Recovering from crisis : the effect of CSR on consumer attitude : an exploratory study on CSR support in Portugal and the Netherlands

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RECOVERING FROM CRISIS: THE EFFECT OF CSR ON

CONSUMER ATTITUDE.

AN EXPLORATORY STUDY ON CSR SUPPORT IN PORTUGAL

AND THE NETHERLANDS

MASTER THESIS – FINAL SUBMISSION

Executive Master in Management Studies (part-time) – Marketing Track

Amsterdam Business School, University of Amsterdam

by

Victor Abreu Cabral

Student Number: 10317155

victorcabral@live.nl

Supervisor: Dhr. Vincent de Graaff

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Master Thesis – Victor Abreu Cabral Page 2 PREFACE

Writing this master thesis has been the last great learning experience during my master

program at the Amsterdam Business School. It was only December 2013 when I was sitting

outside on a terrace in Ericeira thinking about a research topic and now, six months later, I am

glad to say that this project has finished.

I must disclose that to accomplish this work I have had to put a lot of hard work and

dedication into it during these last six months. These months were extremely educational but

also included the occasional setback. However, now it is with a feeling of great

accomplishment that I proudly present you this thesis.

Evidently, I could not have done such a big project without the invaluable support of a

number of individuals: Vincent de Graaff, thank you very much for challenging me and

guiding me into the right direction every time I appeared to get off track. My gratitude also

goes to my colleagues at the HvA who were always prepared to brainstorm with me and were

always willing to help and review whatever I had produced. Moreover, without your help I

could not have collected my data in the Netherlands and therefore an enormous Thank you,

Spasibo, Obrigado and Shukran! A special thank goes to my colleague M. Rusthoven who

gave invaluable support throughout the entire process. My colleagues at Universidade

Católica do Porto who were extremely helpful and dedicated in helping me to collect my

Portuguese data. Without your help this thesis could not have been written. Muitissimo

obrigado! And last but not least I am eternally grateful to my family, thank you for all of your

unconditional support throughout this process.

Enjoy reading,

Victor Abreu Cabral

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Master Thesis – Victor Abreu Cabral Page 3 CONTENTS

ABSTRACT ... 5

1. INTRODUCTION ... 6

1.1 Research Question ... 13

2. THEORY AND HYPOTHESES ... 15

2.1 Hypothesis 1: The impact of CSR on consumer attitude ... 16

2.2 Hypothesis 2: Support for CSR in Portugal versus the Netherlands ... 18

2.3 Hypothesis 3 and 4: Society, Environment and the moderating role of culture ... 20

3. METHODS ... 27

3.1 Data collection and Sample ... 29

3.2 Procedure and Design ... 32

3.3 Independent, dependent and comparative variables ... 36

4. RESULTS ... 41 5. DISCUSSION ... 52 5.1: Managerial Implications ... 55 5.2: Future Research ... 56 6. CONCLUSION ... 58 REFERENCES ... 60

APPENDIX 1: QUESTIONNAIRES ENGLISH ... 65

APPENDIX 2: QUESTIONNAIRES DUTCH ... 70

APPENDIX 3: QUESTIONNAIRES PORTUGUESE ... 75

APPENDIX 4: INTERVIEW PROTOCOL ... 80

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Master Thesis – Victor Abreu Cabral Page 4 OVERVIEW OF FIGURES AND TABLES

FIGURES

Figure 1: Scores on the cultural dimensions of G.Hofstede: Portugal versus the Netherlands

Figure 2: Conceptual model

Figure 3: Research set-up

Figure 4: Research set-up including hypotheses

Figure 5: Estimated marginal means of company evaluations

Figure 6: Support for CSR and CSR domains in Portugal and the Netherlands

TABLES

Table 1: Analysis of variance results

Table 2: Descriptive statistics

Table 3: Quotations supporting analysis

Table 4: Means and standard deviations of dependent variables

Table 5: Correlations, means and standard deviations between two CSR domains and CSR

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Master Thesis – Victor Abreu Cabral Page 5 ABSTRACT

A corporate crisis has the potential to negatively affect consumer attitude, which often

results in threatening the image of a company. Based on theories that CSR can help as a tool

to recover from a crisis situation, an experiment highlights the role of cultural background in

determining the effectiveness of CSR activities. This thesis also explores the cultural

dimensions individualism/collectivism and masculinity/feminity as identified by G. Hofstede

and links them to CSR domains community support and environmental management.

Consequently four propositions were developed and tested. These hypotheses relate CSR to

consumer attitude as well as relate aspects of culture to support for CSR. 266 surveys and 16

interviews were conducted in the Netherlands and Portugal and the results showed that CSR

activities have a positive impact on consumer attitude after a crisis situation. However, the

overall support for CSR is higher in Portugal than in the Netherlands. Moreover, results

revealed that in a collectivist country, such as Portugal, a CSR domain with a collectivist

angle - community support - had higher support than in an individualist country, such as the

Netheralands. In contrast, it was found that in a feminist country, such as the Netherlands, a

CSR domain with a feminist angle - environmental management -, did not have higher

support than in a masculine country, such as Portugal. These findings have implications for

how multinational companies should implement CSR strategies in different cultural contexts

after they have been in a crisis sitiuation.

Keywords: CSR, MNEs, consumer attitude, corporate crisis, Portugal, the Netherlands,

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Master Thesis – Victor Abreu Cabral Page 6 1. INTRODUCTION

Probably one of the worst case scenarios for food and drink companies is the outbreak

of food poisoning which is associated with one of its products. For one of the largest

Japanese multinational dairy food companies, Snow Brand, this situation became reality in the

year 2000. Over 15.000 people came down with food poisoning after consuming milk or milk

related products produced by Snow Brand. The consequences for Snow Brand were dramatic

and at that time sales plummeted and consumer confidence vanished resulting in amongst

others the closure of several factories. After recalling the products most of the top executives

resigned. As a response to recover from this crisis situation one of the key components of

Snow Brand was to revitalize its approach to Corporate Social Responsibility (CSR). CSR is a

concept whereby companies integrate social and environmental concerns in their business

operations and in their interaction with their stakeholders on a voluntary basis (European

Commission, 2001). For Snow Brand this meant that they completely renewed their corporate

philosophy in which customer- oriented management is promoted and corporate governance is

enhanced. Moreover, they reestablished their corporate charter making it a guarantor of more

responsible corporate behaviour. Nevertheless, Snow Brand has had to endure a lot of

criticism by various stakeholders and as a result suffered severe reputational problems and is

curently still struggling to recover.

CSR: Engagement by Multinational Enterprises

Just like Snow Brand many large multinational enterprises (MNEs) have been

criticized of many things by many commentators. For instance, they have been criticized to

invest in poor and corrupt countries and walking away with the profits to satisfy investors in

developed countries. They have also been criticized to overly exploit natural resources and

trying to commecialize practically every natural resource. However, despite the past failures

and shortcomings of various MNEs some believe that MNEs, with their financial prowess

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Master Thesis – Victor Abreu Cabral Page 7

development and become solvers of the social, environmental and economic crises we face

(Sharma & Lee, 2011).

There is vast literature available on reasons why companies should engage in CSR.

Porter & Kramer (2006) for example state that CSR can be a source of opportunity, innovation and competitive advantage when it’s done on a strategic level. Margolis & Walsh (2003) showed that there is a positive relationship between corporate social performance and

corporate financial performance. Moreover, a proactive stance towards CSR instead of a

forced one, can lead to improved financial and social performance (Husted & Salazar, 2006).

Additionally, committing to CSR can be an opportunity to enhance the reputation of a

company bringing benefits to a variety of constituencies: investors, communities who engage

with CSR issues, media who report about the company and its initiatives, customers and

employees (Hoffman, 2004). Accordingly, there are many scholars who have written

literature addressing why CSR under certain conditions can lead to specific positive outcomes

for companies and by these means improving our understanding on this phenomenon.

CSR: The challenge to recover from a corporate crisis

A lot has been written about why and how companies should recover from a situation

of crisis. A corporate crisis is defined as an unexpected, non routine event that creates uncertainty and threatens an organization’s priority goals (Seeger, Sellnow, & Ulmer, 1998). The main issue for companies is that whenever they face crisis this often results in negative

media attention. Bond and Kirschenbaum (1998) showed that media has strong influence on

consumers and that media has more influence on consumer perception than

company-controlled communications. Consumers also tend to weight negative information more than

positive news in their evaluations, a phenomenon also known as the negativity effect

(Mizerksi, 1982). When firms appear negatively in the news, this threatens their social

legitimacy (Ulmer and Sellnow, 2000). Moreover, negative publicity also impacts negatively

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2007). Therefore, a company should manage a crisis appropriately to avoid any loss of

legitimacy or company support as a result of the negative publicity.

Murray and Shohen (1992) mention the Tylonel case as a ‘golden standard’ in

managing crisis. In their work they refer to fairness theory. This theory puts forward that

responses by companies to crises that diminish the likelihood of `Could´ and ´Would´

counterfactuals increase perceptions of fairness. Tylenol is a product from MNE “Johnson & Johnson” and in the early 1980s an unknown terrorist spiked capsules with cyanide after they had been manufactured. This resulted in 7 deaths amongst unsuspecting consumers.

Fortunately, for Johnson & Johnson the media coverage was mild in saying they had little

control, which suppressed the ´Could´ counterfactuals. However, they also took highly effective actions to counter any ‘Should’ counterfactuals. They recalled all capsules from every store in the US, offered a reward for tips regarding the murderer and introduced a new

triple-sealed package. According to the authors, the way Johnson & Johnson reacted to this

case was highly effective and now serves as a basis for many crisis communication strategies.

For companies it is therefore of utmost importance to have a corporate response to crisis that

suppresses any `Could´ and ‘Should’ counterfactuals in order to be perceived more fairly and

to be higher regarded. Moreover, if the company does not want to lose legitimacy by showing

to be irresponsible, dishonest, breaking the law or acting in a way that exhibits little concern

for the community, it should implement a crisis management strategy (Dean, 2004).

One of the ways to show concern towards society and addressing the ‘Should’

counterfactuals is by engaging in CSR activities. There is much literature available about

companies using CSR as a tool to recover from a situation of crisis. As mentioned earlier, a

crisis such as the one Snow Brand suffered, Johnson & Johnson, the BP oil spill in the Gulf of

Mexico or the sinking of the oil platform “Brent Spar” by Royal Dutch Shell can lead to

increased negative media attention. As a response to the negative publicity companies can

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examples of MNEs that are publicly accused of misbehavior impact how consumers see the

company and its products (Dean, 2004; De Raaf, 2000; Riezebos, 1996). Therefore, the

engagement in social and environmental activities represents a strategy to influence how

consumers view the company after a crisis. In the context of public negative disclosure it is

paramount for organizations to recover from a crisis and CSR can be a means for achieving

this. Brown and Dacin (1997) have shown that CSR can be used as an instrument to enhance

consumer’s behavioral intentions. Moreover, CSR is effective as a tool to communicate to

counter the negative impact of a crisis (van Hamme & Grobben, 2009) and can help to

increase the legitimacy of a company (Hooghiemstra, 2000). Especially if a company has a

long history of CSR, the implementation of CSR after a crisis will not raise suspicion and

show to be an effective tool (van Hamme & Grobben, 2009). Moreover, when companies

respond to the crisis with fairness and compassion for those affected, they will be more highly

regarded than companies that don’t (Dean, 2004). For that purpose it is important for firms to

consider CSR as a tool to recover from a crisis situation.

CSR: Cultural context

CSR is a relatively recent phenomenon and a result of the process of globalization in

which the need to protect human and environmental dimensions is increased. As a result

MNEs adopt CSR practices giving it a transnational dimension. CSR is therefore in several

ways linked with the process of globalization, and MNEs are in many respects drivers behind CSR. Nike has for example commited itself to enviromental stewardship with its “Reuse-A-Shoe” initiative in which it collects used shoes to transform it to grind material, which is used for the surfaces of all kinds of athletic fields, tracks and courts. In December 2004, HSBC

commited to neutralize 100% of its carbon emissions by purchasing green electricity and

offset certificates. Coca Cola has commited itself to community needs and priorities with its

foundation focussing amongst others on local education, “water stewardship” and the support

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suggests that CSR should be applied differently across cultural contexts (Jonker &Wegner,

2005). Consequently, considering the fact that today corporate activities transcend national

borders, it is important for businesses to know whether certain CSR activities have the same

effect on consumer perceptions in different country contexts. Despite the fact that when

MNEs centrally coordinate their CSR strategies this would stimulate efficiency, it is

questioned whether this approach leads to increased local effectiveness and legitimacy. A.

Muller (2006) for example found out that for MNEs who have subsidiaries in countries with

lower standards and perceptions of CSR the decentralization of CSR decision making will

lead to higher local CSR performance. This would imply that the effect of CSR activities on

attidudes towards a company is possibly moderated by social differences.

Within academia little has been researched on individual country level and on the

impact of CSR on the perception of consumers in different country contexts. Knowing this

will allow practitioners to know whether CSR strategies can be standardized on a

transnational level or should be adapted to individual countries by MNEs. This exploratory

study will therefore focus on analyzing the effect of engagement in CSR on consumer attitude

in two geographically-distant European countries. It will also explore in which country the

support for CSR is larger and which CSR domains have more consumer support in these

countries. The context created for the purpose of this research was a fictitious company that

has been in a situation of crisis. Since there are already valuable insights in that CSR can

work to recover from a crisis, this study will give a closer focus on what works in which

national context.

Addressing this gap this study will firstly examine if the engagement in CSR will

impact the attitude of consumers towards a company which is operating in the fast moving

consumer goods (FMCG) industry after it has been in a crisis situation. The choice for FMCG

is made due to the reason that this is an industry where consumers over time have become

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Secondly, this study will analyze if there is a difference in CSR support between

consumers in two culturally diverse and geographically distant European countries: Portugal

and the Netherlands. It goes beyond this exploratory study to demonstrate that there are

cultural differences. However, this research has the goal to reveal if there are different

reactions between consumers in two different countries to the CSR activities employed by

companies. The reason for the selection of these two specific countries is that within academia

the emphasis has mainly been on EU and US (Alniacik et al., 2011) and little has been

researched on individual country level. However, the EU has several countries each with its

own characteristics and one can therefore not treat the EU as one common area. Portugal and

the Netherlands are countries that are geographically and culturally distant from each other,

making it interesting to explore if perceptions of consumers towards CSR activities also

differ. Current research has indicated that the Dutch society is already known to be actively

engaged in CSR (Gjolberg, 2009) and Portugal is a country where CSR is increasingly

becoming more important (Branco and Rodrigues, 2008). However, little has been written on

reactions of consumers in different European countries to CSR activities, which this study

will explore.

To compare the Portuguese and Dutch culture and to create argumentations for the

hypotheses, the work of G. Hofstede (1984) will be applied who studied the impact of

difference in cultures on management practices. In his work he placed countries on the

following dimensions of culture: power distance, individualism-collectivism, uncertainty

avoidance, masculinity-femininity and long versus short-term orientation. G. Hofstede (1984)

already classified and acknowledged the cultural dissimilarities between Portugal and the

Netherlands and this study will therefore not measure this. This study focuses on applying

two of Hofstede’s dimensions -individualism/collectivism- and -masculinity/femininity- in

building up towards hypotheses H3 and H4. This study will therefore look at whether there is

an influential effect of the cultural background of the consumers on their support for CSR

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Finally, two different CSR domains will be introduced to analyze which domain has

more support in which country. These domains will be linked to two of the aforementioned

cultural dimensions, developed by G. Hofstede (1984). This study will therefore indicate if

the cultural background of consumers influence their support for CSR activities. This study

has been done by conducting a between-subject experiment (Saunders et al., 2011) in Portugal

and the Netherlands in which a situation of corporate crisis is presented to the respondents. In

one scenario the company does not respond with CSR to a situation of crisis and in the

alternative scenario the company responds with different CSR activities. Additionally, the

data that will be obtained from this experiment will be complemented with the results of 16

non-standardized one-to-one interviews (Saunders et al., 2011).

Theoretical and Managerial contribution

This research will contribute to theoretical knowledge in several ways. Existing

literature empirically proved that engaging in CSR after a crisis situation impacts the

perceived legitimacy of companies. Nevertheless, this study contributes by trying to

demonstrate the impact on consumer attitude. This study also gives new insights by revealing

if there are differences in CSR support between culturally diverse consumers (Portuguese

versus Dutch). Additionally, this study focuses on support in respective countries for

Community Support (CS) and Environmental Management (EM) as specific domains of CSR.

Corporate CS projects encompass a variety of forms and points of focus, ranging from

corporate support for training and educating adults and youth in local communities, to

nationwide programs helping welfare recipients get jobs, to globally focused efforts providing

aid to developing countries (Hess et al., 2002). Environmental Management by companies can

be seen as the management of the company activities and its interaction and impact on the

natural environment. These activities can range from reduction of CO2 emissions and

hazardous waste management to initiatives to preserve natural areas and to manage, protect,

and enhance wildlife habitat. There is little literature available on the impact of these domains

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for these practices and it will be tested amongst consumers in the countries Portugal and the

Netherlands. The results will give information about whether CSR can be applied to recover

from a crisis situation, if there is a difference between Portuguese and Dutch consumers with

regards to CSR support ánd what the support is by respective consumers for CS and EM. It

can be of specific relevance for MNEs who engage in CSR on a transnational scale to know if

CSR strategies can be generalized across countries.

As far as the consumers, a focus will be made on the age group of 18 to 30 years old,

also known as ´Generation Y´ or ´Millennials´. This choice is made because Millennials are

predicted to be a generation with a civic-minded attitude with a strong sense of community

both local and global (Howe & Strauss, 2009). Moreover, they are told to have idealistic

approach to social change whilst having a deep desire to make the world a better place

(Burstein, 2013). To achieve this, new institutions should be created or current ones should

require an adjustment of their approach to social and environmental issues.

1.1 Research Question

The aim of this study is to research what the impact of CSR is on consumer attitude after

a company has been in a situation of crisis. Moreover, it analyzes if there is a difference in

CSR support between consumers with a different cultural background (Portuguese versus

Dutch). Additionally, the overall support for two different CSR domains is measured. The

context that is created is a financial crisis within a company operating in the FMCG industry

with a focus on ‘Milllenials’ or ´Generation Y`. This study was done by conducting

exploratory research. Firstly, this paper starts by reviewing CSR literature and by defining

CSR more explicitly and it’s relation to consumer attitude. Similarly, a literature review is

done on CSR in Portugal, the Netherlands and on cultural classifications. Accordingly, a

conceptual model and hypotheses are developed which are tested. Afterwards, the results of

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on the findings and managerial implications for companies are given as well as areas for

future research. The main research questions that will be addressed in this study are:

“Does CSR have an effect on consumer attitude after a corporate crisis situation? Is there a difference in CSR support between Portuguese and Dutch consumers?”

The following part will provide the theoretical background and associated hypotheses for this

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Master Thesis – Victor Abreu Cabral Page 15 2. THEORY AND HYPOTHESES

The world economy has shown enormous growth over the last century and with

globalization new social and environmental challenges have arisen for companies. MNEs

have been strong drivers behind globalization and have largely contributed to economic

wealth. However, the economic growth which has resulted from globalization has come at the

expense of the natural environment and social well-being of poor nations (Stiglitz, 2007).

These environmental and social challenges ask from MNEs to become more socially responsible and demand for “sustainable development”. Sustainable development is the kind of development which can enable the present generation to meet their environmental, social,

and economic needs, without inhibiting the ability of future generations to meet their needs on

their own (World Commission on Environment and Development, 1987). There are several

terms used within corporations used for this responsible behavior like for example “corporate citizenship” or “corporate conscience” or “sustainable responsible business” but the most commonly used term is Corporate Social Responsibility (CSR). For this research a definition

of CSR will be applied which was used by the European Commission and which is stated as a

concept whereby companies integrate social and environmental concerns in their business

operations and in their interaction with their stakeholders on a voluntary basis (European

Commission, 2001).

Increasingly MNEs feel the responsibility to incorporate environmental and social

concerns in their activities. Moreover, pressure from institutional stakeholders such as NGOs

also push companies to engage in CSR activities and as a result companies show to be

increasingly responsive in their CSR strategies (Spar & La Mure, 2003). Apart from NGOs,

consumers also influence companies to engage in CSR through their evaluations and

purchasing behavior (Sen & Bhattacharya, 2001). Marquis et al. (2007) have shown that

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activism. Weaver et al. (1999) have demonstrated the relationship between media pressure on

management commitment to CSR practices and social performance. Their results show how

external expectations of legitimacy and top management commitments to ethics and to

financial, operational, and strategic concerns lead to integrated and easily decoupled forms of

corporate social performance (Weaver et al., 1999).

In this chapter a theoretical background on CSR and its impact on consumer attitudes

will be given. Moreover, CSR will be placed in a transnational context and a background on

several of its domains will be given. This theoretical review will lead to 4 propositions and

consequently a conceptual model is developed. First will be explained what the impact of

CSR on consumer attitudes is and whether and how it is effective as a response to a corporate

crisis. This will lead to our first hypothesis. Second, the effects of CSR across borders will be

discussed and what is already known about MNEs and local or global CSR strategies. This

will lead to our second hypothesis. Third, based on the work of G. Hofstede (1984) the

cultural dimensions will be introduced applied to Portugal and the Netherlands as will be the

CSR domains “Community Support” and “Environmental Management”. Consequently, it

will be theorized what the right fit would be between culture and the specific CSR domains.

This will be the argumentation for our third and fourth hypothesis.

2.1 Hypothesis 1: The impact of CSR on consumer attitude

With the current situation in which companies are increasingly being held accountable

for their social performance and with growing pressure by the media, it is becoming of utmost

importance to define how consumers respond to CSR initiatives after a firm has been in a

situation of a crisis, disaster or catastrophe. As mentioned previously there are countless

situations of large multinationals that have been put under media pressure for certain negative

activities (e.g. Royal Dutch Shell & the sinking of Brent Spar, Nike & allegations of using

child labour) and as a result companies may respond with CSR activities in order to

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CSR initiatives have shown to have an impact on how consumers evaluate the

reputation of a firm (Brammer & Pavelin, 2006), evaluate a firm and its products (Brown &

Dacin, 1997; Ellen, Mohr, & Webb, 2000; Sen & Bhattacharya, 2001) as well as their loyalty

towards a firm. Once a consumer knows about a certain activity and has a certain affect

towards it this could lead to attitude formation towards the company and its activities. In

academia there is a lot of discussion on what components determine attitude and commonly it

is accepted to state that they are: affect, behavior and cognition (Breckler, 1984). Affect is

seen as an emotional response to a certain environmental stimulus and beliefs, knowledge or

thoughts constitute the cognitive component. As K. Edwards (1990) states there is interplay

between cognition and affect and the interaction between these two are determinant in the

formation of attitudes. After all, when firms engage in CSR activities after a crisis situation it

is paramount for them to effectuate positive attitudes with consumers because according to the

theory of planned behavior, beliefs and attitude will lead to behavior mediated by behavioral

intentions (Armitage & Christian, 2003).

As far as behavioral, or more specifically purchase intentions most people are positive

towards socially responsible companies but only a small portion uses CSR regularly as a

purchasing criterium (Mohr. et al., 2001). It has also been shown that there is a positive link

between CSR and purchase behavior only when a variety of contingent conditions are

satisfied: when the consumer supports the issue central to the company’s CSR efforts, when

there is a high company/cause fit, when the product itself is of high quality, and when the

consumer is not asked to pay a premium for social responsibility (Bhattacharya & Sen, 2004).

Mohr and Webb (2005), have shown that that the environmental and philanthropical CSR

domains have a significant positive effect on evaluation of the company and eventually

purchase intent. Especially when people have the feeling that through their consuming

behavior they are improving the world, a stronger reaction to the information about the level

of social responsibility of the firm is witnessed (Mohr &Webb, 2005). Sen & Bhattacharya

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identification is enhanced, which positively mediates the responses to companies. Moreover,

communicating publically about your CSR initiatives can be a tool to defend your reputation.

However, companies that only recently started with CSR initiatives will face consumer

skepticism whereas companies with a long history tend not to (Vanhamme & Grobben 2009).

For firms that have been in a situation of a crisis it is also important to know that it has been

shown that the increase in social disclosures is a strategy to alter the public's perception about

the legitimacy of the organization (Hooghiemstra, 2000) and can therefore help to recover

from the crisis situation. Knowing that CSR influences how consumers evaluate a firm and

with the knowledge that CSR can be a tool to increase legitimacy after a situation of crisis the

following hypothesis will be argued:

H1: The implementation of CSR after a crisis situation will have a positive impact on consumer attitude.

2.2 Hypothesis 2: Support for CSR in Portugal versus the Netherlands

MNEs can choose to apply global CSR strategies in order to respond to international

challenges (e.g. climate change) and consequently taking an efficient global approach of CSR

practices worldwide. However, MNEs can also choose to adapt to local contexts and develop

decentralized CSR strategies that meet the expectations of local stakeholder groups. Prahalad

and Doz (1999) have given attention to strategic issues and whether companies should

respond to local situations or go for global integration. However, little attention is given to the

question whether this also applies to CSR strategies. Christmann (2004) showed that MNEs

focus on standardizing different environmental policy dimensions in response to pressures

from different external stakeholders. A. Muller (2006) has shown that decentralized

decision-making as far as CSR practices, may be associated with higher local CSR performance. Little

is known however about local effects of CSR practices on consumer attitudes to recover from

a situation of a crisis. Most of the research in the field of CSR has been mainly focused on

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and Europe is a region that has recently begun to adapt the language and practice of CSR

(Matten & Moon, 2008). Williams and Zinkin (2008) provide empirical evidence that when it

comes to punishment of companies who behave socially irresponsible there are differences in

consumer behavior across countries. Their study is conducted across 28 different countries in

different continents and within Europe they find for example that there is a significant

difference between Nordic countries (Great Britain and Germany) and Southern countries

(France and Spain).

It goes beyond the comparative investigation of this study to elaborate on a detailed

framework of national systems of CSR. However, there is a good reason to expect that there

are different national responses within Europe to CSR initiatives undertaken by MNEs.

Hence, for the purpose of this exploratory paper two countries, Portugal and The

Netherlands, are chosen to test whether cultural background plays a role in the support of

consumers towards CSR. Gjolberg (2008) describes the Dutch society as one who is known to

be actively engaged in CSR and as a country where CSR is already a more established

phenomenon. On the contrary, Portugal is a country where CSR is growing as a phenomenon

and where CSR is becoming more important with a strong concentration of CSR

engaged-companies in the area of Lisbon. The Portuguese economy is based primarily on SMEs and

these enterprises are an integral part of the local community; their success is related to the

capability to obtain legitimacy and consensus among the local stakeholders, like customers,

consumers, suppliers, employees, competitors, financial institutions, public authorities, and

community (Abreu et al., 2005). Therefore the integration of CSR by companies with their

communities can be a reason why CSR is becoming a growing concept in Portugal.

Additionally, based on the work G. Hofstede (1984) who compared national cultures, it can be

expected that the reactions to CSR initiatives after a situation of crisis will be culturally

dependent. This leads to the derivation of the following hypothesis:

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2.3 Hypothesis 3 and 4: Society, Environment and the moderating role of culture

Bhattacharya and Sen (2004) refer to numerous activities that are being undertaken by

companies and narrow them down to six broad domains: Community Support, Diversity,

Employee Support, Environment, Non-U.S. Operations and Product. When companies engage

in various types of CSR activities they relate to multiple stakeholders based on importance

and priority (Mitchel et al, 1997). A stakeholder is any group or individual that can affect or is affected by the achievement of an organization’s objectives (Freeman, 1984). For the purpose of this study the primary focus will be on customers because they are essential for the

long-term survival of a company (Clarkson, 1995). The purpose of this paper is to reveal if there is

a difference in support towards CSR activities between consumers in two culturally diverse

countries. This exploratory study will address two CSR domains which will be introduced in

this section, “Community Support” and “Environmental Management”. These domains will afterwards be linked to the cultural dimensions of G. Hofstede (1984), “Individualism / Collectivism” and “Masculinity / Femininity”.

CSR Domain “Community Support”

One of the important domains which are core in many CSR programs is the

responsibility towards society. Community Support (CS) involves corporate projects for

people in need (e.g. the poor, disabled, unemployed, and the sick) and the most popular are

financial and product charity donations and corporate volunteering (Öberseder et al., 2013).

Starbucks for example, a leading coffee company, tries with their `Global Months of Service`

to incentive partners to lead local community projects focused on individual needs of the

neighborhoods where they live and work. They also support social development projects with

the farmers living in underdeveloped countries that produce their coffee. These projects

encompass activities such as improving access to education and agricultural training,

microfinance and microcredit services, improving biodiversity conservation, and increasing

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actions to maximize shareholder value but also responding to and anticipating existing and

changing marketplace morality relevant to the firm. However, Brammer and Millington

(2003) state that general preferences and attitudes of society may play a significant role in

conditioning the ways in which community involvement initiatives are implemented within

companies. Therefore, it is important for companies to define whether their community

support activities show to be effective for the various stakeholders.

CSR Domain “Environmental Management”

Another important domain which is of extreme importance for corporations in a period

of climate change is the environmental domain. Climate can be seen as average weather and

looking at today's weather one can only conclude that the climate has changed (Metz, 2011).

For example the "... global average surface temperatures has gone up about 0.8 °C since the

pre-industrial era… " (Metz, 2011). Climate change has a planet scale boundary and is likely

to exhibit a global-scale threshold effect that once crossed, it will be very difficult to recover

(Whiteman et al., 2013). Therefore, MNEs who are drivers behind globalization should

respond with environmental management (EM) by focusing amongst others on designing

environment friendly products, hazardous waste management and controlling pollution.

Porter and Van der Linde (1995) state that it is not only imperative to reduce pollution

from a environmental perspective, but that it is also a sign that resources have been used

incompletely, inefficiently, or ineffectively. Pollution prevention is a first step, but a more

important second step is that companies reframe environmental improvements in terms of

resource productivity. Moreover, properly designed environmental standards can trigger

innovations that lower the total cost of a product or improve its value and ultimately, this

enhanced resource productivity makes companies more competitive (Porter & Van der Linde,

1995). In 2011 Porter and Kramer argue that capitalism has created an environment in which

businesses focus on the short term financial benefit as key measure for their performance

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still have (in)direct influence on the performance of the organizations even on the short term

financial measures. The solution they propose is a concept called shared value. “A shared

value perspective, instead, focuses on the improving growing techniques and strengthening

the local cluster of supporting suppliers and other institutions in order to increase and yield

product quality and sustainability” (Porter & Kramer, 2011). A good example they give is

from Nespresso, a leading coffee brand owned by Nestlé, who strongly rely on coffee grown

by small farmers in impoverished rural areas of Africa and Latin America. These farmers

often find themselves trapped in a cycle of low productivity, poor quality, and environmental

degradation that limits production volume. To address some of these issues Nestlé worked

intensively with its growers by providing farming practices and helping secure inputs such as

plant stock, pesticides, and fertilizers. This resulted in greater yield per hectare and higher

production quality which increased growers’ incomes, and the environmental impact of farms

shrank. Another result was that Nestlé’s reliable supply of good coffee grew significantly and

by these means shared value was created.

Besides creating shared value MNEs are also active in dealing with climate change by

means of operational improvements to reduce energy consumption. This can be in their

operational activities, transportation and even cost reductions in energy across sectors are

regions possible. Some examples of companies who claim to neutralize 100% of its carbon

emissions are Dell, Google, HSBC and the ING Group. Levy and Kolk (2002) argue that

MNEs can respond with market (based and high economic costs of Green House Gases

(GHG) controls) and non-market responses (based on precautionary actions to deal with

GHG). However, they state that different strategies depend on home country context.

Culture: Collectivism and Feminity

To define, compare and classify culture and country context one of the most renowned

models is the work from G. Hofstede (1984). In one of many of his works he derived a theory

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people in different countries in similar positions can experience the same type of problems but

the solutions to these problems are influenced by culture. His original theory proposed four

dimensions along which cultural values could be measured:

Power Distance (PDI): “The extent to which the less powerful members of institutions and

organizations within a country expect and accept that power is distributed unequally.”

Individualism-Collectivism (IDV): “The degree of interdependence a society maintains

among its member”

Masculinity-femininity (MAS): “The fundamental issue is what motivates people, wanting to

be the best (masculine) or liking what you do (feminine).”

Uncertainty Avoidance (UAI): “The extent to which the members of a culture feel threatened

by ambiguous or unknown situations and have created beliefs and institutions that try to avoid these.”

Later on, two other dimensions were added: long-term versus short-term orientation

(LTO) and indulgence versus restrain (IND). The scores of the chosen countries for this study,

Portugal and the Netherlands, are shown in Figure 1.

Figure 1

Scores on the cultural dimensions of G. Hofstede: Portugal versus the Netherlands

63 27 31 104 30 83 ₈₀ 14 53 44 0 20 40 60 80 100 120

PDI IDV MAS UAI LTO

Portugal The Netherlands

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The choice for the Netherlands was made because on the dimension of individualism

(IDV) the Dutch society, being a relatively wealthy European society, scores relatively high.

This makes it a very individualist society. In his work of 2005, G. Hofstede already mentions that there is a strong relationship between a county’s national wealth and the degree of individualism in its culture. With a score of 80 it is explained that the Netherlands has a high

preference for a loosely-knit social framework in which individuals are expected to take care

of themselves and their immediate families only.

Portugal on the other hand, being a relatively poor European society, scores very low

on individualism with a score of 27 making it a collectivist country. This is manifest in a close

long-term commitment to the member 'group', be that a family, extended family, or extended

relationships.

For the purpose of this paper the countries Portugal and the Netherlands were chosen

because within Europe they are two geographically distant countries. Moreover, after

comparing the scores on the different dimension of G. Hofstede (1984) it was also confirmed

that these countries are culturally distant. This paper has an exploratory nature and the cultural

dissimilarities will not be questioned. The purpose is to reveal if there are different reactions

of Portuguese and Dutch consumers to CSR activities. Therefore, from the 6 dimensions on

which both countries differ (figure 1) two of Hofstede’s dimensions will be highlighted (IDV

and MAS) and they will be linked to two different CSR domains and consequently tested on

consumer support.

A CSR domain that is very focused on “group” and society thinking is Community Support (CS). The expectations are that with regard to CSR domains with a collectivistic

angle like CS (caring about fellow citizens), Portuguese consumers (collectivist culture) will

feel more appealed to this than Dutch consumers. Formally:

H3: The engagement in community support by companies will have higher support of Portuguese consumers than Dutch consumers.

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Another of the G. Hofstede dimensions is masculinity versus femininity (MAS). This

dimension entails that the fundamental issue is what motivates people, wanting to be the best

(masculine) or liking what you do (feminine). Moreover, femininity is seen to be the trait

which stresses caring and nurturing behaviors, sexuality equality and environmental

awareness. The Netherlands scores relatively low on masculinity compared to Portugal

making it a feminist country. The scores are 14 (the Netherlands) vs. 31 (Portugal). Since

environmental management (EM) is focusing amongst others on reduction of energy usage

and consumption and has a focus on being environmental sustainable this leads to the

following hypothesis:

H4: The engagement in environmental management by companies will have higher support of Dutch consumers than Portuguese consumers.

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The conceptual model is presented in Figure 2, which shows the relationship between

CSR and consumer attitude towards the company. The analysis will be done amongst

Portuguese and Dutch consumers. Additionaly, within this exploratory research a secondary

layer in the model is made. CSR support will be measured in both countries and is

consequently subdivided in two domains, `Community Support` and `Environmental

Management`. These are CSR activities which can be implemented by firms. In this study the

overall support for these two domains will be measured in Portugal and the Netherlands and

this will not be linked to consumer attitude. The following part will provide the methodology

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Master Thesis – Victor Abreu Cabral Page 27 3. METHODS

A quantitative exploratory research was designed in order to examine the conceptual

model presented earlier. 266 students enrolled at Amsterdam University of Applied Sciences

(the Netherlands) and Universidade Católica do Porto (Portugal) volunteered to serve as

participants. The obtained data was compared in a systematic way for it to be generalized

between different populations. This study looked into a relationship between company CSR

engagement after a crisis situation and the consequential attitude of consumers in the age

category of 18-30 years. Additionally, this study tried to reveal if there are differences in

CSR, EM and CS support between Portuguese and Dutch consumers. The purpose of this

study is therefore not to show that there are cultural differences but to reveal if there are

different consumer reactions to CSR activities between Portuguese and Dutch consumers.

This can be of interest for MNEs which have been in a situation of crisis and want to restore

their image by employing CSR. The question remains which is the most effective tool in

which context.

Since the aim of this research is to explore the reactions and support of consumers to

CSR engagement and activities, field research was conducted and the quantitative data was

afterwards complemented by qualitative data. A method known as methodological

triangulation. Methodological triangulation is the use of at least two methods, usually

qualitative and quantitative, to address the same research problem (Morse, 1991). The choice

for simultaneous methodological triangulation is made in order to obtain complementary

findings that strengthen research results and contribute to theory and knowledge development

(Morse, 1991). Moreover, data triangulation will give a more complete understanding of the

correlation between the variables CSR engagement and consumer attitude. Because of the

deductive approach, quantitative methods took precedence and were complemented by

qualitative methods (Morse, 1991). Hence, hypotheses related to the impact of CSR on

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feelings towards companies were elaborated on by means of qualitative data. Therefore, two

sources were used to collect data: questionnaires and interviews.

This section will address how the research was conducted, it will give explanation

about the sample and procedure, the design and it will elaborate on the variables. Figure 3

gives the set-up of this research.

Figure 3: Research Set-up

The hypotheses that were formulated and which will be tested are shown in figure 4.

This gives the visualization of how the four hypotheses are integrated in the research design.

The first hypthesis tests the general impact of engagement in CSR on consumer attitude afer a

crisis situation. Hypothesis two tests the difference in CSR support between Portugal and the

Netherlands. Hypothesis 3 tests the difference in support for community support between

Portugal and the Netherlands and Hypothesis 4 tests the difference in support for

environmental management between Portugal and the Netherlands.

Figure 4: Research set-up including hypotheses

Control Gr. (Crisis Situation without CSR) Experiment Gr. (Crisis Situation with CSR) CSR The Netherlands CS EM H1 H2 H3 H4 Control Gr. (Crisis Situation without CSR) Experiment Gr. (Crisis Situation with CSR) CSR Portugal CS EM H1

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3.1 Data collection and Sample

For the purpose of this exploratory study, primary data was collected. Moreover, this

data needed to be appropriate in order to be able to answer our research questions. Therefore,

a relevant sample with fitting criteria needed to be selected. This part will firstly outline how

the data was selected and afterwards it will discuss the chosen sample design.

Data collection: Questionnaires and Interviews

Firstly, data was collected through 266 self-administered questionnaires. By using

self-administered questionnaires it could be ensured that the respondents would fulfill the

predetermined criteria which are business students in the age group of 18-30. This increased

the reliability of the answers (Saunders et al., 2011). To assess whether each item in the

questionnaire was essential for answering the research question, constructs were used from

earlier research and afterwards they were discussed with the thesis supervisor and other

research specialists. This ensured that in terms of content the questionnaire was valid

(Saunders et al., 2011). The disadvantages of using self- administered interviews were that the

reach was limited compared to on-line questionnaires and processing the results was more

time-consuming (Saunders et al., 2011).

After designing the questionnaire and before presenting it to the actual sample it

needed to be translated. The questionnaires were designed in English (Appendix 1) and

afterwards translated into Dutch (Appendix 2) and Portuguese (Appendix 3). The Portuguese

and Dutch versions were afterwards translated back to English by independent translators to

reveal if there were any inconsistencies based on cultural differences in phrasing in both

languages. After translation they were pretested on a group of 5 Dutch and 5 Portuguese

students living in the Netherlands. The group that pretested the questionnaire was not a

statistical sample. Considering the time constraint and the limited accessibility in the

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questionnaire on. However, this amount showed that some item wording needed to be

changed.

The second source for collecting data was conducting non-standardized one-to-one

interviews with 8 Dutch and 8 Portuguese students (from each country 4 students from the

control group and 4 from the experimental group). These students were asked to elaborate on

their opinions given in the questionnaires (Interview Protocol: Appendix 4) and were asked to

take the case with company X and the crisis situation in mind. The advantage of conducting

interviews was that a rich and detailed complementary set of data was obtained (Saunders et

al., 2011). A disadvantage is that the analysis of the data was time consuming. Moreover,

since the sample is relatively small it affects generalization or representativeness of larger set

of data (Gephart, 2004).

All respondents were told that this research was aimed to find out how consumers feel

towards companies who have been in a crisis situation. CSR was not mentioned in order to

avoid unconscious misrepresentation. Respondents were asked for their personal opinions and

were told that there was no right or wrong answers. They were reminded that confidentiality

is strictly respected and that their answers were purely used for the purpose of this research.

Sample

The population that is the focus of this study are Dutch and Portuguese consumers in

the age group of 18 to 30 years old, also known as ´Generation Y´ or ´Millennials´. This

choice is made because Millennials are predicted to be a generation with a civic-minded

attitude with a strong sense of community both local and global (Howe & Strauss, 2009).

Moreover, they are told to have an idealistic approach to social change whilst having a deep

desire to make the world a better place (Burstein, 2013).

To reach consumers in the age category of the population the choice was made to go to

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Porto. At these universities a full list of students was requested from their database which was

the sampling frame. These frames were not entirely accurate since there were students who

already had enrolled or disenrolled and were not in the system. This is an associated error that

was accepted.

From the sampling frame provided by both universities a sample was drawn of 150

Dutch (75 respondents control group and 75 experiment group) and 150 Portuguese (75

respondents control group and 75 experiment group) business students who were assigned to

fill out the questionnaires (confidence interval: 90%, margin of error: 8.2%). 88% of the

respondents who were approached agreed to participate (n=266).

This sampling method is known as a non-probability convenience method (Saunders et

al., 2011). This entails that not the entire Portuguese and Dutch population of consumers

between the ages of 18-30 were represented with this sample limiting generalization and

inference making impacting external validity. The results can possibly only be generalized

across educated consumers with a connection to business between the ages of 18-30.

Nevertheless, this sample was easy to reach, the response rate was high, subjects were readily

available and the results gave valuable insights in how Dutch and Portuguese consumers react

to CSR in the context of a crisis situation and what the support is for different CSR activities.

Moreover, undergraduate students are being confronted in their school careers with CSR

making this group relevant and aware of the topic. Additionally, since the questionnaires were

distributed amongst a convenience sample it was expected to have at least 80% response rate.

Non-responders were excluded. To confirm that the respondents fulfilled the context variable

of being `Millennials` demographics of the respondents (age) were measured with basic

descriptive statistics. The average age of the respondents was 21 years (s.d. 2.09) which meets

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3.2 Procedure and Design

To test the hypotheses a between-subject experiment was used with two conditions

(a crisis situation without any CSR engagement afterwards and a crisis situation with CSR

engagement afterwards). Students in the Netherlands and in Portugal were randomly assigned

to one of the two conditions. The control group was presented with a crisis situation without

CSR information and the experimental groups received CSR information (both CS and EM).

This experiment attempted to show if CSR is valued as a tool to recover from crisis in the

countries Portugal and the Netherlands. Secondly, this study revealed whether there are any

significant differences between Portuguese and Dutch consumers in their support for CSR and

the domains CS and EM. It goes beyond the set-up of this exploratory research to establish

which domain has a stronger effect in each country on company evaluations. However, with

this study the intention is to reveal if any differences in support can be detected. This will be

further discussed in the discussion section.

Respondents in both situations first read a text. All participants (control and test

group) received a text a text mentioning a fictive multinational enterprise, describing the

company and its products. The texts which were used were adapted from a paper by Dean

(2004).

CRISIS SITUATION. This company was explained to have been in a crisis situation

due to the former CEO stealing money which impacted the market value. The choice was

made to manipulate a crisis relating to financial performance since Fombrun et al. (2000)

stated that financial performance is seen as one of the central dimensions of corporate

reputation. Moreover, the focus on financial performance will make it less likely for the crisis

to be linked to social responsibility (Einwiller et al.,2006). Since this paper has an exploratory

nature, it was assumed that the type of crisis was perceived equally bad across both countries.

Whether that is the case should be addressed by future research and will be mentioned later on

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A fictive foreign company was used to ensure the absence of any a priori knowledge

of the company among respondents, which could influence results. The text that the control

group read said:

“Company X (we will call it that instead of its real name) is a leading manufacturer in soft drinks, toiletries and grocery items. In 2011, the company marked the highest revenue, income and market share in Europe among its competitors. However, in 2012, the CEO of the company was alleged for stealing company money which he used to buy amongst others a yacht and several sports cars. This negative news resulted in an enormous drop in stock prices which meant that its investors lost practically most of their money. The CEO had to resign and still faces charges in court.

Company X responded to these events with a press conference, releasing the following statement: “We at company X are very sad to learn that the activities of our former CEO led to a drop in shareholder value. Shareholder value has always been our main focus and we understand that now is not the time for excuse making but for actions to restore investor confidence. Despite the advice from Consultancy firm Y (we will call it that instead of its real name) to focus on Corporate Social Responsibility (CSR) with community involvement practices and environmentally sustainable practices we have decided to take the following steps. Firstly, we will do our utmost to hire a new highly respected CEO who will be responsible to restore the position of market leader within the industry. Secondly, we are going to appoint a new board of directors to oversee the activities of the entire organization. Finally, we will have a new audit committee to ensure that there is no doubt in any of the company’s expenditures. We take these steps because we consider the trust of our shareholders

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Master Thesis – Victor Abreu Cabral Page 34 to be our most important asset. Moreover, we believe that these steps

are sound investments that will ensure long-term growth of the company”

Participants in the experimental groups read a similar text. However, the way for company X

to recover from the crisis situation was with engagement in different types of CSR activities

(CS and EM). The information from the websites of two of the world’s largest FMCG

companies (P&G.com and Unilever.com) was used to pick two CSR activities and adapted to

represent a Community Support (CS) and Environmental Management (EM) CSR activity.

All participants in the experimental groups read:

“Company X (we will call it that instead of its real name) is a leading manufacturer in soft drinks, toiletries and grocery items. In 2011, the company marked the highest revenues; income and market share in Europe among its competitors. However, in 2012, the CEO of the company was alleged for stealing company money which he used to buy amongst others a yacht and several sports cars. This negative news resulted in an enormous drop in stock prices which meant that its investors lost practically most of their money. The CEO had to resign and still faces charges in court.

Company X responded to these events with a press conference, releasing the following statement: “We at company X are very sad to learn that the activities of our former CEO led to a drop in shareholder value. Shareholder value has always been our main focus and we understand that now is not the time for excuse making but for actions to restore investor confidence. We have decided to take the following steps. Firstly, we are going to appoint a new board of directors to oversee the activities of the entire organization. Secondly, we will have a new audit committee to ensure that there is no doubt in any of the company’s expenditures. Finally, we will hire a new respected

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Master Thesis – Victor Abreu Cabral Page 35 CEO who is known to take social responsibility and sustainability

extremely seriously. This CEO will be responsible to restore the position of market leader within the industry. We take these steps because we consider the trust of our shareholders to be our most important asset. Moreover, we believe that these steps are sound investments that will ensure long-term growth of the company” Since the new CEO was hired one of his focus points has been to change the company’s approach to Corporate Social Responsibility (CSR). This means that company X wants to behave more responsibly towards people and the planet. He introduced for example a new program called “Tackle Climate Change”. With this program company X wants to reduce the emission of GHG (Greenhouse Gases). The target is set on having GHG emissions reduced with 70 % by the year 2020.

He also managed to have company X starting a partnership with “Habitat for Humanity”. With this partnership the company makes an effort to provide decent, safe and affordable places to live for families in need by sponsoring home builds in Portugal (Netherlands). Company X also teams up as volunteers to build, clean and repair homes in every region in Portugal (Netherlands) where it conducts business.”

After reading each text, respondents in the control and experimental groups filled out a

questionnaire that measured the dependent variables (consumer attitude towards company X

and support for CSR causes which was consequently split up in attitude towards community

support and environmental management). Participants learned afterwards that the company