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The impact of environmental Increasing

customer
uncertainty on increasing satisfaction
customer satisfaction through
corporate social responsibility 1209
Wenbin Sun Received 5 February 2015
Revised 31 August 2015
Helzberg School of Management, Rockhurst University, Kansas City, 13 January 2016
Missouri, USA, and Accepted 17 March 2016

Joseph M. Price
Belmont University, Nashville, Tennessee, USA

Abstract
Purpose – This paper aims to examine the relationship between corporate social responsibility and
customer satisfaction and evaluate the impact of this relationship on firm performance, specifically the
moderating impact of environmental uncertainty on the corporate social responsibility to customer
satisfaction relationship.
Design/methodology/approach – The authors constructed a panel data set by collecting data from
Fortune Magazine’s World’s Most Admired Companies and Compustat. The authors used two methods,
Newey–West and White–Cluster robust regressions, to estimate the empirical models.
Findings – The results from this moderating analysis of environmental uncertainty are largely
consistent with this study’s hypotheses. In particular, the authors find that corporate social
responsibility contributes to increased customer satisfaction for large firms, in highly competitive
environments and in highly dynamic industries. This paper also finds that in high growth
environments, corporate social responsibility can result in decreased customer satisfaction.
Research limitations/implications – The study is limited to environmental factors in the
examination boundary conditions. Researchers should broaden the moderators to include criteria such
as market orientation, marketing and/or operations capability.
Practical implications – The empirical results provide practitioners with insight to better translate
corporate social responsibility into higher levels of customer satisfaction.
Social implications – The empirical results support corporate social responsibility as a viable and
productive means of increasing customer satisfaction.
Originality/value – This study is the first that builds upon the work of Luo and Bhattacharya (2006)
and Saeidi et al. (2015) by examining environmental factors that influence the relationship between
corporate social responsibility and customer satisfaction. This research provides useful implications for
marketing theories as well as business practice.
Keywords Corporate responsibility, Social responsibility, Customer satisfaction
Paper type Research paper

1. Introduction European Journal of Marketing

Corporate social responsibility (CSR) influences the relationship between firms and Vol. 50 No. 7/8, 2016
pp. 1209-1238
stakeholders and has the potential to drive firm performance through customer © Emerald Group Publishing Limited
0309-0566
influence. CSR and customer satisfaction are related strategic drivers of firm DOI 10.1108/EJM-02-2015-0077
EJM performance (Luo and Bhattacharya, 2006). Customer satisfaction, satisfaction with the
50,7/8 overall consumption experience of a firm’s offering, is a central construct in marketing
and is known to drive firm performance (Fornell et al., 2006; Morgan and Rego, 2006).
CSR, firm initiatives and activities to address concerns and managerial obligations
concerning the wellbeing of society as a whole, is a marketing construct that has
received considerable recent attention and is known to impact stakeholders. CSR
1210 represents substantial firm investments which also has a direct impact on firm
performance through customer relationships (Rogers, 2013). Firms spend substantial
resources in addressing customer satisfaction (Durvasula et al., 2004) and keeping
customers satisfied is becoming increasingly complex (Tarasi et al., 2011). Satisfied
customers provide benefits to the firm by increasing consumer switching costs,
reducing marketing costs, promoting customer loyalty and enhancing firm reputation
(Fornell, 1992). While researchers know that CSR and customer satisfaction impact firm
performance, researchers know very little about the conditions which influence the
relationship between CSR and customer satisfaction. This paper extends the literature
in examining the relationship between these two important drivers of firm performance:
CSR and customer satisfaction.
There are compelling business reasons for firms to invest in CSR activities. Recent
industry research provides salient insight into the importance of the impact of CSR on
consumers. Reputation Institute’s 2013 Global CSR RepTrak® 100, a study of 55,000
consumers across 15 countries, reports that 73 per cent of consumers are willing to
recommend firms that are perceived to be delivering on CSR (Reputation Institute, 2013).
In addition, 92 per cent of consumers would purchase products, if given the opportunity,
with a social and/or environmental benefit and 67 per cent report having done so in the
past 12 months Cone (2013) (Cone Communications and Echo). With Fortune Global 500
firms spending US$15.2 bn a year on CSR activities, a better understanding of how CSR
activities impact the customer is needed (Smith, 2014).
The Luo and Bhattacharya (2006) study established the relationship between CSR
and customer satisfaction. This study found that customer satisfaction fully mediates
the relationship between CSR and firm market value as measured by Tobin’s Q and
stock return. The authors further examine the relationship with the addition of product
quality and innovativeness capacity as mediators and found mediated moderation. The
findings of this study indicate that the relationship between CSR and customer
satisfaction is moderated by these conditions. Specifically, Tobin’s Q and stock return
are directly influenced by the interaction between CSR and product quality, and Tobin’s
Q is directly influenced by the interaction between CSR and innovativeness capability.
This research seeks to extend the understanding of the CSR and customer satisfaction
relationship on firm performance in the examination of additional conditions,
environmental uncertainty, which may impact this relationship. Environmental
uncertainty has been found to moderate important marketing relationships: buyer–
supplier commitment (Norris and McNeilly, 1995), market orientation (Lonial and Raju,
2001) and customer and supply chain (Sanzo and Vázquez, 2011).
Environmental uncertainty refers to unpredictable external environmental
conditions that impact managerial decisions regarding future competitive situations
and consequences of firm behaviors (Milliken, 1987). Industries’ experience periods in
which levels of growth, dynamism and complexity vary, and understanding how each of
these environmental conditions impact the CSR and customer satisfaction relationship
is important. In this paper, this research builds upon the work of previous research Increasing
scholars (Luo and Bhattacharya, 2006; Walsh and Bartikowski, 2013; Saeidi et al., 2015; customer
Pérez et al., 2013) in the examination of important boundary conditions that influence the
relationship between CSR and customer satisfaction. Specifically, this research studies
satisfaction
the research question: under what environmental conditions does CSR result in
increased customer satisfaction?
This paper argues that certain environmental conditions strengthen the relationship 1211
between CSR and customer satisfaction and discusses the implications. Multiple data
sources are combined in the investigation of the impact of environmental conditions on
the CSR and customer satisfaction relationship. A review of the literature indicates that
the role of CSR in determining customer satisfaction is becoming more important to
researchers, and more research is needed to address the numerous studies which
indicate the importance of customer satisfaction (Gruca and Rego, 2005; Rego et al.,
2013).
This research is important to understand the implications of CSR on customer
satisfaction for both practitioners and researchers. Our research has several important
contributions to the existing marketing literature. This research extends previous
research in the examination of the direct impact of CSR on customer satisfaction. This
research adds to the research streams of CSR and customer satisfaction streams in
examining environmental uncertainty to further clarify this relationship. Our research
has several important implications for practitioners; it provides managers with insight
into understanding environmental uncertainty and conditions which impact their
decision to choose to deploy or withhold CSR activities.
The paper is organized as follows. First, this paper provides the theoretical
background and conceptual framework for this empirical study. Then, it argues that
environmental conditions moderate the CSR and customer satisfaction relationship and
develops the hypotheses. Next, the data, measurements and operationalization of
variables are described. Then, the data are analyzed, and the results are discussed.
Finally, the implications, limitations and future research directions are provided.

2. Conceptual framework and hypothesis development

Support for the positive direct relationship of CSR on customer satisfaction can be seen
in multiple studies. In a study on CSR and service brand, He and Li (2011) found that CSR
has a direct positive effect on customer satisfaction and an indirect influence on
customer satisfaction through brand identification. A cross-cultural study found a
direct positive relationship between CSR and customer satisfaction that was consistent
in the USA and Germany, but the outcome effects of customer satisfaction differ by
country. Customer satisfaction partially mediates the relationship between CSR and
behavioral outcomes in Germany but fully mediates the behavioral outcomes in the USA
(Walsh and Bartikowski, 2013). In another study, Saeidi et al. (2015) sample Iranian
companies and find a direct positive relationship with CSR and customer satisfaction
and that the relationship between CSR and firm performance is fully mediated by
customer satisfaction. Galbreath and Shum (2012), in a study of Australian companies,
also found a positive significant relationship between CSR and customer satisfaction
that fully mediates the relationship with CSR and firm performance. A positive
relationship between CSR and customer satisfaction has been found in research
concentrating on Taiwan (McDonald and Hung Lai, 2011), France (Lombart and
EJM Louis, 2014), China (Xie, 2014), Portugal (Loureiro et al., 2012) and India (Mishra and
50,7/8 Suar, 2010) across multiple industries. Previous marketing research provides an
understanding of the relationship between CSR and firm performance, as well as,
establishes support for CSR as a marketing resource (Luo and Bhattacharya, 2009; Sen
and Bhattacharya, 2001).
The resource-based view (RBV) of the firm (Barney, 1991; Penrose, 1959; Wernerfelt,
1212 1984) prescribes that the firm comprises heterogeneous resources and capabilities that
are imperfectly mobile, and the objective of the firm is to attain a competitive advantage.
Additionally, unique resources and capabilities are required for a competitive
advantage. Oliver (1997) presents a sustainable completive advantage which states that
socially responsible economic behaviors, like CSR, can be used to produce a sustainable
competitive advantage. The new institutionalism in organization theory (DiMaggio and
Powell, 1983, 1991; Scott, 1987) and RBV (Barney, 1991; Penrose, 1959; Wernerfelt, 1984)
are combined and reconciled to present CSR as a resource that is motivated to comply
with social pressures and optimize economic choices and that presumes resource
decision-making is a normatively rational process.
Furthermore, Hart (1995) produced a theoretical paper which applied the RBV
framework to CSR. In this paper, Hart asserts that for certain types of firms
environmental social responsibility can constitute a source of competitive advantage,
and these assertions were latter empirically supported (Russo and Fouts, 1997). Recent
research has supported the RBV perspective in the examination of CSR providing
resources to the firm (Gallego-Álvarez et al., 2011; Branco and Rodrigues, 2006;
Moura-Leite et al., 2012).
Institutional theory (Scott, 1987) and stakeholder theory (Maignan et al., 2005) are
used as a basis for understanding the impact of CSR on customer satisfaction.
Institutional stakeholder theory posits firms adapt and react to the beliefs of society to
continue to perform (Scott, 2001; DiMaggio and Powell, 1983). The instrumental
approach to stakeholder theory, which connects stakeholder interest and the firm
performance perspective, identifies profitability and financial performance as being
derived from a connection between customers and management. The normative
approach to stakeholder theory, which addresses moral or philosophical principles,
identifies CSR activities as the potential right action to take. Therefore, firms attempt to
increase customer satisfaction by addressing important social issues of their customers
because it is the right action to take for the greater good and to drive firm performance.
These theoretical perspectives are consistent with extant marketing research (Luo and
Bhattacharya, 2009; Sen and Bhattacharya, 2001; Maignan et al., 2005). Institutional
stakeholder theory supports firm level actions to customer level outcomes, providing
justification of firm level CSR activities to influence customer level outcomes such as
satisfaction.
We use instrumental stakeholder theory to argue that CSR contributes to customer
satisfaction by establishing customer relationships and meeting customer needs. We
combine stakeholder theory and RBV to argue that these strong customer relationships
provide valuable resources to the firm that are not easily replicated or duplicated by
competitors (Wang and Choi, 2013). The strength and impact of the effects of CSR on
customer satisfaction may be context dependent. Environmental uncertainty creates
certain contexts that may strengthen or weaken the effect of CSR on customer
satisfaction. We use needs gratification and dual-factor motivation theories (Herzberg
et al., 1959) to argue that CSR increases customer satisfaction by acting as a hygiene or Increasing
motivator under specific conditions of environmental uncertainty (Figure 1). customer
In the following subsections, this paper describes the main effect hypothesis as well
as the external and internal environmental factors which moderate the CSR and
satisfaction
customer satisfaction relationship hypotheses.

2.1 Corporate social responsibility and customer satisfaction 1213

Previous marketing research provides evidence of a causal chain relating CSR to firm
performance through customer satisfaction that suggests a firm’s CSR activities
promotes satisfied customers increasing firm performance (Luo and Bhattacharya,
2009). Customer satisfaction has been found to fully mediate the relationship between
CSR and performance outcomes (Saeidi et al., 2015; Galbreath and Shum, 2012). This
research uses the definitions from Luo and Bhattacharya (2006): “CSR is a company’s
activities and status related to its perceived societal or stakeholder obligations” and
“Customer satisfaction is defined as an overall evaluation based on the customer’s total
purchase and consumption experience with a good or service over time”.
The literature on the relationship between CSR and customer satisfactions does not
always support a positive significant relationship. There are contradictory findings in
the banking industry. For example, Bravo et al. (2009); Pérez et al. (2013) find that there
is no relationship between CSR perceptions and customer satisfaction. While, McDonald
and Lai (2011) and Pérez and Rodríguez del Bosque (2015) find a significant positive
relationship between CSR and customer satisfaction. These contradictory findings
underscore the need for additional research in this area.
CSR can influence customer satisfaction through several means. One, when viewed
from the institutional stakeholder theory (Scott, 1987) perspective, a firm’s activities and
actions, such as CSR, appeal to the multidimensionality of the consumer as not only on

Environmental Environment
Uncertainty Internal

Dynamism Firm Size

Competitive Firm Age

Munificence

Corporate H2 H3 H4 H5 H6
Social Customer
Responsibility Satisfaction
H1

Controls
SG&A
Diversification
Leverage Figure 1.
Cash Flow Theoretical
Time framework
EJM an economic level but also on multiple levels, based on the consumer being a member of
50,7/8 multiple stakeholder groups. Consumers care about the firm’s CSR activities, in addition
to the direct consumption experience, and may have higher levels of satisfaction with
socially responsible goods and services than socially irresponsible goods and services
(Daub and Ergenzinger, 2005). In general, customer satisfaction is likely to increase as
the firm meets the CSR expectations of their customers. Two, a firm’s CSR activities
1214 influence the consumer’s purchase intensions, both directly and indirectly through
consumer identification with the company (Pérez et al., 2013). Consumer identification
with the company is influential in the customer purchase decision because it can create
a good social image that can be used to generate customer loyalty (Lichtenstein et al.,
2004). CSR affects the consumers purchase intensions directly through attitudes that
form a customer to company identity relationship, that consumers can identify with on
a personal level and via the attractiveness of the products and indirectly through the
overall evaluation of the company (Sen and Bhattacharya, 2001; Brown and Dacin, 1997;
Bhattacharya and Sen, 2003). This influences the customer to purchase the offering,
which is a first step toward a satisfactory interaction with the firm. Three, the customer
satisfaction literature identifies perceived value as an antecedent to customer
satisfaction, and firms can promote perceived value through CSR activities (Mithas
et al., 2005). In addition, customer perceptions and attitudes toward the firm are more
positive when the firm has a history of CSR (Sen and Bhattacharya, 2001). Socially
irresponsible firms are likely to decrease customer satisfaction and generate negative
customer reactions (Mishra and Suar, 2010).
A firm engages in CSR activities to satisfy and address customer needs to be socially
responsible stakeholders. These actions directly and indirectly influence the customer
attitudes and perceptions in a positive manner and generate increased perceived value
from the firm’s offerings. Therefore, when a customer selects a product or service from
a socially responsible firm, they have more positive attitudes and perceptions regarding
the firm than from a socially irresponsible firm. CSR activities will generate more
satisfied customers. Consistent with extant research:
H1. CSR positively impacts customer satisfaction.

2.2 Environmental uncertainty

The positive impact of CSR on customer satisfaction depends partially on the ability of
the firm to shape customer perception in a positive manner. There are many factors
which might affect the translation of CSR into customer satisfaction. This relationship
may be impacted by uncertainty in the environment in which the firm operates. Broadly,
this research investigates two types of moderating effects, environmental uncertainty
and internal environmental factors, on the relationship between CSR and customer
satisfaction.
Drawing from needs gratification and dual-factor motivation theories (Herzberg
et al., 1959; Herzberg, 1966; Wolf, 1970), this paper classifies CSR into one of two
categories based upon the environment. One, CSR acts as a basic, low-order, hygiene
need, and two, CSR acts as a growth, high-order and motivator need. Furthermore,
“hygienes” are considered dissatisfaction-avoidance factors, and “motivators” are
considered satisfaction-producing factors. Hygienes produce a stronger negative effect
on satisfaction and a weaker positive effect on satisfaction; this is in accordance with the
negativity effect. Motivators, however, produce a stronger positive effect on satisfaction
and a weaker negative effect. CSR will have different impacts on customer satisfaction Increasing
depending on whether CSR is considered a hygiene or motivator. customer
Dess and Beard (1984) provide a concise framework for evaluating environmental
uncertainty using three environmental dimensions: environmental dynamism,
satisfaction
environmental munificence and complexity. These dimensions provide an industry
level view into the environment and can be measured using readily available data.
Dynamism refers to the rate and magnitude of change and instability in the environment 1215
that generates greater uncertainty in the market. Munificence refers to the availability of
resources to competitors in the industry as the industry grows. Complexity refers to the
concentration of competition in the industry and to the amount of information
processing required to make strategic decisions (Aldrich, 1979; Dess and Beard, 1984;
Keats and Hitt, 1988). Therefore, this research evaluates environmental uncertainty
using these three important dimensions which is consistent with current marketing and
management literature (Achrol and Stern, 1988; Bergh, 1998; Bradley et al., 2011; Ju and
Zhao, 2009).
2.2.1 Effect of environmental dynamism on the relationship between corporate social
responsibility and customer satisfaction. Environmental dynamism reflects the degree of
turbulence or instability of an industry. Environmental dynamism impacts the
competitive environment due to the difficulty of predicting external events (Aldrich,
1979) and is characterized by frequent changes in products, customer needs and
technologies (Miller and Friesen, 1982). During periods of high environmental
dynamism, CSR is considered a motivator, as having a larger positive impact on
customer satisfaction, for the following reasons. One, in highly dynamic environments,
the customization aspects of differentiation become more desirable to consumers
(Porter, 1980). CSR activities differentiate products from the competition as being
socially responsible and satisfying customer stakeholders’ CSR needs. CSR generates
product differentiation signals to the consumer at the firm and product level to be more
appealing to customers (McWilliams and Siegel, 2001). In general, CSR activities can
help the firm and their products stand out from the competition and can be more
appealing in highly dynamic environments. Two, CSR creates value through building
customer relationships using product and company identification (Peloza and Shang,
2011, Pérez and 2015). As customers identify more with the firm and product, customer
relationships become stronger, more established and able to withstand the dynamic
nature of the market in turbulent environments. Three, CSR was found to promote
customer trust which can increase customer satisfaction and loyalty (Homburg et al.,
2013; Martínez and del Bosque, 2013). CSR associations not only impact the evolution of
the product but also are likely to foster satisfaction, trust and loyalty through creating
aligned relationships (Martínez and del Bosque, 2013). CSR activities promote deep,
meaningful relationships between the firm and customers.
This research argues that CSR will act as a motivator in highly dynamic
environments providing more benefits to the firm in this environment as opposed to a
low dynamic environment. The Goll and Rasheed (2004) study is consistent with this
thought; CSR is a motivator in highly dynamic environments, finding that in highly
dynamic environments, discretionary social responsibility increased firm performance
by allowing the firm to gain support from various stakeholders and provided protection
from environmental unpredictability. This research posits that the relationship will
remain consistent when applied to increasing customer satisfaction. To address the
EJM opposite side of the motivator argument, in low dynamic environments, customer
50,7/8 preferences and products are relatively stable with customer relationships and
established satisfaction levels which would lessen the negative effects of a firm not
engaging in CSR.
In dynamic environments, firms can use CSR as a means to differentiate their
offerings in the market place, build customer relationships through identification with
1216 the company and products and promote deeper relationships that build trust and
loyalty. Therefore, it is expected that:
H2. The relationship between CSR and customer satisfaction will be stronger in
firms with high environmental dynamism than with low environmental
dynamism.
2.2.2 Effect of environmental munificence on the relationship between corporate social
responsibility and customer satisfaction. Environmental munificence represents the
degree to which the market capacity sin the environment will support growth and
provide slack resources (Dess and Beard, 1984). Munificent environments are evaluated
by the extent to which the market is growing or declining and represent the change of
demand in the marketplace (Shou et al., 2013). One impact of munificence is that it
provides firms, in the market, with additional resources through sales growth and
higher margins (Cyert and March, 1963). The abundance of resources reduces the
conflict for resources among competing stakeholders allowing resources to be used on
exploration activities and other activities which are not related specifically to
production (Dwyer and Sejo, 1987; March, 1991). This means that when resources are
plentiful, many firms may not be under financial pressure to obtain more profit, and
therefore they enjoy growth derived from the environment. For example, when a firm is
in a munificent industry, one which has higher profit margins, it would have more
freedom to deploy the resources or not deploy the resources. Demands on management
are lessened giving management the ability to explore, innovate, experiment in strategic
areas (Sharma, 2000). In highly munificent environments, firms may enjoy the growth
and profit margins from the environment and not feel the pressure to invest the
additional resources in CSR to foster growth, or many firms in the market may deploy
resources in CSR, thereby, lessening the benefits from CSR. Based on these perspectives,
CSR is viewed as a hygiene during periods of high environmental munificence, as
having a smaller positive impact on customer satisfaction.
In contrast, if the environment is not munificent, stakeholders within the firm will
compete aggressively to gain the limited resources that are available. Munificence and
hostility have been regarded as book ends along the spectrum (Aragón-Correa and
Sharma, 2003). Resources would likely be allocated in ways to help the firm better use
the limited resources in an effort to achieve better performance (Dwyer and Sejo, 1987),
possibly through CSR. Aragon-Correa and Sharma (2003) present the theoretical
argument that in highly munificent environments, competitors may obscure any
competitive advantages derived from proactive CSR because a competitor have the
resources to derived advantage through strategies unrelated to CSR. Martinez-del-Rio
et al. (2015) empirically examine, the relationship between CSR and financial
performance and found that CSR will produce the highest competitive advantage in low
munificence environments than in environments perceived as highly munificent. In
hostile environments, fewer firms will develop CSR because managers will lack the
necessary resources, making CSR more valuable and more difficult to imitate. In Increasing
addition, the relative cost of developing and maintaining complex practices, such as new customer
CSR activities in low munificent environments, might be more beneficial than in satisfaction
munificent environments. Therefore, in low munificent environments, fewer firms may
adopt a proactive approach to CSR. Consequently, the competitive advantage of
proactive CSR firms will be more sustainable.
CSR will be considered a motivator in environments with low munificence. Firms in 1217
low munificent environments may benefit more from satisfying concerned socially
responsible customers with investments in CSR. For example, in hostile environments
resources are scarce and stakeholders within an organization compete aggressively for
resource allocations (Staw and Szwajkowski, 1975). As a result, a firm in a low
munificent environment may need to seek a competitive advantage through CSR and
benefit from addressing the needs of socially responsible shareholders. Additionally,
CSR will gain a more unique competitive advantage because competing firms are less
likely to implement and maintain a CSR approach in a hostile environments. Therefore,
it is expected that:
H3. The relationship between CSR and customer satisfaction will be stronger in
firms with low environmental munificence than with high environmental
munificence.
2.2.3 Effect of environmental complexity on the relationship between corporate social
responsibility and customer satisfaction. Environmental complexity refers to the number
of competitors in the industry and reflects the degree of competition in a market. During
periods of high competitive intensity, CSR is considered a motivator, as having a larger
positive impact on customer satisfaction, for the following reasons. One, in periods of
high competition, firms engage in a differentiation strategy in efforts to improve
business performance (Deshpandé et al., 2012). During periods of high competitive
intensity, consumers have the opportunity to purchase from a larger number of firms,
and consumers can use firm level CSR activities to differentiate products and offerings
(Menon and Menon, 1997). Two, in highly competitive market environments, consumers
can more easily switch from one product to another, and firms that adopt a CSR
marketing perspective are perceived as more likeable and their offerings more
attractive, especially among consumers sensitive to CSR issues (Tsai et al., 2008). Three,
as the competition increases or intensifies, firms explore means of differentiation to
address their competitors’ offerings (Day and Nedungadi, 1994), and firms that are
responsive to the needs of their socially responsible customers are likely to perform
better (Jaworski and Kohli, 1993).
CSR is a form of product differentiation which can be integrated into the firms’ brand
differentiation strategy and marketing perspective (Siegel and Vitaliano, 2007; Bigne=
et al., 2012). By incorporating CSR into their strategy, the firm creates competitive
advantages by differentiating their products, as being environmentally or socially
responsible, in the customer mindset (Boehe and Barin Cruz, 2010). In addition, CSR can
contribute to product differentiation in developing a strong, positive corporate brand
(Hillestad et al., 2010). Firms may also build a reputation as being socially and
environmentally responsive to their customers (Fombrun and Shanley, 1990).
Fernández-Kranz and Santaló (2010) found that firms engage in more CSR when there is
EJM greater competition in the market, and that CSR is a strategic choice due to customers’
50,7/8 increasing pressure on firms to address social and environmental issues.
Thus, during higher levels of competition, CSR will produce a stronger positive
effect, act as a motivator, on customer satisfaction by differentiating firm offerings,
strengthen firm brands and produce more desirable products for firm customers.
Therefore, it is expected:
1218 H4. The relationship between CSR and customer satisfaction will be stronger in
firms with high complexity than with low complexity.

2.3 Moderating effects of the internal environment

Firm size and firm age are two easily accessible internal factors that are of interest in
evaluating internal environmental factors in marketing research (Rego et al., 2013; Luo
and Bhattacharya, 2009). CSR and customer satisfaction may be influenced by the
amount of firm resources, firm size and the extent to which the firm is knowledgeable
about customer’s prefaces, firm age. Firm size and firm age are used because they
are widely used in the marketing literature and provide an encompassing perspective of
the firm.
2.3.1 Effect of firm size on the relationship between corporate social responsibility and
customer satisfaction. Firm size represents a good approximation of resources and
capabilities available to management. This metric is routinely used in marketing
research, and many studies use firm size as a moderating variable in efforts to determine
the differences between larger and smaller firms in the market (Marinova, 2004; Ellinger
et al., 2003; Hong, 1995). Several studies have found significant differences in market
orientation (Hong, 1995), innovation (Cohen and Kleppler, 1996), channel management
(Teas and Sibley, 1980) and new service offerings (de Brentani, 1995) related to firm size.
Larger firms have greater resources and larger scales of operations to draw upon for
additional endeavors such as CSR. According to Institutional theory, firms that are able
to adapt and react to customers continue to perform well (Scott, 2001; DiMaggio and
Powell, 1983). The additional resources of larger firms support the capabilities of the
firm to both adapt and react better than smaller firms.
As large firms have the resources to collect and process more environmental data,
large firms have the resources to announce more frequently, disclose more information
and be more accurate than do small firms (Bayus et al., 2001; Sharma, 2000). These
additional resources may also enable firms to create an environmental strategy which
allows them to be more responsive to CSR (Sharma, 2000). The ability of the firm
to announce and disclose accurate and specific information regarding their CSR
activities will allow the firm to disseminate and align their message with their
environmental strategy, thus being more effective in their message to customers. By
relating the benefits of CSR to customers through effective messaging firms may
positively impact customer satisfaction.
While smaller firms may be more nimble and able to adapt more quickly than larger
firms, we argue that larger firms possess more knowledge stock of their customers’
needs and are able to address them better than smaller firms. Customers must also be
aware of the firms’ CSR initiatives, and larger firms tend to be more visible to public
media and stakeholders, including customers, than smaller firms (Henriques and
Sadorsky, 1996). This increased visibility is due in part to the attention from consumer
organizations and media exposure (Greening and Gray, 1994) which build a firms’
reputation. A firms’ reputation is considered an important driver of firm performance, Increasing
customer retention and repurchase behaviors (Boyd et al., 2010; Eberl and Schwaiger, customer
2005). Stakeholder theory indicates that CSR contributes to the reputation of the firm
and can enhance the reputation perceived by customers when there is a match to their
satisfaction
environmental concerns (Fombrun and Shanley, 1990; Brammer and Pavelin, 2006;
Maignan et al., 2005).
Larger firms have resources that enable them to adapt and react to the CSR needs of 1219
their customers. In addition, larger firms are more visible to customers and build CSR
reputations easier that smaller firms. As larger firms have more resources and
capabilities to identify and address customer CSR needs, larger firms should benefit
from CSR and strengthen the relationship between CSR and customer satisfaction.
Therefore:
H5. The relationship between CSR and customer satisfaction will be stronger for
large firms than smaller firms.
2.3.2 Effect of firm age on the relationship between corporate social responsibility and
customer satisfaction. Firm age represents the length of time the firm has been in
operation accumulating experience, knowledge and customer relationships. Older firms
have more established routines, knowledge and investment resources to draw upon for
CSR (Erhemjamts et al., 2013). Older firms benefit from well-established, embedded
routines constructed from prior operations (Nelson and Winter, 1982). In addition, older
firms possess a knowledge stock built from an accumulation of knowledge derived from
prior operating experiences which enhances the firm’s ability to acquire, interpret and
incorporate information for new operations and activities (Cohen and Levinthal, 1990).
These established routines, knowledge and relationships provide older firms with the
ability to match CSR to their current customer preferences.
Older firms generally have more absorptive capacity than younger firms because
they have more accumulated experience and resources (Penrose, 1959; Kotha et al.,
2011). Over time, a firm will accumulate absorptive capacity by building absorptive
capacity in one period which will be leveraged in subsequent periods (Cohen and
Levinthal, 1990). The ability to recognize the value of new information regarding
customer CSR preferences and priorities, assimilate these preferences and priorities into
CSR indicatives and derive customer benefits allow older firms to be more effective in
CSR activities. Older firms engage in innovation activities more frequently, but these
activities are less disruptive to the market (Sorensen and Stuart, 2000). This absorptive
capacity and the tendency for older firms to engage in more frequent innovation projects
leads us to believe that older firms will engage more effectively in CSR than younger
firms.
Institutional theory indicates that firms which are better at understanding and
matching CSR to the beliefs and priorities of customers will perform better (Scott, 2001).
The instrumental and normative approaches of stakeholder theory requires firms to
connect with customers and address their principles to increase firm performance
(Maignan et al., 2005). Older firms have more established routines and knowledge,
absorptive capacity and established relationships with customers. The more a firm
knows their customer’s preferences and the more ability a firm has at recognizing value
from CSR, the better that firm will be at matching CSR to their customer’s needs.
Therefore, as older firms will more effectively engage in CSR that more closely meets
EJM and addresses the needs of their customers, older firms will realize more customer
50,7/8 satisfaction from CSR activities:
H6. The relationship between CSR and customer satisfaction will be stronger for
older firms than younger firms.

1220 3. Data and measures

CSR and customer satisfaction relationship is studied by collecting data for a set of US
publicly listed firms from two data sources: Fortune Magazine’s World’s Most Admired
Companies (WMAC) and Compustat. The final data set ranges from year 2008 to 2011
and contains 505 observations from 187 firms. (Please see the “More Descriptive of
WMAC CSR Variable and Number of Observations in Each Industry Included in the
Analysis” Table AI for additional details on the sample).

3.1 Satisfaction
Satisfaction data are collected from the American Customer Satisfaction Index (ACSI).
The ACSI is a result of surveys from about 70,000 US consumers regarding their
comprehensive level of satisfaction. Some advantages of using ACSI data have been
raised by previous researcher such as Anderson et al. (2004). For example, ACSI
measures customer satisfaction that is experienced by customers instead of experts.
Further, the companies in ACSI list account for the majority of market share in their
industry sectors. Fornell et al. (1996) provided a detailed description of the nature,
purpose and applications of ACSI database.

3.2 Corporate social responsibility

CSR data are collected from Fortune Magazine’s WMAC. Fortune Magazine surveys a
large number of professionals (more than 10,000) annually in efforts to determine the
extent of firm CSR. Firms within specific industries are ranked based on their CSR
involvement. This data set is appropriate for several reasons. First, the reliability and
validity of this data source has been demonstrated in the literature (McGuire et al., 1988).
Second, this measure of CSR is widely adopted in marketing and management research
(Fombrun and Shanley, 1990; Houston and Johnson, 2000; Luo and Bhattacharya, 2006).
Third, this data source enables us to merge this CSR measure with objective data items
collected from the Compustat data source.
The WMAC direct measure of CSR is calculated to address two concerns with this
measure. First, the rank score is dependent on the size of industry. For example, the rank
“8” in a 16-firm industry means a middle place within the industry, but the same rank “8”
in an 8-firm industry denotes the last place within the industry. To address this issue,
the calculation transforms each rank from an absolute score to a relative distance score
from the industry mean. This estimation enables the firm score to be comparable across
different industries. Second, there may be a “halo” effect with this measure. Roberts and
Dowling (2002) indicate that directly using the CSR measure from WMAC is not
appropriate because the measure may have a “halo” effect created by firm performance.
Following Roberts and Dowling (2002) and Luo and Bhattacharya (2006), the CSR score
is regressed against firm performance [return on assets (ROA) and Tobin’s Q] to tease
out the “halo” effect.
3.3 Firm size and age Increasing
Firm size and age are collected from the Compustat annual data set. Firm size is customer
measured as the log-transformed firm asset size (Gruca and Rego, 2005). Firm age is
measured as the log-transformed number of years a firm has been listed on Compustat
satisfaction
(McAlister et al., 2007).

3.4 Environmental dynamism 1221

Quarterly industry sales is collected, within a four-digit standard industrial
classification (SIC) code, from the Compustat Quarterly database to measure dynamism.
Dynamism reflects the degree of sales turbulence within the industry. Quarterly
industry sales are aggregated over a period of three years, and then the standard
deviation over this three-year period is calculated. Then, the standard deviation is
divided by the mean of industry sales over the same quarters within the three-year
period. This operationalization captures the change in industry sales over the period
(Fang et al., 2008b).

3.5 Environmental munificence

Quarterly industry sales are collected, within a four-digit SIC code, from the Compustat
Quarterly database to measure munificence. Munificence essentially reflects the growth
rate of a specific industry. Keats and Hitt (1988) measure munificence by taking a
time-series regression that uses industry sales as the dependent variable and time as the
independent variable. The coefficient of the time variable therefore captures the growth
trend of the industry. The regression is formulated:

Yt ⫽ ␤0 ⫹ ␤1t ⫹ ␧t (1)

Where Y denotes the log-transformed aggregate industry sales, t is time. The antilog of
␤1 is the measure of munificence. Industry sales is regressed against time (quarters) over
a period of three years. Quarterly data have a major advantage of reflecting seasonal
variation in addition to yearly variation, and thus may be a preferred measure of
environmental factors when studying firm attributes and environmental influences.

3.6 Complexity
Individual firm sales are collected within a four-digit SIC code from the Compustat
annual data set to measure complexity. Complexity is frequently operationalized by
measures of economic concentration such as a Herfindahl index (Boyd et al., 1993). Each
firm’s market share is squared and summed within the industry to calculate the
Herfindahl index. This outcome variable measures the concentration rate. This
concentration rate is subtracted from 1 to obtain competitive intensity (Fang et al.,
2008a).

3.7 Control variables

Based on existing marketing literature, this research controls for several important
elements which are consistent with the CSR and satisfaction research (Rego et al., 2009,
2013; Luo, 2009; Luo and Bhattacharya, 2006). This research controls for firm marketing
expenditures, market diversification, leverage and performance. Customer satisfaction
may be influenced by a firm’s marketing expenditure (Luo and Bhattacharya, 2009).
This research controls for this effect by collecting selling, general and administrative
EJM expense (SGA) from the Compustat annual data set. To remove the size effect, SGA is
50,7/8 scaled by the firm’s asset size. This research controls for market diversification because
a firm that covers more markets than other firms may have certain advantages, such as
cross validation, or certain disadvantages, such as lower market depth due to diluted
marketing resources (Tripsas, 1997). The number of business segments that a firm
engages in is collected from the Compustat Business Segment database (Robins and
1222 Wiersema, 1995). To remove the industry effect, this research scales the number of
business segments by the industry mean. This research controls for firm leverage
because a firm that relies too much on external support may possibly yield negative
image on the firm’s capability to sustain (Aivazian et al., 2005). Long-term debt is
collected from the Compustat annual data set. To remove the size effect, long-term debt
is scaled by firm asset size (Rao et al., 2004). This research also controls for firm
performance. Current customer satisfaction may be related to the consumer’s
observation of the firm’s performance during the prior period, and also strong prior
performance is likely to provide more slack resources for the firm and thus enables
managers to better deploy their relationship programs that lead to higher customer
satisfaction rates (Mithas et al., 2005). Cash flow is used as the performance measure
because it represents the firm’s ability to influence the market. Cash flow from operating
activities is collected from the Compustat annual data set. To remove the size effect, cash
flow is scaled by firm asset size. In addition, the time effect is controlled for by adding a
series of time dummy variables.

4. Model and estimation method

Based on the empirical model, this study uses a robust regression to test the hypothesis. The
model is formulated as equation (2). Customer satisfaction (Satisfaction) is the dependent
variable. To avoid the reverse causality between satisfaction and firm performance,
Satisfaction (t ⫹ 1) is used as the dependent variable (Luo and Bhattacharya, 2009). The
main effects include CSR, firm size, firm age, environmental munificence, environmental
dynamism and competitive intensity. The control variables include SG&A, firm market
diversification, leverage, cash flow and time dummy variables. Further, the interaction
terms between CSR and the five main effects are included. The non-dummy individual
variables are mean-centered to mitigate multicollinearity:

Satisfactionit ⫽ ␤0 ⫹ ␤1 ⫻ CSRit ⫹ ␤2 ⫻ Firm Sizeit ⫹ ␤3 ⫻ Firm Ageit

⫹ ␤4 ⫻ Environmental Munificencetj ⫹ ␤5 ⫻ Environmental Dynamsimtj
⫹ ␤6 ⫻ Competitive Intensitytj ⫹ ␤7 ⫻ CSRit ⫻ Firm Sizeit
⫹ ␤8 ⫻ CSRit ⫻ Firm Ageit ⫹ ␤9 ⫻ CSRit ⫻ Environmental Munificencetj
⫹ ␤10 ⫻ CSRit ⫻ Environmental Dynamsimtj ⫹ ␤11 ⫻ CSRit
⫻ Competitive Intensitytj ⫹ ␤12 ⫻ SG & Ait ⫹ ␤13 ⫻ Market Diversificationit
⫹ ␤14 ⫻ Leverageit ⫹ ␤15 ⫻ Cash Flowit⫺1 ⫹ TimeDummies ⫹ ␮it, (2)

where i denotes individual firms, t denotes time (year) and j represents industry sectors.
Due to the panel structure of the data set, special cautions should be made when
determining the appropriate estimation method. The Wooldridge (2002) test for
autocorrelation indicate that autocorrelation is a concern (F ⫽ 26.0, p ⬍ 0.01). Therefore,
the Newey and West (1987) method is used to account for the autocorrelation. This Increasing
method has been proven to be especially appropriate in panel data models in which the customer
standard assumptions of regression no longer apply. This method is widely adopted in
marketing and management research involving time-series firm financial data (Morgan
satisfaction
and Rego, 2009). This estimation method produces Newey–West standard errors which
are autocorrelation and heteroscedasticity consistent (Newey and West, 1987). In
addition, to ensure the robustness across estimation methods, results are produced 1223
with a second method to account for the autocorrelation and heteroscedasticity: White
standard errors (Eckbo and Smith, 1998; Cecchetti et al., 1997).

5. Results
A stepwise regression model is used for testing the hypotheses. First, the model is run
with only with control variables. Then, the main effects are added, and finally the full
model is estimated. In general, the control variables are consistent across these steps.
The R2 of control model is 0.180, main effects model is 0.301 and full model is 0.415.
Adding the main effects and then the interaction terms significantly increase the
explanatory power of the models. Further, a partial F-test is conducted on the
contribution of the five interaction terms and the test displays a high significance (p ⬍
0.01). In addition, the variance inflation factors are checked, and they are all below 4.0,
which indicate multicollinearity is not a concern. Table I reports the variable descriptive
and contains the means and standard deviations, by construct, as well as, the
correlations between the constructs.
The main effects of the model produce the expected results. CSR has a strong positive
impact on customer satisfaction (b ⫽ 0.45, p ⬍ 0.01), supporting H1. This is consistent
with and confirms the prior findings from Luo and Bhattacharya (2006). Firm size also
has a strong positive effect of customer satisfaction (b ⫽ 0.62, p ⬍ 0.05), showing that
larger firms may have natural advantage in determining what activities are appealing to
customers. The results show a weak negative relationship between firm age and
customer satisfaction (b ⫽ ⫺0.25, p ⬍ 0.1). An interesting finding, when viewing the
main effects in the model, is that dynamism is positively associated with satisfaction
(b ⫽ 0.48, p ⬍ 0.05). The results show a strong negative relationship between
competitive intensity and customer satisfaction (b ⫽ ⫺0.59, p ⬍ 0.01) (Table II).
The results from the moderating analysis of the environmental factors are largely
consistent with the hypotheses. Evidence is found (b ⫽ 0.33, p ⬍ 0.05), supporting H2,
which predicts environmental dynamism’s positive moderating effect. The third
hypothesis (H3) predicts environmental munificence will negatively moderate the CSR
and satisfaction relationship. The findings of the empirical test support the negative
moderating influence of environmental munificence (b ⫽ ⫺0.24, p ⬍ 0.05); therefore, H3
is supported. Strong support for the positive moderating effect of competitive intensity
is found (b ⫽ 0.41, p ⬍ 0.01), supporting H4. Strong evidence that firm size positively
moderates the relationship between CSR and customer satisfaction is also found (b ⫽
0.34, p ⬍ 0.05), supporting H5. A moderating effect of firm age is not found (b ⫽ 0.19,
p ⬎ 0.1), and therefore H6 is not supported.
To address the non-normal regression, the model is evaluated by using another
accepted technique, White–Cluster robust regression, in addition to the Newey–West
method. The results from both methods are largely consistent. In addition to the model
tests stated above, a series of robustness checks are conducted. The external
 EJM
50,7/8

1224

Table I.

variables
Descriptives of
Variable M SD V1 V2 V3 V4 V5 V6 V7 V8 V9 V10

V1 Satisfaction 76.42 6.45

V2 CSR 0.13 0.48 0.05
V3 Firm size 16.86 1.23 ⫺0.03 0.02
V4 Firm age 3.39 0.65 0.08 0.04 0.30***
V5 Munificence 0.04 0.06 ⫺0.02 0.00 0.13*** ⫺0.04
V6 Dynamism 0.04 0.03 0.21*** 0.01 ⫺0.04 0.01 ⫺0.01
V7 Comp intensity 0.78 0.14 ⫺0.22*** ⫺0.02 0.00 0.05 ⫺0.04* 0.01
V8 SG&A 0.29 0.19 0.18*** 0.02 0.00 0.03 ⫺0.01 0.04* 0.11***
V9 Diversification 1.88 1.37 0.17*** 0.11*** 0.13*** 0.10** 0.08*** ⫺0.07*** 0.06** 0.22***
V10 Leverage 0.21 0.15 ⫺0.16*** ⫺0.10*** ⫺0.12*** ⫺0.19*** ⫺0.06** 0.00 ⫺0.01 ⫺0.04 ⫺0.15***
V11 Cash flow 0.06 0.09 0.16*** ⫺0.02 0.08*** ⫺0.14*** 0.02 ⫺0.14*** 0.06*** 0.11*** 0.06** ⫺0.03

Notes: * p ⬍ 0.10; ** p ⬍ 0.05; *** p ⬍ 0.01

 White–Cluster Newey–West
Increasing
Control variables Main effects Robust regression Robust regression customer
Variable Beta(t) Significance Beta(t) Significance Beta(t) Significance Beta(t) Significance
satisfaction
CSR 0.22 ** 0.45 *** 0.45 ***
(2.68) (3.09) (2.99)
CSR ⫻ Size 0.34 * 0.34 **
(2.01) (2.13) 1225
CSR ⫻ Age 0.19 0.19
(1.65) (1.35)
CSR ⫻ Env ⫺0.24 * ⫺0.24 **
Munificence
(⫺1.80) (⫺2.07)
CSR ⫻ Env 0.33 * 0.33 **
dynamism (1.85) (2.08)
CSR ⫻ Comp 0.41 *** 0.41 ***
intensity (3.22) (3.02)
Firm size 0.57 ** 0.62 ** 0.62 **
(2.68) (2.33) (2.60)
Firm age ⫺0.06 ⫺0.25 * ⫺0.25 *
(⫺0.47) (⫺2.02) (⫺1.73)
Env 0.05 0.15 0.15
munificence (0.32) (0.83) (0.96)
Env 0.37 ** 0.48 * 0.48 **
dynamism (2.26) (1.98) (2.10)
Comp ⫺0.34 * ⫺0.59 *** ⫺0.59 ***
intensity (⫺1.83) (⫺2.97) (⫺3.42)
SG&A 0.16 ** 0.29 ** 0.25 0.25
(2.14) (2.13) (1.58) (1.67)
Diversification 0.08 ⫺0.03 0.02 0.02
(1.07) (⫺0.26) (0.22) (0.24)
Leverage ⫺0.34 *** ⫺0.44 * ⫺0.40 ⫺0.40 *
(⫺3.38) (⫺1.89) (⫺1.63) (⫺1.92)
Cash flow 0.10 0.41 * 0.57 ** 0.57 ***
(1.16) (1.80) (2.82) (3.63)
Time dummy Yes Yes Yes Yes
Adj. R2 0.180 0.301 0.415 0.415
Table II.
Notes: DV: Satisfaction (t ⫹ 1); * p ⬍ 0.10; ** p ⬍ 0.05; *** p ⬍ 0.01; all VIFs are lower than 4.0 Analysis results

environmental moderators are also examined by expanding the industry classification

using a three-digit SIC as opposed to four-digit SIC codes, the patterns remained the
same. Additionally, environmental dynamism is operationalized using the Keats and
Hitt’s (1988) measure of dynamism [the antilog of the standard error of the coefficient in
equation (1), again the results remain consistent].
Four graphs are produced to gain insight from the moderating effects. The
moderating impact of firm size (Figure 2) displays a steeper slope of larger firm (solid
line) which indicates that CSR in larger firms has a stronger impact on customer
satisfaction than in smaller firms. The graph of the moderating impact of environmental
munificence (Figure 3) displays the pattern that was predicted. When firms are in a low
munificence industry (dotted line), CSR positively increases customer satisfaction more
than firms in a high munificence industry (solid line). Figure 4 illustrates that in low
dynamism environments, CSR only marginally increases satisfaction level (dotted line),
EJM
50,7/8

1226

Figure 2.
Firm size

Figure 3.
Munificence
 Increasing
customer
satisfaction

1227

Figure 4.
Dynamism

but in high dynamism environments, CSR significantly drives satisfaction (solid line). In
a similar vein, CSR appears to help firms significantly more when they are in a high
competitive market (solid line, Figure 5) than in a low competitive one (dotted line).

6. Discussion
Sustainability has been become an increasingly focused topic in marketing and
management researchers. Among sustainability fields, CSR is an especially important
avenue that marketing scholars are attentive to because CSR has the capability of
building close linkage between the firm and stakeholders. Marketing scholars realize
that CSR is not only a firm’s activities that benefit the society and yield social outcomes
but also a strategic asset that may enable the firm to acquire desirable external gains
such as customer satisfaction, which will eventually benefit the firm itself. So “doing
well by doing good” is well illustrated by marketing scholars such as Luo and
Bhattacharya (2006) who depict a strong positive relationship between CSR and
satisfaction. This paper illumines the importance of CSR when a firm faces varied
uncertain conditions and presents strong evidence that CSR indeed performs differently
when these conditions vary.
Contradictory findings in previous research indicate the need to examine the
conditions that impact the relationship between CSR and customer satisfaction. The
findings of this study may be helpful in explaining some of the inconsistent findings.
Other researcher have proposed other factor that influence this relationship. Walsh and
Bartikowski (2013) argue that cultural differences such as individualism, monochronic
time orientation and context account for variations in satisfaction formation and
customer behavior. Pérez and Rodríguez del Bosque (2015) propose that the type of
EJM
50,7/8

1228

Figure 5.
Competitive intensity

company (savings banks vs commercial banks) moderates the relationship to account

for the variation in previous findings.
These findings indicate large firms have higher customer satisfaction levels, and,
more importantly, large firms’ CSR has a stronger impact on customer satisfaction. Firm
age does not appear to be related to customer satisfactions levels and does not impact the
CSR and satisfaction relationship. This may be due to older firms having an
“organizational inertia” which prevents them from adapting to environmental issues
such as newer CSR initiatives (Hannan and Freeman, 1984). Older firms may also
become trapped in leaning new competencies, preventing the firm from realizing
benefits from CSR initiatives (Cohen and Levinthal, 1990).
Our research also shows that the impact of CSR initiatives differ in certain external
environments. An interesting finding is that firms in highly munificent environments do
not reap the benefits of customer satisfaction from CSR initiatives. In fact, findings
indicate a negative impact of CSR initiatives on customer satisfaction in highly
munificent environments. This differs from previous findings; specifically, Goll and
Rasheed (2004) found a significant relationship between financial performance and
discretionary social responsibility only in highly munificent environments, and Staw
and Swajkowski (1975) found that firms tend to engage in CSR in munificent industries.
Our findings indicate that CSR provides more customer satisfaction benefits in low
munificent environments, and that engaging in CSR activities in highly munificent
environments is detrimental. It may be easier to invest in CSR initiatives during high
growth periods, but customers may be more focused on product-related attributes and
not be as focused on the social aspects of the offerings. This finding could also be related
to customer preferences not being established in growing markets so firms have a
difficult time in aligning their CSR initiatives to the customer preferences. Good
customer relationships facilitate the knowledge required to get the most out of CSR Increasing
initiatives by fitting the CSR initiative to the customers’ environmental concerns customer
(Brammer and Pavelin, 2006).
A further look at the results yields insights about the true beneficial role of firm CSR.
satisfaction
All of the three moderating effects of environmental uncertainty factors are significant.
Also, CSR seems to be particularly strong when the firm’s environment has a low
growth rate, high competition and high dynamism. This effect of CSR further 1229
demonstrates that it represents an “insurance-like” investment that produces a better
firm image that assures firm stakeholders and helps the firm when cope with adverse
conditions in the market. Marketing theorists have supported that CSR should be
regarded as an important firm asset. Therefore, efficient resource management is likely
to make a better use of these assets and achieve better results. This finding is inherently
in line with Luo and Bhattacharya (2006) in that CSR benefits are greatly enhanced when
a firm has strong capabilities.

6.1 Implications for theory and practice

Our research adds to the existing marketing literature by further clarifying the
relationship between CSR and customer satisfaction. Built upon the previous found
relationship between CSR and customer satisfaction, this research extends the
understanding of this theoretical framework by providing a set of contextual factors
with which the function of CSR becomes more transparent. Thus, a more detailed
pattern of this effect helps to advance the existing knowledge involving CSR and
customer satisfaction.
This research also advances the RBV of firms. Previous research on CSR focuses
more on its strategy side strength. Our research not only acknowledges but also treats
CSR as a critical firm resource with which firms create an advantage by increasing
customer satisfaction. Our research also expands the understanding of environmental
uncertainty. The five moderators, size, age, munificence, dynamism and competition,
are largely independent from the firm’s will. The moderating effects of these
uncontrollable factors are different from the interactions between CSR and firm
controllable factors such as firm capability and resource allocation. This aspect of CSR
not only depicts its function in generating firm gains but also emphasizes CSR’s role in
aligning the firm strategy best suited to the internal and external environment. This
research also addresses McWilliams et al.’s (2006) review work, which indicates a salient
inconsistency in the CSR literature. This research’s moderating model calls for a new
thinking point, in that marketing theorists, when examining firm strategic activities,
CSR and customer satisfaction, should be aware of situational variables. Conclusions
cannot be quickly made without clarifying the relationship strength which varies due to
environmental conditions. Knowing such a clear pattern should assist marketing
researchers to formulate better models because, in many cases, the firm and industry
heterogeneity may cancel out effects which might be salient if the moderating variables
are considered.
In practice, when firms become larger, the departmental functions become more
diversified and more specialized. This size effect leads to a higher degree of separation
between CSR initiatives and marketing activities. These findings indicate the
significant moderating effect of firm size shows that the impact of CSR is particularly
important for large firms in terms of strengthening customer satisfaction. In light of
EJM these findings, marketing managers need to recognize the advantages of firm size due to
50,7/8 the resource scope and market position and, therefore, extend the coordination of CSR to
other functional departments and market territories, thus achieving intra-firm synergy.
In practice, the importance of CSR, satisfaction and the environment are well-known
to marketing managers. This research indicates that managers should evaluate their
environment, along the dimensions of firm size, munificence, dynamism and
1230 competitive intensity, in their respective industries when evaluating CSR initiatives.
Mangers should keep in mind other industries in which the firm operates in efforts to
align CSR initiatives across product lines and industries. Managers must allocate
resources carefully. For instance, a high-growth market may provide managers with
more resources with which to invest in marketing-related activities including CSR.
Effective management of these resources will allow for the CSR initiatives to be funded
when growth slows, which is a time that will provide benefit via customer satisfaction.
Our research finds that in low munificent environments, CSR will be more powerful in
leading to customer satisfaction. Our research also yields implications to managers in
facing turbulent market situations. When a market becomes more dynamic, managers
have to be continuously alert to the changing patterns in their external environment.
These results indicate that CSR is particularly powerful in predicting customer
satisfaction in turbulent market. Our research further shows that in a highly competitive
market, the firm can use CSR to realize a higher level of customer satisfaction from CSR
initiatives.
CSR’s ability to generate “insurance-like” assets may help the firm reduce
unpredictability in the market and appeal to their customers by infusing a positive and
emotional ingredient into customer relationships. This “insurance-like” asset may also
help managers in a firm with limited information processing capability. The choice of a
framework, including munificence, dynamism and competition provides a manageable
tool with which to understand the current situation.

6.2 Limitations and future directions

Studying firms using longitudinal secondary data has certain advantages such as using
objective measures, but it also has limitations to obtain certain variables that can only be
collected through perceptual data collection. Therefore, survey-based research could
supplement this research by providing a wider range of internal and external
moderators. Future research may consider controllable factors such as market
orientation, marketing and/or operations capability. Future research should focus on the
time effect of the model formulated in this study. For example, it would be worthy to
know for what type of firm and in what types of environment CSR will have an enduring
impact on satisfaction. This time-based moderation could produce a novel contribution
to the understanding of CSR, satisfaction and marketing aspect of the firm.

7. Conclusion
This research supports the impact of five moderators on the relationship between CSR
and customer. These five moderators are environmental munificence, dynamism,
competitive intensity, firm size and firm age and represent environmental uncertainty
and internal environmental factors that any firm will face. Our results show that four of
the five moderating effects are significant and have a meaningful impact on the CSR and
customer satisfaction relationship. CSR’s impact on customer satisfaction is stronger
when the firm is larger and when the environment has low munificence, high dynamism Increasing
and a high competition level. The results indicate that CSR is a manageable asset which customer
provides benefit to the firm when aligned with the environment and, thus, achieve better satisfaction
customer side outcomes.

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Pérez, A. and, I. (2015), “An integrative framework to understand how csr affects customer loyalty
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No. 3, pp. 571-584.
EJM Appendix
50,7/8
NO. of No. of
Industry (SIC) observation Mean SD Industry (SIC) observation Mean SD

10xx 6 0.23 0.62 42xx 5 0.22 0.31

1238 12xx 1 0.29 0.75 45xx 9 0.15 0.39
13xx 8 0.35 0.42 47xx 4 0.05 0.4
14xx 1 0.45 0.34 48xx 22 0.12 0.42
15xx 10 0.27 0.43 49xx 3 0.12 0.52
16xx 5 0.08 0.46 50xx 22 0.17 0.45
17xx 1 0.59 0.36 51xx 10 0.09 0.45
20xx 28 0.19 0.42 52xx 2 0.27 0.35
21xx 6 0.16 0.41 53xx 11 0.05 0.33
23xx 9 0.05 0.42 54xx 9 0.04 0.42
24xx 2 ⫺0.09 0.47 55xx 5 0.17 0.48
25xx 7 0.24 0.43 56xx 5 0.13 0.40
26xx 10 0.19 0.36 57xx 1 ⫺0.13 0.30
27xx 3 0.02 0.46 58xx 12 0.10 0.39
28xx 38 0.13 0.39 59xx 8 ⫺0.04 0.37
29xx 14 0.21 0.43 60xx 20 0.12 0.43
30xx 7 0.45 0.37 63xx 11 0.25 0.44
31xx 3 0.14 0.57 64xx 2 ⫺0.02 0.38
32xx 3 ⫺0.09 0.40 65xx 2 0.14 0.55
33xx 10 0.12 0.45 70xx 3 0.04 0.37
34xx 3 0.05 0.35 73xx 37 0.09 0.41
35xx 27 0.15 0.41 75xx 1 0.01 0.20
36xx 38 0.08 0.38 79xx 4 ⫺0.20 0.31
Table AI. 37xx 26 0.08 0.41 80xx 6 0.03 0.42
More descriptive of 38xx 13 0.02 0.37 87xx 5 0.16 0.38
WMAC CSR variable 40xx 1 ⫺0.36 0.25 99xx 6 0.34 0.38
and number of
observations in each Notes: The Mean and SD are values of the entire WMAC data set before merged to COMPUSTAT
industry included in variables; number of observation indicates the actual number of data points (firm-year) of each industry
the analysis included in our data set

Corresponding author
Joseph M. Price can be contacted at: dr.josephmprice@gmail.com

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