ARTI-2

CSR and Service Brand: The Mediating Effect of Brand Identification and Moderating Effect of Service Quality

Author(s): Hongwei He and Yan Li

Source: Journal of Business Ethics , June 2011, Vol. 100, No. 4 (June 2011), pp. 673-688

Published by: Springer

Stable URL: https://www.jstor.org/stable/41475867

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Journal of Business Ethics (2011) 100:673-688 © Springer 2010 DOI 10.1007/sl0551-010-0703-y

CSR and Service Brand: The Mediating Effect of Brand Identification

and Moderating Effect of Service Quality Hongwei He

Yan Li

ABSTRACT. This article examines the mediation effect

of brand identification and the moderating effect of service quality (SQ) on the effects of corporate social responsibility (CSR) association on service brand per- formance. A survey of customers of mobile telecom- munications services was conducted. The study finds, first, that both CSR and SQ have direct effects on brand identification and customer satisfaction and indirect

effects on customer satisfaction (via brand identification)

and on service brand loyalty (via customer satisfaction and via "brand identification/customer satisfaction"). Second, SQ enhances the effect of CSR on brand identification. This study contributes to the literature by incorporating three perspectives of service brand per- formance - CSR association, SQ, and brand identifica- tion - into one general framework that stresses (a) the mediating role of brand identification in predicting customer satisfaction and service brand loyalty; and (b) the interactive effect of CSR and SQ in predicting brand identification.

KEY WORDS: service brand loyalty, corporate associ- ations, CSR, brand identification, service quality, cus- tomer satisfaction

Introduction

Identifying the channel and process of the effect of corporate social responsibility (CSR) association on consumer behavior and marketing performance is a key issue in marketing-based CSR research (e.g., Brown, 1998; Luo and Bhattacharya, 2006; Maignan and Ferrell, 2004; Marin et al., 2009). Recent empirical studies have examined the effects of CSR on a number of issues on consumer behaviors and

responses, such as product responses (e.g., Berens et al., 2005; Brown and Dacin, 1997; Gurhan-Canli

and Batra, 2004); customer satisfaction and mar- ket value (e.g., Luo and Bhattacharya, 2006); stakeholder relationships (e.g., Bhattacharya et al., 2009; Sen et al., 2006); customer donations (e.g., Lichtenstein et al., 2004); brand loyalty (Marin et al., 2009), brand evaluations in a product-harm crisis (Klein and Dawar, 2004), and so on. However, little research has examined (a) the (conditional) effect of CSR association on service brand performance, such as brand satisfaction and brand loyalty; and (b) the mediating effect of brand identification on the effect of CSR on both customer satisfaction and service

brand loyalty.

These are important issues for the following two reasons. First, previous research finds that the effects of CSR association on consumer attitudes

and behaviors are not consistent (sometimes no effect or even negative effect) (see, e.g., Berens et al., 2005; Gurhan-Canli and Batra, 2004; Sen and Bhattacharya, 2001), which suggests that the effects of CSR association could be conditional on other

factors. One prior explanation of the lack of positive effect of CSR is the concept of corporate ability (CA)-CSR trade-off (Sen and Bhattacharya, 2001), which represents the fact that some consumers might have a belief that if a company investment more in CSR, the company would compromise its CA development. Accordingly, we propose that the effect of CSR association on service brands could be

strengthened if the service brands are perceived as more capable of delivering higher service quality (SQ)-

Second, the application of social identity theory to brand relationship proposes a construct of brand identification to represent consumer's sense of belonging to and perceived oneness with a

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674 Hongwei He and Yan Li

company /brand (Bhattacharya and Sen, 2003). Brand identification is proposed to be a major pre- dictor of customer loyalty (e.g., Bhattacharya and Sen, 2003; He and Mukheqee, 2009; Marin et al., 2009) and firm performance (Homburg et al., 2009). Therefore, it is an equally important issue to examine how brand identification can be incorpo- rated into the traditional path (e.g., CSR association, SQ perception, and customer satisfaction) to service brand loyalty (see, e.g., Marin et al., 2009). Al- though Marin et al. (2009) has examined the mediating role of brand identification on the effect of CSR on brand loyalty, their study does not examine the (moderating) effects of SQ or the role of customer satisfaction along with the path from CSR and SQ to service brand loyalty.

Based on social identification theory (e.g., Bhattacharya and Sen, 2003; Tajfel and Turner, 1985), CSR literature (e.g., Brown and Dacin, 1997; Marin et al., 2009), and SQ literature (e.g., Anderson and Sullivan, 1993; Harris and Goode,

2004), the present study incorporates CSR associ- ation, SQ perception, and brand identification into one framework in predicting service brand perfor- mance. This study proposes and supports that (1) both CSR association and overall service quality (OSQ) association have significant effects on brand identification, customer satisfaction (also via brand identification), and service brand loyalty (via cus- tomer satisfaction and via "brand identification/

brand loyalty") and (2) SQ enhances the effects of CSR on brand identification.

The study makes a number of contributions to the literature. First, it tests and confirms that brand

identification plays a central role along the path from corporate level associations to customer satis- faction as well as service brand loyalty. Second, it tests and supports for the first time that CSR's ef- fects on brand identification are conditional on the

brand's ability to deliver its services. The next section of this article presents the conceptual framework and develops associated hypotheses. It starts with an overview of the model, which is followed by a review of brand identification liter- ature and its effects on service brand loyalty. We then explain the effect of CSR association and explain SQ perception and its effects. Finally, we explain why SQ provides a favorable condition for CSR to take effect.

Conceptual framework and hypotheses development

Branding is especially important for service firms, because most service consumption is continuous or periodical, and strong brands enhance consumers' trust on intangible purchase and consumption (Berry, 2000; Krishnan and Hartline, 2001; Meiewar and Storne, 2001). Thus, it is of paramount importance for service firms to build brand loyalty (Harris and Goode, 2004). Furthermore, the intan- gibility and variability of services bring higher risks to services consumers; yet strong service brands are capable of reducing such risks and boosting con- sumers' confidence in service consumption.

Brand associations can drive brand performances, including brand loyalty (Chaudhuri and Holbrook, 2001; Keller and Lehmann, 2006). However, a key characteristic of a service brand is that there is a

much overlap between a service brand and a cor- porate brand. Unlike FMCG, service brands are mainly corporate brands (McDonald et al., 2001). A corporate/service brand entails associations by con- sumers on various areas of the company, including CSR association (Berens et al., 2005; Brown and Dacin, 1997). Therefore, CSR associations are rel- evant for service brands. This study develops two main propositions. First, brand identification medi- ates the effect of corporate associations on customer satisfaction and service brand loyalty. Second, CSR enhances the effect of SQ on brand identification. Figure 1 illustrates the conceptual framework of this

study.

Brand identification

According to social identification and categorization theory, an individual will identify with a social cat- egory when the social category (and its associated social identity) enhances an individual's self-esteem, and an identified individual will engage in positive pro-category behavior to perverse the attractiveness of the social identity (hence their own self-esteem) (Bhattacharya and Sen, 2003; Tajfel and Turner, 1985). Companies (and their brands) can be mean- ingful social categories for consumers to identify with (Bhattacharya and Sen, 2003). Bhattacharya and Sen (2003, p. 77) define consumer identification as

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CSR and Service Brand 675

Figure 1. Proposed research model. CSR corporate social responsibility, SQ service quality, IDF brand identification, CS customer satisfaction, SBL Service brand loyalty.

"...an active, selective, and volitional act motivated

by the satisfaction of one or more self-definitional (i.e., "Who am I?") needs... cannot be unilaterally imposed by companies; they must be sought out by consumers in their quest for self-definitional need fulfillment."

Accordingly, based on the prediction of social identification theory (Tajfel, 1978; Tajfel and Turner, 1985; Turner, 1987), consumers with stronger brand identification are more prone to engage in pro-brand activities, such as supporting the company goals, protecting its reputation, supporting its products and brand loyalty (Bhattacharya and Sen, 2003). Empiri- cally, a number of studies have confirmed such an effect (e.g., Ahearne et al., 2005; Marin et al., 2009). This effect is also in alignment with similar studies in

the field of organizational identification (see, e.g., Dutton et al., 1994; Pratt, 1998; Scott and Lane, 2000).

We further propose that the effect of brand identification on brand loyalty passes through cus- tomer satisfaction, for the following reasons. First, customer satisfaction refers to the accumulated

general emotional evaluation of a company's ser- vices over time (Anderson et al., 2004). Marketing literature has ample evidence on the influence of customer satisfaction on customer loyalty (e.g., Anderson and Sullivan, 1993; Andreassen and Lin- destad, 1998; Bloemer and de Ruyter, 1998; He and Mukherjee, 2007; Oliver, 1997, 1999; Russell- Bennett et al., 2007; Suh and Yi, 2006). Second,

brand identification has a positive effect on customer

satisfaction. Expectation disconfirmation theory of customer satisfaction suggests that customers are more likely to be satisfied when the actual brand performance exceeds or confirms prior expectation (Yi and La, 2004). Brand identification provides a more favorable context for customers to respond to brand performance experience as against to prior expectation. When brand performance expectation is confirmed or exceeded, customers with stronger brand identification would be more satisfied, since it

reassures customers of their psychological attachment with the brand, which in turn helps the customers to

preserve its self-esteem. Whereas, when brand per- formance expectation is not confirmed, customers with stronger brand identification tend to be less dissatisfied due to their (a) more affective attachment

to the brand (Chaudhuri and Holbrook, 2001) and (b) more resilience to bad information and experi- ence about the brand (Bhattacharya and Sen, 2003). Therefore, customers with stronger identification are

more likely to be satisfied with the focal brand. In addition, based on the logic of mediation (Baron and Kenny, 1986), we expect that customer satisfaction will mediates the effect of brand identification on

brand loyalty. Hence:

HI: Brand identification has a positive effect on customer satisfaction.

H2 : Brand identification has a positive indirect effect on brand loyalty via customer satisfaction.

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676 Hongwei He and Yan Li

CSR association

Corporate social responsibility association is a spe- cific aspect of corporate associations. Brown and Dacin (1997) first use corporate associations to rep- resent and categorize the various types of cognitive associations that consumers can hold for a corporate brand. These cognitive associations "might include perceptions, inferences, and beliefs about a com- pany; a person's knowledge of his or her prior behaviors with respect to the company; information about the company's prior actions' moods and emotions experienced by the person with respect to the company; and overall and specific evaluations of the company and its perceived attributes. (Brown and Dacin, 1997, p. 69)"

Despite the seemingly all-inclusive and amor- phous feature of corporate brand associations, two types of corporate brand associations (i.e., CA association and CSR association) are of particular relevance for various stakeholders, especially for consumers (Brown and Dacin, 1997). CA associa- tion refers to the company's expertise and skills in producing and delivering product/service offerings, whereas CSR association refers to perception and knowledge of a company's activities and status relating to its societal or stakeholder obligations (Brown and Dacin, 1997).

A number of studies have examined the effect of

corporate brand associations on consumer behavior. This emerging line of research has a strong focus on the effect of corporate brand associations on product

evaluations, but less on brand performances. For example, Brown and Dacin (1997) find that CA and CSR associations affect product attitudes through different "channels." CA association's effect goes through their influence on both specific product attitudes and overall evaluation of the company, whereas CSR association's effect goes through its influence on the overall company evaluation only.

Other studies find that CSR/CA's effects on

product evaluation are (a) positively influenced by perceived fit between the product and the corporate brand (Madrigal, 2000) and fit between the cause and the firm's product line (Becker-Olsen et al., 2006); (b) moderated by risk associated with a product (Gurhan-Canli and Batra, 2004); and (c) moderated by corporate brand's presence in the advertising (Sheinin and Biehal, 1999) and corporate

brand's dominance (Berens et al., 2005). More re- cently, Sen et al. (2006) find that CSR in the real world does not only affect product consumption, but

also employment and investment. The above review of the CSR association litera-

ture suggests that CSR tends to have positive effect on consumers attitude and behavior towards the

focal brand, including brand identification. Lich- tenstein et al. (2004) find that CSR has a direct effect on brand identification, which in turn mediates CSR's effect on customers' donation to corporate- supported nonprofits. The significant effect of CSR association on brand identification has also been

found by Marin et al. (2009). In addition, self- concept research suggests that people are generally more likely to identify with a brand with higher CSR to enhance their self-esteem and to project and express a more ethical and moral social image (Aquino and Reed II, 2002). Hence:

H3 : CSR association has a positive effect on brand identification.

CSR and customer satisfaction

Corporate social responsibility can influence cus- tomer satisfaction in the following ways (Luo and Bhattacharya, 2006). First, a company's customers could be potential various stakeholders who cares not only the economic value of consumption, but the overall standing (incl. social performance) of the company (Maignan et al., 2005). In general, cus- tomers are likely to be more satisfied if the services/

products providers are more socially responsible. Second, CSR can increase the perceived utility and value, which in turn enhances customer satisfaction. Perceived value can take both economic and non-

economic forms. To hold other things being equal, strong CSR associations of the services/products providers can add extra benefits/utilities (e.g., con- sumer self-enhancement, self-esteem) to the con- sumers. In addition, CSR association can be a major determinant to perceived attractiveness of a brand's identity, which in turn enhances the strength of brand identification (Marin et al., 2009). And cus- tomers with higher brand identification are more likely to be satisfied (Bhattacharya and Sen, 2003; Bhattacharya et al., 1995). Given that CSR has direct effects on both brand identification and

customer satisfaction, and that brand identification

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CSR and Service Brand 677

has a direct effect on customer satisfaction, we ex-

pect brand identification may mediate the effect of CSR on customer satisfaction (Baron and Kenny, 1986).

H4 : CSR has a positive (a) direct effect on customer satisfaction and (b) indirect effect on customer satisfaction via brand identification.

CSR and brand loyalty Prior discussion has established that CSR has an

impact on customer responses to a firm, its prod- ucts, and brand loyalty. Klein and Dawar (2004) finds that CSR has both direct and indirect effects

(mediated by its influence on attribution) on brand evaluation in the context of product-harm crisis. For service firms, the major issue is the effect of CSR on service brand loyalty. Since service brands are typically corporate brands (McDonald et al., 2001), corporate associations, such as CSR associ- ation, can influence service brand loyalty more strongly. Sen and Bhattacharya (2001) report that CSR information influences both overall company evaluation and product purchase intention. Specif- ically, customer-company congruence (the per- ceived congruence between consumers' own characters and that of the company) mediates its influence on overall company evaluation. Marin et al. (2009) find that CSR has an indirect effect on brand loyalty via brand identification with a sample of bank customers. But no prior studies have pro- posed or tested the mediation effect of customer satisfaction on the effect of CSR on brand loyalty. We propose that CSR can have indirect effect on brand loyalty via (a) customer satisfaction and (b) both brand identification and customer satisfaction.

This proposition is developed from our prior dis- cussion on the following effects. First, CSR affects not only brand identification, but also customer satisfaction. Second, brand loyalty is predicted by both customer satisfaction and brand identification

(indirectly via customer satisfaction). Based on the logic of mediation (Baron and Kenny, 1986), we expect:

H5 : CSR has indirect effects on brand loyalty (a) via customer satisfaction and (b) via brand identification/customer satisfaction.

Service quality

Corporate ability association is another major aspect of corporate associations. Translating CA to the domain of service branding, it is similar to a key construct in service marketingiservice quality. The antecedent role of SQ to service loyalty is well documented in the literature (e.g., Parasuraman et al., 1985; Sureshchandar et al., 2002; Taylor and Baker, 1994). It is important to differentiate OSQ from specific SQ (Brady et al., 2002). OSQ refers to consumers' overall perception of the gap between expectations and actual service performance. OSQ also refers to the global, long-term accumulated perception. Specific SQ refers to the major service- related drivers for consumers to judge the OSQ. Either SERVQUAL (Parasuraman et al., 1988, 1991) or SERVPERF (Cronin and Taylor, 1992, 1994) can measure specific SQ. In this study, we are interested in only the OSQ, since past research confirms that OSQ (in the rest of the article, we use SQ to denote overall SQ) is a more immediate antecedent to SQ's outcomes and mediates the effects of specific service qualities on those outcomes (Brady et al., 2002; Tam, 2004).

Service quality and brand identification

Service quality has a direct main effect on brand identification. As noted earlier, customers tend to

identify with a company that has favorable CSR image (Lichtenstein et al., 2004; Luo and Bhat- tacharya, 2006). Unlike the effect of CSR on brand identification, no empirical evidence exists in the literature regarding the effect of SQ on brand identification. SQ is a specific CA association for service firms (Brown and Dacin, 1997). Thus, SQ can enhance the overall corporate associations, which in turn positively affects the attractiveness of the focal company's identity. Since identity attrac- tiveness can further enhance brand identification

(Bhattacharya and Sen, 2003; Dutton et al., 1994), SQ can enhance brand identification. From con- sumers' perspective, consumers are motivated by self-consistence and/or self-enhancement to identify with a company. Identifying with a service company that has more favorable image of OSQ can better enable consumers to fulfill their needs for self- consistence and enhancement. Hence:

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678 Hongwei He and Yan Li

H6 : Service quality has a positive effect on brand identification.

Service quality and customer satisfaction

Extant literature offers two contrasting explanations of the relationship between SQ and customer satis- faction. On one hand, some studies propose that SQ is an antecedent to customer satisfaction (Anderson and Sullivan, 1993; de Ruy ter et al., 1997; Ravald and Groenroos, 1996). On the other hand, a view exists that customer satisfaction precedes perceived SQ (Bolton and Drew, 1991; Parasuraman et al., 1988). This study proposes that SQ precedes cus- tomer satisfaction for the following reasons. First, perception of SQ is cognitive knowledge that is accumulated by direct experience with the service provider and/ or derived from other learning sources,

such as, word of mouth, publicity and company's marketing activities. However, customer satisfaction refers to emotional responses to needs/wants fulfill- ment (Oliver, 1997). In addition, as noted earlier, SQ positively relates to brand identification, which in turn relates positively to customer satisfaction. Hence, brand identification should partially mediate the effect of SQ on customer satisfaction. Finally, many empirical studies also confirm the mediation effect of customer satisfaction on the effect of SQ on

brand loyalty (Caruana, 2002; Harris and Goode, 2004). Therefore, we posit:

H7 : Service quality has a positive (a) direct effect on customer satisfaction; and (b) indirect effect on customer satisfaction via brand identifica-

tion.

H8: Service quality has an indirect effect on service brand loyalty (a) via customer satisfaction; and (b) via "brand identification/customer satis- faction."

The interactive effect between CSR and service quality

Prior discussion established the main model and its

associated hypotheses. Another major contribution of this study is modeling an interactive effect be- tween CSR and SQ in predicting brand identifica- tion. This is important for a number of reasons. First, the empirical evidence on the effects of CSR asso-

ciation on consumer attitudes and behaviors are

mixed in prior studies. A number of studies have found that CSR has no (or even negative) effect on new product evaluation (e.g., Berens et al., 2005; Sen and Bhattacharya, 2001). The inconsistence of CSR' s effect strongly suggests that the effect of CSR

could be dependent on other factors. Brown and Dacin (1997) explain that CSR association tends to have weaker effect due to CSR information is less

relevant or diagnostic for the task of product eval- uation, as compared to CA association which directly relates to a company's ability of offering high quality products/services. Although no prior research has found a negative effect of CSR associa- tion on product responses, Sen and Bhattacharya (2001) find that CSR record could have a negative effect on purchase intention under certain circum- stances (i.e., of high-quality product and with high consumer support of the CSR domain). The potential negative effects of corporate associations were explained by the contrasting effect that is derived from the evaluative corporate context, where

corporate information of more positive valence could

make consumers evaluate the less-positive new product even less positive than CSR information of less positive valence (Brown and Dacin, 1997).

One prior explanation of the lack of positive effect of CSR is the concept of CA-CSR trade-off (Sen and Bhattacharya, 2001), which represents the fact that some consumers might have a belief that if a

company investment more in CSR, the company would compromise its CA development. Companies do not necessary enjoy both high CSR association and SQ among their customers at the same time. A key question is then how consumers would think of a company with high CSR but low SQ.

Accordingly, we propose that the effect of CSR association could be strengthened if the service brands are perceived as more capable of delivering higher SQ. Although generally CSR association tend to positively relate to brand identification due to its spill-over effects on brand identity and overall brand evaluation, CSR's effect on brand identifica-

tion is likely to be enhanced for brands that enjoy higher SQ. When SQ is low, especially for a service brand whose core business is the service itself (e.g., telecommunications), the focal service brand risks the deterioration of credibility of its commitment to the core business, which in turn undermines

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CSR and Service Brand 679

consumers' responses to the brand' CSR perfor- mance. Although we developed formal hypotheses regarding the enhancing effects of SQ on the effects of CSR on brand identification and customer satis-

faction, we do not expect firmly that such a mod- erating effect would occur for brand loyalty, as we do not expect CSR will have a significant direct effect on brand loyalty. Hence:

H9' Service quality enhances the effect of CSR association on brand identification; when ser-

vice quality perception is high, CSR associa- tion has a stronger effect.

H 10: Service quality enhances the effect of CSR association on customer satisfaction; when

service quality perception is high, CSR asso- ciation has a stronger effect.

Method

Data collection and sample

We conducted a survey on customers of mobile telecommunications services to test the hypotheses. Two hundred and sixty-eight usable questionnaires were collected through email snowball sampling. Questionnaires were initially emailed to 10 acquain- tances of the research assistant. These acquaintances were asked to further distribute the questionnaires to

their acquaintances who were active users of tele- communication services in Taiwan. The final sample consists of 147 female (54.85%) and 121 male (45.15%); 110 under the age of 25 (41.04%), 62 at the ages of 25-30 (23.13%), 47 at the ages of 31-35 (17.54%), and 49 over the age of 36 (18.28%). The participants were instructed to refer to their current main mobile telephony services providers rather than

a specific fixed brand when answering questions regarding the major variables, since we are interested in understanding their brand experience as custom- ers. This approach also offers the opportunity to recruit customers from a wider range of mobile services providers. Although snowball sampling has the limitations of not being able to define the final population framework and being prone to biases of sample representation, we consider it is suitable (a limitation though) for this study. This is because

that this study is not interested in the variation of the

variables (e.g., brand loyalty, customer satisfaction, etc.) across a population. Instead, the purpose is to find initial evidence on the proposed relationships among those variables. Questionnaire was prepared in English and translated to Chinese following the double-translation principles.

Measures

Existing well-established multiple-item 7-point Lik- ert scales, ranging from strongly disagree (1) to strongly agree (7), were adopted to measure most of our variables. Service brand loyalty was measured by three items from future behavioral intention scale

(see, e.g., Cronin et al., 2000; He and Mukheijee 2007; Wang et al., 2004). SQ was measured by three items (Wang et al., 2004), which has been used to measure the OSQ perception of a telecommunica- tion service brand. Customer satisfaction is measured

by three items: "I am completely satisfied with X," "I am very pleased with X," and "I am absolutely delighted by X." Similar measures have been widely used in marketing literature to capture the overall customer satisfaction (e.g., Dabholkar et al., 2000; Tam, 2004; Wang et al., 2004). CSR association was measured by four items borrowed from Marin and Ruiz (2007) and Berens et al. 's (2005). Brand identification was measured by modifying a well- established scale (Mael and Ashforth, 1992) to fit the consumer context (see also Marin et al., 2009). Sample items include "When someone criticizes X, it feels like a personal insult"; "I am very interested in what others think about X." These items are

relevant for consumer identification, as originally the

measure was developed in the context of quasi- consumer context (Alumni) by Mael and Ashforth (1992). In addition, Marin et al. (2009) have suc- cessfully applied it to mainstream consumer context. The measure in the context of consumers has

demonstrated strong construct reliability and validity in Marin et al.'s (2009) study (AVE = 0.62, a = 0.89) and in the present study (AVE = 0.58; a = 0.86). In reality, it is quite common, for example, for a customer with strong brand identifi- cation to get offended and feel insulted to hear someone criticize the focal brand, as (a) brand choice

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680 Hongwei He and Yan Li

TABLE I

Descriptive statistics

Variables Mean SD 1 2 3 4 5

1. CSR 3.91 1.08 1

2. Service quality 4.46 0.98 0.46** 1 3. Customer satisfaction 4.35 0.97 0.55** 0.81** 1

4. Brand loyalty 4.42 1.03 0.68** 0.67** 0.71** 1 5. Brand identification 4.10 0.97 0.74** 0.63** 0.64** 0.73** 1

SD standard deviation.

**Correlation is significant at the 0.01 level (2-tailed).

or possession can be thought of a matter of personal choice and taste, and (b) the focal brand becomes internalized to the customer's self-definition. Table I

presents the descriptive statistics and correlations of all variables. Table II lists all measurement items.

Analyses and results

Measurement model

The analyses include a two-step approach of struc- tural equation modeling (SEM) to analyze the data and test hypotheses (Anderson and Gerbing, 1988), using AMOS 18.0 (maximum likelihood estima- tion). Confirmatory factor analysis (CFA) produced adequate fit: Standardized RMR = 0.08, CFI = 0.91, X2 = 469.45(125), *2/df = 3.76. Convergent validity occurs when (a) all factor loads are signifi- cantly over 0.50 threshold (Fornell and Larcker, 1981); (b) the average variance extracted (AVE) in items by their respective constructs is greater than the variance unexplained (AVE >0.50) (Bagozzi and Yi, 1988; Fornell and Larcker, 1981); and (c) factor composite reliability is equal to or greater than 0.60 (Fornell and Larcker, 1981). Table II reports the results of CFAs. The measurement scales show

strong convergent validity. Discriminant validity is achieved when the variance-extracted estimates

exceed the squared correlation estimates (Fornell and Larcker, 1981; Hair et al., 2006). From Tables I and II, it is clear that the AVEs of all variables are higher than the squared correlations of any pairs of vari- ables, which supports the discriminant validity of all measures.

Structural models

Structural equation modeling, with AMOS 18.0 (maximum likelihood estimation), was conducted to test the hypotheses regarding the direct and indirect effects (HI to H8). Standard procedure of mediation test was followed (Baron and Kenny, 1986; MacK- innon et al., 2007). Table III presents the results. We first ran a model (Model 1) that corresponds to our proposed framework (but without the interaction) to

test the hypotheses regarding direct and indirect effects. Model 1 achieves adequate fit: = 471.657 (128), y2/àï= 3.685, CFI = 0.91, PCFI = 0.76. The results show that all proposed direct paths are significant. To further confirm that our proposed model is a preferred model, we ran Model 2, which adds all paths from independent variables and mediators to the exogenous variables. Model 2 also achieves acceptable fit: CFI = 0.91, PCFI = 0.75, X2 = 469.45(125), /2/d f = 3.76. However, model comparison suggests that Model 1 is not significantly

worse than model 2 (p = 0.53). Based on the ground of parsimony, Model 1 is a more preferred model than Model 2 (Burnham and Anderson, 2002). In addition, none of the additional paths in Model 2 is significant, and Model 2 does not enhance the R2 - explanatory power of the model - on any endoge- nous variable.

The direct effects are presented in Table III. To test the indirect effects, we conducted Sobel test (Baron and Kenny, 1986; MacKinnon et al., 2007) based on the results of Model 1 (the preferred model). Table IV (see also Figure 2) presents the results of both direct and indirect effects. We resort

to these results to test the hypotheses. HI predicts

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CSR and Service Brand 681

TABLE II

Results of the CFA

Construct Factor loading a CR AVE Items

CSR 0.85 0.86 0.62 X is socially responsible 0.63 X is environmentally friendly 0.89 X is green 0.89 X cares about the environment 0.70

Service quality 0.86 0.88 0.72 X deliver excellent overall service 0.67

The offerings of X are of high quality 0.92 X deliver superior service in every way 0.92 Customer satisfaction 0.91 0.91 0.78 I am completely satisfied with X 0.88 I am very pleased with X 0.89 I am absolutely delighted by X 0.88 Brand loyalty 0.88 0.91 0.75 I would like to repurchase the offerings from the service provider 0.84 I would like to recommend the mobile communication service to others 0.88 I would like to keep close relationship with the service provider 0.87 Brand identification 0.86 0.87 0.58 When someone criticizes X, it feels like a personal insult. 0.69 I am very interested in what others think about X 0.60 X's successes are my successes 0.84 When someone praises X, it feels like a personal compliment 0.86 If a story in the media criticized X, I would feel embarrassed 0.77

CR composite reliability, A VE average variance extracted.

that brand identification has a positive effect on cus-

tomer satisfaction. HI is supported (ß = 0.21***). H2 expects that customer satisfaction mediates the effect of brand identification on brand loyalty. H2 is

supported, as brand identity has a significant indirect effect on brand loyalty via customer satisfaction (ß = 0.20*). H3 predicts that CSR association has a positive

effect on brand identification. H3 is supported (ß = 0.63***). H4a expects that CSR has a direct effect on customer satisfaction. H4a is supported (ß = 0.17*). H4b expects that CSR has an indirect effect on customer satisfaction via brand identifica-

tion. H4b is supported (ß = 0.13*). H5a and H5b are both supported, as Table IV shows that CSR has indirect effects on brand loyalty via customer satis- faction (ß = 0.16*) and via brand identification and customer satisfaction (ß = 0.12*).

Regarding the effects of SQ perception, H6 posits that SQ perception has a positive effect on brand identification. H6 is supported (ß = 0.34***). H7a is supported, as SQ has a significant positive direct effect on customer satisfaction ( ß = 0.83***). H7b expects SQ to have an indirect effect on customer satisfaction via brand identification, which is also

supported (ß = 0.07*). Finally, H8 predicts that SQ has an indirect effect on service brand loyalty (a) via customer satisfaction; (b) via "brand identification and customer satisfaction." Both H8a and H8b are

supported (ß = 0.79*** and ß = 0.07*, respec- tively). Therefore, in sum, the proposed model is fully supported by the results. To test the interactive effects that are associated

with H9 and H 10, we applied moderated regressions (Aiken and West, 1991). We mean centered con- tinuous variables before generating the interaction of

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682 Hongwei He and Yan Li

TABLE III

SEM results

Models X2 df #2/df Comparison CFI PCFI

Model 1 471.657 128 3.685 2.204/3 (p = 0.53) 0.91 0.76 Model 2 469.453 125 3.756 Compared base 0.91 0.75

Model 1: Proposed model Model 2: Partial mediation

Coefficient SE Coefficient SE

CS -> BL 0.95*** 0.058 0.83*** 0.105

IDF -> BL 0.09 0.086

CSR -> BL -0.00 0.080

SQ -> BL 0.10 0.105 IDF -> CS 0.21*** 0.094 0.20* 0.099

CSR -> CS 0.17* 0.079 0.17* 0.083

SQ -> CS 0.83*** 0.086 0.83*** 0.088 CSR IDF 0.63*** 0.080 0.63*** 0.080

SQ -> IDF 0.34*** 0.34*** 0.061 R2 BL 0.86 0.85

CS 0.78 0.77

IDF 0.69 0.69

*p< 0.05, ***p< 0.001. All estimates are unstandardized coefficients.

TABLE IV

Direct and indirect effects

CSR SQ IDF SAT

IDF

DE 0.63*** 0.34***

IE

SAT

DE 0.17* 0.83*** 0.21***

IE 0.13* via IDF 0.07* via IDF

Loyalty DE 0.95***

IE 0.16* via CS 0.79*** via CS 0.20* via CS 0.12* via IDF/CS 0.07* via IDF/CS

*p < 0.05, ***p < 0.001. DE direct effect, IE indirect effect, SAT satisfaction, IDF brand identification, SQ service quality.

CSR and SQ (Aiken and West, 1991). Table V presents the moderated regression results of both the brand identification and customer satisfaction mod-

els. H9 expects that SQ enhances the effect of CSR

on brand identification. The Step 2 (interaction model) of brand identification shows that it explains 1 % (p < 0.05) more variance of brand identification than Step 1 (the solely main effect model). The

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CSR and Service Brand 683

Figure 2. Proposed research model. CSR corporate social responsibility, SQ service quality, IDF brand identification, CS customer satisfaction, SBL service brand loyalty. < 0.05, ***p < 0.001.

coefficient of the interaction of CSR x SQ is also significant (ß = 0.05*), which suggests there is sig- nificant interactive effect between CSR and SQ. Figure 3 illustrates the pattern of how CSR en- hances the effect of SQ. H9 is supported, as CSR association has stronger (weaker) effect on brand identification when SQ is higher (lower). H10 ex- pects that SQ enhances the effect of CSR on cus- tomer satisfaction. H10 is not supported, as the results of the customer satisfaction model (Step 2) imply that the interaction between CSR and SQ is insignificant in predicting customer satisfaction.

Discussion and conclusion

Theoretical contribution

The major purpose of corporate branding and cor- porate marketing is to build strong corporate brand associations, including CSR association and CA association (Brown and Dacin, 1997). Companies are under increasing pressure to enhance their social performance (Mohr et al., 2001; Osterhus, 1997). On one hand, being more socially responsible is a moral and ethic standard for contemporary busi- nesses; on the other hand, CSR should be a central concern for firms due to its implications for con- sumer behavior and firm performance (Windsor, 2006). According to stakeholder theory, stakeholders reward those firms having good social performance

and penalize those having poor social performance (Handelman and Arnold, 1999; Jamali, 2008).

In practice, companies are paying increasing attention to corporate branding (Balmer and Gray, 2003; Knox and Bickerton, 2003; Urde, 2003) and corporate marketing (Balmer and Greyser, 2006; He and Balmer, 2007), such as CSR initiatives and associations, with a belief that it leads to better market and financial performance. Research in dif- ferent disciplines examines the link between CSR and performance at the firm level. Yet, extant lit- erature pays insufficient attention to the micro- process of the joint effect of corporate brand associations (including CSR association and SQ perception) on individual stakeholders, especially customers. On the other hand, service firms are

increasing their investments/efforts in service improve- ment to enable better customer service experience, satisfaction, and loyalty. Accumulated evidences exist to support the path from SQ to customer sat- isfaction. However, what is the role of CSR in this process? The present study incorporates both the consumer model of CSR and SQ model of loyalty to form an integrative model of CSR-SQ model of brand performance.

Theoretically, this study makes a number of contributions to the literature. First, it tests and confirms that brand identification plays a central role

along the path from corporate level associations to customer satisfaction as well as service brand loyalty.

Specifically, our study expands the traditional view

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684 Hongwei He and Yan Li

TABLE V

Moderated regression results

Identification Satisfaction

Step 1 Step 2 Step 1 Step 2

Coefficient SE Coefficient SE Coefficient SE Coefficient SE

Constant 4.10 0.035 4.08 0.037 4.36 0.033 4.43 0.035

CSR 0.51*** 0.037 0.49*** 0.038 0.20*** 0.035 0.19*** 0.035

SQ 0.36*** 0.041 0.36*** 0.041 0.70*** 0.038 0.70*** 0.038 CSR X SQ 0.05* 0.025 0.03 0.023 Adjusted R2 0.64 0.65 0.69 0.69 AR2 0.01* 0.00

*p < 0.05, ***p < 0.001.

Figure 3. Enhancing effect of SQ on the effect of CSR on brand identification.

of CSR's effect on customers and suggests that CSR does not only affect product evaluation, but also brand identification, customer satisfaction, and brand

loyalty. This study adds further empirical evidence to the recent observation of the positive effect of CSR on brand identification (Lichtenstein et al., 2004; Marin et al., 2009) and customer satisfaction (Luo and Bhattacharya, 2006), and extends Luo and Bhattacharya's (2006) work by identifying and confirming the mediation role of brand identifica- tion on the relationship between CSR and customer satisfaction. Although Marin et al. (2009) have examined the mediating role of brand identification on the effect of CSR on brand loyalty, their study does not examine the (moderating) effects of SQ or the role of customer satisfaction along with the path

from CSR and SQ to service brand loyalty. The

study further finds that SQ perception (besides CSR) is also a significant antecedent of brand identification

that in turn mediates the effect of SQ perception on customer satisfaction and brand loyalty. Traditional path from SQ to service brand loyalty does not acknowledge the pivotal role of brand identification.

Second, it tests and supports, for the first time, that CSR's effects on certain key service brand performance indictors are conditional on the brand's ability to deliver its services. Prior research has found

that the effects of CSR association on product evaluation and brand attitude tend to be less con-

sistent than other corporate level associations (espe- cially CA association). However, little research examines what factors could cause the lack of con-

sistent main effect of CSR association. This study contributes to the explanation of CSR's inconsistent effect by finding that CSR has weaker effects on brand identification and other outcomes when SQ of the focal service brand is low.

However, it is important to note that the enhancing effect of SQ on the effect of CSR on customer satisfaction is not significant. The results show that although both CSR and SQ have sig- nificant main effects on customer satisfaction, the

effect of SQ tends to be much stronger and the effect of CSR tends to be weaker. And such a

relative weaker effect of CSR cannot be aided by SQ. Instead, SQ itself explains a very large pro- portion of the variance of customer satisfaction with a service brand. This result is consistent with the

effects on brand identification.

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CSR and Service Brand 685

Managerial implications

The results of this study suggest that a service company with positive CSR association and OSQ perception by its consumers is able to keep and sustain customer loyalty, because both CSR asso- ciation and SQ can enhance brand identification and customer satisfaction. Such findings have significant implications for managers. First, it is encouraging for managers to know that CSR en- hances both brand identification and customer

satisfaction, which suggests they should invest more in social initiatives. Consumers tend to reward

those companies that are more socially responsible by being more loyal to them. It is also important to understand that both brand identification and

customer satisfaction still play pivotal roles in ser- vice brand loyalty. Second, given that CSR has stronger effect than SQ on brand identification, whereas SQ has stronger effect than CSR on customer satisfaction, companies should strategically allocate their resources to improve the areas of CSR and SQ. If the major purpose is to enhance customer satisfaction, services companies should invest more on SQ, whilst firms should pay more attention to CSR initiatives, if the major purpose is to foster customer identification, due to the

stronger direct positive effect of CSR on brand identification.

However, it is also important to note that the positive effects of CSR on consumer attitudes and loyalty are likely to be reduced if the SQ is low. Therefore, firms should not compromise the invest- ment in SQ. The significant relevance of brand identification for customer satisfaction and brand

loyalty suggests that service firms should invest in the area of corporate identity management (e.g., man- aging and communicating vision and mission, values, imageries, and symbolism). Strategically managing corporate identity can enhance corporate associations and reputation, which in turn fosters senses of belonging and identification among various stake- holders (Balmer and Greyser, 2006; Brown et al., 2006; He, 2008; He and Balmer, 2007) and encourages favorable attitudinal and behavioral re- sponses to the focal firms (Brown and Dacin, 1997). In sum, service firms should maintain a strategic balance between quality control and investment in social initiatives to build balanced corporate brand

associations. Companies should also pay attention to establishing strong customer identification with the focal corporate brand.

Limitations and future research

The present study generates a number of avenues for

future research. The following research directions are

meant to be illustrative. This study tests the hypoth- eses with mobile telephony customers based on a convenient sample from Taiwan. Future research should test this model with larger random samples or samples in other contexts, for example, in different service sectors and in different cultures. The present

study does not examine the effects of personal factors on the process/path towards brand loyalty. Future studies should examine personal factors, such as per- sonal cultural values, variety seeking behavior, per- sonality traits, etc. This study examines the antecedent

role of OSQ only, future studies should incorporate specific dimensions of SQ to the model. In addition, the present study focuses on brand identification's effect on service corporate brand only. For FMCG companies, within the same company, many product brands exist and differ from the corporate brand. Future research should examine how brand identifi-

cation affects product brands performance. Finally, the moderating effect of SQ on the effect of CSR could be conditional on other factors. Although, in general, we find supportive evidence on the enhancing effect of SQ on CSR on brand identifi- cation for telecommunications service brands, future

research should examine whether such an enhancing effect of SQ still holds in other contexts, in particular

in those sectors (psychical products, e.g., mobile phone brands) where SQ seems to be secondary to the quality of the products themselves.

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Hongwei He Warwick Business School,

University of Warwick,

Coventry CV4 7 AL, U.K. E-mail: hongwei. [email protected]

Yan Li

Oxford Brookes University Business School,

Oxford Brookes University,

Wlteatley Campus, Oxford OX33 1HX, U.K. E-mail: [email protected]

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