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Published by: Allied Business Academies
Originally published in: "Academy of Marketing Studies Journal", 2016
Length: 17 pages

Abstract

Corporate philanthropic activities, such as charitable donations, have become common business practice. But while academics have sought to verify the direct relationship between corporate philanthropy (CP) and corporate performance in terms of reputation, there has thus far been relatively little research that aims to identify the underlying reasons as to how CP improves a firm's performance. Therefore, this study tests the relationship between CP and consumer loyalty, which leads in the final analysis to financial success. In addition, this study aims to investigate the mechanisms, which have been largely unexplored, through which CP influences consumer loyalty. To investigate the proposed hypotheses of this study, we recruited subjects in South Korea and tested a structural equation model. The results of our study indicate that CP is significantly related to consumer loyalty, and is mediated by gratitude, trust, and commitment. Specifically, consumers tend to feel gratitude towards firms that divert at least a portion of their resources to CP. In addition, consumers who feel gratitude are prone to show a high level of trust and commitment towards such corporations in order to reciprocate those firms' CP efforts. As these findings suggest, commitment elicited by gratitude and trust leads to consumer loyalty. This research contributes to expanding the scope of CP research by verifying the effectiveness of CP on consumer loyalty.

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Abstract

Corporate philanthropic activities, such as charitable donations, have become common business practice. But while academics have sought to verify the direct relationship between corporate philanthropy (CP) and corporate performance in terms of reputation, there has thus far been relatively little research that aims to identify the underlying reasons as to how CP improves a firm's performance. Therefore, this study tests the relationship between CP and consumer loyalty, which leads in the final analysis to financial success. In addition, this study aims to investigate the mechanisms, which have been largely unexplored, through which CP influences consumer loyalty. To investigate the proposed hypotheses of this study, we recruited subjects in South Korea and tested a structural equation model. The results of our study indicate that CP is significantly related to consumer loyalty, and is mediated by gratitude, trust, and commitment. Specifically, consumers tend to feel gratitude towards firms that divert at least a portion of their resources to CP. In addition, consumers who feel gratitude are prone to show a high level of trust and commitment towards such corporations in order to reciprocate those firms' CP efforts. As these findings suggest, commitment elicited by gratitude and trust leads to consumer loyalty. This research contributes to expanding the scope of CP research by verifying the effectiveness of CP on consumer loyalty.

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