Doing good when times are bad:
the impact of CSR on brands
Faculty of Economics and Business, Rijksuniversiteit Groningen, Groningen,
Department of Marketing, Michigan State University, East Lansing,
Michigan, USA, and
Department of Marketing, University of North Florida, Jacksonville, Florida, USA
Purpose –This paper aims to determine what the brand performance consequences of corporate social
responsibility (CSR) activities would be during times of recession for well-known brands.
Design/methodology/approach –Based on signaling theory, this paper investigates if CSR
activities serve to signal higher brand value for consumers via perceptions of better quality and greater
differentiation, speciﬁcally during recessions. This study incorporates a representative longitudinal
sample of known US ﬁrms for the analyses, which is accomplished through generalized method of
Findings –The ﬁndings empirically demonstrate that CSR initiatives during recessions are actually
associated with increased perceptions of brand value. More speciﬁcally, during recessions, CSR initiatives
such as charitable contributions provide a signal to customers of higher brand quality.
Research limitations/implications –This study did not control for the costs of doing speciﬁc CSR
activities that may be less visible to consumers.
Practical implications –While individual ﬁrms or managers may not be able to prevent recessions from
happening, they can limit the negative impact of recessions on their performance by engaging in CSR
activities (or refrain from cutting back)during these times.
Social implications –Because CSR initiatives during recessions result in more favorable consumer
perceptions of the brand, engaging in CSR aligns both social and managerial interests, owing to the economic
gains from CSR investments.
Originality/value –During times of recession, some critics indicate that CSR may be an unaffordable
luxury. On the contrary, this research shows that managers may want to consider CSR activities as a means
of increasing the value of their brands, especially during economic recessions.
Keywords Corporate social responsibility (CSR), Brand value, Recession, Quality, Differentiation
Paper type Research paper
© Abhi Bhattacharya, Valerie Good and Hanieh Sardashti. Published by Emerald Publishing
Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence.
Anyone may reproduce, distribute, translate and create derivative works of this article (for both
commercial & non-commercial purposes), subject to full attribution to the original publication and
authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/
when times are
Received 30 January2019
Revised 26 July2019
12 January 2020
27 March 2020
Accepted 29 April2020
European Journal of Marketing
Vol. 54 No. 9, 2020
Emerald Publishing Limited
The current issue and full text archive of this journal is available on Emerald Insight at:
Corporate social responsibility (CSR) has been recognized as a key driver of ﬁrm success, with
more than half of Fortune 500 companies producing distinct CSR reports and assigning senior
executives the responsibility for CSR initiatives (Keys et al., 2009). A consistent, strong body of
evidence links CSR to future ﬁrm ﬁnancial performance (Oh et al., 2016;Kang et al., 2016;Yim
et al., 2019). Prior research deﬁnes CSR as “actions that appear to further some social good,
beyond the interests of the ﬁrm and that which is required by law”(McWilliams and Siegel,
2001,p.117;Lindgreen et al., 2012, p. 967). While not required by law, many ﬁrms have
embraced CSR as a major component of their overall strategy (Mishra and Modi, 2016).
Consumers and other stakeholders (such as employees, channel partners and regulators) may
pressure a ﬁrm to conduct itself responsibly and actively engage in broader societal and
environmental stewardship. Thus, businesses may engage in CSR to maintain social norms
and legitimacy in business dealings (Lindgreen et al., 2012). Prior literature demonstrates that
CSR may help consumers form impressions of the ﬁrm; hence, CSR activities may help
cultivate the customer asset (Saxton et al., 2019;Guzm
an and Davis, 2017).
Understandably, the notion of CSR has attracted the attention of diverse business
disciplines, including marketing, management, economics and business ethics. In particular,
marketing researchers have shaped much of the conversation surrounding CSR, which has
been deemed an “inescapable priority”(Porter and Kramer, 2006). As CSR features can be
one of the critical inﬂuencers of a corporate brand (Rust et al.,2004), it is imperative to
understand how CSR initiatives affect various facets of brand performance. Though recent
research has provided some evidence for the positive inﬂuence of CSR on brand loyalty (Cha
et al.,2016), global brand equity (Torres et al., 2012) and brand credibility (Bigné et al.,2012),
our understanding of the impact of CSR on different aspects of brand performance is still
equivocal, particularly during ﬂuctuations in the business cycle.
Certainly, recessions –essentially deﬁned as a signiﬁcant decline in economic activity
spread across the economy, normally visible in real GDP (National Bureau of Economic
Research, 2010)–are a common occurrence in the world’s major economies. Even though a
recessionmaybetriggeredbyaspeciﬁc event (such as the subprime loan market in the USA),
ﬁrms across industries, sectors and countries feel its effects. Indeed, several studies
demonstrate how harshly recessions can impact the performance of ﬁrms and entire economic
sectors (Stock and Watson, 2012;Dekimpe and Deleersnyder, 2018). At such times, ﬁrms face
declining revenues and a shortage of cash. Some expenses are difﬁcult to reduce (such as
certain operational expenses in a manufacturing ﬁrm). A natural tendency is to cut back on
seemingly discretionary undertakings such as research and development and advertising to
save on costs (Lamey et al., 2007). This helps ﬁrms overcome the shortfall in revenue and ward
off a decline in proﬁtability. Because CSR is often perceived as a peripheral activity and thus
discretionary (Aguinis and Glavas, 2013), ﬁrm managers also may face pressure to reduce their
CSR levels. Indeed, during the 2008-2009  recession, some described CSR as an “unaffordable
luxury”and suggested ﬁrms “tighten their belts”and only spend on core business activities
(Franklin, 2008). However, no study to date speciﬁcally looks at CSR activities during a
recession, especially their impact on brand value, which is a customer-level indicator of future
ﬁrm performance (Srinivasan et al., 2010).
This gap is important to address for two reasons. First, based on past literature, we have
reason to believe that CSR may positively affect brand value (Torres et al.,2012;Lindgreen
et al., 2012). However, past research has not disentangled the differential impact of CSR on the
various pillars that constitute overall brand value. Second, marketing activities –particularly,
advertising –have been shown to become signiﬁcantly more important to a ﬁrm’s success
during recessions (Özturan et al., 2014;Tellis and Tellis, 2009;O’Malley et al.,2011). While CSR
activities may likewise follow this pattern of marketing actions that distinguish a ﬁrm from its
competitors during a recession, no research has investigated this critical issue. When faced
with decisions regarding which investments are essential to help a ﬁrm during recessions when
revenue is often restricted, managers need to know where to allocate their resources for
achieving the highest return.
To address this gap, in this study, we seek to answer the question, what are the
performance consequences of brand value when ﬁrms leverage CSR during a recession. To
answer this question, we investigate the impact of CSR on well-known ﬁrms’brand value in
a large longitudinal panel of US ﬁrms during and after the 2008–2009 recession using
generalized method of moments (GMM) estimations. In doing so, we provide the following
contributions to the literature.
First, our ﬁndings reveal that on aggregate, at least for established brands, CSR has a
positive impact on brand value during recessions, owing to a change in the effect of CSR on
brand quality perceptions. This makes CSR an important factor in forming an impression of
a company’s brand, particularly during recessions. Although prior research shows that
managers face many opposing tensions from performing CSR –for example, customers
often pressure ﬁrms to perform CSR activities to beneﬁt society while opposing pressures
from stockholders and top management teams exist along the lines of accountability, limited
resources and public governance (Lindgreen et al., 2012)–our research provides some
evidence that investing in CSR as a strategic initiative aligns the interests of both customers
and other stakeholders during recessions, hence giving managers positive rationale for
performing CSR activities.
Second, we identify two pathways for CSR to impact brand performance. The ﬁrst, based
on signaling theory, shows that CSR efforts are a signal of quality to consumers, which leads
to greater esteemed brand quality (during recessions). The second path is through
differentiating a brand from its competitors.
Overall, we provide a more nuanced understanding of the rich literature on CSR as an
integral marketing strategy. Following our analyses and ﬁndings, we offer an in-depth
discussion, including actionable managerial insights, as well as directions for future
Conceptual development and hypotheses
The marketing literature has proposed that consumers appreciate the CSR initiatives of
ﬁrms and feel good about the ﬁrm as well as themselves (Habel et al., 2016). In addition,
several studies have investigated the relationship between corporate social performance and
brand performance, as shown in Table 1. Consumer behavior research clearly demonstrates
that customer beliefs concerning CSR affect individual customer outcomes such as brand
preference, brand loyalty and positive word-of-mouth (Klein and Dawar, 2004). However,
outside of those looking at CSR-brand ﬁt(Cha et al., 2016), extant studies highlighted in
Table 1 have not often investigated when such an effect is stronger and whether such an
effect varies across ﬁrms or even within ﬁrms over time. Because positive brand evaluations
are often a prerequisite for ultimate ﬁnancial performance, demonstrating when CSR may
inﬂuence such a customer-level outcome such as brand value is important. Strong brands
attract more loyal customers, buyers who are willing to pay more and higher customer
lifetime value; brand value captures this added value from brands based on customer
perceptions (Mizik and Jacobson, 2008). Because brand associations and strengths are more
lasting than short-term ﬁnancial performance (Wood, 2000), ﬁrms should be more attune to
these outcomes when making strategic decisions such as CSR.
when times are
Citation Data source Theoretical framework Estimation Relevant findings in our context
Surveys of 370
Not explicitly mentioned Structural equation
Two types of brand–cause ﬁt (value and function) have
differential effects on attitude toward the brand and
ad, which in turn inﬂuence brand equity
Sierra et al. (2017) Surveys (primary data) Various related to
CSR impacts brand equity through higher perceived ethical
image of the ﬁrm
Cha et al. (2016) Surveys (primary data) Self-expansion theory Structural equation
CSR brand ﬁt increases service brand loyalty
Tingchi Liu et al.
Surveys (primary data) Not explicitly mentioned Regression Customers’brand preference via perceived brand quality
in Chinese hotels can be enhanced by CSR performance
Hur et al. (2014) Surveys (primary data) Resource-based view
CSR impacts brand equity and the effect is mediated by
brand credibility and corporate reputation
Torres et al.
SGP database; Interbrand Stakeholder theory
Partial adjustment model CSR increases global brand equity
Bigné et al. (2012) Surveys (primary data) Pyramid conception of
CSR –brand ﬁtinﬂuences brand CSR perception
Lindgreen et al.
approach from ﬁve ﬁrms
Qualitative Firms link CSR to their brand building both directly and
Lai et al. (2010) Surveys (primary data) Stakeholder theory Structural equation
CSR impacts brand performance and the effect is mediated
by industrial brand equity and corporate reputation
Melo and Galan
Panel data Instrumental stakeholder
Panel data regression CSR positively impacts brand value and has a long-term
impact on corporate performance
Berens et al.
Surveys (primary data) Accessibility–
Hierarchical regressions CSR partially mediates the effect of corporate brand
knowledge on product attitudes
Conceptual Institutional theory and
Conceptual article CSR offers corporate brand insuranceagainst management
Klein and Dawar
Experimental Attribution theory ANOVA CSR increases ﬁrm performance through improved
consumer brand evaluations and protects a ﬁrm from
negative impact of product harm crises
Experimental Congruence theory ANOVA A company’s CSR initiatives will enhance consumers’
evaluations of that company
A literature review
on CSR and brand
performance by year
Impact of corporate social responsibility on brand value
One of the largest and most widely accepted valuation models for brands is the Young and
Rubicam Brand Asset Valuator (Y&R BAV), which includes four pillars or central brand
attributes (Datta et al.,2017;Mizik and Jacobson,2014, 2008). They are (in alphabetical
order): differentiation, esteem, knowledge and relevance. Differentiation is the perceived
distinctiveness of the brand and reﬂects its ability to stand out from competition (Mizik and
Jacobson, 2008). Esteem reﬂects the level of respect, deference and regard a consumer holds
for a given brand based on perceptions of overall brand quality, which is related to being
reliable and a leader in its category (Mizik and Jacobson, 2008). Knowledge accounts for
customer awareness, recall and recognition of the brand (Mizik and Jacobson, 2008). Finally,
relevance reﬂects the degree to which a brand is personally appropriate to a consumer (Mizik
and Jacobson, 2008).
CSR as a quality signal
The ﬁrst theorized mechanism by which CSR may lead to enhanced brand value is by
signaling quality. According to signaling theory (Spence, 1978), an informed party in a
market that is characterized by information asymmetry can use signals to communicate
unobservable qualities to the other party. To be most effective, such signals should
be visible and costly to imitate. Past literature has conveyed that signaling theory may be
useful for understanding organizational CSR activities (Connelly et al., 2011). For example,
information asymmetry often exists between ﬁrms and customers with regard to a ﬁrm’s
brand quality. Hence, Hult (2011) suggested that organizations can use CSR to:
[...] signal to the marketplace what type of organization they are (e.g., an organization dedicated
to sustainability practices), thus transferring information to the organization’s stakeholders (most
notably its customers in the marketplace) and resolving the information asymmetry (p. 518).
Past literature has indeed used signaling theory in the context of CSR (Thorne et al.,2017;
Saxton et al.,2019;Yim et al.,2019); however, prior studies have not examined if CSR
provides a signal of greater brand quality to customers during speciﬁc times. Moreover,
articles that do involve signaling theory and CSR are rare, leading to a speciﬁc recent call for
papers investigating the impact of CSR from a signalingperspective (Zerbini, 2017).
Often, consumers may have a difﬁcult time estimating the “true”quality of a brand
becauseof inexperience, lack of motivation or insufﬁcient knowledge about the brand (Jin and
Leslie, 2003;Kirmani and Rao, 2000). While brand quality is normally experienced only
through the consumption experience, prior research demonstrates that consumers can engage
in an information search and use this information to inform their decisions and ultimately
arrive at a certain perceived level of quality, which may or may not be close to the true quality
level (Brucks et al., 2000). Therefore, past literature emphasizes the distinction between “true”
quality and “perceived”quality, with the latter having a stronger effect on overall perceived
value and purchase intentions (Erdem and Swait, 2004). To aid consumers in their search as
well as predispose customers favorably toward a brand (i.e. increase the perceived quality of
the brand), ﬁrms engage in marketing activities that inform consumers about the brand
quality (Hennig-Thurau et al., 2006). From this perspective, ﬁrms may use their CSR activities
as a signal of higher quality to consumers, which reduces information asymmetry.
By engaging in CSR activities, ﬁrms can signal an elevated level of quality of the ﬁrm’s
internal processes and beliefs, thus creating a “halo effect”on the brand (Klein and Dawar,
2004). This may occur through two complementary signals. First, consumers may
reasonably think that taking care of society implicitly means taking care of customers
(Nicolau, 2008). CSR investments may signal the motivations of the ﬁrm and its emphasis on
when times are
creating a better society and/or that the ﬁrm has much to lose by offering inferior brands
that would damage customer goodwill. Thus, CSR may increase consumers’overall trust in
the brand and the credibility of the brand’s claims. Second, CSR activities may convince
consumers that the brand is of higher quality because they signal greater management
competency and greater resources (McWilliams and Siegel, 2001). Consumers may see
investments in CSR –such as a charitable donation –and assume that the ﬁrm has solid
leadership and accumulated slack resources to spend and therefore must not need to save
the money on quality and safety improvements (i.e. customers perceive those have already
been well established by the ﬁrm). In combination with the deﬁnition of esteem relating to
the consumers’perception of overall quality, CSR should signal a ﬁrm’s conﬁdence in and
commitment to its brand’s superior quality:
H1. CSR positively affects perceived brand quality.
Corporate social responsibility as a tool to diﬀerentiate
Another beneﬁt of CSR initiatives is the ability companies have to differentiate their brands
(Hsu, 2012). Brand differentiation is important because it creates barriers to entry and
improved customer loyalty, as well as increased purchase frequency (Erdem and Swait,
2004). According to Kay (2006, p. 744), “branding is about being different”so consumers can
make distinctions between products and services and base purchase decisions accordingly.
Past literature has shown that effective employment of CSR initiatives by managers can
differentiate brands from their competitors through excelling in their social responsibilities
(Smith and Higgins, 2000). A brand can create a certain level of association with CSR best
practices by embodying itself with CSR attributes (such as “hybrid”cars) or by using CSR-
related resources in its production process and organizational policies (such as “free trade”
coffee) (Hsu, 2012;McWilliams and Siegel, 2001). These qualities may then differentiate a
brand by appealing to ethical values within and across customer segments (Van de Ven and
Jeurissen, 2005). Infact, past research has theorized that manufacturers have an opportunity
to differentiate their brand through their investments in CSR and that these CSR
investments become even more impactful for ﬁrm ﬁnancial performance as competition
increases (Madden et al.,2012;Neville et al., 2005). This makes CSR an integral element in a
ﬁrm’s differentiation strategies and a form of strategicinvestment under managerial control,
similar to R&D and advertising (Gardberg and Fombrun, 2006;McWilliams et al.,2006).
With differentiation deﬁned as the perceived distinctiveness of the brand and its ability to
stand out in the marketplace, we predict the following:
H2. CSR positively affects brand differentiation.
Ex ante we do not expect an effect of CSR on either knowledge or relevance for a few
reasons. First, previous research has highlighted that to esteem a brand, it must already be
known (de Mortanges and van Riel, 2003). For the signal of CSR to be regarded, consumers
must be aware that the brand exists to be seeking or deciphering the cue. Moreover, the
brands in our secondary data sample are all well known. Thus, CSR efforts are not going to
make known that which is already known, in or out of a recession. In addition, with respect
to brand relevance, we argue that the impact of CSR may not be universal. While CSR may
make the brand more relevant to a group of customers, it may also make the brand less
relevant to other groups. Hence, the overall impact on brand relevance may be minimal.
However, to be thorough in our empirical analyses, we test for an effect for these two pillars
to conﬁrm our suspicions that the effect on brand value is being driven by our hypothesized
relationships of esteemed brand quality and differentiation.
Overall, we expect that CSR should increase both perceived brand quality and
differentiation while not decreasing brand relevance and knowledge. As mentioned, prior
research provides some indication that to esteem a brand’s quality requires that consumers
are aware of and can recall the brand (De Mortanges and Van Riel, 2003). Thus, knowledge
of the brand is assumed to already have taken place. Likewise, some evidence exists
showing that differentiation and relevance can work in tandem, which has been called
“brand strength”in past literature (De Mortanges and Van Riel, 2003). Because uniqueness
and speciﬁcally differentiation in the consumers’memory between associations with one
brand and those of another brand has been shown to reduce brand substitution (Rego et al.,
2009), we predict that the differentiation from doing CSR activities will have a positive
impact on the total brand value. We thus presume an overall positive impact of CSR on
brand value, driven primarily by the impact on perceived brand quality and differentiation.
Moreover, CSR is increasingly becoming a core component of a brand besides a range of
traditional product-related brand “features”such as quality and styling (Werther and
Chandler, 2005). A major assumption behind adopting CSR activities centers on the notion
that customers reward good corporate citizenship through greater, more sustained
patronage (Luo and Bhattacharya, 2006). As CSR activities create goodwill, consumers who
are a core constituent of the broader society may be directly or indirectly impacted by a
ﬁrm’s CSR initiatives, which may engender stronger attachment toward the ﬁrms’offerings
and brand. Taken together, we predict the following:
H3. CSR positively affects brand value.
Impact of recession
Recessions are an inevitable part of the overall business cycle. While unpleasant, recessions
can offer opportunities if handled strategically. The recession that forms the context of our
study was induced by the collapse of the derivative market and subsequently the housing
market. The so-called Great Recession of 2008-2009 (Han and Goetz, 2015) was characterized
by the most severe year-over-year decline in consumption the USA had experienced since
1945. The consumption slump was extensive (De Nardi et al., 2011) and ﬁrms found
themselves struggling to generate sales, in large part because of increases in the price
sensitivity of consumers, many of whom had lost or were struggling to retain their
employment (van Heerde et al., 2013).
Marketing actions and investments to protect or even increase perceived brand value
likely gain in importance during recessions. While CSR could serve as a strategic marketing
action, performing CSR activities during a recession could create a conundrum for ﬁrms.
From one perspective, CSR activities may act as a calculated initiative to differentiate the
ﬁrm from its competitors. Thus, CSR initiatives during a recession could predict future
brand performance. On the other hand, managers would be ill-advised to allocate scarce
resources to CSR initiatives during times of crisis without any expectations of returns.
Undeniably, a compelling reason for reducing strategic initiatives such as CSR or marketing
investments during a recession is that sales are likely to be lower than at times of economic
expansion (Tellis and Tellis, 2009). Thus, a call for future research in the marketing
literature suggests investigating the effects of CSR on ﬁrm outcomes during periods of
recession (Torres et al.,2012).
Past research shows that the economic environment inﬂuences both purchase decisions and
brand considerations (Van Steenburg and Spears, 2011;Dekimpe and Deleersnyder, 2018).
when times are
Extant research also suggests that the recession (perhaps extendable to recessions in general)
forced many consumers to re-evaluate the brands they buy, primarily on the consideration of
whether or not “value”waspartofthebrand’s promise (Raggio and Leone, 2009). Such a
re-evaluation may even be positive and beneﬁcial for brands when combined with CSR.
During recessions, consumers may ﬁnd it difﬁcult to make decisions (Dekimpe and
Deleersnyder, 2018) leading them to seek stability, predictability and low risk rather than
change and new experiences (Erdem et al.,2004). Previous marketing research has
demonstrated that during times of economic decline, consumers typically consciously alter
their spending habits –they may reduce quantities, purchase off-brands, postpone buying
or make other tough choices (Green and Peloza, 2011;Lamey et al.,2007). Rather than
unconscious consumption, customers begin actively seeking cues for greater value (both
quality and price) to reduce the risks of purchase. Consumers take more time and effort
searching for goods and search harder to determine the “true”quality of the brand during
recessions (Quelch, 2008). Thus, when ﬁrms use CSR to signal quality, these signals are
more likely to be discovered and contemplated during recessions when customers are
actively looking for them. Furthermore, Steenkamp et al. (2010) found that during
recessions, customers are more willing to pay a price premium for a brand only if they are
convinced of its superior quality. Thus, during recessionary periods, when value is essential
to buyers, using CSR as a signal of higher quality and better perceived value likely becomes
even more important.
Second, customers may appreciate ﬁrms for not abandoning CSR investments during
tough times. During a stable economy, consumers often expect companies’CSR actions to be
motivated at least in part by self-interest (Ellen et al., 2006), but such attributions are less
likely to be associated with the ﬁrm during recessions when consumers know that ﬁrm
resources are scarcer. For this reason, CSR during recessions may also help the ﬁrm combat
perceptions of unethical practices such as greenwashing –where companies often use
claims that sound environmentally friendly, but are actually vague, and at times even false
(Laufer, 2003). Holt et al. (2004) afﬁrm that the biggest challenge to the effectiveness of CSR
in inﬂuencing customer perceptions is that consumers regard CSR initiative as opportunistic
and perceive those actions to be motivated primarily by self-interest and not by an interest
in the welfare of people and the environment. Moreover, research has demonstrated that
consumers will punish ﬁrms perceived as insincere in their CSR claims (Bhattacharya and
Sen, 2004). On the other hand, CSR activities during recessions (when resources are more
constrained) may be viewed as an authentic and true display of social responsibility and
In summary, CSR efforts by ﬁrms during recessions may provide a stronger quality
signal for two reasons –consumers are more likely to look for additional cues when faced
with greater risk and uncertainty in purchase as is predicated in a recession, and consumers
are more likely to consider CSR efforts to be genuine and in turn appreciate and trust a
brand more. Overall, we predict the following:
H4. The positive effect of CSR on perceived brand quality is stronger during a recession.
In addition to the signal of quality, CSR activities can pay off during a recession because
competition for customers’attention is reduced because of ﬁrms cutting back on advertising
expenses (Tellis and Tellis, 2009;Deleersnyder et al., 2009). In line with research
demonstrating a positiveimpact of a higher share of voice with regard to advertising(Putte,
2009), we assert that when less clutter exists in the marketplace, brands should be able to
stand out from the competition through their strategic initiatives related to CSR and thus
differentiate more on the basis of CSR. Moreover, the 2008–2009 recession (the one we
observe in our sample) was attributed to the unethical activities of large ﬁnancial
institutions (Lewis et al.,2010). When this unethical side of businesses is salient in
customers’minds, CSR activities may be more visible and result in stronger positive
externalities. Thus, we hypothesize the following:
H5. The positive effect of CSR on brand differentiation is stronger during a recession.
Academic research in this area generally tends to demonstrate that investments in
marketing are desirable during recessions. For example, O’Malley et al. (2011) demonstrated
that strong ﬁrms generally beneﬁt from investments in marketing and suffer from cost
reduction initiatives. Likewise, a strong, consistent body of evidence conveys that cutting
back on advertising during a recession can hurt sales during and after therecession, without
generating any substantial increase in proﬁts (Özturan et al.,2014;Deleersnyder et al., 2009;
Tellis and Tellis, 2009). To the extent that CSR be considered a marketing action,
investments in CSR, even during a recession, is likely to pay off. As detailed above, we
predict that both the relationship between CSR and esteemed brand quality and the
relationship between CSR and brand differentiation is higher during recessions, owing in
part to the stronger signal of genuineness and greater salience of such activities in the minds
of consumers. We hypothesize that in a recession, CSR investments will have an even
greater positive impact on brand value:
H6. The positive effect of CSR on brand value is stronger during a recession.
One of the most widely accepted deﬁnitions of brand equity is Keller’s (1993)
conceptualization, which deﬁnes brand equity as the differential preference and response to
marketing effort that a product obtains because of its brand identiﬁcation as compared to
the same product that did not have the brand identiﬁcation. Although many measures of
brand equity exist, most fall under two broad measurement approaches: based on
consumers’attitude toward the brand (consumer-based brand equity, hereafter “CBBE”) and
based on share in the marketplace (sales-based brand equity, hereafter “SBBE”)(Datta et al.,
2017). The CBBE is more aligned with our research context because we are interested in
changes in consumers’perception of a brand. The CBBE is afﬁliated with stated consumer
preferences more than measures that include product market (such as category likeability)
and ﬁnancial market (such as ﬁrm reputation) indicators. Hence, the CBBE is most closely
linked to the stakeholder we investigate in this paper –consumers. Over the years, several
consulting companies have developed their own CBBE constructs and measures. Important
examples include Young and Rubicam’s Brand Asset Valuator (BAV), YouGov’s Brand
Index, Millward Brown’s Brand Dynamics and Harris Interactive’s EquiTrend. These
syndicated databases use large-scale consumer surveys to measure perceptions of brands
along multiple dimensions. While each CBBE system has its own measures (and perhaps
idiosyncrasies), they tap into many of the same or related dimensions, making them largely
interchangeable, as pointed out by Keller (2001).
Thus, we chose to use Young and Rubicam’s BAV to obtain publicly traded mono-brand
ﬁrms . Young and Rubicam collects brand-related data from samples of 1,200 or more
respondents each quarter from a panel of 15,000 US consumers, using a 45-min survey. The
BAV is one of the few sources of brand value data that span more than 10 years and has
been used in prior research (Datta et al., 2017;Mizik and Jacobson,2014, 2008). To construct
when times are
the sample, we matched ﬁrms from the BAV metrics survey with annual social
responsibility data from Kinder, Lydenberg and Domini and Co., Inc. (KLD). KLD measures
how well the ﬁrm did on seven particular CSR categories, including product, human rights,
environment, employee relations, diversity, corporate governance and community
engagement. For each of these seven categories, KLD offers a rating of the ﬁrm’s strengths
and concerns. We then combined this data set with accounting data from COMPUSTAT,
which collects ﬁnancial information for all US listed companies from 10K/10Q disclosures.
The time-series unit of analysis for our study is the ﬁscal year because our social
responsibility data were only available annually. Because BAV brand metrics are measured
quarterly, we aggregated the BAV brand metrics to an annual value by simply using the
mean of the metric averaged over quarters .
Our ﬁnal sample consists of data for 137 public companies, including 19 industries,
during a 9-year period between 2007 and 2015 with a total of 454 ﬁrm-year observations (115
for recession years). The years of recession we study are 2008 and 2009. Our available data
is an unbalanced panel because not all brands are included in every annual edition of the
BAV survey, and not all companies appear in KLD for the duration of our sample. We dealt
with missing data using list-wise deletion.
Dependent variable. Brand Value. We use the overall brand asset metric constructed by
Y&R’s BAV as our measure of brand value. A well-established measure, the BAV, has been
shown to be an important predictor of the ﬁnancial valuations and performance of brands
and is a widely accepted metric of brand value (Datta et al., 2017;Mizik and Jacobson,2014,
2008). The BAV’s overall brand asset metric is the sum of brand strength and brand stature
ranging from 0 to 36. Brand stature ranging from 0 to 9 relates to brand knowledge and
esteem, whereas brand strength ranging from 0 to 4 relates to brand differentiation and
relevance. In summary, the overall brand asset metric combines cognitive and emotional
capital of a brand with its vitality and therefore provides a more comprehensive measure of
brand value (Lovett et al.,2014). We use the BAV’s measure of brand esteem (the level of
respect, deference and regard a consumer holds for a given brand) as our proxy for esteemed
brand quality and differentiation (the level of uniqueness or distinctness of a given brand) as
our measure of differentiation (Mizik and Jacobson, 2008). The measures knowledge
(familiarity with the brand) and relevance (consumers’perceptions of personal relevance and
appropriateness of the brand) were also used in our model to conﬁrm our predictions that
the ﬁrst two facets were driving the effects to increased brand value (Mizik and Jacobson,
2008). Brand value is the sum of brand stature and strength (i.e. the additive total of
knowledge, esteem, differentiation and relevance).
Independent variables. Corporate social responsibility (CSR). We obtained the CSR scores
from the KLD data base. Following prior research, weassume all strength indicators as CSR
(Kashmiri and Mahajan, 2010), the sum of which provides a measure of the total CSR.
Recessionary year. We consider years 2008 and 2009 as the recessionary period on the
basis that these years showed a negative change in gross GDP (Gregg and Wadsworth,
Control variables (ﬁrm level). We used six controls to capture the ability and willingness
of ﬁrms to do CSR duringand outside of recessions.
CSR history. We consider the number of years that a ﬁrm has been part of the KLD
database as a control for a ﬁrm’s history of social responsibility practices. This measure is
used to account for managerial emphasis on CSR practices. A ﬁrm that has historically
practiced CSR may face diminishing returns with regard to the impact of CSR on its brand
value or may be unlikely to forgo its CSR practices even if faced with adverse returns.
For instance, research has shown that organizations experience long periods of
strategic persistence and reluctance to change (Fang et al., 2014). Such CSR persistence
may also be because of managers perceiving CSR to be a cost of competition, i.e. if the
ﬁrm reduces or stops doing CSR, there may be an adverse effect. Hence, we control for
the ﬁrm’s CSR history.
Firm size. We calculate ﬁrm size as the natural logarithm of a ﬁrm’s total assets. This
control allows us to account for efﬁciencies of scale as well as a potential surplus of
resources, which may impact both a ﬁrm’s propensity to engage in CSR and the resources
the ﬁrm has to drive greater brand value. Prior research has indicated that ﬁrm size is
indeed a driver of CSR and that very small and very large ﬁrms are unequally motivated to
participate in CSR (Udayasankar, 2008).
Financial leverage. Firm ﬁnancial leverage is the ratio of long-term book debt to total
assets (Thomas, 2002). Financial leverage may determine the ﬁnancial strength and freedom
the ﬁrm possesses, which may in turn impact its ability and willingness to continually
engage in CSR through the recession.
Firm liquidity. Firm liquidity is the current ratio of the ﬁrm that measures a company’s
ability to pay short-term and long-term obligations. It is calculated as the ratio of ﬁrms’
current total assets to its current total liabilities. Like liquidity, leverage also may determine
the ﬁnancial slack the ﬁrm possesses (Ang and Smedema, 2011), which may affect its ability
to engage in CSR through the recession.
R&D spending. R&D spending is obtained as a line item (Item XRD) in COMPUSTAT.
Following Rothenberg and Zyglidopoulos (2007), who stated that R&D intensive ﬁrms are
likely to engage more in CSR, we include R&D spending as a control.
Advertising spending. Advertising spending is obtained as an expense (Item XAD) in
COMPUSTAT. Following McWilliams and Siegel (2001), who showed that advertising can
often be a substitute for CSR in terms of building reputation and that ﬁrms may choose to do
one instead of the other, we include advertising spending as a control. Because we already
control for ﬁrm assets (to account for ﬁrm size), we use an absolute measure of advertising
and R&D spending instead of a measure relative to the ﬁrm’s total assets, as has been used
sometimes in past literature (Luo and Bhattacharya, 2009).
We report the details of the databases and the variable construction in Table 2 and the
correlation matrix and descriptive statistics in Table 3.
Our data set includes both cross-sectional and temporal dimensions, and as such, it calls for
suitable panel data techniques for analysis. Because the number of ﬁrms (n) is larger than
the time period of our analyses (t), we do not use a traditional time series estimator (Blundell
and Bond, 2000). We instead estimate our hypotheses by using the dynamic panel GMM
estimation (for a full description of this method, see Arellano and Bond, 1991), which
accounts for potential sources of endogeneity, ﬁrm-speciﬁc effects, dynamic dependent
variables, heteroskedasticity and serial correlation within ﬁrms (Levine et al., 2002). Such a
GMM estimator has been used in the past literature in marketing when the data set is a
longitudinal panel and endogeneity may be of concern (Rego et al.,2013;Tuli et al.,2010). In
our context, while we include variables that may inﬂuence both CSR and brand value (such
as ﬁrm size) as covariates, potentially endogeneity could remain. For instance, previous
research has found that the ﬁt between the brand and CSR effort has an effect on consumer
attitudes, responses, perceived brand value and brand loyalty (Bigné et al.,2012;Cha et al.,
2016) and secondary data does not easily allow us to account for such an unobserved
when times are
variable. Further, the effectiveness of CSR may depend on if the consumer (the focus of such
activities) or indeed the market is aware of these activities –yet another unobserved variable
in our context. Hence, an instrumental variable approach is necessary.
We are interested in the following equation:
where istands for ﬁrm, tstands for time in years, y
the brand value of ﬁrm iat time t,X
the set of explanatory variables (such as prior years’brand value, ﬁrm size and advertising
expenses), including the variable of interest –CSR, ℶicaptures unobserved ﬁrm ﬁxed-effects
is a random error term representing all unobserved inﬂuences on CSR and brand
value, respectively. Parameter
reﬂects persistence in the process of adjustment toward
gives the short-run effect of Xon ygiven y
, with the long-run
effect given by
). To eliminate ﬁrm-speciﬁc effects, we take the ﬁrst difference and
By construction, in equation (2), the lagged difference in brand value is correlated with
the error term, which along with the potential endogeneity of the explanatory variables
X, requires the use of instrumental variables (IV). The GMM difference estimator uses
the lagged levels of the explanatory variables as IVs, provided that the error term is not
serially correlated and that the lagged levels of the explanatory variables are weakly
exogenous. To calculate the difference estimator, the following moment conditions
must be used:
Data and measures
Variable Definition Data source Literature support
CSR A mean score of social strengths for
ﬁrm iat year t
KLD Kashmiri and Mahajan
(2010),Kotchen and Moon
Research and development expenses for
ﬁrm iat year t
COMPUSTAT Luo and Homburg (2007)
Advertising expenses for ﬁrm iat year tCOMPUSTAT McAlister et al. (2016)
The ratio of long-term debt to total
assets for ﬁrm iat year t
COMPUSTAT Tuli and Bharadwaj (2009)
The ratio of ﬁrm’s current total assets
to its current total liabilities for ﬁrm iat
COMPUSTAT Luo et al. (2014)
CSR history Number of years that the ﬁrm ihas
appeared in KLD data base
Brand value BAV’s brand value for ﬁrm iat year tBAV
Mizik and Jacobson (2008)
Lovett et al. (2014)
Firm size Natural logarithm of total assets for
ﬁrm iat year t
COMPUSTAT Mizik and Jacobson (2008)
We consider 2008 and 2009 as
Kashmiri and Mahajan
Variable Mean SD 1 2 3 4 5 6 7 8 9 10
Brand value 5.33 5.01 1
CSR 0.25 0.21 0.419 1
R&D expenditure 1,543.46 2,348.55 0.194 0.231 1
Advertising expenditure 1,031.57 1,323.15 0.332 0.255 0.495 1
Financial leverage 0.25 0.38 0.003 0.147 0.071 0.125 1
Current ratio 1.63 0.89 0.051 0.028 0.170 0.088 0.186 1
Firm size 9.78 2.08 0.077 0.407 0.425 0.506 0.277 0.128 1
CSP history 15.60 5.12 0.400 0.327 0.032 0.156 0.090 0.130 0.110 1
Recessionary env. 0.42 0.81 0.034 0.040 0.017 0.020 0.013 0.057 0.058 0.008 1
Brand quality 0.42 0.81 0.951 0.306 0.196 0.388 0.064 0.024 0.187 0.467 0.087 1
Brand diff. 0.42 0.81 0.500 0.254 0.072 0.198 0.109 0.114 0.230 0.090 0.048 0.353
Note: Correlation provided in italics is signiﬁcant at the 0.05 level (two-tailed)
when times are
¼0for s 2;t¼3;...T;(3)
¼0for s 2;t¼3;...T:(4)
Following Blundell and Bond (1998), the difference estimator is further combined with an
estimator in levels to develop a system estimator:
and E yXi;tþpℶi
for all p and q (5)
A couple of speciﬁcation tests may be used: the Arellano –Bond test to conﬁrm that the
error term of the difference equation is not serially correlated, and the Sargan test to
heteroskedasticity and autocorrelation within panels). Valid instrumentation requires
that the Hansen J test be consistent in not rejecting the null hypothesis (Roodman,
Because none of the variables are heavily skewed, we do not transform any of them.
Variance inﬂation and condition indices statistics (the highest VIF being 2.71 and a CI of
14.1) are well below standard cutoffs, which indicate no particular problems with
We use the following full model speciﬁcations to test the hypotheses concerning the
effect on brand value:
10CSR i;t*Recessionary Yeartþℶiþ
In the equation, iindicates the ﬁrm, trefers to time (year), and
are the random
error terms that represent all the unobserved inﬂuences on brand value. In our model, we
controlled for ﬁrm size, ﬁnancial leverage, liquidity ratio, CSR history, advertising, and
R&D expenditure that would potentially inﬂuence both the willingness and ability of the
ﬁrm to invest in CSR and/or potentially inﬂuence the brand value of the ﬁrm. To test our
other hypotheses, we changed the outcome variable from brand value to its composite parts
(speciﬁcally, quality and differentiation). We likewise conﬁrm no signiﬁcant effects for
relevance and knowledge in the same way.
Table 4 summarizes the estimates obtained from the models to test our hypotheses
Our results show that in stable economic conditions, CSR is positively related to brand
= 0.049, p<0.1). While the relationship between CSR and brand quality did not
reach statistical signiﬁcance (
= 0.015, p>0.1), that with differentiation is positive and
statistically signiﬁcant (
= 0.121, p<0.001). The ﬁndings do provide support for our
hypothesis that the effect of CSR on brand value is strengthened during recession, as the
positive effect is signiﬁcant (
= 0.112, p<0.001), and we ﬁnd evidence of a signiﬁcant
positive effect of CSR on brand quality (
= 0.082, p<0.05) but not on differentiation
= 0.041, p>0.1). Figures 1 and 2depict these interactions.
As predicted, we do not ﬁnd CSR to impact the brand dimensions of knowledge
=0.054, p>0.1) and relevance (
=0.025 p >0.1) nor a moderating effect of recession
= 0.061, p>0.1;
=0.010, p>0.1 for knowledge and relevance, respectively) (Table 5). A
summary of our hypotheses testing results is provided in Table 6.
Model-free evidence: We obtain some model-free evidence to test the validity of our ﬁndings.
We observe that the average difference in advertising spending between recessionary and
nonrecessionary years is () $52.15m. This is consistent with past literature (Srinivasan
et al.,2011) that says ﬁrms reduce advertising spending during recessions. The average
growth in advertising expenses during nonrecessionary periods is $17.99m. Interestingly,
we ﬁnd that mean growth in CSR scores is practically nonexistent during recession (0.01)
compared to periods of GDP growth (0.15). However, ﬁrms also reduced their capital
expenses and number of employees (by 8% and 7%, respectively). This suggests that ﬁrms
looked to use a two-pronged strategy –saving on certain costs while maintaining
investments in others, a strategy which might have helped ﬁrms overcome the unique
challenges brought on by the recession (Ioannou and Flammer, 2019). We also observe the
correlation between CSR and brand strength is stronger during recession (0.45) than during
Alternate measures of recession: We obtained data concerning consumer conﬁdence in the
economy from the Michigan Index of Consumer Sentiment (ICS), which is a national survey
of telephone interviews with households. Lower conﬁdence is correlated with more saving,
consistent with precautionary motives and decreases in expected future resources.
Consumer conﬁdence has been shown to be substantially lower during periods of economic
downturns (Ludvigson, 2004). Instead of our indicator for recessionary years, we use this
measure to further ascertain the robustness of our results. Doing so allows us to make our
results more generalizable and increases the power of our analyses (through the use of a
continuous variable). We ﬁnd that the interaction term is negative and signiﬁcant (i.e. the
impact of CSR on brand value is stronger when consumer conﬁdence is lower). This ﬁnding
ties in with our substantive conclusions.
Simultaneous estimations: As another robustness check, we used the same equations as
described before and used the different brand-level outcome variables. We know that the brand
outcome variables –quality, knowledge, differentiation and relevance –are endogenous and
correlated. Ignoring the violation of the assumption of independent observations may result in
higher standard errors and larger Type I error, requiring an estimation technique allowing
correlated errors for more efﬁcient estimates (Cameron and Trivedi, 2013). We accomplish this
when times are
Model 1f BV
0.903 (0.016)*** 0.835 (0.017)*** 0.839 (0.023)*** 0.838 (0.024)*** 0.892 (0.016)*** 0.881 (0.017)***
0.015 (0.028) 0.010 (0.028) 0.121 (0.035)*** 0.118 (0.35)*** 0.049 (0.026) 0.042 (0.029)
0.082 (0.032)* 0.041 (0.040) 0.112 (0.033)***
0.022 (0.067) 0.032 (0.066) 0.049 (0.078) 0.044 (0.078) 0.012 (0.069) 0.001 (0.069)
Research and development expenditure
0.054 (0.066) 0.083 (0.067) 0.136 (0.078) 0.157 (0.078)* 0.017 (0.068) 0.054 (0.069)
0.122 (0.046)* 0.112 (0.046)* 0.135 (0.055)* 0.132 (0.054)* 0.123 (0.048)* 0.109 (0.049)*
0.013 (0.033) 0.015 (0.033) 0.037 (0.040) 0.038 (0.040) 0.070 (0.035)* 0.074 (0.034)*
0.109 (0.090) 0.085 (0.091) 0.313 (0.106)** 0.227 (0.140) 0.156 (0.094) 0.124 (0.094)
History of social engagement
0.361 (0.087)*** 0.357 (0.088)*** 0.044 (0.097) 0.041 (0.094) 0.345 (0.091)*** 0.340 (0.091)***
0.099 (0.015)*** 0.211 (0.030)*** 0.059 (0.018)** 0.111 (0.037)** 0.057 (0.016)*** 0.130 (0.031)***
Constant 0.059 (0.089) 0.057 (0.089) 0.113 (0.099) 0.114 (0.096) 0.032 (0.093) 0.030 (0.093)
Observations 801 801 801 801 801 801
Adjusted R-square % 82.44 82.85 72.05 72.13 85.21 85.80
306.04 315.68 148.50 159.55 287.14 325.48
AR(I) test 1.78* 3.60*** 2.12** 4.11** 3.18** 1.68*
AR(II) test 1.43 0.61 1.53 0.71 2.41 0.14
Hansen-J 173.1 18.96 71.27 52.76 64.06 45.26
Hansen-C 7.96 20.31 12.18 32.18 30.86 33.34
Notes: ***p<0.001; **p<0.01; *p<0.05. Standard errors in parentheses. Industry dummies included. All coefﬁcients are standardized. BQ, brand quality;
BDIFF, brand differentiation; BV, brand value. One period lagged dependent variable (DV) is included in the model
Impact of CSR on
using a recursive set of three interrelated equations in which we estimate the equations jointly,
using Roodman’s (2009) conditional mixed process (CMP) regression technique, as
implemented in Stata 15. The CMP technique is applied to a recursive system of equations to
maximize a higher order multivariate normal generalization of the likelihood function to
account for the likely correlation among our outcome variables. We do not ﬁnd any substantive
difference in our results.
Subgroup regressions: In addition to estimating our model parameters using a random
effects estimator, we also estimated the models using subgroup regressions. Subgroup
regressions, which are a well-established procedure in strategic management for
investigating contingencies (Peng and Luo, 2000), were conducted to test the hypotheses
concerning the effects of recession. Once again, we ﬁnd that our substantive results remain
The results of this study demonstrate some interesting ﬁndings. First, we only observe a
weakly positive impact of CSR on brand value during stable economic conditions. We ﬁnd
that while CSR helps differentiate a brand, the impact on esteemed brand quality is
nonsigniﬁcant. We also do not ﬁnd any evidence that CSR increases brand relevance or
knowledge, as expected. Overall, the positive impact of CSR on brand differentiation is not
enough to drive a strong impact on brand value. Some past literature supports this ﬁnding.
recession and CSR on
recession and CSR on
when times are
For instance, Melo and Galan (2011) demonstrated that when CSR is used as an aggregated
variable combining all seven qualitative areas in one construct, the effect on brand value
was not signiﬁcant.
Interestingly, CSR does not act as a quality signal during stable economic times. This
may be because of the unwillingness of customers to look extensively for (or pay much
heed to) external quality cues during stable economic times when the stakes of making a
wrong purchase are lower. Further, during nonrecessionary periods, the CSR activities of
ﬁrms may be less salient or believable (because of perceptions of greenwashing and
greater CSR clutter). Our ﬁndings support prior research that found no direct effect
between corporate associations (measured as CSR reputation) and product attitude
(measured as a function of appeal, reliability and quality) (Berens et al., 2005) and no
positive effect of CSR philanthropies on brand quality (Ricks, 2005). However, the results
Impact of CSR on
0.840 (0.024)*** 0.839 (0.024)*** 0.961 (0.012)*** 0.961 (0.012)***
0.025 (0.030) 0.054 (0.038) 0.017 (0.019) 0.059 (0.032)
0.010 (0.011) 0.061 (0.042)
0.026 (0.050) 0.017 (0.059) 0.054 (0.049) 0.032 (0.058)
Research and development
0.149 (0.049)** 0.029 (0.058) 0.114 (0.049)* 0.007 (0.058)
0.061 (0.032) 0.048 (0.041) 0.058 (0.034) 0.035 (0.041)
0.053 (0.022)* 0.113 (0.028)*** 0.053 (0.022)* 0.115 (0.027)***
0.539 (0.079)*** 0.301 (0.083)*** 0.304 (0.071)*** 0.274 (0.083)
History of social
0.167 (0.119) 0.206 (0.102)* 0.346 (0.099)*** 0.202 (0.101)*
0.031 (0.014)* 0.054 (0.012)*** 0.034 (0.010)*** 0.061 (0.012)
Constant 0.231 (0.101)* 0.122 (0.105) 0.231 (0.102)* 0.122 (0.104)
Observations 801 801 801 801
Adjusted R-square % 85.59 77.84 85.67 77.95
267.96 251.25 263.61 247.14
AR(I) test 3.27** 1.94 2.17* 2.06*
AR(II) test 1.1 0.4 0.95 0.39
Hansen-J 23.86 42.17 27.32 91.21
Hansen-C 23.16 24.28 21.51 13.59
Notes: ***p<0.001; **p<0.01; *p<0.05. Standard errors in parentheses. All coefﬁcients are
standardized. One period lagged dependent variable (DV) is included in the model
Hypotheses Direction of HResult Significance Support for H
H1: CSR on esteemed brand quality þþNo No
H2: CSR on brand differentiation þþYes Yes
H3: CSR on brand value þþAt p<0.1 Partial
H4: CSR on esteemed brand quality in recession þþNo No
H5: CSR on brand differentiation in recession þþYes Yes
H6: CSR on brand value in recession þþYes Yes
remain contrary to other research that did not speciﬁcally test CSR and a recession
together but propose a CSR –quality link (Benlemlih, 2017;Calveras and Ganuza, 2018;
Saxton et al., 2019). We contend that these inconsistencies could be because of two
(1) studies often do not distinguish between corporate reputation and brand quality; and
(2) a number of the studies that did ﬁnd a positive effect of CSR on brand quality do
not account for potentially unobserved ﬁrm characteristics (such as size), which
could drive both CSR and brand quality (i.e. such studies do not account for
endogeneity because of omitted variables).
Nonetheless, our analyses demonstrate that CSR becomes important during economic
recessions and has a signiﬁcant positive effect on brand value. This relationship is driven by
a positive effect on esteemed brand quality. Three potential reasons may explain this
ﬁnding. First, as we mentioned in prior sections, when the unethical side of businesses is
more salient, customers may value CSR more as such activities indicate that the ﬁrm is
aligned with customer and societal interests. Second, prior research has indicated that
during recessions, customers reject afﬂuent materialism and an emphasis on proﬁts and
instead value ﬁrms’altruistic endeavors (Flatters and Willmott, 2009). Third, the
willingness for customers to look for external quality cues may be heightened during times
of recession, where customers are more risk-averse and seek to obtain the best value and for
the price they pay (Piercy et al., 2010;Bhattacharya et al., 2020).
While recessions moderated the CSR –brand quality relationship, we did not ﬁnd an
effect on the CSR –brand differentiation relationship. This is perhaps owing to an empirical
reason –in our sample, we observe that during stable economic periods, ﬁrms tend to
consistently increase their CSR. In recession, the ﬁrms cut back by mostly maintaining
(rather than increasing) their CSR initiatives. Further, ﬁrms cut back on their advertising
expenses (which we observe in our sample) and therefore may likewise cut back on
advertising their CSR activities. The combined effect might result in ﬁrms not ﬁnding it any
easier to stand out. To further investigate this possibility, we looked at the moderating effect
for a subset of ﬁrms that continued to increase their CSR levels (where the difference in CSR
scores was at least a 0.5 standard deviation) during recession. We did ﬁnd a small but
signiﬁcant effect ondifferentiation then (
= 0.03, p<0.05).
The effect of CSR on corporate ﬁnancial performance has been extensively studied (Yim
et al.,2019;Oh et al.,2016;Kang et al.,2016;Mishra and Modi, 2016). To a lesser extent, the
impact of CSR on brand-level outcomes has also been researched (Guzm
an and Davis, 2017;
Sierra et al.,2017;Cha et al., 2016;Torres et al., 2012). Often, the theoretical bases for these
studies is stewardship (which assumes managers are motivated by ﬁnancial gain),
institutional theory (which conceptualizes CSR as a tool to gain consensus) or resource-
based view (RBV, which discussesCSR as a relational asset of the ﬁrm). Signaling theory, on
the other hand, maintains the assumption of economic rationality and conceptualizes CSR
initiatives as cueing tools that enhance the efﬁciency of the market and the performance of
the ﬁrm (Zerbini, 2017). Moreover, signaling theory also speciﬁes the underlying mechanism
further, by pointing to the cueing process that links the CSR initiatives to the market
response (Zerbini, 2017).
A call to advance signaling theory in recent literature includes examining contingency
factors related to the signal (Zerbini, 2017). From this perspective, our study extends the
understanding of CSR and signaling theory by showing that the receivers (i.e. consumers) are
when times are
more primed to seek cues at certain times, or rather under certain conditions (i.e. recessions).
These cues stand out more when the receiver has more at risk by making a poor choice and
depending on the strength of other cues in the marketplace (such as advertising).
In addition, speciﬁc aspects of brand value that CSR can impact have not been
investigated yet, to the best of the authors’knowledge. Such a study is important because
CSR only affects the pillars of brand differentiation and quality, and each effect is different
depending on the economy.
Moreover, Zerbini (2017) emphasized that scholarly research would beneﬁt from an
empirical analysis of the consequences of signaling through CSR initiatives and the
“fundamental role that CSR plays in the generation of ﬁnancial performance”. This study
highlights that CSR efforts impact customer-based brand equity, particularly during
recessions, and the economic signiﬁcance of these ﬁndings should not be underestimated.
According to Mizik and Jacobson (2008), the ﬁnancial market uses information contained
within these investigated brand attributes to update expectations of future cash ﬂows,
which likewise impacts stock price. Additionally, Steenkamp et al. (2010) showed that in
recessions, consumer shifts in demand as small as 1% point can severely dent ﬁrm
proﬁtability, which is signiﬁcant enough to altermarket dynamics and make marketleaders
respond in tangible ways. The use of CSR under such conditions can be a valuable tool for
managers to increase and protect their brand and reap the rewards that ultimately ensue
from having a stronger brand.
Further, our combined results provide extensive evidence and support for our conjecture
that the quality signalfrom CSR becomes stronger in times of recession, when purchase risk
is higher. Somewhat counterintuitively, we ﬁnd that during recessions, by signaling brand
quality and thereby reducing customer uncertainty, CSR predicts brand value. Thus, rather
than cutting back on or maintaining consistent levels of CSR, ﬁrms may ﬁnd it
advantageous to increase their CSR efforts during recessions to increase consumers’
conﬁdence in the quality of the ﬁrm’s brand. Overall, our ﬁndings suggest that we can now
propose new fundamental propositions concerning CSR, including (P
) CSR’s effect on brand
value is a function of the degree to which it provides signals of a brand’s quality and
differentiation; and (P
) The quality signal of CSR is valuable in the presence of speciﬁc
complementary economic conditions. These propositions provide new insights into the
nature of CSR as a strategic marketing action.
Managers tend to view adverse business environments such as recessions as a threat
because they cannot control the situation and are likely to face ﬁnancial losses (Alessandri
et al., 2014). One of the common responses is the culling of expenses and activities not
considered to be part of the core business. Because CSR is often not considered to be a core
activity for ﬁrms, one may expect ﬁrms to withdraw their social commitments during
recessions (Bansal et al., 2015). Even though managers cannot prevent recessions from
occurring, a synthesis of marketing research conducted over the previous decade and a half
has provided evidence that the impact of business cycles on consumers (and hence on ﬁrm
and brand performance) depends to a large extent on how managers adjust their marketing
mix in response to these macroeconomic swings (Dekimpe and Deleersnyder, 2018). While
this research synthesis included many marketing actions, somewhat surprisingly, CSR was
not part of this list. Our ﬁndings thus build upon this research and demonstrate that
managers can limit the negative impact of recessions on their brand value by engaging in
CSR activities (or refrain from cutting back) duringdifﬁcult times.
Our results show that even when controlling for advertising spending and ﬁrm size (which
are major determinants of brand value for most ﬁrms), CSR initiatives explained signiﬁcant
variance in brand value outcomes. In bad economic times, marketers have been advised to
change their advertising content from time-sensitive promotions to more brand-oriented
messages because the economic environment does have an impact on brand loyalty (Quelch
and Jocz, 2009). CSR activities in a recession may be the answer to protecting a ﬁrm’sbrand
value and ensuring a boost in consumer perceptions of quality. This is especially important
because brand quality perceptions tend to be persistent (Lamey et al., 2007), so any
improvements in perceived quality might be beneﬁcial even after the economy recovers.
During prosperous or at least stable economic periods (and to a lesser extent, even during
recessions), managers may look at CSR as a way to differentiate their brand. Companies
should recognize the crucial role of CSR and invest in CSR initiatives to enhance positive,
strong and differentiated brand value both at the brand level by imbibing brand attributes
congruent with CSR values (for instance, Sunchips has a marketing campaign “Who’s
Hungry for Change?”and made the ﬁrst biodegradable snack bag using renewable energy)
and at the ﬁrm level through companies’social and environmental actions (for instance,
reducing its carbon footprint has been one of Intel’s corporate goals).
For managers attempting to address challenges because of changes in consumer behavior
during recessions, understanding why CSR activities are valuable can help decision-making.
Economic theory posits that changes in the relationship between how much consumers are
willing to pay, on the one hand, and their perception of the value they are receiving, on the
other, underpin behavioral changes (Steenkamp et al.,2010). In times of economic prosperity,
but even more so during recessions, managers should focus their CSR investments on aspects
of CSR that lead to consumer perceptions of higher brand quality and differentiation. As such,
esteemed brands may even be able to charge a higher price for their products and services.
We also ﬁnd some support for our results from managerial literature and ﬁrm practices.
Ioannou and Flammer (2019) report that successful companies, on average, responded to the
recession by simultaneously “saving their way out of the crisis”by reducing their workforce and
capital expenses and “investing their way out of the crisis”by sustaining their investments in
marketing activities. Some strong brands did increase their CSR budgets. Microsoft increased its
corporate tax giving as percentage of pretax proﬁt from 2.09% in 2008 to 2.61% in 2009 (Microsoft
CSR report, 2010). Disney increased its total contribution from $209m in 2008 to $227.4m in 2009 in
the midst of ﬁnancial crisis (Disney CSR report, 2008 and 2009). Perhaps not unsurprisingly, our
data shows that both Microsoft and Disney managed to slightly increase their brand values (0.8%
and 1.5% increases, respectively). Considering the fact that extant research (Johansson et al., 2012)
found that stronger global brands actually fared worse in a recession, our results provide an
important strategic action that ﬁrms can take to prevent any losses.
Limitations and future research
Apart from the above contributions, our research has several limitations which could also
serve as fruitful avenues for future research. First, we use composite CSR scores aggregated
across all dimensions, while some authors (Capelle-Blancard and Petit, 2014) argue that
ﬁrms may differ with regard to their emphasis on different CSR dimensions and one
dimension may be more important than the other depending on ﬁrm and industry
characteristics. While our moderate sample size and our desire to prevent unnecessary
complexity precluded us from separating out each individual dimension of CSR and
examine the ﬁt with ﬁrm and industrycharacteristics, future research could investigate both
the element of a strategic ﬁt and customer preference regarding each dimension. Similarly,
past research has also demonstrated the importance of ﬁt between a brand and CSR
when times are
an and Davis, 2017;Moosmayer and Fuljahn, 2013). This would amount to a “ﬁxed
effect”in a model (because ﬁt can be assumed to be a persistent characteristic of the brand),
and our setup essentially just controls for it. Further, we lack secondary data concerning
brand –CSR ﬁt, though we expect that brands with a greater ﬁt stand to beneﬁt more from
CSR initiatives, while there may be diminishing returns. Thus, future research may shed
further light on this important topic.
Second, our data does not contain the amount of publicity a ﬁrm’s CSR action generates,
whether or not through the ﬁrm’s own doing. While a ﬁrm’s advertising expenses and size
may partly proxy for this, we cannot control for CSR efforts that are less visible to
consumers. Future research may investigate whether the visibility (or lack thereof) of CSR
makes a difference in or out of recessions.
Third, although the KLD data have been used extensively in existing research (Kang
et al.,2016), the CSR measures are based on expert evaluations and not actual monetary
investments (Chatterji et al.,2009). Future research could replicate our ﬁndings using
different CSR data, such as Sustainalytics. On a related note, our measure of brand value is
consumer based and may not strictly transfer to sales. While Datta et al. (2017) note that
such consumer-based measures align well with sales-based measures of brand value, there
are obvious overachievers (highly regarded brands that do not garner the sales they should)
and underachievers (brands that perform above their potential). Such differences could in
part be explained by other marketing mix variables such as price or distribution. Future
research may use other measures of brand value/equity to extend our knowledge.
Fourth, while we control for past CSR performance as a proxy for whether CSR is an
integral part of the ﬁrm’s activities, future research may identify whether ﬁrms that
proactively engage in CSR –and where CSR is woven into the fabric of the company –have
more to gain (or lose) by increasing (reducing) their CSR activities during periods of
economic downturn. Likewise, researchers may wish to investigate the extent to which
companies have cut back or increased their CSR during recessions and subsequent recovery
to determine the effects on ﬁrm ﬁnancial performance.
Fifth, past research has indicated that consumers’cognitive and affective orientation
toward the economy, which is inﬂuenced by the age of the customer, may have an impact on
brand loyalty (Van Steenburg and Spears, 2011). There could be other consumer
characteristics that could inﬂuence the effectiveness of CSR during recessions. For instance,
millennials might view CSR as a necessity for ﬁrms to engage in even during recessions, and
aﬁrm particularly targeting that demographic might achieve even greater returns from
their CSR actions. Unfortunately, we do not have information involving consumer
characteristics in ourdata set, and we leave this question as an inquiry for future research.
1. The Financial Crisis Inquiry Commission in their January 2011 report “Economics Crisis in the
United States”labels the period as a Great Recession in the USA. The speciﬁc months are
December 2007 through June 2009.
2. A mono-brand is a single brand that represents the bulk of the ﬁrm’s business (Mizik and Jacobson,
2008). Examples of mono-brands include IBM, Yahoo, American Express, Disney, Apple and Microsoft.
We select only mono-brand ﬁrms for two reasons. First, using this sample selection strategy prevents
bias because of unobservable heterogeneity. For example, some brands may present a greater ﬁtwith
the CSR alignment of the ﬁrm. Second, CSR initiatives are related to corporate-level performance but not
subdivisions or business units. Hence, it seems appropriate to assume that customers associate CSR
activities to the corporate brandas part of ﬁrm’s commitment to society.
3. In case all four quarters of data were not available, the mean is simply that of the quarters
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