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CN 34-1054/N

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Open AccessOpen Access JUSTC Management 13 December 2022

Socially responsible donation decision analysis in a supply chain under government subsidy

  • International Institute of Finance, School of Management, University of Science and Technology of China, Hefei 230601, China

Cite this:
https://doi.org/10.52396/JUSTC-2022-0017
More Information
  • Author Bio:

    Dongxu Du is a graduate student at the School of Management, University of Science and Technology of China. His research interests focus on corporate social responsibility management

    Manman Wang is currently a postdoctoral researcher of operations management at the School of Management, University of Science and Technology of China (USTC). She received her Ph.D. degree from the USTC in 2021. Her research interests include sustainable operations and the reverse supply chain management

  • Corresponding author: E-mail: wmm2016@mail.ustc.edu.cn
  • Received Date: 21 January 2022
  • Accepted Date: 18 April 2022
    • Available Online: 13 December 2022
    Abstract

  • Abstract

    As an important form for firms to demonstrate social responsibility, socially responsible donation (SRD) is becoming increasingly widespread and attracting more attention. It is important to encourage firms to effectively undertake social responsibilities and improve social welfare. Recently, it has become very popular for firms to demonstrate their social responsibility through SRD campaigns. With the aim of solving the decision-making problem of a retailer-led socially responsible supply chain considering government subsidy, this study established a three-stage Stackelberg game model. By analyzing the impact of pricing and donation decisions on operations and management, either with or without government subsidy, we found that to achieve better performance, retail firms will choose to implement donation activities. However, it is not the case that the higher the donation, the better the performance. In addition, there is a gap: without government subsidy, social welfare is not optimal when members’ performance in the supply chain is maximized, and more donations are needed to maximize social welfare. This study proves that government subsidy can encourage supply chain members to generate more donations, while improving the performance of the supply chain and social welfare. We propose an optimal subsidy rate to eliminate the gap and maximize social welfare. We also analyze the impact of external parameters, including the cost parameter and consumer preference level, on the equilibrium results. Finally, we extend this research to provide management insights for businesses under uncertain market sizes and centralized decision-making scenarios.

    Graphical abstract

    The research framework of socially responsible donation supply chain under different models.

    Abstract

    As an important form for firms to demonstrate social responsibility, socially responsible donation (SRD) is becoming increasingly widespread and attracting more attention. It is important to encourage firms to effectively undertake social responsibilities and improve social welfare. Recently, it has become very popular for firms to demonstrate their social responsibility through SRD campaigns. With the aim of solving the decision-making problem of a retailer-led socially responsible supply chain considering government subsidy, this study established a three-stage Stackelberg game model. By analyzing the impact of pricing and donation decisions on operations and management, either with or without government subsidy, we found that to achieve better performance, retail firms will choose to implement donation activities. However, it is not the case that the higher the donation, the better the performance. In addition, there is a gap: without government subsidy, social welfare is not optimal when members’ performance in the supply chain is maximized, and more donations are needed to maximize social welfare. This study proves that government subsidy can encourage supply chain members to generate more donations, while improving the performance of the supply chain and social welfare. We propose an optimal subsidy rate to eliminate the gap and maximize social welfare. We also analyze the impact of external parameters, including the cost parameter and consumer preference level, on the equilibrium results. Finally, we extend this research to provide management insights for businesses under uncertain market sizes and centralized decision-making scenarios.

    • Public Summary

    • The study investigates a specific CSR activity that links donation behavior with consumer purchase under government subsidy.
    • To balance corporate income and social welfare, we explore how to design donation and product pricing effectively using the Stackelberg game model.
    • The study provides decision supports for firms and governments to improve firm performance and social welfare by choosing appropriate policies.

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    • References(40)
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    Lee H L, Tang C S. Socially and environmentally responsible value chain innovations: New operations management research opportunities. Management Science, 2018, 64 (3): 983–996. doi: 10.1287/mnsc.2016.2682
    [2]
    Jin L, He Y. How the frequency and amount of corporate donation affect consumer perception and behavioral responses. Journal of the Academy of Marketing Science, 2018, 46 (6): 1072–1088. doi: 10.1007/s11747-018-0584-7
    [3]
    Tang C S. Socially responsible supply chains in emerging markets: Some research opportunities. Journal of Operations Management, 2018, 57: 1–10. doi: 10.1016/j.jom.2018.01.002
    [4]
    Liao H Y, Hsu C T, Chiang H C. How does green intellectual capital influence employee pro-environmental behavior? The mediating role of corporate social responsibility. International Journal of Management Studies, 2021, 28 (2): 27–47. doi: 10.32890/ijms2021.28.2.2
    [5]
    Homburg C, Stierl M, Bornemann T. Corporate social responsibility in business-to-business markets: How organizational customers account for supplier corporate social responsibility engagement. Journal of Marketing, 2013, 77 (6): 54–72. doi: 10.1509/jm.12.0089
    [6]
    Szőcs I, Schlegelmilch B B, Rusch T, et al. Linking cause assessment, corporate philanthropy, and corporate reputation. Journal of the Academy of Marketing Science, 2016, 44 (3): 376–396. doi: 10.1007/s11747-014-0417-2
    [7]
    Singh J, Teng N, Netessine S. Philanthropic campaigns and customer behavior: Field experiments on an online taxi booking platform. Management Science, 2019, 65 (2): 913–932. doi: 10.1287/mnsc.2017.2887
    [8]
    Koschate-Fischer N, Stefan I V, Hoyer W D. Willingness to pay for cause-related marketing: The impact of donation amount and moderating effects. Journal of Marketing Research, 2012, 49 (6): 910–927. doi: 10.1509/jmr.10.0511
    [9]
    Fan X, Deng N, Qian Y, et al. Factors affecting the effectiveness of cause-related marketing: A meta-analysis. Journal of Business Ethics, 2022, 175: 339–360. doi: 10.1007/s10551-020-04639-6
    [10]
    Chang C T, Chen P C, Chu X Y, et al. Is cash always king? Bundling product–cause fit and product type in cause-related marketing. Psychology & Marketing, 2018, 35 (12): 990–1009. doi: 10.1002/mar.21151
    [11]
    Lafferty B A, Lueth A K, McCafferty R. An evolutionary process model of cause-related marketing and systematic review of the empirical literature. Psychology & Marketing, 2016, 33 (11): 951–970. doi: 10.1002/mar.20930
    [12]
    Sabri O. The detrimental effect of cause-related marketing parodies. Journal of Business Ethics, 2018, 151 (2): 517–537. doi: 10.1007/s10551-016-3232-5
    [13]
    Müller S S, Fries A J, Gedenk K. How much to give?—The effect of donation size on tactical and strategic success in cause-related marketing. International Journal of Research in Marketing, 2014, 31 (2): 178–191. doi: 10.1016/j.ijresmar.2013.09.005
    [14]
    Webb D J, Mohr L A. A typology of consumer responses to cause-related marketing: From skeptics to socially concerned. Journal of Public Policy & Marketing, 1998, 17 (2): 226–238. doi: 10.1177/074391569801700207
    [15]
    Krishna A. Can supporting a cause decrease donation and happiness? The cause marketing paradox. Journal of Consumer Psychology, 2011, 21 (3): 338–345. doi: 10.1016/j.jcps.2011.02.001
    [16]
    Joo S, Koo J, Fink J S. Cause-related marketing in sports: The power of altruism. European Sport Management Quarterly, 2016, 16 (3): 316–340. doi: 10.1080/16184742.2016.1143854
    [17]
    Modak N M, Kelle P. Using social work donation as a tool of corporate social responsibility in a closed-loop supply chain considering carbon emissions tax and demand uncertainty. Journal of the Operational Research Society, 2021, 72 (1): 61–77. doi: 10.1080/01605682.2019.1654413
    [18]
    Koschate-Fischer N, Hube I V, Hoyer W D. When will price increases associated with company donation to charity be perceived as fair? Journal of the Academy of Marketing Science, 2016, 44: 608–626. doi: 10.1007/s11747-015-0454-5
    [19]
    Flammer C. Does corporate social responsibility lead to superior financial performance? A regression discontinuity approach. Management Science, 2015, 61 (11): 2549–2568. doi: 10.1287/mnsc.2014.2038
    [20]
    Albuquerque R, Koskinen Y, Zhang C. Corporate social responsibility and firm risk: Theory and empirical evidence. Management Science, 2019, 65 (10): 4451–4469. doi: 10.1287/mnsc.2018.3043
    [21]
    Ni D, Li K W. A game-theoretic analysis of social responsibility conduct in two-echelon supply chains. International Journal of Production Economics, 2012, 138 (2): 303–313. doi: 10.1016/j.ijpe.2012.04.002
    [22]
    Panda S. Coordination of a socially responsible supply chain using revenue sharing contract. Transportation Research Part E: Logistics and Transportation Review, 2014, 67: 92–104. doi: 10.1016/j.tre.2014.04.002
    [23]
    Servaes H, Tamayo A. The impact of corporate social responsibility on firm value: The role of customer awareness. Management science, 2013, 59 (5): 1045–1061. doi: 10.1287/mnsc.1120.1630
    [24]
    Chen L M, Yang S J S. Are purchase-triggered donation advantageous with competition? Journal of the Operational Research Society, 2017, 68 (3): 237–252. doi: 10.1057/s41274-016-0006-5
    [25]
    Dubé J P, Luo X, Fang Z. Self-signaling and prosocial behavior: A cause marketing experiment. Marketing Science, 2017, 36 (2): 161–186. doi: 10.1287/mksc.2016.1012
    [26]
    Kulow K, Kwon M, Barone M J. Does seeing bad make you do good? How witnessing retail transgressions influence responses to cause marketing offers. Journal of Business Research, 2021, 132: 680–692. doi: 10.1016/j.jbusres.2020.10.020
    [27]
    Xu M, Li X. The interplay between e-tailer information sharing and supplier cause marketing. International Journal of Production Research, 2021, 60 (12): 3863–3878. doi: 10.1080/00207543.2021.1933643
    [28]
    Berenguer G, Feng Q, Shanthikumar J G, et al. The effects of subsidy on increasing consumption through for-profit and not-for-profit newsvendors. Production and Operations Management, 2017, 26 (6): 1191–1206. doi: 10.1111/poms.12632
    [29]
    Yang R, Tang W, Zhang J. Optimal subsidy and recycling mode of waste cooking oil under asymmetric information. Journal of the Operational Research Society, 2020, 73 (3): 674–691. doi: 10.1080/01605682.2020.1860658
    [30]
    Chu L Y, Sappington D E M. Motivating energy suppliers to promote energy conservation. Journal of Regulatory Economics, 2013, 43 (3): 229–247. doi: 10.1007/s11149-013-9215-x
    [31]
    Liu Y, Quan B, Xu Q, et al. Corporate social responsibility and decision analysis in a supply chain through government subsidy. Journal of Cleaner Production, 2019, 208: 436–447. doi: 10.1016/j.jclepro.2018.10.121
    [32]
    Arya A, Mittendorf B. Supply chain consequences of subsidy for corporate social responsibility. Production and Operations Management, 2015, 24 (8): 1346–1357. doi: 10.1111/poms.12326
    [33]
    Chu L Y, Li G, Rusmevichientong P. Optimal pricing and inventory planning with charitable donation. Manufacturing & Service Operations Management, 2018, 20 (4): 687–703. doi: 10.1287/msom.2017.0676
    [34]
    Modak N M, Kazemi N, Cárdenas-Barrón L E. Investigating structure of a two-echelon closed-loop supply chain using social work donation as a Corporate Social Responsibility practice. International Journal of Production Economics, 2019, 207: 19–33. doi: 10.1016/j.ijpe.2018.10.009
    [35]
    Ma P, Wang H, Shang J. Contract design for two-stage supply chain coordination: Integrating manufacturer-quality and retailer-marketing efforts. International Journal of Production Economics, 2013, 146 (2): 745–755. doi: 10.1016/j.ijpe.2013.09.004
    [36]
    Chen J Y, Dimitrov S, Pun H. The impact of government subsidy on supply chains’ sustainability innovation. Omega, 2019, 86: 42–58. doi: 10.1016/j.omega.2018.06.012
    [37]
    Savaskan R C, Bhattacharya S, Van Wassenhove L N. Closed-loop supply chain models with product remanufacturing. Management science, 2004, 50 (2): 239–252. doi: 10.1287/mnsc.1030.0186
    [38]
    Leszczyc P T L P, Rothkopf M H. Charitable motives and bidding in charity auctions. Management Science, 2010, 56 (3): 399–413. doi: 10.1287/mnsc.1090.1120
    [39]
    Chitra K. In search of the green consumers: A perceptual study. Journal of Services Research, 2007, 7 (1): 173–191.
    [40]
    Zhang L, Wang J, You J. Consumer environmental awareness and channel coordination with two substitutable products. European Journal of Operational Research, 2015, 241 (1): 63–73. doi: 10.1016/j.ejor.2014.07.043
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    Figure  1.  The impact of the SRD on the retailer’s profit and the social welfare.

    Figure  2.  The impact of government subsidy rate on SRD, the corporate profits, and social welfare.

    Figure  3.  The impact of the cost parameter on SRD, the firms’ profits, and social welfare.

    Figure  4.  The impact of consumer CSR preference on SRD, the corporate profits, and social welfare.

    Figure  5.  The impact of market size on decision variables and equilibrium results.

    [1]
    Lee H L, Tang C S. Socially and environmentally responsible value chain innovations: New operations management research opportunities. Management Science, 2018, 64 (3): 983–996. doi: 10.1287/mnsc.2016.2682
    [2]
    Jin L, He Y. How the frequency and amount of corporate donation affect consumer perception and behavioral responses. Journal of the Academy of Marketing Science, 2018, 46 (6): 1072–1088. doi: 10.1007/s11747-018-0584-7
    [3]
    Tang C S. Socially responsible supply chains in emerging markets: Some research opportunities. Journal of Operations Management, 2018, 57: 1–10. doi: 10.1016/j.jom.2018.01.002
    [4]
    Liao H Y, Hsu C T, Chiang H C. How does green intellectual capital influence employee pro-environmental behavior? The mediating role of corporate social responsibility. International Journal of Management Studies, 2021, 28 (2): 27–47. doi: 10.32890/ijms2021.28.2.2
    [5]
    Homburg C, Stierl M, Bornemann T. Corporate social responsibility in business-to-business markets: How organizational customers account for supplier corporate social responsibility engagement. Journal of Marketing, 2013, 77 (6): 54–72. doi: 10.1509/jm.12.0089
    [6]
    Szőcs I, Schlegelmilch B B, Rusch T, et al. Linking cause assessment, corporate philanthropy, and corporate reputation. Journal of the Academy of Marketing Science, 2016, 44 (3): 376–396. doi: 10.1007/s11747-014-0417-2
    [7]
    Singh J, Teng N, Netessine S. Philanthropic campaigns and customer behavior: Field experiments on an online taxi booking platform. Management Science, 2019, 65 (2): 913–932. doi: 10.1287/mnsc.2017.2887
    [8]
    Koschate-Fischer N, Stefan I V, Hoyer W D. Willingness to pay for cause-related marketing: The impact of donation amount and moderating effects. Journal of Marketing Research, 2012, 49 (6): 910–927. doi: 10.1509/jmr.10.0511
    [9]
    Fan X, Deng N, Qian Y, et al. Factors affecting the effectiveness of cause-related marketing: A meta-analysis. Journal of Business Ethics, 2022, 175: 339–360. doi: 10.1007/s10551-020-04639-6
    [10]
    Chang C T, Chen P C, Chu X Y, et al. Is cash always king? Bundling product–cause fit and product type in cause-related marketing. Psychology & Marketing, 2018, 35 (12): 990–1009. doi: 10.1002/mar.21151
    [11]
    Lafferty B A, Lueth A K, McCafferty R. An evolutionary process model of cause-related marketing and systematic review of the empirical literature. Psychology & Marketing, 2016, 33 (11): 951–970. doi: 10.1002/mar.20930
    [12]
    Sabri O. The detrimental effect of cause-related marketing parodies. Journal of Business Ethics, 2018, 151 (2): 517–537. doi: 10.1007/s10551-016-3232-5
    [13]
    Müller S S, Fries A J, Gedenk K. How much to give?—The effect of donation size on tactical and strategic success in cause-related marketing. International Journal of Research in Marketing, 2014, 31 (2): 178–191. doi: 10.1016/j.ijresmar.2013.09.005
    [14]
    Webb D J, Mohr L A. A typology of consumer responses to cause-related marketing: From skeptics to socially concerned. Journal of Public Policy & Marketing, 1998, 17 (2): 226–238. doi: 10.1177/074391569801700207
    [15]
    Krishna A. Can supporting a cause decrease donation and happiness? The cause marketing paradox. Journal of Consumer Psychology, 2011, 21 (3): 338–345. doi: 10.1016/j.jcps.2011.02.001
    [16]
    Joo S, Koo J, Fink J S. Cause-related marketing in sports: The power of altruism. European Sport Management Quarterly, 2016, 16 (3): 316–340. doi: 10.1080/16184742.2016.1143854
    [17]
    Modak N M, Kelle P. Using social work donation as a tool of corporate social responsibility in a closed-loop supply chain considering carbon emissions tax and demand uncertainty. Journal of the Operational Research Society, 2021, 72 (1): 61–77. doi: 10.1080/01605682.2019.1654413
    [18]
    Koschate-Fischer N, Hube I V, Hoyer W D. When will price increases associated with company donation to charity be perceived as fair? Journal of the Academy of Marketing Science, 2016, 44: 608–626. doi: 10.1007/s11747-015-0454-5
    [19]
    Flammer C. Does corporate social responsibility lead to superior financial performance? A regression discontinuity approach. Management Science, 2015, 61 (11): 2549–2568. doi: 10.1287/mnsc.2014.2038
    [20]
    Albuquerque R, Koskinen Y, Zhang C. Corporate social responsibility and firm risk: Theory and empirical evidence. Management Science, 2019, 65 (10): 4451–4469. doi: 10.1287/mnsc.2018.3043
    [21]
    Ni D, Li K W. A game-theoretic analysis of social responsibility conduct in two-echelon supply chains. International Journal of Production Economics, 2012, 138 (2): 303–313. doi: 10.1016/j.ijpe.2012.04.002
    [22]
    Panda S. Coordination of a socially responsible supply chain using revenue sharing contract. Transportation Research Part E: Logistics and Transportation Review, 2014, 67: 92–104. doi: 10.1016/j.tre.2014.04.002
    [23]
    Servaes H, Tamayo A. The impact of corporate social responsibility on firm value: The role of customer awareness. Management science, 2013, 59 (5): 1045–1061. doi: 10.1287/mnsc.1120.1630
    [24]
    Chen L M, Yang S J S. Are purchase-triggered donation advantageous with competition? Journal of the Operational Research Society, 2017, 68 (3): 237–252. doi: 10.1057/s41274-016-0006-5
    [25]
    Dubé J P, Luo X, Fang Z. Self-signaling and prosocial behavior: A cause marketing experiment. Marketing Science, 2017, 36 (2): 161–186. doi: 10.1287/mksc.2016.1012
    [26]
    Kulow K, Kwon M, Barone M J. Does seeing bad make you do good? How witnessing retail transgressions influence responses to cause marketing offers. Journal of Business Research, 2021, 132: 680–692. doi: 10.1016/j.jbusres.2020.10.020
    [27]
    Xu M, Li X. The interplay between e-tailer information sharing and supplier cause marketing. International Journal of Production Research, 2021, 60 (12): 3863–3878. doi: 10.1080/00207543.2021.1933643
    [28]
    Berenguer G, Feng Q, Shanthikumar J G, et al. The effects of subsidy on increasing consumption through for-profit and not-for-profit newsvendors. Production and Operations Management, 2017, 26 (6): 1191–1206. doi: 10.1111/poms.12632
    [29]
    Yang R, Tang W, Zhang J. Optimal subsidy and recycling mode of waste cooking oil under asymmetric information. Journal of the Operational Research Society, 2020, 73 (3): 674–691. doi: 10.1080/01605682.2020.1860658
    [30]
    Chu L Y, Sappington D E M. Motivating energy suppliers to promote energy conservation. Journal of Regulatory Economics, 2013, 43 (3): 229–247. doi: 10.1007/s11149-013-9215-x
    [31]
    Liu Y, Quan B, Xu Q, et al. Corporate social responsibility and decision analysis in a supply chain through government subsidy. Journal of Cleaner Production, 2019, 208: 436–447. doi: 10.1016/j.jclepro.2018.10.121
    [32]
    Arya A, Mittendorf B. Supply chain consequences of subsidy for corporate social responsibility. Production and Operations Management, 2015, 24 (8): 1346–1357. doi: 10.1111/poms.12326
    [33]
    Chu L Y, Li G, Rusmevichientong P. Optimal pricing and inventory planning with charitable donation. Manufacturing & Service Operations Management, 2018, 20 (4): 687–703. doi: 10.1287/msom.2017.0676
    [34]
    Modak N M, Kazemi N, Cárdenas-Barrón L E. Investigating structure of a two-echelon closed-loop supply chain using social work donation as a Corporate Social Responsibility practice. International Journal of Production Economics, 2019, 207: 19–33. doi: 10.1016/j.ijpe.2018.10.009
    [35]
    Ma P, Wang H, Shang J. Contract design for two-stage supply chain coordination: Integrating manufacturer-quality and retailer-marketing efforts. International Journal of Production Economics, 2013, 146 (2): 745–755. doi: 10.1016/j.ijpe.2013.09.004
    [36]
    Chen J Y, Dimitrov S, Pun H. The impact of government subsidy on supply chains’ sustainability innovation. Omega, 2019, 86: 42–58. doi: 10.1016/j.omega.2018.06.012
    [37]
    Savaskan R C, Bhattacharya S, Van Wassenhove L N. Closed-loop supply chain models with product remanufacturing. Management science, 2004, 50 (2): 239–252. doi: 10.1287/mnsc.1030.0186
    [38]
    Leszczyc P T L P, Rothkopf M H. Charitable motives and bidding in charity auctions. Management Science, 2010, 56 (3): 399–413. doi: 10.1287/mnsc.1090.1120
    [39]
    Chitra K. In search of the green consumers: A perceptual study. Journal of Services Research, 2007, 7 (1): 173–191.
    [40]
    Zhang L, Wang J, You J. Consumer environmental awareness and channel coordination with two substitutable products. European Journal of Operational Research, 2015, 241 (1): 63–73. doi: 10.1016/j.ejor.2014.07.043
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