Corporate Social Hypocrisy and Firm Sales

Abstract

A particularly insidious form of deception occurs when organizations claim to engage in socially and environmentally responsible business practices, when in truth they do not. The present paper terms this phenomenon “corporate social hypocrisy” and examines (1) whether or not consumers reduce purchases from firms that do it, (2) the psychological reasons behind their responses, and (3) which firms consumers are more vs. less likely to punish. Across two experimental studies and a large panel data study involving 3,308 firms over a ten year period, this paper shows that consumers reduce purchases from firms that engage in corporate social hypocrisy because they perceive such firms to be less trustworthy. Drawing from expectancy violation theory, this research further shows that consumers are more likely to punish firms for corporate social hypocrisy when such firms are in industries perceived to be ethically non-stigmatized

ethically stigmatized firms (e.g., alcohol, tobacco, gambling, and extraction firms) are less likely to be punished for corporate social hypocrisy.