The Legitimacy Theory: Whether CSR Activities Foster Consumers' Intention to Purchase and Pay the Price Premium?

Abstract

Recently, many scholars have been working to investigate the role of Corporate Social Responsibility in enhancing an organization's financial and strategic performance. This paper analyzes the effects of a three-dimensional construct of Corporate Social Responsibility on Corporate Reputation using the legitimacy theory. Also, examine the mediating role of Corporate Reputation on the association of Corporate Social Responsibility with a price premium and purchase intention of consumers. The statistical techniques applied to the dataset were confirmatory factor analysis and partial least square structural equation modeling.The findings indicate that corporate social responsibility positively impacts a firm's cognitive and affective reputation. Further, CSR fosters consumers' intention to purchase but does not want to pay the premium. Therefore, it suggests the need for Pakistani firms to engage in socially responsible activities to develop a corporate reputation, resulting in the potential acceptance of price premiums and higher purchase intentions. This paper contributes to the literature by drawing on the legitimacy theory, studying the impact of CSR on corporate reputation, purchase intention, and price premium from the perspectives of emerging economy consumers. This research evaluates whether consumers of an emerging economy intend to purchase and pay price premiums based on the organizations' CSR activities and corporate reputation. Thus, it will provide an insight to the marketers and scholars regarding CSR activities. So that in upcoming times, firms might practice more CSR activities.