CHAPTER 2

LITERAURE REVIEW

2.1 Chapter Introduction

This chapter discusses the theoretical background and literature behind the corporate
social responsibility and customer purchase intention. As well as here, number of
interested findings, arguments and theories made up around the world are summarized
in this chapter. It must state that number of studies can be found regarding these two
steps separately. But very few literaturesare available about the relationship between
two variables, CSR and purchase intention in Sri Lankan context. For the purpose of
reviling the underline theories behind concepts, books, journal articles and web pages
are used. The literature will be usedin building conceptual framework and the
questionnaire and to come up with the conclusion at the end of the report.

2.2. Corporate Social Responsibility

The definition of CSR bas developed time to time from 1950s to the present. CSR can
be defined as,“The total corporate social responsibility of business entails the
simultaneous fulfillment of the firm’s legal, economic, ethical and philanthropic
responsibilities or we can say that the CSR firm should strive to make a profit, be
ethical, obey the law and be a good corporate citizen[ CITATION Car91 \l 1033 ].

Another popular definition of CSR is “a form of corporate philanthropy, which can be

combined with economic benefits to provide a form of competitive advantage”
[ CITATION Por02 \l 1033 ].

New government bodies established that the national public policy now formally
recognized the environment, employees and customers to be significant and legitimate
stakeholders of business [ CITATION Car91 \t \l 1033 ].

European Commission presented its new definition for CSR in 2011 as,“…the
responsibility of enterprises for their impacts on society, …a process integrates social,
environmental, ethical, human rights, and consumer concerns in to business
operations and core strategy in close collaboration with stakeholders, …maximizing
the creation of shared value for shareholders and other stakeholders and society at
large; identifying, preventing and mitigating their possible adverse impacts”
[ CITATION Com11 \l 1033 ].

According to [ CITATION Kot05 \l 1033 ] , there are five elements which every
corporation should fulfill called “Five C’s”. They are, Conviction which means actual
improvement in organizational performance. Commitment, this shows that it can gain
results or achievements as much as they give their commitment toward.
Communication which tells an organization responsible to transparent operations, be
honest and maintain direct & close two way communication with all stakeholders.
Consistency, this stands for continual improvements without framing to a limited
capacity. And finally Credibility which means corporations must maintain the
stakeholders’ trust, because firm performance depends on credibility of their efforts.

As well as [ CITATION Kot04 \l 1033 ] presented there are some areas for corporations to
practice the CSR operations. They are, providing cash donations, offering grants,
awarding scholarships, donating products, donating services, providing expertise,
allowing use of facilities & distribution of channels, and offering the use of
equipment.

2.2.1 Evolution of Corporate Social Responsibility

The concept of CSR has a long and varied history. Since 1930s, this concept is
developing time to time in accordance with the timely needs in business environment.

The modern era of the CSR initiated since 1950s. Before 1950s, mostly many of
researchers and scholars address this concept as “Social Responsibility” than
“Corporate Social Responsibility”[ CITATION Bow53 \l 1033 ]. Bowen argued on the
CSR to build a modern period of literature on this concept. He developed his
workings and proceedings based on the number of largest businesses were vital center
of power and decision making and the activities of these firms affected the lives of
citizens at many points. After that [ CITATION Bow53 \l 1033 ] built a basic definition for
the CSR concept of which related to the businessmen, “It refers to the obligations of
businessmen to pursue those policies, to make those decisions, or to follow those lines
of actions which are desirable in terms of the objectives and values of our society”.
By 1960s, the literature of CSR expanded than it was. During this decade, Keith
Davis was the one of most prominent writers who defined CSR. He defined the CSR,
“businessmen’s decisions and actions taken for reasons at least partially beyond the
firm’s direct economic or technical interest” [ CITATION Dav60 \l 1033 ] . Most of these
definitional literatureswere disseminated by academics and the names that seemed to
dominate that period included Davis, Fredrick, McGuire, and Walton.

In 1970s, definitions of CSR began to thrive and also CSR became more specific. At
the same duration few other alternative concepts also raised, such as Corporate Social
Responsiveness, Corporate Social Performance. In 1971 the Committee for Economic
Development used a “three concentric circles” approach to depicting CSR concept.
These three cycles represent the basic economic functions (growth, products, jobs),
economic functions with awareness of social values and newly emerging and still
unstructured responsibilities that business should assume to become more actively
involved in improving the social environment. The focus on developing new or
refined definitions of CSR gave a way to research on CSR. Though other concepts
such as corporate social responsiveness, corporate social performance, public policy,
business ethics and stakeholder management, were built up, the interest in CSR did
not die out. Carroll presented his definition through four part definition of CSR.
“CSR involves the conduct of a business, so that it is economically profitable, law
abiding, ethical and socially supportive. Thus CSR is composed of four parts,
economic, legal, ethical, and voluntary or philanthropic. [ CITATION Car83 \l 1033 ]

When we close out to 20th century, the CSR practice remains as the essential part of
the business practices, because it is a vital sustaining to many of the other theories and
is continually dependable with what the public expects of the business community
today [CITATION Car99 \t \l 1033 ].

2.2.2. CSR and Its Importance

With ever changing business era, every organization has tried to experiment in
different alternatives which help to distinguish themselves as business leaders and to
improve or ensure their overall position in the business world as well as society. The
major reason behind this CSR practice is sustainable development [CITATION Inf \l
1033 ]. [ CITATION Ree01 \l 1033 ] Defined the business sustainability as “business
strategies that are intended to add social and environmental value to external
stakeholders while increasing value to shareholders”. Nowadays many organizations
have realized that to do something through their businesses other than the profit
maximization.

During 21st century, aspects of CSR grow stronger and stronger and the society’s
increased interest and awareness regarding the business practices could give a new
picture of CSR. “CSR is a concept whereby companies integrate social and
environmental concerns in their business operations and in their interaction with the
stakeholders on a voluntary basis. [CITATION Eur11 \l 1033 ].

The World Business Council for sustainable development (2006) has described the
CSR practices as the continual commitment by companies to operate ethically and to
contribute the country economic development with improving the quality of life of
their employees as well as of public. Today companies are becoming more aware of
the need to communicate who they are, what they do, how what they do affects
society and the environment, and their future intentions and plans in not just
generating profits but being more responsible to all stakeholders, society and the
environment. The main aim of CSR is undertake the responsibility for all the
company’s activities and to create a positive impact on its customers, employees,
communities, environment and all other stakeholders. [ CITATION Fre10 \l 1033 ] .
Nowadays more companies involve in CSR practices such as corporate philanthropy,
responsible manufacturing practices and employment. [ CITATION Kau13 \l 1033 ].

CSR has become a powerful tool in business strategy. But every organizations could
not able to achieve positive outcomes through involve in CSR practices. Through
CSR practices, an organization can gain competitive advantage, because when an
organization undertakes CSR practices, it helps to maintain organizational values,
stakeholder relationships [ CITATION DeS10 \l 1033 ] . And also CSR activities help to
attract quality employees. CSR is a broad concept which provides positive outcomes
all the parties not only for the organizations. This is a long term strategy which helps
to create good corporate image in the society.
2.2.3. Corporate Social Responsibility Practices in Sri Lanka

Private sector in Sri Lanka has become country’s largest employer and most powerful
source of revenue. At the same time private sector which include multinational
companies has become primary engine of financial growth and a major contributor to
human resource development in Sri Lanka [ CITATION Int05 \l 1033 ]. Still the concept
of the CSR is hot and genuine to Sri Lankans.The importance of CSR is recognized as
vital factor in private sector in Sri Lanka has been emergent amidst skepticism of the
general public towards businesses [ CITATION Kum03 \l 1033 ].

Today to last in the competitive business world, it is important to do something that

goes beyond the society expectations. Business organizations in Sri Lanka still know
very little about what to do and how to do CSR practices strategically. [ CITATION
Moh01 \l 1033 ].Most of Sri Lankans think that CSR is related only to the sponsorship
of social activities and donations to good causes, but CSR concept is much more than
mere sponsorships and donations. On one side these charitabledonations are positive
foundation for future CSR practices and it has demonstrated the intention of
businesses to support or the social needs. International Alert, 2005 concluded that
understanding of CSR is at still low level in private sector of Sri Lanka. It depicted
the reason behind most of Sri Lankan organizations ignore of CSR. That is they
concern only about the short term outflows which has to incurwhen initiating CSR
practices, they not foreseen about the future benefits including specially sustainable
development which can gain through CSR activities. Rathnasiri, 2003 examined the
fifty private sector companies covering the wide range of industries in Sri Lanka and
his study found that there does not seem to be consensus in the corporate sector as a
whole on what is socially responsible behavior.

Few of businesses in Colombo have some understanding of CSR relatively and they
are engaging in the CSR initiative practices, but without standard policy or procedure
[ CITATION Int051 \l 1033 ] . According to the business point of view, most of
organizations have realized that there is an emergent necessity to involve in CSR
practices for their survival and sustainability, but still they have no clear direction on
how or what to contribute towards the community, or the advantages of doing so. As
Colombo based organizations, most of small and medium enterprises also try to
engage in charitable activities such as donations for health services, educational
institutes and give sponsorships…etc, but those practices are not progressed as in
Colombo. This is because of Colombo based companies have greater capacity human
resourcedevelopment and under greater inspection by labor regulations. [ CITATION
Int051 \l 1033 ]. By today few multinational companies and professional associations
have taken possible steps to persuade the obedience to and reporting of CSR activities
including the organization of CSR awards. [ CITATION ACC07 \l 1033 ].

2.2.4. Theories of Corporate Social Responsibilities

2.2.4.1. Carroll’s Four Parts Model

From money centered perspective, today businesses have become to look for social
needs rather than mere profit earning. Carroll is one of most prominent researchers
regarding the CSR. Carroll has developed a model of CSR which shows any
corporation has not only legal & economic obligations, but also it has both ethical and
philanthropic responsibilities. Further these four kinds of components of CSR can be
depicted as a pyramid. All of these responsibilities have always existed to some
extent. Today ethical and philanthropic responsibilities have taken a vital place in the
business context[ CITATION Car91 \t \l 1033 ] . The importance of Carroll’s pyramid of
Corporate Social Responsibility persists given its fundamental framework by which
any company can not only realize the necessary principles of social responsibility, but
ultimately describe the practices to achieve each step of the pyramid with ultimate
goal of reaching the top.
Figure 2.1 Carroll’s Pyramid of CSR

t ise s
liie
biilities
R sspp
Reees
R o
poonsnn
ib
sislii
ib
c
E
Phc o
Le n o mroi c
ical
il angal
Eth th pi
 Source:[ CITATION Car96 \l 1033 ]Pyramid of Corporate Social
Responsibility

Table 2.1 Components of CSR

Economic Responsibilities- be profitable Legal Responsibilities- obey the law

It is important to perform in a manner It is important to perform in a manner

consistent with maximizing earnings per consistent with expectations of government
share and law.

It is important to be committed to being as It is important to comply with various

profitable as possible federal, state, and local regulations

It is important to maintain a strong It is important to be a law-abiding

competitive position corporate citizen

It is important to maintain a high level of It is important that a successful firm be

operating efficiency defined as one that fulfills its legal
obligations
It is important that a successful firm be It is important to provide goods and
defined as one that is consistently profitable services that at least meet minimal legal
requirements

Ethical Responsibilities- be ethical Philanthropic Responsibilities- be a good

corporate citizen
It is important to perform in a manner It is important to perform in a manner
consistent with expectations of societal consistent with the philanthropic and
morals and ethical norms charitable expectations of society
It is important to recognize and respect new It is important to assist the fine and
ethical moral norms adopted by society performing arts

It is important to prevent ethical norms It is important that managers and

from being compromised in order to employees participate in voluntary and
achieve corporate goals charitable activities within their local
communities
 It is important that good corporate It is important to provide assistance to
citizenship be defined as doing what is private and public educational institutions
expected morally or ethically

It is important to recognize that corporate It is important to assist voluntarily those

integrity and ethical behavior go beyond projects that enhance a community’s
mere compliance with laws and regulations “quality of life”

Table 1

Source: [ CITATION Car91 \l 1033 ]

2.2.4.2. Stakeholder Theory

Stakeholder theory which has described by Edward Freeman is a mirror image for
Corporate Social responsibility. Any corporations have stakeholders that are groups
and individuals who benefit from or are harmed by, and whose rights are violated or
respected by, corporation actions.

With begin of the recognizing the importance of ethical behavior of business entities,
stakeholders have started to asked “what rights do they have with respect to the firm’s
activities? what are their legal power on the business? Which kind of responsibilities
and obligations can stakeholders reasonably impose on a business entity? ” Hence the
stakeholder theory described that those whose lives are touched by a corporation hold
a right and obligation to participate in directing it [ CITATION Bra \l 1033 ].

Here management has the responsibility of defending the wellbeing of the entity that
is the corporation, and this engage balancing the cluster of claims of conflicting
stakeholders. As example owners want higher financial returns, while investors want
money spent on research and development. Employees want higher wages and better
benefits, while public wants parks and day care facilities. Stakeholder theory does not
give priority to one stakeholder over another, though there will be surely be times
when one group will benefit at the expense of others. However management must
keep the relationships among stakeholders in balance. When these relationships
become imbalanced, the survival of the firm is in jeopardy. In order to succeed and be
sustainable overtime, executives must keep the interests of customers, suppliers,
employees, communities and shareholders aligned and going in the same direction.
Hence by managing for stakeholders, executives will also create as much value as
possible for stakeholders.

Under this theory, the objective of the firm is to optimize the profit on collective
bottom lines with the profit described not as money but as human welfare. Here
transparency is an important value for promoting stakeholder ethics.

However this stakeholder theory makescorporate management responsible to balance

everyone’ interests and welfare through maximizing benefits across the spectrum of
stakeholders whose lives are positively or negatively affected by the business.

2.2.4.3. Triple Bottom Line Model

[ CITATION Elk99 \l 1033 ] proposed the triple bottom line concept suggesting the CSR
concept to be including the three elements of sustainability; economic, social and
environmental.The triple bottom line is a form of corporate social responsibility
which presenting corporate management alignsall the bottom line results not only in
monetary or economic perspective, but also in the terms of society and environment.
For every business entity, sustainability is the most vital factor when doing their
businesses. At the point of intersection of economic terms and ethical behavior,
sustainability plays the long term maintenance of balance. [ CITATION Bra \l 1033 ].

Economic Sustainability

This concerns long term financial strength rather than short term monetary benefits
and more impulsive. Thus economic sustainability does not mean to gain quick
benefits as well as it avoids tragic losses too.

Social Sustainability

This concerns the peoples’ quality of lives. When very few can enjoy the luxurious
lifestyles, majority of people suffered to find day today meal. Thus it is believe that it
must have societal equity as well as quality lives to everyone. Social sustainability
does not mean to money, but to human welfare, human respect and quality life style.
And this requires corporations to maintain healthy relationships with public.

Environmental Sustainability
This is specially linking with natural resources in our environment. This is clearly
mentioned that the natural resources which we are enjoying are very limited and there
is an important role to save them for the future generation also. Here all the
individuals as well as corporations have some responsibilities to avoid the water, air
and land pollution and must support for the recycling, waste management, water
management, using renewable energy sources, utilizing reusable resources, creating
greener supply chains, using digital technology instead of hard copies and developing
buildings according to Leadership in Energy & Environmental Design (LEED)
standards. All these actions which corporations must support, not because they are
legally required to do so, but because the preservation of a livable nature is a direct
obligation of any business entity. [ CITATION Bra \l 1033 ].

2.2.5. Types of Corporate Social Responsibilities

This study has recognized four types of CSR practices as four independent variables
which are economic responsibilities, legal responsibilities, ethical responsibilities and
finally philanthropic responsibilities. These are based on the Archie Carroll’s
“Pyramid of Corporate Social Responsibility”.

2.2.5.1. Economic Responsibilities

Economic responsibilities are the primary part out of the four types of responsibilities.
Any corporation basically responsible for generating some economic profit through
providing goods and services which are demanded by the society. To survive and
grow, a company must earn profit, because before it was anything else, a business
organization was the basic economic unit in the society. Hence all other
responsibilities have based on this firm’s economic responsibility, because without
earning profit, all others become moot considerations.

2.2.5.2. Legal Responsibilities

Next element of CSR is legal responsibilities and also these are coexisting with
economic responsibilities as fundamental concepts of the free enterprise system. This
requires to obey the laws and regulations. Every business entity is expected to comply
with the laws and regulations formulated by state, federal, and local governments as
the ground rules under which business must operate while creating profits for
shareholders[ CITATION Car91 \t \l 1033 ] . This helps to build trust and faith in society.
Legally responsible presents the “codified ethics” of business activities, as well as
pursuit of economic obligations expose by lawmakers[ CITATION Car91 \t \l 1033 ].

2.2.5.3. Ethical Responsibilities

Ethical responsibilities mean to do what is right even when business is not compelled
to do so by law. These obligations are expected by the society and done by firms
voluntarily regarding justice, fair and respect for or protection of stakeholders’ moral
rights. Ethical responsibilities go beyond the legal responsibilities as they engage
newly updated norms and values that the society expects an organization comply with
and are at a higher quality of business practices than that present legal system
required. Thus engage in ethical responsibilities is not an easy task, because aspects
related to ethical obligations are often changing with time to time, then it must keep in
touch with societal needs and current legal system.

2.2.5.4. Philanthropic Responsibilities

This also called “Discretionary Responsibilities”. This kind of responsibilities can be

best described by the resources contributed by organizations toward social,
educational and cultural aspects. This specially refers the public expectations of
businessto be a good corporate citizen. Though there is always social or public
expectations that businesses provide, philanthropy is more voluntary on the part of the
businesses. Thus society will not regard firms which fail to fulfill philanthropic
responsibilities as unethical as philanthropic is not in the field of ethics and morals
[ CITATION Car91 \t \l 1033 ].

2.3. Customer Purchase Intention

Purchase intention is a prediction of consumer attitude or behavior towards a future

purchase decision [ CITATION Esp08 \l 1033 ]. As well as purchase intention can be
defined as a pattern of consumers’ attitudes and perceptions regarding their future
purchases. The positive attitudes of customers towards the company’s product, image,
and reputation can be affected by CSR activities [ CITATION Dac \l 1033 ]. Thus
customer purchase intention is a positive or favorable attitude toward a product or
service. Customer purchase intention plays as a mediator between their actual
purchase behavior and their attitude toward a product or service. [ CITATION Fis75 \l
1033 ] and [ CITATION Gru71 \l 1033 ] found that intentions provide a link between
customers’ responses or reactions to products and their acquisition or use of the
products. Therefore many researchers use the purchase intention as measure to actual
purchasing behavior of consumers.

Normally consumers’ purchase decisions are very complex, because they are related
with customers’ perceptions, attitudes, beliefs and behavior and these factors are vary
from one customer to another. Purchasing intention or purchasing decision is a critical
key point when considering and evaluating of certain products or services. [ CITATION
Kel01 \l 1033 ]. [ CITATION Gho90 \l 1033 ] discussed that customer purchase intention is
a strategic tool which can be used in certain company, they will be motivated by their
intention. Kim & Jin, 2001 stated that consumer behavior will be influenced by the
physiological factors that inspire their respond which bring them to the retail store to
fulfill their needs and wants.

Customer purchase intentions have been used to observe number of variables, such as
customer satisfaction, customer loyalty [ CITATION And98 \l 1033 ] , [ CITATION Bha04 \l
1033 ] , and customer trust [ CITATION Ken08 \l 1033 ], [ CITATION Rom03 \l 1033 ].

2.3.1.Customer Satisfaction

Customer satisfaction is a measure of how far goods and services which are provided
by a company fulfill customer expectations. 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 ]. Within a competitive business environment, customer satisfaction can
be identified as a key differentiator where today every business compete for the
winning customers and also customer satisfaction rapidly has become a key factor of
business strategy [ CITATION Git05 \l 1033 ] . Thus customer satisfaction provides a
leading sign or aspect of customer purchase intention[ CITATION Far10 \l 1033 ].

Customer satisfaction is a hazy and theoreticalconcept and the actual demonstration of

the position of satisfaction will contrast from person to person and product or service
to product or service. The stage of customer satisfaction depends on a number of both
psychological and physical variables which link with satisfaction behaviors. The state
of customer satisfaction can also vary depending on other options the customers may
have and other products against which the customer can compare the organization’s
products and services.

Customer satisfaction must be measured at the individual level, but it is always

reported at an aggregate level. Hence measuring customer satisfaction shows how
successful the whole organization is at providing products and services to the market.
When talking about the customer satisfaction, it always examines the gap between
customer expectations and actual receiving of through consuming particular products
or services. Thus consumer expectation is a critical element behind customer
satisfaction. Therefore when customers have high expectations and actual falls short,
it will be a cause to disappoint the customers and that particular customer will not no
longer retain with that organization. So customer satisfaction is a key indicator behind
the customers’ purchase intention toward the products and services.

2.3.2. Customer Loyalty

Customer loyalty can be defined as a customer continuing believes that a particular

company’s product or service offer is their top choice. It best fulfills their value
proposition whatever that may be. They take that offer whenever faced with that
purchasing decision [ CITATION Cus \l 1033 ]. Customer loyalty is a result of continual
favorable emotional experience, perceived value of an experience, and physical
attribute based satisfaction which include in a product or service.

For any kind of organization retaining existing customers is more profitable than
acquiring new customers. Hence it is important for every organization to initiate
strategies to make customers loyal towards their organization. [ CITATION Bey \l 1033 ].
Customer loyalty is related with both attitudinal and behavioral tendency to favor one
product or service over all others. Customers make decisions about their purchases as
where to spend their money, time and effort every day specially base on the history of
the purchases, feelings and intentions. To build customers’ loyal, companies must
differentiate them from competitors, demonstrate superior value of their product or
service and generate significant demand by customers[ CITATION PRL11 \l 1033 ].

A loyal customer is retaining in a particular company even when there may be a

problematic situation. This happens because the company has been favor to them in
the past and addresses issues when they arise. This assures that a loyal customer never
tries to shift for another supplier, because he believes that his best option for the
shopping is that particular supplier.

Accordingly make effort to build loyal customers is like treasure for the company.
And loyal customers are competitive advantage for a company. Loyal customers
believe that products or services they bought from their supplier are superior to other
competitors. Gradually, they are customers who view their interactions as more than
mere transactional. Loyalty meansthe strengths of the relationship between supplier
and buyer or organization and its customers.

2.3.3. Customer Trust

Customer trust can be defined as “a set of beliefs, a desire and accumulated

assumption directed towards a brand [ CITATION Swa08 \l 1033 ]. Customer trust is
occurring through 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 ].

Customer trust can be won only by behaving as a trustworthy and reliable way in
everything which a company does. To keep customer trust, company must consider
everything from customer perspectives and always try to go an extra mile to exceed
customers’ expectations. According to [ CITATION Swa08 \l 1033 ], customer trust has
three important motives. They are perceived integrity which means capability of
associate in terms of keeping promises and honestly. Other one is perceived
credibility which is capability of associate to fulfill and satisfy customer satisfaction
and the final perspective is perceived benevolence that is the capability of associate to
prioritize interests of customers. Customer trust can minimize the uncertainty and
favorably influence the purchasing behavior [ CITATION Ken081 \l 1033 ]. According to
Roman (2003), there is a favorable relationship between trust and ethical behavior.
Hence the higher degree of customer trust reflects to the higher degree of customers’
purchasing intentions [ CITATION Gef04 \l 1033 ]. Thus customer trust is an important
factor to build long term relationships as well as continual repeat businesses
[ CITATION Vic05 \l 1033 ].
2.4. Relationship between CSR and Customer Purchase Intention

Customers’ willingness to buy a particular company’s product or service enhances by

CSR practices. [ CITATION Dac \l 1033 ], [ CITATION Bha04 \l 1033 ]. When a company’s
ethical behaviors towards the society go beyond the expectations of customers, it will
be positively affect to the customer purchase intention towards that particular
company. [ CITATION Cre97 \l 1033 ] . It is obvious that customers may increase the
frequency of purchases on the base of believed and trust to secure future. Customers’
purchasing expectations towards the ethicality and philanthropy behavior of the
corporate bodies would be influenced by ethical and unethical actions of those
corporate bodies [ CITATION Cre97 \l 1033 ]. Positive perceptions and attitudes towards
corporate image, reputation and product evaluation can be motivated by CSR
practices. [ CITATION Dac \l 1033 ]. Further [ CITATION Moh05 \l 1033 ] have found that
CSR initiatives have a positive relationship towards the customers’ purchasing
motives and company’s environmental consideration has a stronger positive effect on
purchase intention over the price of a product and service. Customers’ purchasing
intentions creates a link between their reactions or behavior to products or services
and their use or acquisition of those products or services. Hence, purchase intention
has been used as a measure to customers’ real buying behavior [ CITATION Gru711 \l
1033 ]. Nilanthi Rathnayake (2007) found that firm’s ethical and philanthropic
behavior in the society is an important criterion when customers make purchasing
decisions and ethical behavior will be supported and rewarded by consumers through
giving their willingness to pa even higher prices for that particular firm’s products or
services. However [ CITATION Cre97 \l 1033 ] noted that there is a direct and indirect
response of customer purchase intention on CSR practices and when the effect is
indirect, sometimes it may possible that customers to tend to purchase product at the
negative or unethical circumstances based on the high quality, low price, and so on.

On the other side, consumers have negative attitude towards companies which have
aggressive reactions on CSR or are not involve in ethical and philanthropic activities.
Therefore number of companies has engaged in CSR practices voluntarily to gain and
earn competitive advantage on their brand, quality, price [ CITATION McE08 \l 1033 ].
According to [ CITATION Bha04 \l 1033 ], there are two factors of consumer responses or
consumer intentions to CSR. They are consumers’ awareness of CSR practices and
their attributions regarding the company’s motives for involving in those practices. A
lack of awareness and understanding of firm CSR practices is as to result in an
attitude- behavior gap [ CITATION Moh01 \l 1033 ] and constitute a barrier to the firm’s
purpose to gain strategic advantages through its CSR practices [ CITATION Bha04 \l
1033 ]. Customer attributions are more complex, thus there must be a priority for CSR
activities and responses to be selected more carefully to reflect the company’s values
and domain, and then customers are able to perceive those CSR practices as proactive
and socially motivated. [ CITATION Bec06 \l 1033 ].

CSR practices must match with social expectations. CSR practices which do not
match with the company’s expertise or customer expectations or social needs create
negative impact on customers’ attitudes towards the company. Companies can be
perceived as “doing good” only through addressing selected CSR initiatives. CSR
practices with low fitness with a firm are perceived as “doing CSR business” by
consumers and also it causes to negative customer evaluations. If customers feel CSR
practices of a company are profit oriented rather than social oriented, it also causes to
make customers assess that company negatively. [ CITATION Bec06 \l 1033 ]. The
relationship between customer purchase intention and CSR practices makes a question
of whether customers who buy product or service from a particular company that
depicts the concern the environment are truly concerned with the environment
[ CITATION Lee09 \l 1033 ]. For that question Yoon (2006) had answered through his
study that noted that most of customers influence to purchase product or service from
a particular company concerned with the environment, because that particular product
or service can reflect positively on their self-image.

An increasing number of customers take ethical and social issues in to account when
purchasing products and also they avoid the companies after recognizing as being
insincere in their CSR practices [ CITATION Car04 \l 1033 ]. Number of studies have
noted that customers are more likely to buy products from companies which are
involving in doing CSR practices, particularly when they perceive a compatibility
between the company and cause sincerity of the company’s CSR motives and
overlaps between their attitudes of themselves and their attitudes of the company
[ CITATION Bec06 \l 1033 ], [ CITATION Dac \l 1033 ], [ CITATION Bha04 \l 1033 ].
Bhattacharya (2004) suggested that the concept of CSR must be based on the “one
size does not fit all” which shows the heterogeneity among consumer responses
towards the CSR practices. Consumers respond positively towards corporate
philanthropy without any alternative intention such as price. A study has found that
about seventy seven percent company brand’s selection depend on company’s image
in the environment [ CITATION Dag91 \l 1033 ]. CSR either in the form of support for a
nonprofit organization or favorable ethical practices lead to customer loyalty which
demonstrate customer behavior in the form of frequency of purchases [ CITATION
Lic04 \l 1033 ]. A study found that eighty eight percent of customers are likely to
purchase from a company which is socially responsible [ CITATION Smi96 \l 1033 ],
because customers like companies which fulfill social needs. Then company image
also build based on the customers’ trust, attitudes, satisfaction and impressions about
a company [ CITATION Van97 \l 1033 ]. CSR is a signal of trustworthiness that clarify
the effort of a company in terms of increasing the welfare of customers and CSR
practices have favorable influence on customers’ trust [ CITATION Swa08 \l 1033 ].
According to Spence (1974), customer purchase intention can be weighted by a
company’s CSR practices as it minimizes the inherent uncertainty in any transaction.

It is important to state that the majority of published empirical researches related to

the topics of CSR and customers’ intention remain from the developed countries
[ CITATION Bec06 \l 1033 ] , [ CITATION Moh05 \l 1033 ] , [ CITATION Dac \l 1033 ],
[ CITATION Cre97 \l 1033 ], [ CITATION Fre08 \l 1033 ], [ CITATION Mai01 \l 1033 ],
[ CITATION Bha041 \l 1033 ] . But however a few studies have discussed about customer
perceptions towards CSR practices tend to vary between different cultures [ CITATION
Aug03 \l 1033 ], [ CITATION Srn04 \l 1033 ]. And also it is true that there are very little
studies have been done in developing countries regarding this topic.