Doing good when times are bad: the impact of CSR on brands during recessions

Abstract

PurposeThis 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/approachBased 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 moments estimations.FindingsThe 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/implicationsThis study did not control for the costs of doing specific CSR activities that may be less visible to consumers.Practical implicationsWhile 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 implicationsBecause 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/valueDuring 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.