Magazine Spring 2011 Research Highlight

Does Social Responsibility Help Protect a Company’s Reputation?

When consumers encounter negative information about a company, its reputation for corporate social responsibility can help — but only sometimes.

Andreas B. Eisingerich and Gunjan Bhardwaj Reading Time: 3 min 

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Image courtesy of Flickr user p_a_h.

Negative information about businesses is omnipresent. Even much-admired businesses, such as Apple Inc., must deal with negative information, as Apple discovered when consumer complaints surfaced in 2010 about the antenna design of its iPhone 4. Negative information tends to spread faster than positive and, because of increased usage of social media and the Internet, businesses are likely to be confronted with more — not less — negative information about their companies in the future. While the spread of negative information may not always be under the control of a business, it can try to mitigate the potential damage from negative information in different ways.

An increasing number of companies invest money in corporate social responsibility initiatives, in part to build general good will for their organizations. However, we have not known how effective corporate social responsibility initiatives are in strengthening customer resistance to negative information, compared to other tactics that can enhance a company’s reputation — such as investing in product or service quality or customer care. Does doing good help protect a business’s reputation against negative information it may be confronted with in the future?

Not completely, some recent research of ours suggests. We conducted a study with Gaia Rubera, an assistant professor of marketing at Eli Broad College of Business at Michigan State University, and Matthias Seifert, an assistant professor of operations and technology at IE Business School in Madrid, to look at how customers reacted to negative information about a company. Detailed results from the study were published in the February 2011 issue of the Journal of Service Research.

RELATED RESEARCH

A.B. Eisingerich, G. Rubera, M. Seifert and G. Bhardwaj, “Doing Good and Doing Better Despite Negative Information? The Role of Corporate Social Responsibility in Consumer Resistance to Negative Information,” Journal of Service Research 14, no. 1 (February 2011): 60-75.

In the first part of our study, we surveyed 854 customers of a commercial bank about their opinions of the company and how they would react to negative information about it. The results of the survey showed that the company’s reputation for corporate social responsibility had a greater effect on consumers’ willingness to overlook negative information about the company than the company’s reputation for being customer-oriented (defined as the extent to which a business is viewed as being caring and attentive to customer needs) or for being oriented toward service quality. These results suggest that a dollar invested in corporate social responsibility initiatives would buy greater insurance against negative information than a dollar invested in either service-quality orientation or customer orientation.

Despite the positive impact of corporate social responsibility on customer resilience to negative information, the next part of our results tells a cautionary tale. In a second experiment involving 133 participants, we exposed customers to negative information of specific types — relating to a company’s corporate social responsibility, service quality orientation or customer orientation. In this second experiment, we found that a reputation for corporate social responsibility did not protect a service business against negative information related to service quality or concern for customers; what it did was help protect a company’s reputation more narrowly against negative information related to corporate social responsibility. Something similar held true for service quality and customer orientation as well. Customers who began with a high opinion of an organization’s customer care, for example, were less likely to be influenced by new negative information about the organization’s customer care.

In light of this research, businesses are warned not to expect investments in corporate social responsibility to provide blanket insurance against any negative information they may be faced with in the future. Furthermore, we found that corporate social responsibility is more effective in strengthening customer resistance to negative information when the majority of customers have low levels of service-related or product-related expertise. In the case of expert customers, however, a company’s reputation for good quality has a stronger influence on customers’ resistance to negative information than corporate social responsibility does.

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About the Authors

Andreas B. Eisingerich is an assistant professor in marketing at Imperial College Business School in London. Gunjan Bhardwaj is a project leader with the Boston Consulting Group in its Stuttgart, Germany, office.

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Comments (13)
felipe costa
If the reviews are constructive I support talk about product brands. However in the 20th century and earlier society was hostage to the marks and now in the 21st century the people have voice.
Satya Pullakhandam
Corporate Social Responsibilty is no substitute for Quality and Customer Service. Neither of them are tactics, first one as the name suggests it is every corporate responsibility to give back to society, and the second one is basic operating principle of every corporation for their reputation and very survival in this competetive market place. It is a big mistake if someone thinks that investing in CSR is a way to offset bad quality and customer service.
Reinder Koornstra
The key words should be social responsability, authenticity and conformance quality. If quality fails, the rest does not matter.
Andreas Eisingerich
Thank you for the lively debate and comments! As GT and Yeyi, noted the discussion about the role of social responsibility in a business is still going on and work on Tata and facebook is richly deserving. Too often firms either perceive CSR as not contributing at all or expectations regarding impact are overly optimistic, we agree with Kamall’s assessment. As we note in our JSR paper, CSR is not about advertising blitzes but it needs to be genuine, as Ginny and Kevin pointed out CSR will backfire in most cases unless it is seen as genuine efforts to make a positive difference. Ashish and Abel’s points are well taken. The role of CSR in improving stock performance and firm’s profits may not be straightforward but it does deserve our attention.
GT
a study on Tata group w'ld be worthwhile. Also, a small request to the authors - please try and engage the audience, if people are taking out time to share their insights, you can atleast thank them ;)
Kevin Moss
I am sorry, but I think this all wrong.  Good corporate responsibility is not about spending money on doing some arbitrary good as a protection for when things go wrong - that will backfire. As Ginny Cassidy says, corporate responsibility must focus on the company's core business.  Anything else is pure marketing/advertising spend.  A longer response on my blog at http://bit.ly/g6iNNJ
Yeyi
Social network websites make consumers to be less likely to be influenced by company's reputation for CSR.
If one of mine friends, who is an expert customer, provides negative WOM on his facebook because of the company's low reputation of service quality, I must be influenced even if I have a low level of expertise and the company does invest much on SCR.
Kamall Munir
I am not sure whether companies get what this piece is saying because so many of them fail to act accordingly.

Social responsibility is either seen as worthless or as a silver bullet. CSR is neither. As always the truth is somewhere in between. Interesting read.
Ruben
Nowadays information about firms (especially negative ones) are spread around the globe within hours. The authors explain this well with the Apple example.

The authors show with a huge survey that CSR is important, however they conclude that CSR is not a complimentary ticket for a firm to sweep any misdoing under the carpet.

I am sure that firms can save millions if they consider this research finding!
Abel Kabiru
Responsiveness and good corporate governance cannot be substituted by the best CSR initiatives. Majority of people will quickly overlook a company's past CSR activities when a significantly negative story develops. They focus more on how the company could have avoided or mitigated against the crisis and follow keenly on how the same company is handling the whole issue - and with what speed.
BP does a lot of CSR. However,BP's  initial fiddling with last year's oil spill in the Gulf of Mexico eroded substantial goodwill, that no amount of CSR can compensate.
Bottom line: do the right thing. when a crisis occurs, handle it expeditiously. But if its a big negative thing, all your past CSR activities will not count for nothing.
Tom Kuhn
This piece of advice would have saved my previous firm millions. 

Used to work for a very large oil company. And people actually thought of social responsibility investments as waste. As it turned out the firm got severely punished for it when things did go wrong because people did not perceive the firm as socially responsible in the first place.
Ashish Deodhar
This research really throws some very common sense result. If a company doesn't care enough for its customers, they will not have a good opinion of the company no matter what it does in terms of CSR.

A company I worked for recently is exceptional at customer service and stood out for its response to a major crisis brought about by a natural disaster. Whilst most other companies, including all the big airliners, took flack for their poor handling of the situation, we received nothing but good press throughout and after the crisis.

The company doesn't invest a single penny in CSR by the way.
Ginny Cassidy
What's missing in this analysis is that, when aligned with the Global Reporting Initiative (GRI) framework, Corporate Social Responsibility (CSR) directly addresses "tactics that can enhance a company's reputation," such as product and service quality and customer satisfaction.

The best CSR practices and programs go well beyond "building general good will" and focus on specific issues that impact a business's sustainability as well as its reputation. These run the gamut from quality and customer service to human rights, labor practices, and environmental risks and opportunities.