Corporate social responsibility strategy in product harm crisis management : an empirical investigation of the fashion industry

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Corporate social responsibility strategy in product harm crisis management : an empirical investigation of the fashion industry

 

Author: Lam, Yuen Kiu
Title: Corporate social responsibility strategy in product harm crisis management : an empirical investigation of the fashion industry
Degree: M.Phil.
Year: 2015
Subject: Crisis management.
Clothing trade.
Social responsibility of business.
Hong Kong Polytechnic University -- Dissertations
Department: Institute of Textiles and Clothing
Pages: x, 131 pages : color illustrations
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b2827757
URI: http://theses.lib.polyu.edu.hk/handle/200/8290
Abstract: Today' consumers are not only interested in the technical benefits of a product, but also concern the corporate social responsibility (CSR) of the firms. CSR is a dominant factor of public opinion towards a firm's reputation. Consumers' perception of a brand's reputation influences their perception towards the firm's products. Effective CSR strategies are thus important for companies to create positive consumer's perception of their products and eventually enhance their brand value. Negative publicity, such as product harm crisis, weakens consumers' satisfaction, purchase intention, and brand evaluation. Positive publicity, such as taking CSR leadership, improves the consumers' perception towards the company. In the current CSR literature, little attention has been paid to the contextual factors of product harm crisis and there is a lack of empirical evidence from the fashion industry. Previous studies argue that a product harm crisis is costly to firms and brings negative impact to firms' image and long-term performance, but there is no objective evidence of the impact of response strategies during a product harm crisis. Therefore, this research focused on the contextual factors of the relationship between product harm crisis management and firms' long-term performance. This research consists of two sections. In the first section, we examined the effective strategic responses and moderators in managing product recalls in the fashion industry. Based on situational crisis communication theory (SCCT), we developed a research framework of product harm crisis management. We then examined the framework by 48 Consumer Product Safety Commission (CPSC) product recalls of fashion products between the years 1990 and 2009 by 31 U.S. listed companies. The ordinary least square regression analysis of a year -2 to year 2 panel data set shows that the effectiveness of financial compensation and proactive recall strategy are stronger in recalling products targeted on highly vulnerable consumers. The findings contribute to fashion product recall management literature based on the SCCT framework and provide direct implications for operations managers to design remedy and recall strategies for product harm crisis in the fashion industry. To explore more contingency factors for the research framework, in the second section, we expanded the scope of product harm crisis management by examining firms in semi-durable and durable consumer product industries in addition to the fashion industry. We examined 170 CPSC product recalls by 87 U.S. listed companies between the years 1987 and 2011. The negative impact on financial performance is more serious to recalls of high crisis severity and for companies with outsourcing practices. Also, we find no evidence that using suppliers in China will worsen the firms' profitability after a product recall in long run. Overall, our results suggest that product recalls are beneficial to fashion firms. However, the effectiveness depends on different contingency factors and these factors are summarized in our research models. Managers should carefully examine the contingency factors in designing CSR strategies in both product harm crisis management, because the effective management will protect and build their brand in today's global market, which emphasizes the importance of corporate social responsibility.

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