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ELSEVIER
Using a Hierarchy-of-Effects Approach to
Gauge the Effectiveness of Corporate Social
Responsibility to Generate Goodwill Toward the
Firm: Financial versus Nonfinancial Impacts
Keith B. Murray
BRYANTCOLLEGE
Christine M. Vogel
VOGELASSOCIATES
Corporate social responsibility (CSR) has long been widely acknowledged
as something business should be more concerned with. However, few
management models that encourage this to happen and by which managers
can assess the impact of such activity on either stakeholders and~or the
firm have been offered. This article describes why and how prosocial
activities of the firm should be managed--and evaluated--in a conscious
and explicit manner using another accepted, market-relevant paradigm.
A management perspective that encourages the evaluation and control of
prosocial activities by business using a hierarchy-of-effects technique to
gauge impact on attitudes and behaviors of stakeholders is offered. Pilot
study data derived from a controlled experiment support the view described
and illustrate how goodwill can be evaluated using an affects approach
to CSR. © ] 9 9 7 Elsevier Science Inc. j BUSNRES 1997. 38.141--159
he role of the corporate social responsibility (CSR)
programs in U.S. companies is potentially very important and frequently pivotal to the success of the firm
(Drucker, 1954, 1977; Ferrell and Gresham, 1985; Robin and
Reidenbach, 1987). However, the reluctance of many firms
to develop an explicit CSR program suggests that these types
of activities represent, in effect, a cost-intensive and problemfraught effort with no obvious payoff for the firm. Indeed,
compelling evidence of prudent management practice technique, strategic relevance, and expected benefit to the firm-financial or otherwise--of CSR has not been amply demonstrated.
Considerable research on whether prosocial firms experi-
T
Address correspondence to Keith Murray, Department of Marketing, Bryant
College, Smithfield, RI 02917.
Journal of Business Research 38, 141-159 (1997)
© 1997 Elsevier Science Inc.
655 Avenue of the Americas, New York, NY 10010
ence a financial payoff for being socially responsible (Arlow
and Gannon, 1978; Abbott and Monsen, 1979; Alexander and
Buchholz, 1978; Cochran and Wood, 1984; Aupperle et al.,
1985; Lehman, 1985) has produced anomalous findings. The
term "prosocial" comes from social psychology and management literature and describes voluntary behavior that is expressly intended to benefit others with no apparent probability
of immediate extrinsic reward to the benefactor [see Brief
and Motowidlo (1986) or Organ (1988)]. While conceptually
founded in the behavior of individual actors within an organization, this term is useful in describing corporate actors who
seek the well-being and satisfaction of societal stakeholders
without the proximate prospect of financial gain. Thus, the
term prosocial is used to be, at a minimum, functionally
equivalent of behavior otherwise referred to as corporate social
responsibility. In short, viewing prosocial corporate endeavors
as integral to the business operations and a vital part of the
firm's offerings is not understood nor fully appreciated by all
scholars and managers.
The effectiveness of prosocial activities of the firm is predicated on the expectation that CSR plays a fundamental role in
cultivating corporate goodwill on the part of key stakeholders
(Blair, 1986; Sen, 1993; Black, 1994). However, the critical
nature of external goodwill to the smooth operation of the
firm (Emery and Trist, 1965; Freeman and Reed, 1972) has
been long noted, underscores the relevance of CSR to an
organization's success, and points to the need for specific
strategic management and evaluation techniques. While methodologies that provide business with a framework to effectively
evaluate and manage the public image of the firm and its
conventional product offerings exist, such methodologies have
yet to be applied to the external evaluation of the organization's
CSR activities and goodwill strategies.
ISSN 0148-2963/97/$17.00
PII S0148-2963(96)00061-6
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Given the importance of the sociopolitical environment in
the long-term success of the firm, this article examines a
management process that targets key stakeholder groups with
relevant, issue-focused social programs and proposes, in effect,
a "market" approach to cultivating public goodwill. Specifically, a hierarchy-of-effects framework is used to describe the
impact of CSR on goodwill. Experimental data that demonstrate the efficacy of this technique as well as non financial,
individual-referent effects of prosocial activities by the firm
on one or more potential constituencies are offered.
A Context for Managing Goodwill
"Exchanges" between the Firm
and Stakeholders
In terms of a practical definition, a stakeholder is any entity,
typically (but not necessarily) outside of the firm, that impacts
the organization and that the organization seeks to influence.
Generic stakeholders include customers, competitors, the financial community, government and regulatory agencies, and/
or political-activist groups. Since it has long been recognized
that one or more of these groups can significantly alter the
viability of the firm (Dill, 1958), knowledge of relevant stakeholder groups is of considerable interest to business. The
relevance of pertinent stakeholders is dramatized when one
views the firm's environment in terms of concentric elements
including its competitive, political/regulatory, and sociocuhural venues of operation. To the degree that the task environment of the firm impinges on one or more of these external
realities, the opportunity for individuals in that environment--stakeholders acting either informally or formally, individually or collectively--to positively or negatively affect the
operation of the organization is readily apparent (see Montanari et al., 1980; Fischer, 1983; Dess and Beard, 1984).
For example, labor groups can dramatically affect operations;
similarly, external groups can rally political and regulatory
support or obstruction. Clearly, the firm's relations with all
key stakeholder groups should be a primary concern of management.
How the firm is viewed and evaluated by stakeholders
underlies all subsequent interactions. Whether the organization is perceived to be ethical and socially responsible is a
matter of managerial interest (Freeman, 1994; Langtry, 1994;
Schlossberger, 1994). Indeed, CSR offerings represent an important "exchange" between the firm and its societal publics,
or stakeholders. This exchange is one in which the firm offers
something of value--typically a social benefit or public service-to an important constituency and, in turn, anticipates
receiving the approval and support of key individuals and/
or sociopolitical groups in its environment. In view of this
transactional framework, it is reasonable to expect managers
to look to the firm's constituencies and stakeholders when
determining and planning CSR activities.
K. 8. Murray and C. M. Vogel
Indeed, a market perspective to goodwill planning offers
at least two benefits to the firm. First, a market approach to
CSR maximizes the opportunity for positive exchanges to
occur between the firm and its sociopolitical environment.
Clearly, having what the firm does in terms of CSR directly
influences individuals and groups it seeks to elicit support
from and substantially increases the likelihood that a mutually
positive and reciprocal transaction will occur. While the desirability of the firm to manage the social and political environment (e.g., Zeithaml and Zeithaml, 1984) in a manner that
results in increased goodwill is readily apparent, a procedural
context for managing the social environment has been largely
ignored. Consequently, when CSR market orientation is used,
a second attractive aspect is that managers are able to put
established and relevant management heuristics to work, including market research techniques, cost-benefit analysis, and
product line management approaches.
In essence, a market transactional approach to corporate
goodwill activity facilitates an evaluative framework to guide
managers in their corporate decisions affecting the social milieu and the deployment of organizational resources. In such
an exchange framework, three phases characterize the effective
management of sound goodwill strategy: (1) management's
understanding of and inclination to be responsive to the social
environment; (2) stakeholder identification and the subsequent development of action strategies that influence key publics of the firm; and (3) social program effectiveness measurement. Each of these topics is briefly explored in the discussion
that follows.
Management Approaches to Social
Aspects of the Environment
How a firm views the social environment and has mechanisms
in place to respond to external events is critical in the management of goodwill transactions. In effect, how management is
prepared to act predisposes how responsive a firm might be
and how subsequent social exchanges will occur. Ackerman
and Bauer (1976), for example, describe a three-phase pragmatic response process whereby the importance of social issues becomes acknowledged by top managers. This phase is
potentially followed by the addition of staff positions that focus
on social issues that lead to greater organizational involvement
through institutionalization. In turn, societal engagement by
management can be of a primary (i.e., central core relationships that arise from specialized functions of the firm) or
secondary (i.e., consequential or derivative effects flowing
from primary activities of the firm) nature (Preston and Post,
1975). In any case, the posture of the firm with respect to
the greater external environment is critical to understanding
the cultivation of corporate goodwill.
Several have acknowledged that social issues affecting business follow a fairly predictable life cycle (e.g., Chase, 1977;
Chase and Ewing, 1980; Renfro, 1987; Mahon and Waddock,
Hierarchy-of-Effects Approach
1992). When public expectations are ignored and social influence is allowed to take its own course, political and legislative
pressures build, frequently leading to negative consequences
for the firm. Briefly, the hfe cycle of social and political issues
develops in terms of four stages characterized by social expectation, political issue development, exertion of social influence, and a resolution phase, leading to enactment of legislation and/or social sanctions against the firm (Marx, 1986).
The initial phase of an issue's life cycle occurs when a gap
occurs between the perceptions and the expectations of a
stakeholder group regarding a firm's actions and represents
a particularly critical period. Left unattended by the firm,
discrepancies between stakeholder expectations of the firm
and its actual (or perceived) performance can become the
catalyst that transforms perceived shortfalls by the firm into
important social and political issues. At this early stage, the
level of interest and/or activism on the part of one or more
stakeholder groups becomes apparent and may be detected
in the alternative press or newsletters of special interest groups.
If a firm chooses to ignore expectational differences at this
point, the probability increases that a conventional issue's
life cycle will continue to unfold with adverse market forces
prevailing and the gap closed by regulation or legislation,
enforced by the courts. When societal discontent is allowed
to develop to the final stages of the social issue life cycle, the
company may pay in the form of costly lobbying and legal
expenses, compliance with regulation or legislation mandates,
and immeasurable ill will from various publics. Thus, when
a firm acts during early stages of stakeholder dissatisfaction,
costs to the firm are minimized.
Following the inception phase of any social issue, a period
of increased public interest, debate, and eventually social influence occurs. Debate is conducted in the popular press, the
evening news, and other mass media. Government regulation
of business is contemplated, legislative alternatives are explored, and consumer and special interest groups become
more active. The phase of heightened public awareness and
increased social pressure is followed by a resolution period.
During the resolution phase, stakeholders' concerns are either
effectively addressed by the firm or ameliorated through the
legislative and/or regulatory process or market-related sanctions against the firm, including boycotts and judicial remedies.
Goodwill Management Options
That exchanges occur between the firm and society is indisputable (e.g., Shocker and Sethi, 1973; Zeithaml and Zeithaml,
1984; Silverstein, 1987) and the failure of business to perform
in a manner consistent with social expectations is--certainly
in the long run--likely inevitable. The potential extent for
organizations to exert harm, if only inadvertently, has been
delineated by Collins (1989). However, how a company-either explicitly or implicitly--approaches the management of
such problematic transactions encompasses a range of possible
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143
responses. Three potential response patterns by business have
been described [see Sethi (1979) for a more complete discussion] and are briefly noted below.
Avoiding Stakeholder Pressure
By ignoring many public demands, many executives assume,
mistakenly, that the company's position is adequate and that
stakeholders are interfering in the firm's private affairs. Confronted by social demands and externally imposed expectations, less progressive firms attempt to disregard dealing with
public issues. Management may deny being responsive to
public expectations by employing various tactics (see Strand,
1983). Avoidance approaches include, for example, efforts to
distort stakeholder demands in order to avoid responding to
underlying constituent dissatisfaction; to co-opt members of
constituent groups in order to change their goals; to lobby
for laws in favor of the firm or implore the courts to delay
demands or press for company rights; to use corporate advertising or public relations to minimize damage to the company's
image; or to attribute blame among the constituent groups
and attempt to redirect the perceived cause of dissatisfactions.
However, as stakeholder dissatisfaction is allowed to build,
when corporate practices do not fulfill societal expectations
and the gap (see Sethi, 1979) between the company and
stakeholders widens, costs to the firm mount and public trust
erodes. Ironically, many firms are ill equipped to deal with
public dissatisfactions at early stages of the social issue life
cycle. Public relations programs do not address issues until
they have reached media recognition. Governmental relations
or public affairs departments generally do not typically handle
issues until they have escalated to the legislative or regulatory
level. In any case, the avoidance by management to respond
to stakeholder pressure frequently carries an eventual price,
albeit disguised in the short run (see Hutt et al., 1986).
Reacting to Public Pressure
When discrepancies become evident between stakeholder expectations and actual corporate behavior, the firm can pursue
one or more of several alternatives. For example, the firm
could alter its behavior sufficiently to reduce or eliminate
stakeholder pressures. This might involve changing corporate
practices or policies in various functional areas and is frequently a very effective means for dealing with social pressures.
Johnson & Johnson, a consumer health products firm and
analgesic purveyor, significantly reduced the gap between
public expectations and corporate performance during the
Tylenol-tamper scare by redeeming all previous purchases,
withdrawing and replacing all products on store shelves, and
instituting a new product seal. Indeed, as a result of its public
actions as a responsible pharmaceutical producer, Johnson &
Johnson enhanced its public image by taking decisive action.
Firms that take voluntary measures are perceived as responsive
and are often spared more rigid and costly legislative or regula-
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tory strictures. Furthermore, they achieve or retain a strong
consumer franchise both in terms of sales and public esteem.
Alternatively, the firm might try to alter the expectations
of stakeholders to bring public expectations closer to likely
perceptions of corporate performance. This may involve educating stakeholders about realistic company behavior, using
a corporate communication campaign. Dunng periods of oil
import shortages caused by military conflict or action by producer cartels, petroleum companies have sought to diminish
public furor over price hikes by explaining how market forces
account for rapid increases in gasoline prices. Also, the firm
might choose to contest the issue in the public arena. Confrontational debates, public testimony before regulatory panels or
the legislature, editonal articles, and other forms of defensive
communications tactics are typical of this response. Unfortunately, when stakeholder groups face opposition they often
solidify, gain media attention, and then recruit others to their
cause.
Taking a Proactive Approach
By contrast to reactive and sometimes ineffectual approaches,
well-managed CSR programs represent a unique alternative
to foster goodwill and bring company practices into line with
public expectations at early stages of issues development. Indeed, more progressive, socially responsible firms will seek
to honestly address the fundamental desires and dissatisfactions that are at the core of societal stakeholder demands.
Instead of ignoring discrepancies between what the firm does
(or fails to do) and what its public expects, well-managed
companies seek to handle social issues proactively (see Mescon
et al., 1981; Morris and Biederman, 1985; Grahn et al., 1987;
Mescon and Tilson, 1987; Vogel, 1994). Rather than waiting
for grievances to reach the legislature, regulatory commission,
the courts, or even the media, progressive businesses employ
alternative dispute resolution or a public involvement strategy
to confront potential goodwill problems at the earliest possible
stage of social issues development. This approach fundamentally consists of managers identifying important issues of threat
and/or mutual interest between the firm and stakeholder
groups and subsequently initiating promising, feasible response activities on the part of the company that address
potential and relevant disputes.
However, to effectively influence the environment, the
company must focus social program offerings in a timely and
strategic manner to achieve the most favorable payoffs for
both the firm and its important stakeholder group(s). Prosocial
programs should be developed and sustained with the expectations of key publics explicitly in mind. Corporate social
programs need, in a word, to be "targeted." What the firm
does must be designed to specifically appeal to stakeholders
it deems important and seeks to serve the interests of. Acknowledging that a smorgasbord or shotgun approach to social
programs may likely be inadequate, CSR activity must, indeed,
be aimed to effect and influence specific stakeholder groups
K.B. Murray and C. M. Vogel
or segmented populations. See Table 1 for a summary of
goodwill management options.
Need to Know Who Stakeholders Are
and What They Expect
From a market perspective, the management of corporate
social programs begins with an examination of the social environment in which the organization operates. Since changes
can--and do--occur frequently in the ecological, cultural,
political, and social setting of the firm, the environment must
be systematically and periodically monitored to determine
sociopolitical opportunities and threats to the firm (Fahey et
al., 1981; Fischer, 1983; Arrington and Sawaya, 1984; Mesch,
1984). Indeed, systematic assessment of the social milieu of
the firm is potentially as enlightening to CSR planning as the
monitoring of various other aspects of the external context is
to strategic planners.
Since most firms operate in an environment composed of
groups with diverse social expectations, it is likely that a
generic or universal approach to conducting CSR endeavors
will be neither particularly effective nor efficient in addressing
the specific interests of key stakeholder groups. Further, such
an orientation is unlikely to provide strategic advantage to
the firm. While "issues management" is frequently considered
a way to anticipate and handle problems, it is not truly possible, in a strict sense, to manage issues. Instead, companies can
only solidify their relationship with key groups by addressing
issues of interest to important stakeholder constituencies.
Nonetheless, even proactive problem-solving is not likely to
redefine or allow the firm to superimpose what the agenda
of issues is--or will be--for various publics of that firm.
Instead, social issues must be seen as frequently formidable
realities and fundamentally independent of being controlled
by the firm.
That the external context of the firm is, in some sense,
"fixed" is not to suggest that the company is not without
options. Instead, given the desire of the firm to enhance the
impact of its social programs to influence key groups, the first
step in delineating a CSR-derived goodwill strategy calls for
management to identify key stakeholders of the organization.
This task presumes a thorough knowledge of the social and
cultural environment of the firm and, ideally, an understanding of the strategic role and relative importance of various
groups, both internal and external to the firm. Potential stakeholder groups constitute a wide range of publics, including
employees, prospective employee applicants, special interest
groups, consumer-action organizations, community residents
in the vicinity of company's operations, socially minded investors, regulators, legislators, the media, other business leaders,
elected officials, and others. Based on research data, this analysis phase requires the firm to formulate a plan to systematically
survey key stakeholders to understand their respective expectations. Clearly, the strategic interests of the firm are best
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Hierarchy-of-Effects Approach
Table 1. Types of Finns and Their Response Characteristics to Stakeholder Pressure
Firm Avoids Social Pressure
Firm's response
Social action timing
Proscriptive: Firm executes social obligations with respect to strict economic and legal
criteria.
Subsequent to perceived harmful impact by firm and the organization of entrenched
opposition by social forces.
Opportunity to foster goodwill
Minimal.
Specific strategies
• Deny societal displeasure
• Co-opt constituent leaders
Firm Responds to Social Pressure
Firm's response
• Seek civil or legal protections
• Sponsor institutional advertising
defending company position(s)
Prescriptive: Firm makes corporate performance congruent with prevailing social norms
and expectations.
Social action timing
Subsequent to perceived harmful impact by firm but prior to formation of significant environmental pressure.
Opportunity to foster goodwill
Preservation of extant goodwill.
Specific strategies
• Take decisive action in the face
of product problems
• Stem legislative and regulatory
actions by voluntary compliance
• Focus on maintaining positive
company image
• Educate public regarding
company behavior
Firm is Responsive to the Social Environment
Firm's response
Proactive: Firm exhibits anticipatory and preventive actions to minimize
"gaps" between social expectations and corporate performance.
Social action timing
Prior to the occurrence of perceived corporate social deficiencies.
Opportunity to foster goodwill
Considerable.
Specific strategies
• Manage CSR product portfolio
• Relate social program to multiple
stakeholder groups
served when as many key societal segments as possible are
identified so that few relevant exchanges between the firm
and key stakeholders are overlooked.
Addressing Stakeholder
Expectations
In terms of conventional product offerings, the key to the
success of any business is the organization's ability to be
knowledgeable regarding--and ultimately to address the needs
and desires of---prospective customers. Similarly, for a company to achieve an optimal level of goodwill requires that
management meet the societal expectations of important stakeholder groups (Pfeffer and Salancik, 1978; Dersmith and Covaleski, 1983; Freeman, 1984, 1988, 1991; Freeman and Gilbert, 1992). Attention to key stakeholders' social demands
with respect to CSR offers managers an opportunity to gauge
the effectiveness of specific social programs and, in turn, the
achievement of strategic payoffs to the firm (see Business Week,
1982; Hamaker, 1984; Reiss, 1984; Norris, 1985). Indeed, it
is potentially feasible to calculate the impact of CSR activities
in terms of resources allocated to social programs. While optimal
product planning and production of conventional offerings are
• Systematically seek out social needs
• Track impact of corporate activities
on social environment
predicated on careful market analysis and segmentation, relevant goodwill planning similarly requires a detailed understanding of the various needs, interests, and "problems" of
important stakeholders (Murray and Montanari, 1986).
Thus, the underlying purpose of stakeholder analysis is
twofold: first, to discover unmet social needs or expectancies
and to uncover opportunities and threats that exist in the
social environment and that may benefit or adversely affect
the firm. The discovery of which social problems, needs, interests, or demands exist that a firm can logically address is
essential for continued goodwill and support of the firm by
relevant publics. Second, stakeholder analysis can also provide
ongoing evaluations of CSR program effectiveness. Unfortunately, in some organizations, CSR programs, if offered at all,
lack real-world impact. Such programs typically render social
offerings that hearken back to a previous social-political climate or an earlier period in the company's history. Typically,
these programs fail to serve the current strategic interests of
the firm and are lacking in relevance, largely because they fail
to address the needs, interests, and "problems" of current
stakeholders (Wood, 1986). Thus, stakeholder expectation
analysis and subsequent monitoring are critical first- and second-step measures corporate planners and managers must
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take to ensure that what the firm subsequently does with
respect to prosocial behavior should be relevant to both the
external environment and the strategic interests of the firm.
Evaluating the Goodwill Strategy
of the Firm
While managers' knowledge and understanding of the social
and political environment is fundamental to corporate planning and implementation (Meyer, 1982), the specific evaluation of prosocial programs ensures that a company's offerings
are on target and effective in engendering positive support
behaviors from key stakeholders that contribute to the overall
success of the firm (Murray and Montanari, 1986). Precisely
how social programs of the firm are evaluated, however, is
critical, since poor evaluative measures can provide erroneous
information and lead to faulty decisions. With weak or irrelevant measurement techniques, sound and effective CSR programs may be terminated. Likewise, worthy programs can
fail to win the support of top management when evaluative
measures are inadequate and, therefore, do not demonstrate
the positive effects that are intended or desired by the firm.
The most frequently reported measures of CSR effect has
been financial performance in terms of profitability, stock
value, etc. Unfortunately, it is not evident from the literature
whether this is an appropriate indicator of CSR effects or if
CSR is even associated--positively or negatively--with this
factor (see Spencer and Taylor, 1987).
Indeed, it is reasonable to expect that corporate goodwill
efforts do not result in immediate, short-term payoffs-financial or otherwise--to the firm. In the short run, expenditures for CSR activities consume both financial and nonfinancial resources of the firm, thus diminishing opportunity of
favorable "bottomline results." Instead, positive program effects can be expected to build over time to produce favorable
market responses with potential benefits of either a financial
or a nonfinancial nature accruing to the firm over time. Nonetheless, the need to determine the current impact of CSR
programs and by extrapolation--to predict future effects on
stakeholders are important tasks of management vis-a-vis the
organizational tasks of evaluation and control.
Dimensions of Pro-social Evaluation
Relevant management concerns are "What can prosocial programs realistically be expected to accomplish for the firm?"
and "Are our prosocial offerings evoking a favorable response
on the part of key stakeholders." Few simple answers to these
questions exist, since various social programs have different
targets, duration, and program objectives. Indeed, immediate
benefit to the firm is probably best viewed only in the context
of an extended time period, multiple social program objectives, and in terms of particular stakeholder groups.
Only in ideal circumstances will a firm's social programs
manifest an immediate impact on stakeholders' profirm behavior. Instead, a more likely outcome of the initial phase of a
K.B. Murray and C. M. Vogel
firm's prosocial activities is for stakeholder awareness level of
the firm's programmatic efforts to be affected first. The longterm effects of corporate prosocial activity, in contrast, can
be expected to lead stakeholders to respond positively or, at
a minimum, be predisposed to act favorably toward the firm.
Thus, two temporal and substantive endpoints in stakeholder
effects exist and are relevant in gauging benefit to the firm
stemming from the CSR program. Further, they imply a range
of response outcomes and provide a basis for planning and
tracking program effects for any one or more stakeholder
groups.
Thus, to evaluate the impact on stakeholders of prosocial
programs against strategic or corporate objectives, a multiple
effects approach would appear to be most appropriate; this
is particularly true when it is desirable to estimate long-term
consequences from current attitudes. Indeed, a hierarchyof-effects model offers such a measurement technique in that
it addresses cognitive and affective dimensions as well as
behavioral outcomes, which, taken together, capture how individuals process and use information (see Ray, 1973; Feick,
1987; Berry, 1987; McGinley and Hawes, 1991; Thorson et
al., 1991) regarding the firm. In turn, this knowledge is useful
in understanding how stakeholders form judgments and make
subsequent decisions about appropriate behaviors toward or
on behalf of the firm.
Using an Effects Hierarchy to Gauge
Goodwill Impact
From a strategic perspective, one or several long-term objectives of a firm's social policy is to create support for the firm
on the part of various stakeholders. However, it is readily
apparent that individuals in any stakeholder group can rarely
be expected to offer allegiance to the firm immediately upon
learning of its social policy. Instead, it is more likely that a
longer-term impact of prosocial behavior occurs. Nevertheless,
for there to be a longer-term impact, there inevitably must
be some kind of short-term effect operating. Indeed, a hierarchy-of-effects framework describes the logical process of how
an individual moves from unawareness of the firm and its
activities to stakeholder support. Although potentially very
complex, a modest effects framework includes stages beginning with unawareness, knowledge, attitudes formation, and
behavior.
For example, were a firm to seek the support of key constituent groups with respect to pending legislation, it would likely
examine short-term attitude effects (which precede subsequent and more complex behavioral effects) in order to gauge
the likelihood or extent of desired long-term outcomes. In
such circumstances, knowledgeability, of awareness, of a firm's
perceived position with respect to the issues surrounding the
proposed law--which ostensibly would be a function of the
firm's external affairs or community awareness programs-would be of interest and represent an initial, first-level analysis
of program impact. Subsequent stakeholder attitudes with
respect to the firm are also of interest. Finally, stakeholder
Hierarchy-of-Effects Approach
intention to act measures are also of consequence to the firm
and might include behaviors such as contacting elected officials, writing letters-to-the-editor, and voting.
In short, the desirability of applying such a model resides
precisely in its ability to evaluate the social benefit to both
society and the firm at several relevant levels, instead of solely
financial measures, which focus essentially on the economic
well being of the firm. Awareness, attitudes and intentions
are dependent variables often used to assess information impact and are components in most accepted hierarchical conceptualizations of the communication process (e.g., McGuire,
1976; Engel et al., 1993). Derived from long recognized marketing communication impact techniques (Lavidge and
Steiner, 1961), both the present and expected impact of corporate prosocial efforts can thus be assessed by a hierarchyof-effects approach, assisting managers to better understand
the effectiveness of goodwill programs undertaken by the
firm. This multivariate evaluation strategy offers freedom from
dependence on quantitative, indirect, or spurious financial
measures--which represent, in the short run at least, relatively
obscure and imprecise measures of program success (e.g.,
Folger and Nutt, 1975; Alexander and Buchholz, 1978; Abbott
and Monsen, 1979; Chen and Metcalf, 1980; Aupperle et al.,
1985).
Further, an effects approach offers the opportunity to quantify multiple stakeholder measures--from simple program
awareness to motivated action that reflects desired actions
by stakeholders. A hierarchy-of-effects approach to prosocial
evaluation provides direct and relevant indications of immediate program impact as well as a basis for estimating long-term
CSR success in cultivating goodwill. In effect, a hierarchical
perspective to CSR effectiveness assessment is based on a
series of predictable information processing stages through
which stakeholders proceed, from indifference toward the
firm, at best--or hostility, at worst--to more favorable dispositions and/or inclinations. Fundamentally, these stages delineate a range of stakeholder response to the organiration, from
initial awareness of the firm and its key image components;
familiarity with various CSR programs and the formation of
attitudes regarding the firm; and, finally, to likelihood measures of positive action toward, or on behalf of, the company.
Consistent with its application in other business contexts,
a hierarchical model essentially approaches the analysis of
prosocial program impact by identifying two broad categories
of effects: attitudinal and behavioral characteristics of stakeholders (e.g., Beatty and Kahle, 1988). Examples of attitude
measures include awareness regarding the company (and/or
its prosocial programs), beliefs about various activities, and
evaluative statements regarding the firm, prosocial responsibility programs, and/or perceived benefit of as well as satisfaction statements regarding consumer programs. Behavior measures would typically include respondent likelihood to engage
in specific support actions on behalf of the company, including
inclination to buy stock, for example, or respondent predisposition to influence others favorably regarding the firm.
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147
The real-world impact of the firm's sociopolitical activities
can be expected to follow a predictable course. Initally, stakeholders become aware of company's consumer programs. In
turn, awareness leads to knowledge about the company and
its corporate and social values. Over time, familiarity regarding
the firm serves to evoke favorable attitudes and response approval by stakeholders. Positive evaluations of the firm stem
from the realization that the company is concerned with stakeholder interests and strives to address their vital expectations.
In effect, informed stakeholders, acknowledging that the prosocial firm is a positive societal force, become predisposed to
manifest support for the firm. Thus, for the firm that seeks
to exert a deliberate influence on its social milieu, the evolution
of events are in an entirely different direction from the issue
life cycle spiral noted earlier. Instead of external forces imposing or prompting the firm to act, a managed goodwill program
allows the firm to cultivate--in the context of preexisting and
independent social expectations--a favorable arena for the
firm to operate.
Subsequent pro-company behaviors can be viewed to occur
largely on the part of stakeholders who have "moved through"
the attitude stage and who have developed a conviction regarding the firm's integrity to take stakeholder concerns seriously
and to deploy resources that address those expectations. Consequently, some stakeholders become inclined to engage in
profirm behaviors. Corporate support behaviors can potentially take many forms, including initiating positive contact
with legislators or regulatory agencies, defending the firm in
a conversation with friends and acquaintances, buying stock in
the company, or affirming the organization in public opinion
surveys.
In short, prosocial programs can be viewed to impact stakeholders at varying levels of effects and, thus, prosocial programs can logically be evaluated in terms of a range of possible
program outcomes. Based on an orderly sequence of events-occurring at both an individual and aggregate level--a hierarchy-of-effects approach simultaneously encompasses a variety
of response variables that are associated with a firm's prosocial
program strategy. By implication, the use of a hierarchy-ofeffects approach allows CSR program objectives to be directly
and meaningfully linked to program effectiveness measures
via-a-vis key stakeholder groups. Since management practice
in other functional areas supports the validity of this approach,
CSR evaluation employing a hierarchy-of-effects approach can
be viewed to detect meaningful changes occurring in the short
run, as well as predictive of long-term outcomes, and thus
vital to the executive or CSR manager committed to efficient
resource deployment and effective program oversight.
Research Questions Regarding
Prosocial Evaluation
The research undertaken for this study is organized to provide
an empirical critique of using a hierarchy-of-effects approach
to evaluating CSR activities and the generation of goodwill
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1997:38:141-159
toward the firm. In view of the lack of demonstrated measures
focusing on manager-relevant considerations with respect to
CSR, several questions are feasible with regard to evaluation
of prosocial activity of the firm using a hierarchy-of-effects
methodology.
First, as noted previously, prior research in the field of
CSR has been implicitly premised on two fundamental assumptions: that the appropriate measure of CSR effects is (a)
financial in nature and (b) fundamentally long term in duration. Since much of the literature regarding CSR is implicitly
moralistic and normative in nature (e.g., Goodpaster and Matthews, 1982; Byron and William, 1982), the emphasis of
research heretofore that focuses on long-term financial measures is arguably defensible in its convergence on an independent, quantitative, and generally accepted measure of business
success, namely profitability. Irrespective of whether these
assumptions are theoretically sound or not, however, generalizations regarding previous findings are inconclusive (e.g.,
Arlow and Gannon, 1978). Arguably a test of CSR effects
against independent firms in varying industries across differing time and economic period may pose, at best, too stringent a test of outcomes and highlights the need for an alternate
approach. In any case, different measures of effect and, in turn,
the inherent methodologies associated with those measures are
called for. However, since transactions between the firm and
other external parties include a wide range of possible exchanges (see Bagozzi, 1974, 1975, 1979) that are transitory
and noneconomic in nature, examination of more immediate
effects is called for. Thus, a principal research question is:
Research Question 1: Are short-term, nonfinancial, and individual effects measures of CSR impact observable and
amenable to empirical verification?
Second, although business scholars have long asserted that
the effects of social responsibility in terms of the firm are
positive (e.g., Davis and Bloomstrom, 1975; Dalton and Cosier, 1982), subsequent findings regarding this outcome-certainly with regard to the use of financial measures--are
equivocal, hence the need to examine CSR effects for favorable
impact on agents external to the firm. Examination of effect
of CSR on the firm's stakeholders represents a logical alternative to monetary calculations, since such individual or collective parties, either directly or indirectly, represent the potential
to act in a manner that affects the firm favorably (e.g., engage
in purchase behavior, serve as an employee, refrain from regulation, buy stock) or adversely (e.g., diminish the reputation
of the firm, sell stock, buy from firm competitors). Clearly,
research evidence regarding such complex transaction behaviors is predicated on corresponding cognitive and affective
effects (see Mowen, 1990). These observations lead to:
Research Question 2: Does information regarding CSR programs have a measurably positive effect on stakeholders
attitudes and behavioral intentions toward the firm?
K.B. Murray and C. M. Vogel
There is little prior evidence that CSR effects, while predicted to be positive, are likely to have the same impact on
all types of stakeholders. Understandably, some parties might
reasonably be expected to be more interested in and thus
involved with a particular firm, industry, etc. Conversely,
various stakeholders differ in terms of their relative importance
to any business enterprise. Constellation of stakeholders, by
definition, represent different interest groups, each with particular demographic and qualitative profiles. Consequently,
a priori equivalency among stakeholder groups relative to
underlying characteristics, strategic importance, and response
inclinations is not expected, underscoring the importance of
strategic planning and targeting of CSR activities and information by the firm (see Murray and Montanari, 1986). It follows,
then, that CSR activities by the firm might produce uneven
effects among various stakeholders, leading to:
Research Question 3: Do CSR programs have a differential
effect on various types of stakeholders of the firm?
Although the use of a hierarchy-of-effects model is an accepted paradigm with respect to branded offerings of the firm,
it has yet to be demonstrated as viable insofar as a tool for
evaluation of the prosocial activities. An empirical examination
of these questions is called for and the description of such a
study is noted in the section that follows.
An Experimental Test
The authors conducted a controlled study to test the impact
of prosocial programs on corporate goodwill as indicated by
a hierarchy-of-effects evaluation model. Although not longitudinal in nature, this study seeks in a controlled setting to
examine the efficacy of estimating goodwill effects stemming
from CSR activities using a hierarchical evaluation approach.
The sample composition, experimental procedure, data analysis, and findings are described briefly in the sections that
follow.
Sample
The subject pool was composed of a quota sample of 82
respondents employed in a managerial position within the
past 5 years. Managers were selected as participants in the
study for three reasons. First, managers represent professional
decision makers and, as such, those whose orientation approximates that of many other formal stakeholder groups (e.g.,
suppliers, regulators, media). In their capacity as managers,
subjects with this background, by virtue of their professional
orientation, routinely contemplate engaging in specific courses
of actions consistent with their attitudes and opinions, thus
representing a group of interest with respect to CSR policy
and decision makers. Second, managers represent a relatively
homogeneous subject pool. The particular merits of such an
approach to sampling in an experimental context is persuasively argued by Greenberg (1987). Third, managers constitute
Hierarchy-of-Effects Approach
J Busn Res
1997:38:141-159
149
Table 2. Sample Demographic and Quota Factor Profile
Age (in years):
Gender:
Reports managerial experience currently or within last 5 years:
Belongs to a firm that takes a stand on local issues.
Belongs to a firm that takes a stand on national issues.
Sees self as local issues thought leader.
Sees self as state issues thought leader.
Reads a daily newspaper.
Reads a weekly news magazine.
Frequently gets news from CNN.
Watches Sunday morning news/talk programs.
25-34
7%
Proportion of Subjects
35-44
68%
Women
49%
Yes
100%
Agreed a
63%
44%
63%
6t%
76%
83%
54%
64%
45-54
25%
Men
51%
No
2%
Disagreed
37%
66%
37%
39%
24%
17%
46%
36%
.'Itemsreportedin this sectiondenoteaggregated,"collapsed"responsesfor the sampleon itemsmeasuredon a Likert7-pointAgree-Disagreescale.
a mature subject pool that, despite being recruited in a management training setting, was deemed to be superior to a more
traditional student sample.
Subjects invited to participate in the research were participants in a management development program at a large university in a major eastern U.S. metropolitan area. Subjects
were qualified for inclusion in the study by indicating having
voted in an election (national, state, and/or local) within the
previous 5 years. Voting behavior data, in effect, was viewed
as operationafizing the capacity of subjects to engage in social
action--a desired outcome from the point of view of the firm
vis-a-vis the ideal effects of CSR.
Median age of respondents in the sample was 41 years.
To substantiate the social and opinion leadership of subjects
included in the sample, subjects were asked to report on their
voting behavior, self-perceptions with regard to social-political
activity, as well as appetite for news information (as evidenced
by magazine readership and television programming. A composite description of the subject pool is shown in Table 2. By
virtue of homogeneity with regard to managerial experience
the respondent pool was deemed a worthy sample against
which to test empirical effects associated with the research
[see Calder et al. (1981) for an extended discussion of the
merits of this approach]. With random assignment of subjects,
n of 40 per treatment group was viewed as more than adequate
for a test of the principal effects of CSR (see Mason et al.,
1991). An overall participation rate of 90% was achieved; to
derive the total sample of 82 subjects, 91 individuals were
approached to participate in the research procedures.
Design and Procedures
The research design constitutes a classical, randomized between-groups comparison laboratory study (Campbell and
Stanley, 1963). Experimental prospects were invited by the
authors to participate in a study under the pretext of examining
the issue of "fairness of the press" to business (vis-a-vis editorial and reporting style). Subjects were individually asked to
read an ostensibly "reprinted" newspaper feature story describing an electric utility under the supervision of one of the
authors. All subjects were told that they would be asked to
make judgments regarding how fairly the press had reported
the information on the utility. Subjects' participation in the
study was voluntary and without compensation; prior to participation in the study, subjects were assured that the information they provided would be held in confidence and that
personal identities would not be revealed. The administration
of the experimental (reading) materials and subject completion
of the data collection instrument was not time limited. Instead,
respondents were encouraged to proceed at their own pace.
Average time spent by subjects in reading and completing the
research materials was approximately 15 rain. Individuals who
consented to participate in the study were debriefed subsequent to their reading task on the collection of all dependent
measures involving fairness of the press as well as other studyrelevant matters.
Subjects qualifying for inclusion in the sample were randomly assigned to one of two conditions, control versus experimental. The control group was assigned the task of reading
a general description of the (fictitious) electric utility company,
including positive financial and management information. In
addition to viewing the same narrative read by control subjects, the experimental group was also provided additional
information mentioning various CSR and consumer affairs
programs of the firm. Prosocial activities were described in
the "reprinted" material provided to the experimental group
and included brief mention of the following: energy conservation, a consumer panel program, an employee training program to assist senior citizens in need of social services, the
utility's participation in the economic development of the
region, a latchkey children's program, an employee volunteer
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J Busn Res
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program, and electric safety education for school children. In
short, the general description of the utility provided to both
groups was identical; the experimental group, however, was
given exclusive information regarding how the utility conducted a meaningful prosocial program, whereas the control
group was not.
Subsequent to exposure to the assigned utility description,
the experimental and control materials were removed from
subjects' view and each participant in the study was individually asked to respond to a series of questions pertaining to
journalistic style, perceptions of the utility, and personal reactions to the utility described in the "reprinted" article. The
collection of these data was consistent with the stated experimental pretext and was intended to diminish subject reactivity
to the independent variables of the study. Subsequent to being
given the opportunity to respond to editorial fairness issues,
subjects were, using hierarchy-of-effectsmeasures, specifically
queried regarding their personal reaction to and behavioral
intention toward the firm. Employing a seven-point Likert
scale (i.e., from "Strongly Agree" to "Strongly Disagree"), respondents were asked to indicate their agreement with statements that measured cognitive awareness, affective response,
and support intentions relative to the utility described in the
experimentally controlled manipulations. Subjects were also
asked to provide data with respect to demographic and behavioral measures. Demographic measures included age, gender,
and employment status. Included in the nonexperimental behavioral measures were items that addressed voting and various social and political activities engaged in by the respondent
as well as media habits.
A test of respondent group equality was conducted. Beyond
demographic factors that address obvious aspects of group
equivalency, other relevant measures were examined. Since
dependent measures of interest sought to explore firm-related
attitudes and behaviors, relevant media lifestyle as well as
social-political activities of respondents were considered germane. Absent the determination of group comparability, potentially discrepant experimental outcomes might arguably
be attributed to factors other than experimental conditions.
Consequently, respondent groups were compared for differences with respect to media habits and social and political
behavior. No statistically significant differences between the
two groups were evident. The statistical equivalency of the
control and experimental groups on all relevant considerations
with respect to demographic, occupational, voting behavior,
political and social behavior, and media habits is shown in
Table 3.
Measures
Experimental relevant aspects of the data collection instrument
contained l0 items intended to capture subjects' attitudes of
the firm as well as 7 items to gauge their behavioral inclinations. A five-point Likert type scale was used (5, strongly
agree; 4, moderately agree; 3, neither agree or disagree; 2,
moderately disagree; 1, strongly disagree). Implicitly, state-
K.B. Murray and C. M. Vogel
ments regarding the firm were assumed to tap cognitive and
affective reactions of subjects. Thus, each dimension of research interest was constituted by multiple measures, i.e., 10
in the case of attitude and 7 in the case of behavioral items.
Note that cognitive and affective elements of attitudes are
closely intertwined and a large number of sources provide an
extended discussion of attitude theory relative to the integration of cognitive and affective aspects (see Wilkie (1994) or
Solomon (1994) for an overview treatment; see Fishbein
(1983) for a more technical treatment of the topic). However,
to specify the precise cognitive and affective content of each
aspect of interest associated with the dependent variable would
have required a measurement device more lengthy and elaborate than was feasible without undermining the experimental
purposes. Thus, cognitive and affective aspects of subjects are
treated as perceptual, nonbehavioral attitude factors.
Attitude items included statements that characterized the
firm with respect to its responsiveness to employees; responsiveness to customers and consumers; truth in advertising;
safety; use of natural resources; product quality; honesty; financial performance; pricing; and customer satisfaction. Behavioral items related to respondents' inclination to support
the company in a government dispute; to write legislative
representative or newspaper editor; to recommend a job application to a friend; to believe a negative report about the firm;
to read the annual report; to support the firm in a labor
dispute; and to consider buying stock in the company.
Preceding the elicitation of subjects' reaction to the firm
described in the experimental and control conditions, respondents were asked to respond to questions (also using a Likerttype, five-point agree-disagree scale) regarding the fairness of
the press in coverage of business in the "reprint." Questions
of this nature were consistent with the explanation provided
subject prospects prior to the administration of the independent variable. Subjects were asked to respond to statements
regarding whether information in the article was interesting
to read; balanced in its coverage; fairly presented; easy to
read; etc. Although these items were not analyzed, they served
to reduce experimental reactivity by serving as a time and
activity "distraction" between the administration of the independent variable and the collection of the data.
In addition, items concerning the personal characteristics
of subjects were included in the data collection instrument.
These items related to subjects' age, gender, income, marital,
and employment verification as well as media habits, voting
behavior, and other social and/or community activities.
Prior to use of the administration of the data collection
device in the research setting described above, a pilot test of
the instrument was conducted with a convenience sample. In
the context of this pilot trial the final version of the data
collection instrument was examined in terms of reliability and
modestly refined with respect to typographical-grammatical
problems as well as, on the basis of pilot respondent debriefing, revision copy with respect to vague or unclear instrnctions, item statements, etc.
Hierarchy-of-Effects Approach
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151
Table 3. Test of Respondent Equivalency: Control Group (N=42) versus Experimental Group (N=40) a
Key Measures of Respondent Equivalency
Demographic Factors
Gender
Age
Occupational Setting
Current or recent executive/manager
Voting Behavior
Registered to vote
Usually votes in national elections
Usually votes in local elections
Has worked in political party in a local, state, or national election
Political and Social Behavior
Belongs to organization that takes a stand on local or state issues
Belong to national organization that takes a stand on national issues
Views self as a local, state, or national issues thought leader
Comfortable talking with others about local, state, or national issues
Would consider writing to an elected official about an issue
Would consider writing to an editor or a mass medium to voice views
Media Habits
Frequently reads major metropolitan newspaper
Frequently reads Time Magazine
Frequently reads U.S. News and World Report
Watches CBS's 60 Minutes regularly
Watches ABC's 20/20 regularly
Listens frequently to talk radio
Frequently views Sunday morning news programs
Frequently gets news from CNN
t-Test
Value
Two-Tail
Probabilityb
0.67
1.30
.385
.196
0.68
.498
1.10
1.00
0.19
1.43
.276
.319
.852
.156
0.17
0.13
0.72
1.64
1.85
1.16
.862
.895
.471
.105
.069
.248
1.10
0.60
0.13
1.09
1.09
1.15
0.79
1.65
.275
.552
.894
.279
.279
.254
.431
.103
a Since the experimental procedures were conducted on an individual basis and thus involved the sequential recruitment of the total sample, data for two additional subjects was
inadvertently collected, tabulated, and thus included in the data analysis. Since randomized groups approaching n = 3 0 are considered "large" sample (see Mason et al., 1991), the
authors did not view slightly unequal experimental groups as statistically relevant.
h In all cases of the t-test analysis, the F value and corresponding two-tail probability was determined to assess the appropriate use of a pooled variance estimate of the underlying
t test of significant differences between the two sample groups. Without exception the F values for all comparisons were not statistically significant and thus supported the use of
a pooled variance estimate based on 80 degrees of freedom.
Subsequent to test administration, the quality of the final
data collection device was assessed for internal consistency
(see Cronbach, 1951; Cronbach et al., 1963, 1972; Churchill,
1979; Peter, 1979). Reliability analysis of the dependent measures were consistent with those acceptable for research of
this nature (Nunnally, 1967) and their estimated correlation
with errorless true scores is noteworthy. Item to total correlations are also examined. See Appendix for estimates of reliability,
correlations with errorless scores, and item to total correlations.
Data Analysis
Consistent with an effects approach, response items were classified in terms of attitude and behavioral elements. To preclude
analytic dependence on single-item measures, each item set
(i.e., attitude and behavioral) was operationally defined as
a multi-item, aggregate measure of dependent measures of
attitude and behavior, respectively. Thus, aggregate measures
of effect were determined by calculation of a simple mean
score of all attitude and behavior items, respectively, for each
individual. In turn, statistical tests of the a priori states propositions employed these aggregate data.
Ten attitude items were intended to denote subjects' fundamental perceptions regarding the utility and its activities, ira-
plicitly reflecting respondents' evaluative judgment regarding
the firm, its products or services, or its position on specific
matters of social interest. In addition, seven behavior items
(e.g., "I would be willing to write a letter to my congressman
on behalf o f . . . [Firm XYZ]") were intended to denote the
inclination, or action-response intention, of the subject to
personally engage in profirm activities. Taken together, these
attitude and behavioral items were intended to reflect relevant
measures of market response on the part of a firm's target
audience to the prosocial activities of the firm. For each item
gauging the effects of corporate goodwill, a Student's t-test
was performed between mean scores for experimental and
control groups, both across aggregated attitude and behavioral
items as well as separately between specific items.
Findings
In the following section the empirical data are described as
they may relate to the previously noted research questions.
Because an appropriate test of Question 3 requires a nonrandom assignment of subjects based on information disclosed
during the data collection phase of the research, the analysis
of that data was, strictly speaking, not a priori in nature. In
152
J Busn Res
1997:38:141-159
view of the fact that in the context of this study a test of
Question 3 involves a post hoc assignment and analysis of the
data, findings with respect to Questions 1 and 2 are reported
as a priori type findings. By contrast, Question 3 is reported
as post hoc analysis results.
Findings Based on a Priori C r i t e r i a
Empirical evidence with respect to each question is discussed
in order of presentation. With regard to Question 1, the data
were examined insofar as their capacity to effect notable empirical differences in information processing pertaining to CSR
on the part of experimental subjects despite its incidental
presentation to the declared "purpose" of the experimental
task. In contrast to established financial approaches previously
used to detect CSR effects, this question presents the opportunity to examine its impact using nonfinancial (albeit quantitative), individual effects measures. Two lines of evidence were
noted with respect to Question 1 and fundamentally constitute
a verification of the experimental conditions. First, a test of
the two experimental manipulation items was carried out.
Subjects were asked to respond to two statements regarding
the article "reprint" they read. Subject agreement to the declaration that the "feature article stressed matters of social and
political importance" was statistically significant (c~ ~ 0.000)
for a Student's t-test of 7.84, reflecting a control group mean
of 4.48 and an experimental group mean of 6.50 (on a sevenpoint scale). The data also show mean values for control
and experimental subjects of 2.19 and 6.55, respectively, for
agreement to the statement the "article address(ed) how socially responsible the firm was." Student's t-test value for
difference between these statistics is 17.55 and is statistically
significant (~ ~ .000). These specific findings are consistent
and indicative that the experimental procedures were, indeed,
efficacious and evoked a notable perceptual difference with
respect to key elements relative to CSR effects.
Further, subjects were debriefed subsequent to the experiment. When queried as the intent of the task, none of the
subjects raised a question as to the possibility of the experimental assignment(s) being a subterfuge to study the social
activities or effects, per se, of the firm. Instead, with respect
to experimental distracter items, control and experimental
subjects reported statistically nonsignificant mean agreement
scores regarding how interesting the article was to read, how
easy the article was to read, as well as how favorable the
reporting was regarding the activities of the firm.
Thus, the data provide findings in support of the notion
that CSR information is of sufficient interest to individuals
participating in the study to evoke a perceptible effect on
experimental subjects. In addition to subsequent evidence
reported below, there appears to be empirical evidence for
the use of human effects measures to gauge CSR impact.
In terms of Question 2, whether subjects' knowledge of
CSR aspects are demonstrably positive with respect to attitudes
and behavioral intentions, both aggregate and individual measures of the dependent variables were examined. Aggregate
K.B. Murray and C. M. Vogel
attitude measures (on a seven-point scale) were 3.92 and 5.00
for control and experimental subject groups, respectively. The
Student's t-test value for difference between these data is 3.92
and statistically significant (o~~< .000), indicating that composite attitude measurement data support the notion that CSR
produces measurably positive effects in test subjects.
Of the 10 individual items tapping attitude factors, all are
statistically significant (c~ ~< .05) excepting two. Exposure to
prosocial information regarding the firm failed to exert any
effect on perception of product competitiveness as well as
evaluation of the financial record of the company. While these
two factors were not positively influenced by the prosocial
information, neither were the perceptions of the firm negatively affected on these dimensions. Instead, experimental and
control groups viewed these two items in a statistically indistinguishable manner.
In a test of behavioral effects of CSR information, composite
scores for control and experimental subjects were 3.96 and
4.81, respectively. The Student's t-test score for this difference
is 5.88 (o~ ~< .000). Of seven specific items tapping behavioral
aspects of subject effect, five reflect positive CSR impact and
are statistically significant (oL ~< .05). Prosocial information
failed to exert a statistically different response on the part of
experimental subjects in terms of their inclination to read the
firm's annual report or buy company stock. Statistical data
relative to the experimental manipulation values as well as
composite and individual items for attitude and behavior measures are shown in Table 4.
Findings Based on Post Hoc Criteria
Question 3 raises the issue whether CSR effects, although
positive for experimental subjects generally, induce uniform
outcomes on the part of all individuals in that group. Since
the favorable CSR effects of the independent variable represent
a random (albeit positive) variable among individuals exposed
to the experimental treatment, there is reason, absent Question
3, to expect that dependent scores for any one set of subjects
within the experimental group would be equivalent with any
other group. In essence, Question 3 tests whether the impact
of the independent variable has a differential effect on subjects,
based on some basis of stakeholder status.
In post hoc analysis, the authors assigned respondents in
the treatment group to one of two groupings predicated on
subjects' self-reports regarding membership in any type of
organization that takes a stand on local (i.e., state or regional)
issues. For the purposes of this test, subjects were operationally classified in terms of two distinct groups for the purpose
of this test. One group was defined as avowed "community
stakeholders," based on their explicit agreement with the statement, "I belong to an organization that takes a stand on
local or state issues such as housing, better local government,
schools, etc." By contrast, subjects who disagreed or were
undecided in their response to the statement were deemed to
constitute unavowed stakeholders, i.e., a relatively disinterested group of community participants. The operational deft-
J Busn Res
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1997:38:141-159
Hierarchy-of-Effects Approach
Table 4. Effects Attributable to Corporate Social Responsibility Information on Key Stakeholder Measures
Test of Between-Subject Likert Scale Statement
Agreement Differences Regarding the Firm
Attitude Measures
Firm is responsive to needs of its employees
Firm is responsive to its customers and consumers generally
Firm is concerned about truth in its advertising
Firm is an environmentally safe company
Firm is concerned about better planning of natural resources
Firm's services or products are of higher quality than competitors
Firm is honest
Firm has a good financial record
would be pleased to be customer
Firm helps to control inflation
Composite Attitude Measure
Behavior Measures
Respondent would be included to . . .
Support company if in a dispute with the government
Write letter to congressman or editor if firm was attacked unfairly
Recommend job application to friend
Think twice before believing a negative report about the firm
Read the annual report of the firm
Support firm in labor dispute
Consider buying stock
Composite Behavior Measure
Experimental Conditions Manipulation Checks
Feature article stressed matters of social and political importance
Feature article addresses how socially responsible the firm was
Student's
t-test
Value
Prob.
Control
Group
Experimental
Group
n=40
n=42
3.90
4.24
3.29
3.90
3.62
3.71
3.57
5.24
3.95
3.76
3.92
4.95
6.10
3.95
5.05
5.80
4.05
4.60
5.45
5.35
4.70
5.00
3.05
7.65
2.66
4.70
8.76
1.14
5.15
.83
5.58
3.12
8.71
.003 a
.000 a
.010 ~
.000 ~
.000 a
.258
.000 ~
.411
.000 a
.003"
.000 ~
3.19
2.86
4.81
2.81
4.90
3.80
5.33
3.96
4.90
4.15
5.65
4.30
5.10
4.45
5.10
4.81
7.29
3.64
3.48
5.05
.58
2.16
.88
5.88
.000 ~
.000 a
.001 a
.000 ~
.361
.034 a
.381
.000 ~
4.48
2.19
6.50
6.55
7.84
17.55
.000 a
.000 ~
"Two-tailStudent'st-test findingsstatisticallysignificantat c~<~ .05 level.
nition of "stakeholder" status between those who responded
affirmatively, in contrast to those who did not, with respect
to the specified statement was meant to provide a basis on
which to examine the influence of overt membership in a
constituency grouping. (Incidently, the resulting dichotomy
between "stakeholders" and "nonstakeholders" was not intended to definitively suggest that individuals without explicit
recognition of interest group status might not, in fact, be
potential, albeit unacknowledged, stakeholders per se).
This operational definition is consistent with segmentation
strategy involving respondent psychographic analysis. This is
an approach whereby activities, interests, and o p i n i o n s - - o f t e n
referred to in segmentation literature as A I O - - a r e used to
delineate a group of individuals in terms of a nondemographic,
lifestyle variable (see Plummet, 1974; Anderson and Golden,
1984; Wells, 1985; Dichter, 1986; Lastovicka et al., 1990).
Indeed, there are good reasons to expect that lifestyle-personal or professional--will affect individual behavior, and
therefore would be a useful segmentation variable. W i t h AIO,
instead of categorizing individuals on the basis of standard
demographic criteria, some relevant variable with explanatory
value is relied upon to classify individuals in a manner that
has meaning with respect to a higher-order concept of interest
in defining a market, public, or stakeholder group (Pernica,
1973; Wells, 1975; Mehrotra and Wells, 1977; Lesser and
Hughes, 1986). Indeed, it should be noted that stakeholder
identification for both theoretical as well as practical research
is a fundamentally subjective process, one in which discretionary judgment and intuition frequently play a vital role. To
that end, the authors classification designation was intended
to provide a real, albeit tentative test of the prepositional
statement in question.
In an appropriate examination of the data with respect to
Question 3, the dependent measures were tested to determine
whether differences exist between self-designated stakeholder
and undeclared subjects with respect to attitude and behavior
measures. In the case of attitude measures, the discrepancy
between the two groups was estimated using a between-subject t-test analysis, which resulted in a specific value of .31
(eL ~< .756); thus, the expected difference for an aggregate
attitude measure was not statistically significant (i.e., at a
necessary e~ ~< .05 level). For behavior estimates, the t-test
value was 2.87 (or ~< .009) and consequently indicative of a
statistically significant difference. These aggregate measures
of attitude and behavior responses as well as individual measures of each are shown in Table 5.
Discussion
Consistent with Questions 1 and 2, measures at each level of
the hierarchy-of-effects appear to show both a positive and
systematic impact on experimental subjects. The data suggest
154
J Busn Res
1997:38:141-159
K.B. Murray and C. M. Vogel
Table 5. Effects of Corporate Social Responsibility Information on Key Measures Attributable to Stakeholder Measures
Test of Between-Subject Likert Scale Statement
Agreement Differences Regarding the Firm
Attitude Measures
Firm is responsive to needs of its employees
Firm is responsive to its customers and consumers generally
Firm is concerned about truth in its advertising
Firm is an environmentally safe company
Firm is concemed about better planning of natural resources
Firm's services or products are of higher quality than competitors
Firm is honest
Firm has a good financial record
I would be pleased to be customer
Firm helps to control inflation
Composite Attitude Measure
Behavior Measures
Respondent would be included to . . .
• . Support company if in a dispute with the government
•. Write letter to congressman or editor if firm was attacked unfairly
• . Recommend job application to friend
• . Think twice before believing a negative report about the firm
• . Read the annual report of the firm
• . Support firm in labor dispute
• . Consider buying stock
Composite Behavior Measure
Treatment Subjects with
Stakeholder Designation
Yes
No
n= 14
n=26
Student's t-test
Value
Prob.
5.00
6.00
3.57
5.43
6.00
3.57
4.57
5.71
5.71
4.85
5.04
4.92
6.15
4.15
4.85
5.69
4.31
4.62
5.31
5.15
4.62
4.98
. 13
.57
1.29
1.33
1.21
1.68
.11
1.33
1.41
.62
.31
.901
.575
.212
.199
.238
.106
.914
.193
.170
.538
.756
5.57
4.43
6.14
3.86
5.29
5.57
5.57
5.20
4.54
4.00
5.39
4.54
5.00
3.85
4.85
4.59
2.99
.74
2.56
1.22
.67
5.33
2.38
2.87
.006a
.467
.016 a
.241
•505
.000a
.025 a
.009 a
~Two-tailStudent'st-test findingsstatisticallysignificantat ~ < .05 level.
that corporate prosocial endeavors are influential and that a
hierarchical evaluative approach is, indeed, sensitive to
changes in attitude as well as potential behavior. Except in
the case of four specific dependent measures spanning attitude
and behavior items, respondents reacted to the firm with
prosocial programs in a markedly more favorable manner
than the "same" utility for which no prosocial activities were
disclosed• Mean score differences for all such items were statistically significant (i.e., ~t ~< .05).
Three of the four nonsignificant factors are ones that address the direct, short-term financial judgments or decisions
with respect to the target firm. Specifically, the investment
inclinations of experimental subjects was fundamentally identical to those of control subjects (i.e., propensity to read annual
report, buy stock, or give differential financial assessment are
statistically equivalent). This research provides evidence that
short-immediate financial effects may not be (1) attainable,
(2) detectable, or either.
Consistent with previous research, these findings indicate
that direct financial "payoff' to firms engaged in CSR is not,
at the very least, a likely immediate gain. Whereas previous
studies have employed financial measures (e.g., stock valuation, profitability) to gauge CSR impact, this effect is similarly
not supported from the particular financially related aspects
of this particular study. These "negative'findings could simply
be attributed to the incapability of CSR behaviors to produce
short-term financial payoffs• It should be noted, however,
that although evidence of direct, short-term impact of CSR
behaviors is largely absent with respect to financial gain to
the firm, long-run economic benefits via indirect effects may be
considerable• Such impacts may accrue by means of favorable
treatment in the press, the ability of the firm to attract (and
manage) superior management and staff personnel, the firm's
ability to forestall undesirable regulation, etc. Needless to
say, financial advantage attributable to these factors would be
difficult to determine and evaluate• In any case, the results of
this research are consistent with previous findings on the
topic•
For item nonsignificant factors it is possible that factors
other than information regarding prosocial programs would
likely affect the respondents' appraisal of the firm. Perhaps it
is unrealistic to expect that information on the prosocial activities of the firm would necessarily be salient in affecting whether
an individual would be willing to read an annual report, buy
stock, etc. In the context of this research, it is clear why there
was an absence of distinguishing characterizations relative to
perceived quality differences in the underlying product output
of the firm. This is readily understandable, since by definition
what constitutes the "product" (i.e., electricity) in the context
of this research is uniform across all electric utilities•
Insofar as goodwill on the part of particular stakeholder
groups is valuable in the strategic ambitions of the firm, a
hierarchical measurement approach to estimating those effects
is especially instrumental, as highlighted in the analysis of the
Hierarchy-of-Effects Approach
data with respect to Question 3. That positive effects may be
differentially distributed among various stakeholder groups is
intuitively reasonable but previously not demonstrated. Precisely why a majority of behavior measures were significant
and all attitude measures were not is open to conjecture. At a
minimum it is evident that attitude impact of CSR information
awareness may be, if only for these particular stakeholder
subjects, comparable while action predisposition is different.
Whether similar results for other stakeholders--that behavior
but not attitude factors are affected--holds will be determined
by subsequent research.
Of seven behavior items, four were statistically significant,
while three were not. One of the three nonsignificant items
(i.e., read annual report) was nonsignificant between experimental groups as well in a test of Research Question 2; the
other two equivalent items (i.e., write to Congress . . . and
think twice before believing a negative report...) likely denote
a heightened skepticism among all individuals comprising the
respondent sample as to how businesses operate. Compared
to subjects who did not view themselves as organized stakeholders, per se, the equivalent behavior predisposition responses of those that received positive CSR information is
limited and apparently does not extend to these factors.
In summary, then, positive results with respect to Questions 1 and 2 are self-consistent and demonstrate a generally
favorable pattern for the effects of CSR on a stakeholder audience. While financial payoffs seem--at least in the short r u n - unlikely, other benefits to the firm are possible and evident.
Although "intangible" (in terms of financial denomination, at
least), a wide range of goodwill payoffs appear to accrue to
the socially responsible firm, some of which are likely to have
favorable, albeit indirect, financial consequences. If the social
milieu presents a venue of either threat or opportunity to the
firm, this research demonstrates that management can now
substantiate or, at a minimum, evaluate expenditures directed
to CSR activities with empirical evidence. At the very least,
this research demonstrates empirically the effects of CSR in
terms that are relevant and meaningful to both managers
and social activists, certainly compared to previously pursued
avenues of tracking CSR impact.
Limitations of the Research
Several shortcomings of the research reported should be acknowledged. First, in view of the exploratory nature of this
research, the post hoc determination of how "stakeholders"
were operationally defined--while defensible--merits some
discussion. To being with, it is important to note that there
is potentially a large number of ways in which stakeholders
might be operationally defined. This is the case because the
stakeholder concept is potentially quite variegated, whereby
there is a very wide range of obvious as well as subtle groupings
of individuals who could arguably have an interest in (as well
as exert influence on) the firm. As a practical matter, other
J Busn Res
1997:38:141-159
I55
stakeholder groups are possible to define; indeed, a large
number of other publics are feasible. Examples include
whether a person belongs to a professional organization that
takes a stand on relevant issues; what relevant media habits,
lifestyle, professional identity, political views, or social positions an individual may have are others, to name a few.
For the purposes of this research, however, defining stakeholders in terms of their affiliation with a local, issue-oriented
organization appeared to have face validity with respect to
testing whether subjects so classified would exhibit distinctive
reaction to the independent variable. While the definition of
other stakeholder profiles was feasible, the size of the total
sample pool limited the test to only one stakeholder classification. Were other stakeholder types to have also been examined,
there would be unacceptable levels of redundancy in the data
analysis. Nonetheless, the data as analyzed provide tentative
support that stakeholders are differentially affected. Ensuing
studies may disprove this finding, but this early evidence is
positive in this regard and invites replication insofar as other
groups may be concerned. Indeed, subsequent research
should examine the effects of CSR knowledge on other types
and configurations of publics to test how robust this effect
may be.
Another relevant issue is the recognition that this study
does not fully explore the implications associated with a hierarchical approach to measuring particular phenomena. While
the tenets of this technique were neither violated nor obviated,
it is important to recognize that longitudinal data represent
the most powerful test of their merits. This is true because
only when data samples are collected over time with respect
to attitude and behavior, for example, can one fully determine
the predictive value of prior effects in terms of latter ones. In
view of the findings of this research, subsequent examinations
of such a measurement technique might well incorporate this
aspect to more fully support its relevance and importance to
strategic planning and social responsibility management.
Contributions and Future Research
Although more empirical scholarship is called for as a result
of this study, there is encouraging empirical support from this
study that provides evidence that CSR activities exert a positive
impact on potential stakeholders. Specifically, the findings
appear to be supportive of a hierarchy-of-effects approach to
corporate prosocial planning and management. These data
provide evidence that the effects of CSR are both measurable
and empirically demonstrable, at both the individual and
group level. Estimating the impact of prosocial activities of the
firm--and the goodwill effects--using a hierarchy-of-effects
approach contrasts sharply with anecdotal, ambiguous, or
frequently insensitive financial measures otherwise used by
managers to justify and assess social programs. Instead of
dependence on spurious measures, this evaluative perspective
provides a range of ways to measure the effectiveness of social
156
J Busn Res
1997:38:141-159
programs. This research offers at least two advantages over
extant views of this function of the contemporary firm.
First, explicit CSR planning and evaluation maximizes the
effectiveness of the prosocial endeavors of the firm in terms
of societal benefit and goodwill to the firm. Despite a long
tradition in the United States calling for greater social responsiveness by business, little in the form of management heuristics has been forthcoming. To the degree that firms devote
more conscious management attention to societal expectations, the more likely it is that meaningful transactions will
occur between business and the greater social and political
environment. Thus, both society and the firm are benefited:
the social environment is likely to receive greater attention
(and corporate resources) from business leaders. On the other
hand, the firm achieves increased and (potentially) strategic
advantage in terms of demonstrable goodwill. By examining
stakeholder responses at various levels of public response,
executives are able to gauge the relative effectiveness of various
programs and to anticipate long-term benefits to both stakeholder groups and the firm. Consequently, executives are
encouraged to engage in CSR activities to the benefit of stakeholders of the firm, specifically, and society in general.
Second, a market approach to prosocial program development and corporate goodwill evaluation makes management
sense. To the degree that prosocial endeavors of the firm are
encouraged--and result in the mutual benefit of society and
the firm--the need to develop sophisticated management approach to guide these kinds of activities is obvious. Taking a
stakeholder approach to CSR provides the impetus to apply
and refine extant management techniques to this function.
This article has described how planning and evaluation might
be viewed when a market approach is adopted. To the degree
that business-societal transactions exist, it seems reasonable
to expect that selective marketing heuristics, those that guide
managers in decision making relative to the conventional offerings of the firm, would be helpful in terms of prosocial activities as well. New and pragmatic management paradigms are
needed to facilitate positive, prosocial transactions between
the firm and society. Clearly, more research should be conducted in the area of CSR. However, a hierarchy-of-effects
approach suggests a promising starting point for future work
in this area.
Future research endeavors should seek to replicate the
findings reported here in several important ways. First, specific
efforts should be undertaken to examine stakeholder and/or
firm configurations different than those focused on in this
research, to determine if the conclusions with respect to managers-as-stakeholders applies to other publics and types of
firms. Future research ought to include the examination of
CSR effects by type of respondent (i.e., investors, type of
employees, politicians, voters, etc.) as well as type of firm
(i.e., foreign, domestic, multinational, etc.). While there is
reason to believe that a uniform conceptual basis underlies
the effects described in this research, that has yet to be shown.
K.B. Murray and C. M. Vogel
Second, a more theoretical basis for CSR effects needs to
be demonstrated. While this research suggests ample evidence
in favor of the real-world impact of CSR activity by business,
a more elaborate and conceptual framework is called for from
a management perspective. Leading this effort is a decomposition of attitude effects such as a decomposition of attitude
effects (i.e., what are relevant evaluative criteria with respect
to CSR judgments) as well as the determination of the relative
impact of CSR "knowledge" vis-a-vis other corporate attributes
(e.g., financial stability, new product development strategic
profile).
Finally, future empirical research should seek to estimate
the longitudinal effects of CSR and the merits of a hierarchyof-effects technique in doing so. In this regard, an understanding of the effect of time and other information regarding the
firm (or industry) is necessary to extend the contribution of
management literature of CSR planning and execution. Future
research ought to focus on differential effects of strategic CSR
actions by firms in various industries and over time to examine
if there are franchise effects attributable to the firm.
APPENDIX: Item Reliability Analysis of Data
Collection Instrument
Correlation
Standardized Estimate
Coefficient
Item
of Errorless
Alpha
Alpha
True Scores
Reliability
Coefficients
Attitude items (10)
Behavioral items (7)
Aggregate measures (17)
.78
.60
.80
.78
.60
.80
.88
.77
.89
Item-to-Total Correlation Values
Firm is responsive to needs of its employees
.34
Firm is responsive to its customers and consumers generally .63
Firm is concerned about truth in its advertising
.32
Firm is an environmentally safe company
.58
Firm is concerned about better planning of natural resources .57
Service or products are of higher quality than competitors .13
Firm is honest
.51
Firm has a good financial record
.26
Pleased to be customer
.55
Firm helps to control inflation
.59
Inclined to support company if in a dispute with the govern- .69
ment
Write letter to congressman or editor if firm was attacked .49
unfairly
Recommend job application to friend
.56
Think twice before believing a negative report about the firm .23
Interested in reading annual report
.13
Support firm in labor disupute
.43
Consider buying stock
- . 17
The impetus for this article was the funding of a study of electric utility
consumer affairs programsby VogelAssociates funded through the Edison
Electric Institute.
Hierarchy-of-Effects Approach
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