The Effects of Donation through Corporate Foundations on Consumers

Abstract

Even with the importance of corporate foundations in corporate social responsibility (CSR hereafter) activities, little research has been conducted in this area. Most of the existing literature on corporate foundations deals with two issues: the reasons that firms set up foundations and activities of the foundations. These studies mainly focus on firms` perspective and investigate the reason why firms set up foundations and what activities these firms do. Most related studies to the present article are CSR governance. Still, these studies do not involve consumers. However, the donation through the corporate foundation is growing fast among activities done by foundations. A Strategic decision on donation should involve consumers. The corporate donation is strongly related to corporate or brand attitude consumers hold. Therefore, it is important to understand how consumers perceive donation through foundation compared to direct donation. In this sense, the present study investigates how consumers perceive foundations. First, an investigation was performed to determine whether donation through foundations influences consumers` attitude toward the founding firm. Next, the donation through foundations and direct donation were compared on two important variables, consumers` attribution of the firm`s motive for CSR and attitude toward the firm. An experiment using scenarios was used to test the hypotheses. To create scenarios, the firm and foundation were selected first. A real company was used because the attitude change (post-attitude - pre-attitude) was used as a dependent variable. Three criteria were used to select and KT & G and KT & G Social Welfare Foundation were used in the scenario. Student sample was used and total 311 responses were used for the analysis. The result revealed that donation through foundations influences consumer attitude toward the firm positively and that it is more influential in bringing positive attribution. Meanwhile, the direct donation is more effective in improving attitude toward the firm. the results have both theoretical and practical implications. Theoretically, this study is most meaningful in that it supported the importance of corporate foundations empirically. Practically, the result of the study gives implications to firms that strategic decision should be made according to the purpose of the donation. Also, the result can be utilized meaningfully for the firm with bad reputations.