Corporate social responsibility (CSR) as a halo effect in issue management: public response to negative news about pro-social local private companies

Abstract

This study investigates the effect of corporate social responsibility (CSR) and corporate nationality on public reactions to negative news about corporations. To explain how CSR activity works as a buffer for a negative issue of an organization, we propose a halo effect theory. This study conducted an experiment using a 2 (CSR activity vs. no CSR activity) x 2 (domestic company vs. foreign company) between-subject design. For this experiment, we developed a negative news story about a fictitious Asian local company. The dependent variable was whether individuals showed willingness to take actions against this company. We found that both CRS activities and corporation nationality have the main effects on individuals’ willingness to take an action against the local company. CSR activities and the company’s national identity (being domestic) were significant positive factors in attenuating participants’ intention to take action against the local company. Further, there was a significant interaction effect of CSR activity and the company’s nationality on individuals’ willingness to take action against the company: CSR activity had a greater positive impact on soothing the public’s negative reactions when the local company was identified as foreign rather than domestic. The results were discussed as a halo effect of CSR activities.