Received: 20 February 2018 Revised: 16 August 2018 Accepted: 30 August 2018

DOI: 10.1002/sd.1901

RESEARCH ARTICLE

What drives “customer loyalty”? The role of corporate social

responsibility
Eunil Park1 | Ki Joon Kim2

1
Department of Interaction Science,
Sungkyunkwan University, Seoul, Republic of Abstract
Korea Given the importance of customer loyalty in the sustainability and success of the
2
Department of Media and Communication,
service industry, this study develops a loyalty‐enhancement model that integrates
City University of Hong Kong, Kowloon, Hong
Kong corporate social responsibility, service quality, customer satisfaction, and trust and
Correspondence applies the model to the case of South Korean mobile telecommunication service
Eunil Park, Department of Interaction Science,
Sungkyunkwan University, Seoul, Republic of
companies in order to explicate the process through which these factors contribute
Korea. to increasing the sense of loyalty among service subscribers. Results of a structural
Email: eunilpark@skku.edu
equation modeling analysis (N = 910) revealed that corporate social responsibility
Funding information
Institute for Information and communications and service quality led customers to experience greater satisfaction with and trust
Technology Promotion, Grant/Award Number: in the service, which in turn encouraged customers to be more loyal to their
2015‐0‐00914
current service providers. Implications of the notable findings and limitations are
discussed.

KEY W ORDS

corporate social responsibility, loyalty, satisfaction, service quality, trust

1 | I N T RO D U CT I O N performance but also to increasing loyal customers (Martínez & del

Bosque, 2013).
Corporate social responsibility (CSR), that is, corporate activities that Customer loyalty is known to largely determine the success of
aim to positively affect customers and stakeholders (Rodríguez, the service industry (Lewis & Soureli, 2006). This is especially true
Montiel, & Ozuna, 2014), has become one of the most important for mobile telecommunication service providers in South Korea
issues in academia, industry, and society because corporations' activi- because a large number of service subscribers frequently change
ties significantly affect societal growth and cultivation of customer mobile network operators, a trend that has been enabled and pro-
perceptions. CSR is a broadly accepted concept that includes various moted by the active implementation of mobile number portability.
dimensions, such as economic, philanthropic, ethical, and legal factors, As a result, attracting new customers from competitors and maintain-
which are essential to success in the market (Lichtenstein, ing current customers have become the ultimate goals and keys to
Drumwright, & Braig, 2004; Luo & Bhattacharya, 2006). Consequently, market success, and one way to achieve these goals is to increase
CSR has been frequently investigated as a core antecedent of cus- customer loyalty. Given that CSR is known to play an influential role
tomer perceptions, including customer satisfaction with and loyalty in shaping customer loyalty in the service industry (Choi & La, 2013;
to a service or product (Choi & La, 2013). de los Salmones, Crespo, & del Bosque, 2005), this study applies the
In early CSR studies, much emphasis was placed on the effects of concept of CSR to mobile telecommunication companies in South
CSR and its related activities on the improvement of corporate finan- Korea and explicates the process through that CSR contributes to
cial performance (McWilliams & Siegel, 2000). Recent CSR studies, increasing customer loyalty. Although this process is found to be
however, have begun to focus on the role of corporate external social mediated by various cognitive, affective, and conative factors (Dick
activities, including volunteer service, environmental protection, and & Basu, 1994), this study focuses on the roles of customer satisfac-
charity for disadvantaged groups (Jamali & Mirshak, 2007), and exam- tion and trust in explaining the relationship between CSR and cus-
ine how these activities contribute not only to enhancing financial tomer loyalty.

Sustainable Development. 2018;1–8. wileyonlinelibrary.com/journal/sd © 2018 John Wiley & Sons, Ltd and ERP Environment 1
2 PARK AND KIM

2 | LITERATURE REVIEW AND customer perceptions, this study expects to find similar effects of
HYPOTHESES CSR on customer satisfaction with and trust in the mobile telecommu-
nication service industry. Therefore, the following hypotheses are
proposed:
2.1 | Mobile telecommunication service industry in
South Korea H1. CSR will lead to greater customer satisfaction.

Since the early 2000s, the South Korean mobile telecommunication H2. CSR will lead to greater trust.
market has been rapidly expanding in terms of both size and quality
due to the technological development of related information and com-
munication technology (ICT) industries. The mobile telecommunication 2.3 | Service quality
market is one of the most competitive ICT industries in South Korea. Since DeLone and McLean (1992) first introduced the concept of ser-
According to a report released by the Ministry of Science, ICT, and vice quality, a large number of studies (e.g., Cronin, Brady, & Hult,
Future Planning of South Korea (2015), approximately 57.54 million 2000) have demonstrated the positive association between perceived
customers are currently subscribed to a mobile telecommunication service quality and customer satisfaction. For example, Shin and Kim
service, indicating that the market has an approximate 113% penetra- (2008) found that the service quality of mobile services is a notable
tion rate. As summarized in Table 1, more than 90% of the market is determinant of customer satisfaction. Studies (e.g., Deng, Lu, Wei, &
shared by three service providers (SKT, KT, and LG U+), with minor Zhang, 2010; Zeithaml, Berry, & Parasuraman, 1996) revealed that a
mobile virtual network operators sharing the remaining 10% of the high degree of service quality is key to not only maintaining current
market. These companies have provided a variety of telecommunica- customers but also attracting new customers and even enticing
tion services, ranging from code division multiple access and wideband competitors' customers.
code division multiple access to long‐term evolution and long‐term Service quality is a concept that reflects customer perceptions of
evolution advanced services and have continued to adopt new service assurance, responsiveness, and reliability (Zhou, 2013).
business models to increase their market share rates. As depicted in Providing and maintaining high quality services allow customers to
Figure 1, SKT holds a nearly oligopolistic position in the market, with experience the feelings that their needs are being taken into consider-
an approximate 50% market share and greater average revenue per ation, and that the service provider is capable of satisfying their needs.
user and national customer satisfaction than its competitors. This ultimately leads customers to form greater trust in both the
service provider and the quality of the services. For example, studies
have shown that improvement in service quality induces greater
2.2 | Corporate social responsibility customer trust, especially in the telecommunication and mobile
Given the importance of CSR‐related activities in the service industry service contexts (Zhou, 2013). Therefore, this study proposes the
(Luo & Bhattacharya, 2006), consistent attempts have been made to following hypotheses:
examine the effects of CSR on corporate performance, which has led
H3. Service quality will lead to greater customer
to a general conclusion that customer perceptions of and attitudes
satisfaction.
toward a service, and its provider are largely determined by CSR activ-
ities (Bhattacharya & Sen, 2003). For example, Brown (1998) found H4. Service quality will lead to greater trust.
that CSR induces greater customer responses to a product or service.
Lichtenstein et al. (2004) contended that corporate programs and
activities for CSR lead to both increasing various corporate benefits
2.4 | Trust
and improving customer loyalty. In addition, de los Salmones et al. In the mobile service context, trust refers to “customer perception that
(2005) and Luo and Bhattacharya (2006) showed that customer loyalty the service provider can be depended on to act in such a manner that
is largely mediated by customers' level of satisfaction with the service. the consumer's current and long‐term interests will be provided”
CSR is also an effective way to induce greater trust (Ball, Coelho, (Martínez & del Bosque, 2013). Customer trust is generally considered
& Machás, 2004). The perception that a service provider is socially, a prerequisite factor for improving and solidifying a long‐term, reliable
legally, and ethically responsible stimulates trust‐based relationships relationship between the customer and the service provider
between customers and the company (Martínez & del Bosque, (Sirdeshmukh, Singh, & Sabol, 2002). In contrast, customer satisfaction
2013). Based on these documented roles of CSR in shaping positive is considered a postservice perception shaped after using or receiving

TABLE 1 Number of mobile telecommunication service subscribers in South Korea (The Ministry of Science, ICT, and Future Planning, 2015)
SKT KT LG U+ MVNOs Total

CDMA 2,798,121 — 2,312,451 524,080 5,634,652

WCDMA 5,827,455 4,058,950 — 3,950,076 13,836,481
LTE 17,537,990 11,201,125 8,753,877 581,627 38,074,619
Total 26,163,566 15,260,075 11,066,328 5,055,783 57,545,752

Note. CDMA: code division multiple access; LTE: long‐term evolution; MVNO: mobile virtual network operator; WCDMA: wideband code division multiple
access.
PARK AND KIM 3

FIGURE 1 Market indices of mobile

telecommunication service providers in South
Korea (National Customer Satisfaction Index,
2014) [Colour figure can be viewed at
wileyonlinelibrary.com]

a service, suggesting that trust leads to greater satisfaction with the is known as one of the most significant determinants of customer loy-
service in both short‐ and long‐term customers (Deng et al., 2010). alty (Dean, 2002), suggesting that customers with a higher degree of
This close relationship between customer trust and satisfaction has satisfaction are more loyal to the service that they receive. This posi-
been consistently validated by a large number of studies (Masrek, tive relationship between satisfaction and loyalty is clearly docu-
Mohamed, Daud, & Omar, 2014). For example, Martínez and del mented in the context of telecommunication and mobile services
Bosque (2013) found that the level of customer trust significantly (Dean, 2002). Therefore, this study proposes that
affects the overall quality of the customer experience in using a partic-
H7. Customer satisfaction will lead to greater cus-
ular service and in communicating with a service provider. Moreover,
tomer loyalty.
the relationship between CSR and customer loyalty through trust
was previously investigated and validated in mobile services (Vlachos,
Tsamakos, Vrechopoulos, & Avramidis, 2009).
As a key concept in marketing research, customer loyalty has been 2.6 | Research model
extensively investigated utilizing the relationship marketing theory The proposed hypotheses are tested by validating the research model
(Ball et al., 2004), and it has been found that trust is one of the most (Figure 2).
influential factors promoting customer loyalty. According to the the-
ory, the goal of relationship marketing is to attract, maintain, and
enhance customer relationships (Berry, 1995), during which trust plays
3 | STUDY METHOD
a critical mediating role between customer loyalty and the service pro-
vider's activities (Ball, Coelho, & Vilares, 2006). Roostika (2011) con-
ducted a survey on approximately 500 mobile users and confirmed
3.1 | Survey design
that trust is one of the significant antecedents of loyalty. In addition, A total of 22 questionnaire items were initially adapted from validated
Lee, Moon, Kim, and Yi (2015) validated the relationship between prior studies in order to assess the perceived levels of CSR, service
trust and customer loyalty in explaining mobile phone usability based quality, customer satisfaction, trust, and customer loyalty. The
on data collected from more than 300 mobile phone users. Based on selected items were reviewed and revised by a panel of five university
these rationales and findings of prior studies, we propose the follow- professors in business, management, and communication and were
ing hypotheses: then administered to 20 students as a pilot survey in order to validate
the items. In order to examine the reliability of the selected items,
H5. Trust will lead to greater customer satisfaction.
Cronbach's alpha values of each construct were calculated from the
H6. Trust will lead to greater customer loyalty. data collected from the pilot survey, and three items were removed
based on the results of the reliability test. The final survey question-
naire items used in this study are reported in Table 2.
2.5 | Satisfaction A professional consulting agency was hired to administer the
Customer satisfaction is a comprehensive concept shaped by cus- survey based on the nonprobability sampling method proposed by
tomers' experiences with a particular service (Garbarino & Johnson, Martínez and del Bosque (2013). The survey was administered in a
1999), which is largely reflected in the degree to which customers paper‐and‐pencil format, and respondents completed the question-
are pleased with the service. Satisfaction is considered an outcome naire by marking their responses on 7‐point Likert scales ranging from
of the customer experience of using a service and communicating with 1 = strongly disagree to 7 = strongly agree. A total of 1,066 users of
the service supplier (Bloemer, de Ruyter, & Peeters, 1998) and is influ- SKT, KT, and LG U+ completed the survey, and the collected data
enced by various individual service‐related factors, such as service were filtered using the multistep sampling method to balance the gen-
quality, age, and gender (Zeithaml et al., 1996). In addition, satisfaction der, age, and education level of the respondents and improve the
4 PARK AND KIM

FIGURE 2 The research model

TABLE 2 Questionnaire items used in the survey

Factors Descriptions Sources

Corporate social responsibility CSR1: The provider of the mobile telecommunication service that I Lai, Chiu, Yang, and Pai (2010); Park, Kim,
currently use is very concerned with our society. and Kwon (2017); Park, Kwon, and
CSR2: The provider of the mobile telecommunication service that I Kim, (2016)
currently use is very concerned with environmental protection.
CSR3: The provider of the mobile telecommunication service that I
currently use is very concerned with its employees.
CSR4: The provider of the mobile telecommunication service that I
currently use actively and significantly participates in social initiatives.
Service quality SQ1: The mobile telecommunication service that I currently use fully Park and Kim (2014)
meets my needs.
SQ2: The mobile telecommunication service that I currently use is easy
and fast.
SQ3: Overall, the mobile telecommunication service that I currently use is
of high quality.
Customer satisfaction CS1: I am satisfied with my decision to use my current mobile Olorunniwom, Hsu, and Udo (2006)
telecommunication service.
CS2: My choice of current mobile telecommunication service was a wise
one.
CS3: My satisfaction level with the mobile telecommunication service that
I currently use is quite close to my ideal service.
Trust TR1: My experience with my current mobile telecommunication service is Pavlou (2003); Wu (2013); Park and Ohm
that it is honest and reliable. (2014)
TR2: My experience with my current mobile telecommunication service is
that it is trustworthy.
TR3: My experience with my current mobile telecommunication service is
that it is predictable.
Customer loyalty CL1: I would recommend the mobile telecommunication service that I use. Deng, Yeh, and Sung (2013)
CL2: I would encourage my family members and colleagues to use the
mobile telecommunication service that I currently use.
CL3: Even if the fee for the mobile telecommunication service that I
currently use increases, I will maintain my current service.

representativeness of the data. After the filtering process, this study between two constructs, thereby satisfying the discriminant validity
employed the final data of 910 respondents for analysis. requirement (Anderson & Gerbing, 1988; Byrne, 1994; Hu & Bentler,
1999; Fornell & Larcker, 1981; Hair et al., 1995). As reported in
Tables 4 and 5, the measurement model of this study met all recom-
mended criteria for satisfactory internal, convergent, and discriminant
4 | RESULTS
validity.

4.1 | Descriptive analysis and measurement validity

Table 3 shows the descriptive statistics. In addition, convergent, inter- TABLE 3 Descriptive statistics
nal, and discriminant validity tests were conducted using Fornell and
Construct Mean Standard deviation
Larcker's (1981) processing method. As recommended by prior studies
Corporate social responsibility 4.71 0.98
(Fornell & Larcker, 1981; Hair, Anderson, Tatham, & Black, 1995), fac-
Service quality 4.69 1.02
tor loadings of the questionnaire items were larger than 0.7, and
Customer satisfaction 5.02 1.00
values of composite reliability and average variance extracted were
Trust 4.84 0.89
all higher than 0.5. Moreover, the square root values of the average
Customer loyalty 5.01 1.07
variance extracted were found to be larger than the shared variance
PARK AND KIM 5

TABLE 4 Internal and convergent validity

Internal reliability Convergent reliability

Construct Cronbach's alpha Item‐total correlation Factor loading Composite reliability Average variance extracted
Corporate social responsibility CSR1 0.848 0.702 0.833 0.899 0.689
CSR2 0.773 0.852
CSR3 0.673 0.739
CSR4 0.662 0.891
Service quality SQ1 0.859 0.785 0.871 0.914 0.781
SQ2 0.515 0.946
SQ3 0.707 0.831
Customer satisfaction CS1 0.885 0.675 0.865 0.929 0.813
CS2 0.801 0.919
CS3 0.678 0.920
Trust TR1 0.933 0.770 0.933
TR2 0.757 0.952 0.953 0.870
TR3 0.837 0.914
Customer loyalty CL1 0.901 0.766 0.906 0.936 0.829
CL2 0.771 0.917
CL3 0.719 0.908

TABLE 5 Discriminant validity (correlations and the square roots of positive effects on customer satisfaction (H1, β = 0.29, SE = 0.044,
average variance extracted) CR = 6.314, p < 0.001) and trust (H2, β = 0.48, SE = 0.027,
Construct 1 2 3 4 5 CR = 12.678.106, p < 0.001). Similarly, service quality was also found
1. Corporate social responsibility 0.830 to be positively associated with both satisfaction (H3, β = 0.27,
2. Service quality 0.103 0.884 SE = 0.074, CR = 5.675, p < 0.001) and trust (H4, β = 0.37, SE = 0.046,
3. Customer satisfaction 0.322 0.609 0.902 CR = 9.399, p < 0.001). Trust was positively related to customer satis-
4. Trust 0.076 0.295 0.193 0.933 faction (H5, β = 0.16, SE = 0.069, CR = 3.055, p < 0.01). Enhanced trust
5. Customer loyalty 0.274 0.161 0.215 0.004 0.910 then led to greater loyalty (H6, β = 0.55, SE = 0.050, CR = 14.464,
p < 0.001) to mobile telecommunication service providers. Finally, sat-

4.2 Fit indices of the measurement and research

| isfaction played a positive predictor of customer loyalty (H7, β = 0.24,
SE = 0.033, CR = 7.165, p < 0.01).
models
Customer satisfaction and trust explained 49.7% of the variance
Confirmatory factor analysis and structural equation modeling (SEM) in customer loyalty, whereas CSR and service quality explained
were conducted to examine the fit indices of the measurement and 39.5% of the variance in customer satisfaction and 58.66% of the var-
research models. As shown in Table 6, both models were found to iance in trust, respectively. Among the four predictors of customer
have satisfactory statistical validity. loyalty, trust had the strongest total effect on loyalty (0.583), as calcu-
lated from the sum of the indirect and direct effects (Table 8).

4.3 | Hypothesis tests

As summarized in Table 7 and Figure 3, the results of the SEM analysis 4.4 | Supplemental analysis
indicated that all proposed hypotheses were supported, thereby vali- This study conducted additional analyses with the period of service
dating the mediating roles of satisfaction and trust in customer loyalty usage, mobile telecommunication service companies, and service
to mobile telecommunication service providers. CSR had significant types, in order to explore whether the structural associations in the
model were changed. The majority of the results indicated that there

TABLE 6 Fit indices of the measurement and research models are not notable differences from the results between the whole group
and the subjective groups.
Measurement Research Recommended
Fit indices model model level

χ2/df 4.901 4.901 <5.000

5 | DISCUSSION
Normed Fit Index (NFI) 0.910 0.910 >0.900
Goodness of Fit Index (GFI) 0.908 0.908 >0.900
This study provides greater insights on how South Korean mobile tele-
Adjusted Goodness of Fit 0.923 0.903 >0.900
Index (AGFI) communication companies can maintain and increase their loyal cus-

Comparative Fit Index (CFI) 0.903 0.923 >0.900 tomers by enhancing their CSR and service quality and inducing
Root Mean Square Residual 0.065 0.065 <0.080 greater customer satisfaction with and trust in their services. Our find-
(RMR) ings suggest that greater CSR and service quality increase the levels of
Incremental Fit Index (IFI) 0.906 0.906 >0.900 customer satisfaction and trust, which in turn allow customers to be
Root Mean Square Error of 0.047 0.047 <0.050 more loyal to their current network service providers. Although all
Approximation (RMSEA)
hypotheses related to CSR and service quality were supported, the
6 PARK AND KIM

TABLE 7 Summary of hypothesis tests

Hypothesis Standardized path coefficient SE CR Results

H1. Corporate social responsibility → Customer satisfaction 0.29** 0.044 6.314 Supported
H2. Corporate social responsibility → Trust 0.48** 0.027 12.678 Supported
H3. Service quality → Customer satisfaction 0.27** 0.074 5.675 Supported
H4. Service quality → Trust 0.37** 0.046 9.399 Supported
H5. Trust → Customer satisfaction 0.16* 0.069 3.055 Supported
H6. Trust → Customer loyalty 0.55** 0.050 14.464 Supported
H7. Customer satisfaction → Customer loyalty 0.24** 0.033 7.165 Supported

*p < 0.01.
**p < 0.001.

FIGURE 3 The research model with

standardized path coefficients (*p < 0.01;
**p < 0.001)

effects of CSR on trust and customer satisfaction were found to be two service providers. This supports the idea that the difference in
generally greater than those of service quality. This is perhaps service quality among the network operators might not have been as
because, as noted in prior studies (Udo, Bagchi, & Kirs, 2010), qual- motivating as other factors such as CSR.
ity‐driven factors such as perceived service quality have strong effects Consistent with prior studies (Sirdeshmukh et al., 2002) that have
on the early or initial adoption of a service, whereas corporate activ- revealed the significant mediating effect of trust on customer loyalty
ity‐related factors such as CSR are more closely associated with the in the service industry, the results of the SEM analysis indicate that
overall positive effects of the usage process that ultimately lead to trust plays a critical role in determining customer loyalty to mobile
greater customer loyalty. telecommunication service providers. Given that CSR is the main ante-
Similarly, the total effect of CSR on customer loyalty was found to cedent of trust, the prevailing CSR‐trust‐loyalty path suggests a theo-
be greater than that of service quality. One possible explanation is that retical mechanism by which greater CSR activities increase customer
the mobile telecommunication service industry in South Korea is loyalty by promoting a sense of trust. The ultimate goal of the industry
extremely saturated and operates based on similar infrastructures is to maintain current customers and attract potential customers. To
and network technologies (e.g., long‐term evolution and long‐term attain this goal, the industry would do well to take our findings into
evolution advanced) while providing comparable types of services consideration and pay close attention to how customer loyalty can
and products (Chang, Li, & Kim, 2014). In reality, therefore, customers be strengthened by improving the quality and diversifying the variety
may perceive no salient differences in the three major network oper- of CSR activities.
ators' (SKT, KT, and LG U+) technological capabilities and quality of Despite the successful confirmation of all proposed hypotheses,
services and pay less attention to service quality when choosing their this study has several limitations concerning the generalizability of the
network operators. Moreover, approximately 80% of the survey findings and the moderating effects of individual characteristics. Given
respondents had more than 5 years of experience using mobile tele- that the data were collected only from mobile network subscribers in
communication services, during which they subscribed to more than South Korea, it is difficult to generalize and apply our findings to other
countries using different network systems and terms of service. More-
TABLE 8 Summary of hypothesis tests
over, the theoretical and practical background for CSR and loyalty
Total Direct Indirect should be enhanced for reflecting the situation and environments of
Factors effects effects effects
South Korea. For example, we can miss a large number of marketing
Corporate social responsibility 0.348 — 0.348
theories that can enhance the theoretical background of this study. In
Service quality 0.279 — 0.279
addition, potential moderating effects of customer characteristics
Trust 0.583 0.546 0.037
should have been taken into consideration when designing the survey.
Customer satisfaction 0.240 0.240 —
For example, individual differences such as age and gender are known
PARK AND KIM 7

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