Effects of Severity and Knowledge of a Scandal on the Perceived Ethical Behavior and Attitude towards a Company: An Intercultural Perspective on CSR Management

Over the last decades, a number of serious corporate scandals have attracted worldwide attention. This study contributes towards understanding the consequences of scandals from a consumer perspective. We use attribution theory to analyze the effects of knowledge of a scandal and personally perceived severity on assessed ethical behavior and attitude towards a company. The recent Dieselgate scandal involving Volkswagen is used as the empirical setting. We test our developed framework using data collected from respondents in the US (the country in which the scandal was initially discovered) and Germany (home country of Volkswagen). Findings show that knowledge of the scandal as well as personally perceived severity of the scandal negatively affect perceived ethical behavior of the company and attitude towards the same, but the results vary between the countries indicating the relevance of a domestic bias in this context. A major implication for management provided by this research is that while a domestic bias mitigates the negative effect of knowledge on consumers’ beliefs and attitudes, it does not mitigate the negative effect of perceived severity.