
context. More specifically, the four main reseach objectives are listed as follow:
i) To examine the relationship between economic responsibility and the consumer buying behaviour.
ii) To examine the relationship between legal responsibility and the consumer buying behaviour.
iii) To examine the relationship between ethical responsibility and the consumer buying behaviour.
iv) To examine the relationship between philanthropic responsibility and the consumer buying behaviour.

2. Corporate Social Responsibility (CSR)- Malaysia

Corporate Social Responsibility is a broad concept and no concrete definition until today (Dusuki and Yusof,
2008). According to Zenisek (nd) “it (CSR) means something, but not always the same thing, just to everyone.”
Therefore, every different groups of people have different forms of definitions of CSR, which followed by their
own interest (Dusuki and Yusof, 2008). The summary of definition of CSR is presented in Table 1.

Table 1: Summary of CSR Definition

Source Proposed CSR Definition:

Business for Social “Business decision making linked to ethical values,
Responsibility compliance with legal requirements, and respect for people,
(America’s largest communities, and the environment around the world.”
organisation (Aaronson 2003, p. 310)
devoted to CSR)

Prince of Wales “Open and transparent business practices that are based on
Business Leaders ethical values and respect for employees, communities, and
Forum the environment. It is designed to deliver sustainable value to
society at large, as well as to shareholders.” (Aaronson 2003,
p. 310)

European “A concept whereby companies decide voluntarily to

Commission contribute to a better society and a cleaner environment.”
(European Commission 2001, p. 5)

Anonymous “CSR is ‘doing the right thing even when no-one is looking’.”
respondent to an (Anonymous 2006a)
Accountancy
Ireland survey

Source: Thomas and Nowak , 2006

Carroll (1991) proposed a more comprehensive approach which defined CSR as “Social responsibility of business
encompasses the economic, legal, ethical, and philantropic that society has of organizations at a given point in
time.” In other words, companies need to comply to the laws and regulations, act ethically, involve in voluntarily
work or charity, to earn a reasonable profit.
According to Malaysia Prime Minister, Datuk Seri Najib Razak: “CSR has become an important dimension, not
just in the context of its role in Malaysia but also abroad. The social responsibility among the corporate should not
be looked at merely as philanthropy or charity to associations or social activities” (Rose, 2004). From the
statement, it is cleared that government of Malaysia recognized the important role of CSR and they are trying to
encourage and promote CSR activities among the stakeholders in Malaysia.

By recognizing the important role of CSR, Malaysian government has developed frameworks for implementation
of CSR initiatives for the businesses. The framework provides guidelines for Government Linked Companies
(GLCs) where Khazanah Nasional Berhad has to monitor the GLCs implement CSR measures in accordance with
the framework. In September 2006, Bursa Malaysia launched another framework for the implementation and
reporting of CSR activities of listed companies. In accordance with this, it makes it compulsory for all listed
companies to disclose their CSR activities.

3. The Relationship between CSR and Consumer Buying Behavior

A consumer who is socially conscious and lead to the social change is known as socially responsible consumer
behavior (SRCB) (Lois, Deborah and Katherine, 2001). This ethical purchasing has been around market for a
long time ago, but consumers had only raised the awareness on these few years (Shanka and Gopalan, nd). As a
socially responsible consumer, this group of people will search for more information or details pertaining to the
products or service, purchase, use, and dispose the products on a way to maximize the advantages and minimize
any harmful effects to the society (Lois, Deborah and Katherine, 2001). Today, companies in Malaysia are
increasingly aware of CSR activities as consumers have become more aware of how business activities affect
society and the environment. Furthermore, consumers are more sensitive to the negative CSR activities compare
to the positive CSR activities before making the purchase decision (Mohammed and Sawandi, nd).

A number of studies showed that CSR did play an important role in influencing consumer buying behaviour (Lois,
Deborah and Katherine, 2001; Sen, Sankar and Bhattacharya, 2001). According to Lee and Maziah Ismail (2009),
firstly, consumer made buying decision based on traditional criteria such as price, quality and convenience and
secondly, it was based on damage or benefits to the society. Lee and Maziah Ismail (2009) also suggested that
companies which like to improve customer satisfaction and company’s financial performance should emphasize
on CSR initiatives.

According to the Corporate Social Responsibility Report published by Royal Norwegian embassy in Kuala
Lumpur (2011), the consulting firm OWW created a Socially Responsible Investment (SRI) index where the 100
most valuable companies listed on Bursa Malaysia are given scores for engagement in relation to different
dimensions of CSR, as well as corporate governance and the respect of human rights. The share prices of
companies were monitored and compared with other listed companies in order to create a picture of how CSR
activities affect companies' market value. The index showed that companies with good CSR programs give 19.3%
higher dividends than other companies from June 2006 to June 2009. This result indicates that focusing on CSR is
not necessarily an obstacle to companies' core business in Malaysia. In fact, it reflexes that consumers in Malaysia
are actually supporting the CSR initiatives through their buying behavior.

4. Economic Responsibility

Economic responsibility refers to the corporate or company produces a good or service with a reasonable profit
(Carroll, 1991). According to Siwar and Harizan (n.d), the economic responsibility refers to the degree of related
activities of CSR and the financial performance which take into consideration of the cost- related advantages,
market advantages and reputation advantages for companies. Dusuki and Yusof (2008) argued that the economic
responsibility is the most essential and basic responsibility compared to the other responsibilities. This implied
that the companies must be able to fulfill the economic responsibility before the companies engage in any other
social programs such as donations or charity events.

According to Onlaor and Rotchanakitumnuai (2010), the price is the most important factor that affects consumer
satisfaction and buying behavior. Consumers feel unsatisfied when the good or service is priced unreasonable
high, which in turn, influence the consumers buying behavior and the customers’ loyalty towards the company.
With this, the following hypothesis is formed:

H1: There is a relationship between economic responsibility and consumer buying behavior.

5. Legal Responsibility

Legal responsibility refers to the corporate or company complies with laws and the regulations when making
business decision (Carroll, 1991). The purpose of legal responsibility is to ensure the activities and performances
of the companies are acceptable by the stakeholders (Siwar and Harizan, nd). Legal responsibility includes
consumer and product laws, environmental laws and employment laws (Carroll and Shabana, 2010). Consumers,
one of the stakeholders, are expecting the companies to meet the legal requirement for product safety, product
quality, accurate product information and so on. Failing to comply with these, company performance will be
adversely affected. With this, the following hypothesis is formed:

H2:There is a relationship between legal responsibility and consumer buying behavior.

6. Ethical Responsibility

Ethical responsibility refers to the corporate or company makes the right decisions and follows the rules in
company or country (Carroll, 1991). According to Carroll and Shabana (2010), ethical responsibility presenting a
company’s voluntary actions to achieve the social goals extend beyond the legal responsibility. It embraces those
standards, norms, or expectations that are related to what consumers, employees, shareholders and the community
regard as fair and justice or protect the stakeholder’s moral right (Carroll, 1991). Creyer and Ross (1997) found
that consumers are willing to pay higher price for products with ethical companies as it creates trustworthy in
consumers. With this, the following hypothesis is formed:

H3: There is a relationship between ethical responsibility and consumer buying behavior.

7. Philanthropic Responsibility

Philanthropic responsibility refers to the corporate or company voluntarily participates in some meaningful
programs or activities to the society (Carroll, 1991). On the other words, the companies are encouraged to
organize the acts or programs to promote human welfare and goodwill to society (Carroll, 1991). According to
Rahim, Jalaludin and Tajuddin (nd), philanthropy will not directly gain the economic return, but it can help to
create and built up the image or reputation of the companies and enhance the firm’s long – term competitive
position in the market. In addition, it also will help to increase employee loyalty and customer satisfaction
(Rahim, Jalaludin and Tajuddin, nd). In another words, engaging in philanthropic activities will create a win-win
situations for both the business sector and societies around them. With this, the following hypothesis is formed:

H4: There is a relationship between philanthropic responsibility and consumer buying behavior.
8. Theoretical Framework

Figure 1: Theoretical Framework of the Study

Economic Responsibility
H1

Legal Responsibility H2
Consumer Buying Behaviour
H3
Ethical Responsibility

H4
Philanthropic Responsibility

There are 4 main independent variables (economic responsibility, legal responsibility, ethical responsibility and
philanthropic responsibility) under investigated in this study. The purpose of this study is to examine the
relationship between each of these CSR elements and the dependent variable, consumer buying behavior in
Malaysia.

9. Methodology

The use of a questionnaire as a research tool in the behavioral science is widely acknowledged (Mihail &
Elefterie, 2006). It has been used in the past research and has been proven to have high reliability and consistency.
The main instrument used in this study was a structured questionnaire which was developed and adapted based on
previous studies. This survey instrument allows the researcher to examine the relationship of the variables and to
analyze the result.

9.1 Sample and data collection method

Convenience sampling method was used in this study. Sometimes, it is called grab or opportunity sampling; this is
the method of choosing items arbitrarily and in an unstructured manner from the frame. This non-probability
method is often used to get a gross estimate of the results, without incurring the cost or time required to select a
random sample. As the name implied, the choice of the sample and element is based on convenience of the
researcher. Therefore, respondents will be selected at the right place and at the right time (Naresh, 2009).
Malaysians from different demographic background are encouraged to participate in this study.

A pilot study is to do a brief exploratory investigation, to try out particular procedures, measurement instruments,
or methods of analysis. Finked (2006) stated: “All types of questionnaires and interviews must be pilot tested.
Self-administered questionnaires are heavily dependent on the clarity of their language, and pilot testing quickly
reveals whether people understand the directions you have provided and if they can answer the questions. Pilot
test can also tell you how much time it takes to complete the survey”.

Prior to release of the survey, researchers conducted a pilot test to refine the questions in the survey.
Questionnaires were given to 50 respondents from the targeted pool of respondents for pilot test. Comments and
feedbacks given were gathered and some items considered vague by these respondents were later reworded before
the final data collection.

A four-page questionnaire which consist of 33 questions, using 5-point Likert scale were distributed to the
targeted respondents, particularly from Kuala Lumpur and Melaka. A total of 420 set of questionnaires were sent
out to the target respondents and 350 completed survey forms were returned, after a 2-month period of data
collection. This represents a satisfactory response rate of 83.3%. Data were then entered into SPSS 19.0 for data
analysis. Descriptive statistics and multiple regression analysis were carried out to test the four hypotheses
developed for this study.

9.2 Instrumentation

There were three sections in the questionnaire. Section A of the questionnaire included information pertaining
respondents’ background such as gender, nationality, ethnicity and education background.

Section B of the questionnaire attempted to study respondents’ awareness of Corporate Social Responsibility
(CSR). Questions such as “Are you familiar with the term Corporate Social Responsibility?”, “Will you support
the products from companies which have taken corporate social responsibility?” are being asked in a nominal
scales.

The last section, Section C attempted to assess the effect of CSR in affecting consumer buying behavior. The
economic responsibility is measured based on 5 items adapted from Rahim, Jalaluddin and Tajuddin (nd) ; Carrol
(1991) such as “I will buy the products from companies that provide reasonable price”, “I will buy the products
from companies that pay the reasonable wages to their employees”, “I will buy the products from the companies
who maximizing earning per share to their shareholders”. As for legal responsibility, 7 items were adapted from
Dato Samad (2008); Carrol (1991) such as “I will buy the products from companies that meet the legal
requirement for products safety”, “I will buy the products from companies that provide accurate products
information” and “I avoid buying products made using child labor”. Ethical responsibility is measured based on 4
items adapted from Elizabeh and William (1997). Questions such as “I really care whether the companies I
patronize have a reputation for ethical behavior”, “ I expect the companies that I deal with to act ethically at all
times”, “ I would go several miles out of my way to buy from companies that I knew to be extremely ethical”
were asked. As for the last element, philanthropic responsibility, it is measured based on 5 items adapted from
Shanka and Gopalan (nd); Carrol (1991) such as “When given a chance, I tend to switch to brands where a portion
of the price is donated to charity”, “I will buy the products from companies that hire people with disabilities” and
“I will buy the products from companies that help the needy”. Consumer buying behavior is adapted from Dusuki
and Yusof (2008). It is measured based on 4 items such as “I will buy the products from the companies which
committed to follow the laws and regulations”, “I will buy the products from the companies which
committed to moral and ethical manners” and “I will buy the products from companies which committed
to voluntary and charitable activities”. All the items in section C are measured using 5 point Likert scale.

10. Finding and Discussion

10.1 Reliability analysis

Cronbach’s coefficient alpha is the most commonly types of measure of internal consistency reliability. Alpha is
used when there have several Likert-type items that are summed to make a composite score or summated scale.
According to Sekaran (2003), Cronbach’s alpha value should generally be more than 0.60, reliabilities less than
0.60 are considered poor. The Cronbach’s alpha coefficient value for the variables in this study are all well above
0.60. This indicates that the items have reasonable internal consistency reliability. The reliability analysis reported
the following: Economic responsibility (Cronbach’s alpha = 0.821), legal responsibility (Cronbach’s alpha =
0.852), ethical responsibility (Cronbach’s alpha = 0.743), philanthropic responsibility (Cronbach’s alpha = 0.855)
and consumer buying behavior (Cronbach’s alpha = 0.818).

10.2 Descriptive Statistics and Analysis

Table 2 provides the summary of respondents’ demographic background. As shown in Table 2, out of the 350
respondents, 187(53.4%) are males and 163 (46.6%) are females. A majority of the respondents are Chinese
(58%), followed by Malay (25.4%), Indian (12%) and others (4.6%). As for the nationality, 94.3% of the
respondents are Malaysian while the internationals stand for 5.7%. A majority of the respondents are degree
holders (54%), followed by SPM holders (34.9%), master holders (7.7%), primary school leavers (2.3%) and
diploma holders (1.1%).

Table 2: Gender, Ethnicity, Nationality and Level of Education of the Respondents

Frequency Percent

Gender Male 187 53.4

Female 163 46.6

Total 350 100.0

Ethnicity Chinese 203 58.0

Malay 89 25.4

Indian 42 12

Others 16 4.6

Total 350 100.0

Nationality Malaysian 330 94.3

International 20 5.7

Total 350 100.0

Education UPSR 8 2.3

SPM 122 34.9

Diploma 4 1.1

Degree 189 54.0

Master 27 7.7

Total 350 100.0

Table 3 shows that 62.3% of the respondents are familiar with the term Corporate Social Responsibility and the
remaining 37.7% of the respondents reported that they are not familiar with the term.

Table 3: Familiarity of Corporate Social Responsibility

Frequency Percent

Familiarity of CSR Yes 218 62.3

No 132 37.7
 Total 350 100.0

Based on the data presented in Table 4, majority of the respondents reported that corporate social responsibility
can be defined as when company fulfils its ethical responsibility (61.1%), 17.7% of the respondents define
corporate social responsibility as when company fulfils its legal responsibility and another 17.7% of the
respondents think that corporate social responsibility is associated with charitable responsibility. A minority of the
respondents associate corporate social responsibility with economic responsibility (3.4%).

Table 4: Definition of Corporate Social Responsibility

Frequency Percent

Definition of CSR Economic 12 3.4

Legal 62 17.7

Ethical 214 61.1

Charitable 62 17.7

Total 350 100.0

Table 5 presents the sources of information regarding Corporate Social Responsibility. Majority of the
respondents obtain the information of corporate social responsibility through reading material (42%), followed by
online (25.7%), friends (25.1%), family (4%) and others (3.1%).

Table 5: Sources of Corporate Social Responsibility

Frequency Percent

Sources of CSR Family 14 4.0

Friends 88 25.1

Reading material 147 42.0

Online 90 25.7

Others 11 3.1

Total 350 100.0

Based on the data presented in Table 6, 96.9% of the respondents reported that they will support the products from
companies that engage themselves in corporate social responsibility activities. While the remaining 3.1% reported
that they will not or never support them.

Table 6: Supportive of Corporate Social Responsibility

Frequency Percent

Supportive of CSR Yes 339 96.9

No/Never 11 3.1

Total 350 100.0

10.3 Multiple Regression Analysis

Multiple regression is a widely used statistical technique in sociology. The result of multiple regression can
generate two things (Neuman, 2009). First, it tells how well a set of independent variables (economic
responsibility, legal responsibility, ethical responsibility and philanthropic responsibility) explain a dependent
variable (consumer buying behavior). Second, it tells the direction and size of effect of each independent variable
on a dependent variable (Neuman, 2009). Table 7 provides the model summary for the study. As shown in Table 7,
it reported a R Square of 0.322. This implies that 32.2% of variance in consumer buying behavior can be
explained by the four elements of CSR (economic responsibility, legal responsibility, ethical responsibility and
philanthropic responsibility).

Table 7: Model Summary

Adjusted R Std. Error of
Model R R Square Square the Estimate
1 .567(a) .322 .314 .45767

Table 8 points out which of the independent variables is the most important predictor in explaining the variance in
consumer buying behaviour. As shown in Table 8, ethical responsibility is the strongest predictor (B= 0.238; p-
value= 0.000) that explained the variance of consumer buying behaviour, followed by philanthropic responsibility
(B=0.080; p-value= 0.000). Thus, hypothesis 3 and hypothesis 4 are supported. On the contrary, economic
responsibility and legal responsibility do not contribute in explaining the variance of dependent variable as both
the p-value are greater than 0.05. Thus, hypothesis 1 and hypothesis 2 are not supported.

Table 8: Multiple Regression Analysis Result

Unstandardized
Model Coefficients Sig.

B Std. Error
1 (Constant) 1.491 .233 .000
Economic .048 .041 .249
Legal .054 .057 .339
Ethical .238 .052 .000
Philanthropic .080 .013 .000

10.4 Discussion

The findings of the descriptive analysis indicate that most of the Malaysians are aware of the practice of
corporate social responsibility in Malaysia. Majority of the people obtain the information pertaining to CSR from
the reading materials. In addition, most of the Malaysians associate the term CSR to ethical responsibility, which
they think is the most important element of CSR. Nethererless, most of the respondents reveal that they will
support the products and services from the companies that engage in corporate social responsibility activities. The
above findings show that Malaysians are sensitive with the act of the businessess and will respond accordingly
through their buying behavior.

As for hypothesis 1: there is a relationship betweeen economic responsibility and consumer buying behavior, is
not supported as the p-value is greater than 0.05. This indicates that economic responsibility is not a main factor
that influence consumer buying behaviour. Hence the result is different from the previous literatures supported
that economic responsibility is the most essential and basic responsibility compared to the other responsibilities
(Dusuki and Yusof, 2008). However, another study conducted by Herpen, Pennings and Meulenberg (2003)
argued that the economic responsibility did not relate well with other responsibilities. In addition, the study also
showed a nearly zero correlation between economic responsibility and consumer buying behaviour. This finding
is consistent with the current study that supported that there is no relationship between economic responsibility
and consumer buying behaviour.

Hypothesis 2: there is a relationship between legal responsibility and consumer buying behavior, is not supported
as well, as the p-value is greater than 0.05. This finding indicates that legal responsibility does not influence
consumer buying behaviour. This finding is not consistent with the previous literatures. The result can be caused
by the respondents’ perception towards CSR. According to McWilliams and Siegel (2001), corporate social
responsibility refers to actions that appear to further some social good, beyond the interests of the firm and that
which is required by law. Respondents might perceive that it is the basic responsibilities for the companies to earn
reasonable profit (economic responsibility) and comply with laws (legal responsibility). For CSR, it is one step
further; it is designed to deliver a sustainable value to the whole society and communities. Having such perception
in mind, it is likely that the respondents associate ethical responsibility and philanthropic responsibility to
corporate social responsibility; instead of economic and legal responsibilities.

As for hypothesis 3: there is a relationship between ethical responsibility and consumer buying behavior, is
supported with the p-value of 0.000(<0.05). The result indicates that ethical responsibility is the main element that
affects consumer buying behavior. This findings correspond with the previous literatures that supported that
consumers expect companies accomplish the ethical responsibility at all the times (Elizabeh and William, 1997).
Furthermore, Creyer and Ross (1997) found that consumers are willing to pay higher price for products with
ethical companies as it creates trustworthy in consumers.

Hypothesis 4: there is a relationship between philanthropic responsibility and consumer buying behavior, is
supported as well, with the p-value of 0.000(<0.05). The result indicates that philanthropic responsibility does
influence consumer buying behavior. The findings correspond with the past literatures. According to Rahim,
Jalaludin and Tajuddin (nd), philanthropy will not directly gain the economic return, but it can help to create and
built up the image or reputation of the companies, which in turn, resulted in increasing employee loyalty and
customer satisfaction. In summary, the variables are validated with the evidence from the results of this study and
supported by the past literatures.

11. Conclusion and Future Recommendation

This research like many others has some limitations but that also present opportunities for future research. Any
further conclusions drawn from this research must be considered tentative as it was based on a relatively small
sample of respondents (N=350) taken solely from Melaka and Kuala Lumpur. Moreover, the survey’s findings
were solely based on the respondents’ perception on the role of corporate social responsibility in influencing their
buying behavior. Therefore, the results could be biased. To remedy this weakness, future research is clearly
needed to examine the relationships of the variables utilizing larger and more diverse samples.

Besides that, this research mainly discusses on the four elements of CSR in affecting consumer buying behavior.
There might have other factors, such as company reputation or image and cultures, might also play a role in
influencing the relationships of the variables. Future researcher may consider studying these factors as part of the
mediator and moderator in the future studies.

In conclusion, this research serves as informational source to the industry especially the management. The
research finding provides information on consumers perception of CSR which in turn, affects consumers buying
behavior. By understanding the role of CSR and the current market trend, management can manage the company
more effectively, such as creating the right marketing strategy in order to stay competitively always in this highly
competitive market.

Acknowledgement

This paper is under research grant of the University.

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