Importance of Economic and Ethical Domains - Coursework Example

Part I A. Fund loyalty among socially responsible investors: The importance of the economic and ethical domains, by Jared L. Peifer A brief introduction to the paper, the main terms, and its research questions. Jared Peifer, in Fund loyalty among socially responsible investors: The importance of the economic and ethical domains, contributed to the growing body of literature on corporate social responsibility (CSR). The article investigated investors on socially responsible mutual funds and attempted to identify how social responsibility affects investor behaviour, particularly in the area of investment decision making as well as investment loyalty. It answered two research questions: 1) Are dual investors more loyal to their SR fund than to their conventional fund? 2) What factors are driving fund loyalty among SR investors? Key terms include CSR, customer loyalty, ethical consumption and socially responsible investing. Peifer’s work demonstrated how an organization’s behaviour especially with respect to corporate ethics and social responsibility could lead to profitability, providing evidence that these variables attract and motivate investors and shareholders. This article is important because it did not only build on existing works on the CSR literature but it also went beyond theorizing by providing empirical evidences, which are largely absent in related prior works. Key themes covered include: how stakeholders instruct organizations on the level and type of CSR policy to adopt and how corporate social responsibility is beneficial to organizations because it benefits the lives of stakeholders and the welfare of the natural environment. The research also echoed the position of previous works citing how stakeholders maintain a narrow view on the role of ethics by focusing on monetary consequences and how shareholders tend to myopically chase high-return performance (see Lee, 2008). The main hypotheses: The article early on outlined the assumption that the investors’ ethical orientation might bind investment dollars to CSR corporations. Specifically, however, the cited hypotheses include: 1. Dual investors are just as loyal to their socially responsible (SR) mutual fund as to their conventional mutual fund. 2.a SR investors who know their fund is engaged in advocacy are no more loyal than those who do not know this fact. 2.b SR investors who know their fund screens are no more loyal than those who do not know this fact. 3.a SR investors who know their fund is engaged in advocacy and more highly value advocacy are more loyal than those investors who know their fund is engaged in advocacy but value it less. 3.b SR investors who know their fund is engaged in screening and more highly value screening are more loyal than those investors who know their fund is engaged in screening but value it less. 4. SR investors who believe they are getting lower returns from their SR funds (as compared to conventional funds) are less loyal. 5. SR investors who believe they are getting lower returns from their SR fund (as compared to conventional funds) are more loyal. 2. What was the design of each of the studies? Were they experiments? Why? What research methods were used? Write general, concise definitions of the designs of the studies and the research methods used. Peifer’s study used a hybrid research design, combining both qualitative and quantitative tools to answer two research questions. It followed a linear progression of stages beginning with the identification of a problem of interest, then, followed by preliminary research, hypotheses formulation and the actual study. The researchers drew heavily from prior research, using secondary data to establish and evaluate hypotheses. In addition, the author also used the case study approach to complement insights from other research sources. The survey, conducted through phone interviews, involving 499 respondents from Mennonite Mutual Aid (MMA) and Praxis Mutual Funds is the main quantitative research method. The data were also evaluated using quantitative tools such as expectancy-value theory (EVT) to measure ethical motivation and several quantitative analytical frameworks to test the hypotheses. For instance, the first hypothesis, which holds that there is no difference in investor loyalty towards both SR and conventional fund, was tested using a multivariate regression analysis. This tool predicted for the study loyalty and disloyalty among dual funds investors. 3. Description of the use of each of the methods: The study was conducted in a sequence and structured according to the order of research hypotheses. The methodology followed this framework as well. The first part, which involved the introduction and the review of literature used the qualitative methods. But each hypothesis was given a separate section with a corresponding brief review of literature, quantitative methodology and their respective analyses. There was no experiment conducted but the manner by which the quantitative investigation was implemented was outlined in detail. This is particularly the case for the phone survey. The study identified 499 survey participants from two mutual funds, Mennonite Mutual Aid (a conventional mutual fund) and Praxis Mutual Funds (An SR mutual fund). The sample population was enough except that it was derived only from two mutual funds. The population might have been more credible or representative of industry conditions if the selected respondents were spread across several SR and mutual funds. The information on how the sample population was selected was also not provided. In developing the survey questionnaire, a pilot study was conducted and the insights gathered along with the information from the available literature were used to fine tune the questionnaire and the actual survey strategy. Each hypothesis was analyzed using different quantitative analytical models. Therefore, they have varying dependent and independent variables. To test the first hypothesis, the dependent variable used was Dual Investors while independent variables were: the mutual funds, number of funds owned, mean centred Household income, mean centred Age, Female, Married and educational level. Religious variables were also included as independent variables. The dependent variable was measured by codifying answers to questions relating to investment on both two mutual funds in terms of performance. The number of funds owned was used as a control variable in the identification and measurement the dependent variable. Independent variables were measured based on their rankings on a 7-point Likert scale. To test the second to fifth hypotheses, the dependent variable was Fund Loyalty whereas Valuation of advocacy and the Valuation of the extent to which investors value ethical attributes were included as independent variables. These two variables were added to the independent variables used to test the first hypothesis. Fund Loyalty was measured “by instructing survey respondents to indicate the likelihood of selling Praxis shares if they were to ‘learn that the return performance of your MMA Praxis fund was usually lower than conventional fund” (p. 642). 4. Advantages and disadvantages of the design and the methods used in the context of the paper (at least one advantage and one disadvantage for the design and each of the methods). Essentially, Peifer’s study drew from the strengths of both qualitative and quantitative methodologies. Taking from Denzin and Lincoln’s (2011) view, such framework allowed the study several capabilities, namely: The collection and analysis that are persuasively and rigorously both qualitative and quantitative data (based on research questions); The combination of the two forms of data concurrently by combining them (or merging them), or sequentially by having one build on the other, and in a way that gives priority to one or to both; The use of the tools and procedures not just in a single study but also in multiple phases within it; The capability to frame procedures within philosophical and theoretical views; and, The combination of the procedures into specific research designs that direct the plan for conducting the study. The main disadvantage of the research design involves the source of primary data. The survey population came from two mutual funds, limiting the findings to insights that could be constrained by unique investor to fund relationship. For instance, investors could have different relationship attachment to Mennonite Mutual Funds based on religious affiliation as the fund is a congregation and many of its investors are members. Respondents from other mutual funds could have provided opportunities for corroboration. 5. Critical Evaluation of the paper, including reliability and validity, possible confounding variables. Aside from the limit to the sampling population on account of the study’s focus on two mutual funds, Peifer’s work is undermined by the choice and the number of independent variables used. The sheer number, which is the same in the testing of all the hypotheses, tends to confound findings. In testing the hypotheses, it became challenging to account for specific and relevant conditions that exert influence on relationships in findings and analyses. For instance, in evaluating the link between the sale of fund and low-return performance, themes such as loyalty and ethics became muddled by variables such as education and gender. Also, the variables were not presented in equations including control variables and error adjustment matrices that could have provided the reader a better understanding of how the results were obtained. 6. Summary and Conclusion: All in all, Peifer’s work contributes immensely to the CSR literature essentially because it is a pioneering study, reporting for the first time empirical evidences as opposed to purely theoretical insights offered in prior works. The study’s finding is credible mainly because of its research design. All the research methods and tools employed were chosen based on the nature of the problem identified by the researcher. The findings and corresponding analyses effectively revealed the relationships among identified variables. The research was also able to authoritatively describe conditions and test hypotheses using credible methodologies and measures. The limitation of the primary data sources with the focus on investors in two mutual funds was addressed by the insights taken from secondary data. The analysis and the interpretation of findings are also credible in the sense that the researcher was able to integrate observational insights with information from the corpus of literature and the fresh information revealed in the survey. B. Brand attachment and consumer emotional response to unethical firm behavior, by Schmalz and Orth. 1. A brief introduction to the paper, the main terms, and its research questions. Schmalz and Orth investigated brand attachment and its role on consumer behaviour. This study focused on its impact on managing crises and challenges, particularly those that result from ethical problems. The gap in the body of literature that the study sought to address concerned the buffering effects of pre-existing consumer-brand relationships (p. 869). The authors drew from several theories and empirical evidences to explain and prove their assumptions on the subject. They identified the dominant view that the consumer attachment to a brand is different from commitment and this underpins the so-called motivated reasoning, which drives consumer behaviour. The authors pointed out that consumers who are strongly attached to a brand are likely to be motivated to maintain and protect such bond, dismissing negative information such as unethical practices or negative social responsibility (p. 871). This revealed the link between brand attachment and consumer judgments on an organization’s ethical practices. This also led to the identification of how the two variables interact and the consequences of their relationship. Through a controlled experiment, the study found that brand attachment could only temper negative behaviour on a firm’s ethical practices up to a point. Based from a field study and an experiment, the authors revealed that it could only work in moderately negative ethical practices and will not work in extremely negative scenarios. 2. The main hypotheses: 1. Consumers who are more rather than less attached to a brand will judge parent firm’s behaviour as less unethical. 2. When given moderately negative information, strongly attached consumers will judge parent firm’s behaviour as less unethical than consumers who are less strongly attached. When given more extremely negative information, ethical judgments will not vary between more or less attached consumers. 3. Emotional ambivalence will be high under conditions of strong attachment and judgments of unethical behaviour, and will be low under conditions of weak attachment and judgments of ethical behaviour. 4. Purchase intention will be lower under conditions of strong attachment and judgments of unethical behaviour, and will be higher under conditions of weak attachment and judgments of ethical behaviour. 3. What was the design of each of the studies? Were they experiments? Why? What research methods were used? Write general, concise definitions of the designs of the studies and the research methods used. Schmalz and Orth’s chose experimental research design . Here the author used experiment as a research method, which is differentiated with the use of control variance or the statistical method of representing variation (Broota, 1989, p. 3). It is considered the gold standard for research design by positivistic researchers (LeCompte and Schensul, 2010, p. 59). The researchers conducted the two studies to achieve the research objective, test the hypotheses and answer the research questions. The first was a field study, using a survey to describe firm behaviour, attachment, ethical judgment, emotional ambivalence and purchase intentions. It used real and current descriptions of firm behaviour (p. 875). The second study, which was conducted to test hypotheses 2,3 and 4, was strictly controlled experiment, conducted to identify and confirm the relationships in- and the impact of moderately and extremely negative ethical firm behaviour. Data gathered were evaluated using the Thomson, MacInnis and Park’s 10-item emotional attachment scale, Multidimensional Ethics Scale, Standard Emotional Profile Scale and the Thompson, Zanna and Griffin ambivalence model. 4. Description of the use of each of the methods. The two studies conducted by Schmalz and Orth were labelled separately as Study 1 and Study 2, with their respective subsections that cover methodologies, findings and discussion. The structure allowed for a clear description of methodologies used. The field study in Study 1 used a questionnaire developed after a series of pretests conducted to eliminate errors. It had a sample population of 157 respondents selected from students across various campus locations. After the participants answered the set of questions, they were then asked to submit their individual judgments through descriptive scenarios. In Study 2, the researchers developed a controlled setting to test hypotheses 2,3 and 4. First, the experiment tested the participants responses to moderately and more extremely unethical firm behaviour. Second, the interactive effect of attachment and ethical judgment were replicated to reveal their impact on ambivalence and the detrimental effect of ambivalence on purchase intentions (p. 877). The procedure used a random intercept procedure in a German city, which generated a 240 sample population. In an interview setting, respondents were asked to respond to a series of scenarios with the goal of establishing levels of brand attachment. The scenarios, which were presented in the form of news articles, were manipulated to trigger consumer judgment, emotion and purchase intention. The measures used for the data gathered were the same for Study 1 and Study 2. Mechanisms to check the efficacy of manipulations were also used such as the series of ANOVAs. Clearly, the methodologies used for both Study 1 and Study 2 were appropriate. Sampling approaches were also credible including the number of participants for both of the studies conducted. Schmalz and Orth did not identify dependent and independent variables. However, key constructs were cited, which include: attachment, ethical judgment, ambivalence (positive and negative emotions), purchase intentions and credibility. 5. Advantages and disadvantages of the design and the methods used in the context of the paper (at least one advantage and one disadvantage for the design and each of the methods). Based on how thorough the authors were able to present their findings and analyses, it is clear that the research design was appropriate and effective. It allowed Schmalz and Orth a high degree of control across all aspects of the study. One of the main drawbacks of this model, however, was the fact that participants to the study may be different from those to whom the research would be applied (Terry, 2014, p. 84). Or, manipulated conditions may be different from real-world scenarios. 6. Critical Evaluation of the paper, including reliability and validity, possible confounding variables. One of the flaws of this study was the lack of details that could help the reader clearly identify the methodology employed used involving randomization in the manipulation and the assignment of participants to manipulated conditions. Based from the work of Reis and Judd (2000), it was explained that this factor can determine whether a study is experimental or quasi experimental in design (p. 17). Furthermore, transparency in this area could address challenges such as questions about researcher bias (Melnyk & Fineout-Overholt, 2011, p. 83). 7. Summary and Conclusion: In this article, Schmalz and Orth successfully demonstrated that consumer attachment to brands can serve as a buffer for problems created by negative ethical practices in parent firms. They also found, however, that this bond works only up to a point. The study revealed that extremely negative ethical practices could not attenuate judgments of unethical behaviour. The findings were built on solid ground as a result of credible research methodologies. The study was also presented in a linear structure, with clear and appropriate research constructs, making it less confounding. The challenge to the Schmalz and Orth’s study is inherent to the research design chosen. As an experimental research framework, the research design may not be able to capture real world conditions as it manipulated variables to achieve answers to questions. This dilemma is particularly pronounced in Study 1, which included students as survey participants. While the sample population came from various campus locations, there was a clear limitation to demographics. Part II Conclusion Schmalz and Orth’s article complements Peifer’s study in several respects. Most importantly, the former demonstrated how negative ethical practices could influence consumer behaviour. Peifer’s work investigated the relationship between investor loyalty and socially responsible mutual funds. Schmalz and Orth confirmed his findings that investor loyalty may be swayed by ethical motivations, hence, directly linked to a firm’s profitability. The key link between the two studies is the ambivalence construct. Schmalz and Orth were able to identify that ambivalence towards unethical practices is not sacrosanct despite strong brand attachments or loyalty. It provided strong theoretical and empirical support to Peifer’s findings. The degree of ambivalence is affected by motivational bias. Consumers demonstrate strong affinity with brands and are motivated to maintain such bond. The degree of threat to such bond could trigger a defensive reaction leading to an increased ambivalence. However, this is no longer the case in conditions where information about ethical practices is extremely negative. It undermines the foundation in which attachment, loyalty and ambivalence are built on. This can be applied in the relationship between investors and mutual funds. The investors’ attachment to their fund can be threatened and undermined in the same manner. Schmalz and Orth cited an excellent explanation that is applicable for both articles in this respect: guilt. Both consumers and investors could experience guilt with extremely negative ethical practices. Evidences from the corpus of literature, support this. For instance, Dahl, Honea and Manchanda (2005) explained that there is a tendency to look for a curative action because of the idea that moral standards were violated and the answer is to reduce or reject the source of guilt. For the consumer, the source was brand attachment and for the investors, it is fund loyalty. It is, however, important to underscore that there is a difference in the relationship dynamics between consumer to a brand and investor to a mutual fund. The consumer’s attachment and loyalty are mainly driven by emotional and cognitive factors while the investor’s is dominated by economic and ethical motivations. Finally, the methodologies used in Peifer and Schmalz and Orth studies are complementary when approached in the context of using the insights of one study to support the other. For example, Peifer’s article can be criticized for its limited sample population, the quality of sample in Schmalz and Orth could help Peifer to authoritatively underscore his findings with its set of evidences. In the same way, Peifer could enrich Schmalz and Orth’s work by providing data taken from the field to corroborate findings taken from manipulated settings. References Broota, K. (1989). Experimental Design in Behavioural Research. New Delhi: New Age International. Dahl, D., Honea, H. and Manchanda, R. (2005). Three Rs of interpersonal consumer guilt: Relationship, reciprocity, reparation. Journal of Consumer Psychology, 15, 307-315. Denzin, N. and Lincoln, Y. (2011), The SAGE Handbook of Qualitative Research. London: SAGE. LeCompte, D. and Schensul, J. (2010). Designing and Conducting Ethnographic Research. Lanham: Rowman Altamira. Lee, M. (2008). A review of the theories of corporate social responsibility: Its revolutionary path and the road ahead. International Journal of Management Reviews, 10(1), 53-73. Melnyk, B. and Fineout-Overholt, E. (2011). Evidence-based Practice in Nursing & Healthcare: A Guide to Best Practice. Lippincott Williams & Wilkins. Peifer, J. (2014). Fund loyalty among socially responsible investors: The importance of the economic and ethical domains. Journal of Business Ethics, 121, 635-649. Reis, H. and Judd, C. (2000). Handbook of Research Methods in Social and Personality Psychology. Cambridge: Cambridge University Press. Schmalz, S. and Orth, U. (2012). B. Brand attachment and consumer emotional response to unethical firm behavior. Psychology and Marketing, 29(11), 869-884. Terry, A. (2014). Clinical Research for the Doctor of Nursing Practice. 2nd ed. Burlington, MA: Jones & Bartlett Publishers. Read More