CHAPTER THREE

CONCEPTUAL FRAMEWORK AND METHODOLOGY

3.1 Chapter Introduction

Research methodology is a systematic way to solve a problem. It is a science of studying
how research is to be carried out. The procedures by which researchers go about their
work of describing, explaining, and predicting phenomena are called research
methodology. Then it is significant for a researcher to design a methodology for the
problem identified. This study is about the relationship between CSR and customer
purchase intention. This chapter reviews the way of doing research in a comprehensive
manner and include method of research approach, population of the study, sample
designing and sample selection, conceptual framework, hypothesis development and the
methods of data analysis.

3.2. Research Approach

This study has designed as a survey study and tries to identify the relationship between
CSR practices and customer purchase intention based on the evidences taken from the
North-Western province, Sri Lanka.

Generally there are two methods of research approaches, known as deductive approach
and inductive approach. Deductive approach is theory testing while inductive approach is
theory generating. Often most of researchers link deductive researches with quantitative
experiments or surveys, and inductive research with qualitative interviews or
ethnographic works. If a research starts with a theory and is driven by hypotheses which
the research is testing, it is deductive approach. [ CITATION DrT05 \l 1033 ].

Since this is a survey study, deductive approach has being used. A deductive approach is
considered with developing hypothesis or hypotheses based on the existing theory and
developing a research strategy to test the hypotheses [ CITATION Wil10 \l 1033 ]. [ CITATION
Bei07 \l 1033 ] stated that deductive approach looks at a known theory or phenomenon and
checks if that theory is applicable in a given contexts. The deductive research approach
 tracks the way of logic most closely. The analysis begins with a theory and direct to a
new hypothesis. This hypothesis is set to the test by dealing with observations that either
guide to a confirmation or rejection of the hypothesis [ CITATION Sni09 \l 1033 ].

Data is collected on the base of quantitative method that is through questionnaire which
comprises with both close-ended and open-ended questions. After analyzing the data
which are collected through the questionnaires, researcher will able to determine to what
extent there is a relationship between two variables. Statistical analysis permits researcher
to discover complex and casual relationships and to what extent one variable influences
another.

3.3. Conceptual Framework

The conceptual framework represents the relationship between the variables related to the
study. The rationale of this study is to understand the relationship between CSR practices
and customer purchase intention. This conceptual framework was developed based on the
Figure 3.1: Conceptual
theoretical background Framework
depicted in the second chapter, literature review.

Corporate Social Responsibilities Customer Purchase

Intention

Economic
Customer Satisfaction
Responsibilities

Legal Responsibilities
Customer Loyalty

Ethical Responsibilities

Customer Trust
Philanthropic
Responsibilities
In this study, CSR is the independent variable and it is divided in to four sub variables as
economic responsibilities, legal responsibilities, ethical responsibilities and philanthropic
responsibilities. This categorization is done according to the literature identified in
chapter two as the finding of [ CITATION Car91 \l 1033 ] . Under independent variables,
economic responsibilities mean to be profitable, legal responsibilities mean to obey the
laws set forth by society, ethical responsibilities mean to do what is right even business is
not compelled to do so by law, and philanthropic responsibilities mean the resources
contributed corporations toward social, educational, recreational and cultural purposes
[ CITATION Car91 \l 1033 ].

Customer purchase intention is the dependant variable in this study. Customer purchase
intention has been divided in to three sub variables as customer satisfaction, customer
loyalty and customer trust. This categorization has done according to the studies of
[ CITATION Ken081 \l 1033 ], [ CITATION Rom03 \l 1033 ], [ CITATION And98 \l 1033 ], and
[ CITATION Bha041 \l 1033 ] . Customer satisfaction can be described as the number of
customers or percentage of total customers, whose reported experience with a firm, its
products or its services exceeds specified satisfaction goals [ CITATION Far10 \l 1033 ],
customer loyalty means attitude or behavior of customer toward the firm’s products,
brand, and services [ CITATION Dag91 \l 1033 ], and customer trust is occurring the
characteristics, motives and intentions of the exchange partners and the evaluation and
the assumptions, and predictions by the consumers as to the promised results or outcomes
of the company [ CITATION Can97 \l 1033 ].

Accordingly with considering above all variables, the conceptual framework of the study
can be developed as in figure 3.1.

3.3.1. Operationalization of the variables

Operationalization is the process of strictly defining variables in to measurable factors. It

is the process defines furry concepts and allows them to be measured empirically and
quantitatively.
Table 3.1: Operationalization of variables

Concepts Variables Indicators Measures

Independent Variables
Corporate Social Economic 1.Be profitable Question No: 1-3
Responsibilities Responsibilities 2.Maintain a strong (Questionnaire- Part
3)
competition position
3.Maintain a higher
efficiency level

Legal 1.Fulfillment of Question No: 4-8

Responsibilities expectations of (Questionnaire Part
3)
government and law
2.Comply with local
regulations and
obligations
3.Be a law-abiding
corporate citizen
Ethical 1.Performing in a Question No: 9-
Responsibilities manner of fulfilling 13 (Questionnaire

social morals and Part 3)

ethical norms
2.Not limited to
mere compliance
with law and
regulations
3.Avoiding from the
unethical marketing
strategies
Philanthropic 1.Perform in manner Question No: 14-
Responsibilities of fulfilling 17 (Questionnaire

philanthropic and Part 3)

charitable
 expectations of the
society
2. Engage in projects
which enhance
quality of life and
humanitarian
projects
Dependant Variables
Customer Purchase Customer 1.Customer feel that Question No: 18-
Intention Satisfaction they are value for the 21 (Questionnaire

company Part 3)

2.Comfortable
shopping
3.Customer
awareness that a
company engage in
CSR activities
Customer Loyalty 1.Customers’ Question No: 22-
attitudes about they 25 (Questionnaire

also contribute to the Part 3)

CSR practices
2.Customers’ revisits
3.Customers’
positive word of
mouth
Customer Trust 1.Customer retention Question No: 26-
with ethical suppliers 29 (Questionnaire

and rejection of the Part 3)

immoral actions
3.3.2. Hypotheses Development

In order to suggest a cause and effect relationship between the independent variable and
the dependant variable in a testable form, the hypotheses have been developed by
studying past literature. Accordingly above conceptual model has enabled the testing of
twelve hypotheses as follows,

3.3.2.1. Economic responsibilities and Customer satisfaction

Economic responsibilities of CSR can be measured in terms of shareholders’ wealth

maximization, profit generation, being competitive, operational efficiency and continual
profitability [ CITATION Car91 \l 1033 ]. Recently price fairness and product quality are also
used to determine economic CSR [ CITATION Onl10 \l 1033 ] . Economic CSR has a
positive and significant impact on customer satisfaction. The determinants of economic
CSR including price fairness are highly associated with customer satisfaction [ CITATION
Kin07 \l 1033 ], [ CITATION Akr12 \l 1033 ] , [ CITATION Dai10 \l 1033 ] , [ CITATION Hag12 \l 1033
], [ CITATION Han10 \l 1033 ], [ CITATION Mar07 \l 1033 ]. Very few empirical researches
depict that improved product and service quality which is a one determinant of economic
CSR do not positively influence customer satisfaction [ CITATION Yue10 \l 1033 ] . And also
researchers including Luo and Bhattacharya, Yeung, Cheng and Chan have found that
operational efficiency also has positive impact on customer satisfaction. After
considering all of these empirical evidences, researcher has developed hypothesis as,

H1: There is a positive relationship between economic responsibilities of CSR and

customer satisfaction.

3.3.2.2. Legal Responsibilities and Customer Satisfaction

Legal responsibilities of CSR is measured in terms of how far that organizations’

activities comply with laws and regulations and law abiding corporate citizen, fulfilling
legal obligations and goods and services must meet the minimal legal requirements
[ CITATION Car91 \l 1033 ] . Numbers of studies have found that there is a significant
influence of legal responsibilities as a dimension of CSR on customer satisfaction
[ CITATION McD08 \l 1033 ], [ CITATION Gal10 \l 1033 ], [ CITATION His \l 1033 ], [ CITATION
Tan06 \l 1033 ], [ CITATION Onl10 \l 1033 ]. And also many researchers have depicted that
compliance with customer privacy laws and customer protection laws are favorably
affected with customer satisfaction [ CITATION Cot05 \l 1033 ], [ CITATION McD08 \l 1033 ],
[ CITATION Onl10 \l 1033 ] . Whatsoever, a recent study depicts that there is significant, but
negative relationship between legal CSR and customer satisfaction[ CITATION Nar13 \l
1033 ].

Thus it is very important to examine the relationship between legal responsibilities of

CSR and customer satisfaction. The following hypothesis has developed for that
requirement.

H2: There is a positive relationship between legal responsibilities and customer

satisfaction.

3.3.2.3. Ethical Responsibilities and Customer Satisfaction

Ethical responsibilities can be measured in terms of the societal morals and ethical norms
[ CITATION Car91 \l 1033 ] . Numbers of studies found that ethical responsibilities of an
organization improves customer satisfaction [ CITATION Sha07 \l 1033 ], [ CITATION Gal10 \l
1033 ], [ CITATION Onl10 \l 1033 ], [ CITATION Lee12 \l 1033 ], [ CITATION Nar13 \l 1033 ]. As
well as ethical behavior of employees or front desk staff also influences customer
satisfaction [ CITATION Coo02 \l 1033 ] , [ CITATION Haz12 \l 1033 ] . Avoidance of child labor
and fair trade practices also lead to customer satisfaction [ CITATION Han10 \l 1033 ],
[ CITATION Lic041 \l 1033 ], [ CITATION McD08 \l 1033 ], [ CITATION Sha07 \l 1033 ].

Accordingly to find out the relationship between ethical responsibilities of CSR and
customer satisfaction, researcher has developed a hypothesis as,

H3: There is a positive relationship between ethical responsibilities and customer

satisfaction.

3.3.2.4. Philanthropic Responsibilities and Customer Satisfaction

Philanthropic responsibilities of CSR can be measured in terms of philanthropic and

charitable expectation of society [ CITATION Car91 \l 1033 ] . Number of studies found that
philanthropic responsibilities can directly influence customer demand through high level
of customer satisfaction [ CITATION Tan06 \l 1033 ], [ CITATION Lev10 \l 1033 ], [ CITATION
Gal10 \l 1033 ], [ CITATION Onl10 \l 1033 ].
Hence it is important to check the relationship between philanthropic responsibilities and
customer satisfaction. For that following hypothesis has being used,

H4: There is positive relationship between philanthropic responsibilities and customer

satisfaction.

3.3.2.5. Economic Responsibilities and Customer Loyalty

Economic responsibilities of CSR have a positive influence on customer loyalty

[ CITATION Nar13 \l 1033 ]. Price fairness, quality of products and operational efficiency
have favorable relationship with customer loyalty [ CITATION Kin07 \l 1033 ], [ CITATION
Akr12 \l 1033 ], [ CITATION Dai10 \l 1033 ], [ CITATION Hag12 \l 1033 ], [ CITATION Han10 \l
1033 ], [ CITATION Mar07 \l 1033 ], [ CITATION Yue10 \l 1033 ], [ CITATION McD08 \l 1033 ],
[ CITATION Luo06 \l 1033 ]. One of element of economic CSR is shareholders’ wealth
maximization and profitability where number of studies stated that there is a negative
relationship between wealth maximization and customer loyalty[ CITATION Onl10 \l 1033 ],
although profit sharing among employees increases customer loyalty [ CITATION McD08 \l
1033 ].

Accordingly, researcher can develop a hypothesis as,

H5: There is a positive relationship between economic responsibilities and customer

loyalty.

3.3.2.6. Legal Responsibilities and Customer Loyalty

Most of past studies show that legal responsibilities of CSR have positive influence on
customer loyalty [ CITATION McD08 \l 1033 ], [ CITATION Gal10 \l 1033 ]. Therefore with
studying past studies, researcher has developed a hypothesis to measure the relationship
between legal responsibilities and customer loyalty as,

H6: There is a positive relationship between legal responsibilities of CSR and customer
loyalty.

3.3.2.7. Ethical Responsibilities and Customer Loyalty

Many past studies have found that ethical responsibilities of the corporate bodies
including fair trade practices and established brands which fulfilling promises, have
favorable influence on customer loyalty [ CITATION Han10 \l 1033 ], [ CITATION Sha07 \l
1033 ]. To examine the relationship between these ethical responsibilities and customer
loyalty, researcher has developed a hypothesis as,

H7: There is a positive relationship between ethical responsibilities and customer loyalty.

3.3.2.8. Philanthropic Responsibilities and Customer Loyalty

Recent studies done on the effect of CSR on customer loyalty depicts that there is a
positive as well as significant relationship between philanthropic responsibilities and
customer loyalty. Philanthropic dimensions such as cause related marketing,
sponsorships, donations or charitable contribution associated positively with customer
loyalty [ CITATION Laf05 \l 1033 ] , [ CITATION Gup06 \l 1033 ] . And also more recently, the
studies show that charitable contributions and society development activities are
positively affected to customer loyalty leading to high revenue growth [ CITATION Lev10 \l
1033 ]. Accordingly to find the relationship, researcher has developed hypothesis as,

H8: There is a positive relationship between philanthropic responsibilities and customer

loyalty.

3.3.2.9. Economic Responsibilities and Customer Trust

There are studies that have found that economic responsibilities of CSR are positively
affected to the level of customer trust [ CITATION Lee12 \l 1033 ]. Therefore after studying
past studies, the researcher is able to develop a hypothesis to examine the relationship
between economic responsibilities and customer trust as,

H9: There is a positive relationship between economic responsibilities and customer trust.

3.3.2.10. Legal Responsibilities and Customer Trust

When an organization acts in a manner of following and obeying legal regulations and
obligations to protect the consumer, shows higher customer trust and confidence
[ CITATION Wir07 \l 1033 ]. Then researcher has developed a hypothesis as,
H10: There is a positive relationship between legal responsibilities of CSR and customer
trust.

3.3.2.11. Ethical Responsibilities and Customer Trust

Ethical responsibilities of CSR and customer retention are linked by the level of customer
trust, and an ethical behavior of a corporate body has positive influence on customer trust
[ CITATION Alr12 \l 1033 ] . Accordingly researcher has developed a hypothesis to find the
relationship between ethical behavior of corporations and customers’ level of trust as,

H11: There is a positive relationship between ethical responsibilities of CSR and

customer trust.

3.3.2.12. Philanthropic Responsibilities and Customer Trust

Impacts of consumer trust are derived from existing values that company share with its
customers [ CITATION Mor94 \l 1033 ]. As well as voluntary activities such as managers and
employees paid time spent on social development can build good relationships with
customer, and it increases customer trust and retention [ CITATION Lev10 \l 1033 ],
[ CITATION Joh \l 1033 ]. Therefore researcher is able to build a hypothesis as,

H12: There is a positive relationship between philanthropic responsibilities and customer

trust.

3.3.2.13. Corporate Social Responsibility and Customer Purchase Intention

There are number of researches which found that there is a positive impact of CSR
practices on customer purchase intention [ CITATION Bha041 \l 1033 ], [ CITATION Dac \l 1033
], [ CITATION Cre97 \l 1033 ], [ CITATION Moh05 \l 1033 ]. As finding this relationship is the
ultimate objective of this study, researcher has developed a hypothesis as,

H13: There is a positive relationship between CSR practices and customer purchase
intention.

3.4. Research Population and Sample

Population of this study is very large. There are about 2,380,861 people who are
1,618,465 from Kurunagala District and 762,396 from Puttlam District in North-Western
province Sri Lanka. These statistics are according to the census on 20th of March 2012,
from the reports of Department of Census and Statistics- Sri Lanka.

From this population, 384 were selected to the sample based on the sample sizes given by
Uma Sekaran through his book, “Research Methods for Business: A Skill Building
Approach, 5th Edition.

For this study researcher has chosen Simple Random Sampling method. Simple random
sampling method is the straight forward method of sampling that assigns each elements
of the target population and equal probability of being selected [ CITATION Col \l 1033 ].

3.5. Data Collection

There are two types of data as primary data and secondary data. Primary data is first hand
data while secondary data can be explained as the data which is obtained from another
source such as annual reports, company records…etc. this study has used only primary
data. Data for this study was collected through the questionnaire from selected sample.
Questionnaire was developed in order to disclose key indicators which are related to
independent and dependant variables to achieve objectives and questionnaire was
presented in both Sinhala and English language to maintain the simplicity and get the
most accurate feedback.

3.5.1. Questionnaire

Primary data for the study is gathered through structured questionnaires among the
customers in North-Western Province. Questionnaire is based on the sources which are
[ CITATION Car91 \l 1033 ], [ CITATION Bri05 \l 1033 ] and [ CITATION Jan12 \l 1033 ].

The questionnaire is consisted of three parts. Part 1 is consisted the questions regarding
the demographic variables like age, marital status, gender, income level. These questions
enable to articulate a simple overview of the sample.
Part 2 is consisted with the questions to test the general knowledge about the concept of
corporate social responsibility which consumers bear. These questions help to make an
idea of the level of awareness about the concept. These questions are created based on the
five point likert scale in order to identify the customer attitudes about CSR practices. And
scale is ranging from strongly agree to strongly disagree.

Part 3 consisted with the questions regarding the CSR and purchase intention according
to its variables. These questions are also created based on the five point likert scale. And
this scale is too ranging from strongly agree to strongly disagree.

(See Appendix 1)

3.6. Data Analysis & Presentation

In order to analyze the data the SPSS analytical tool is used. The data which are collected
by researcher is feed in to SPSS package for doing the data analysis. After that existing
situation of the variables is calculated using descriptive analysis and the relationship
between variables are measured using Pearson’s correlation coefficient.

3.6.1. Descriptive Analysis

The descriptive analysis helps to transformation of raw data in to a form that will make
them very easy and clear to understand as well as interpret. It provides clear and simple
summaries about the sample and measures. To summarize demographic data and general
awareness about the concept, graphical methods and tabulation forms has being used. In
order to understand existing situations of the variables of regarding CSR and purchase
intention the methods such as mean, mode, median and standard deviation used.
The mean is a measure of central tendency that offers a general idea about the data set
without unnecessary inundating one with each of the observations in a data set. Median is
the central element in a group of observations when they are argued in either to ascending
order or to descending order. The mode of a set of numbers is that value which occurs
with the greatest frequency that is, it is the most common value. The median is described
as the middle value of set of numbers arrange in ascending or descending order.
Standard deviation shows how much variation or dispersion from the average exists. A
low standard deviation indicates that the data points tend to be very close to the mean and
a higher standard deviation indicates that the data points are spread out over a large range
of values. Standard deviation is calculated as,

∑ ( x− x́ )2
σ=
√ n

3.6.2. Correlation Analysis

To identify the relationship between CSR practices, independent variable and customer
purchase intention, dependant variable, Pearson’s correlation coefficient has been
calculated.
Correlation coefficient (r) is a measure of the strength and the direction of the
relationship between two variables. Values of correlation coefficient (r) range from +1
(very strong direct relationship), through 0 (no relationship), to -1 (very strong inverse
relationship). Hence the value of correlation coefficient is such that -1 < r < +1. The +
and – signs are used for positive linear correlations and negative linear correlations,
respectively. The correlation coefficient is calculated as,
n ∑ xy−∑ x ∑ y
r=
2 2 2 2
√ [ n∑ x −( ∑ x ) ][ n∑ y −(∑ y ) ]
3.6.3. Cronbach’s Alpha Reliability Test
Cronbach’s Alpha is a tool for assessing reliability of the dataset which means that this
measure the internal consistency of the data. Cronbach Alpha coefficient ranges between
0-1 and the higher the coefficient value or value closer to 1 indicates higher reliability or
internal consistency. Cronbach’s Alpha is calculated as,

rk
[ 1+ ( k−1 ) r ]

Where,
k= number of items considered
r= the mean of the inter-item correlations