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Consumer decision making in a complex environment: Examining the decision making process of socially responsible mutual fund investors
Umeå University, Faculty of Social Sciences, Umeå School of Business.
2010 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

During the last few decades, "regular people" have become increasingly involved with investing in the stock market. One way of doing this, which has become more and more popular, is to invest in mutual funds. The mutual fund industry has, due to its explosive growth, been described as a success story of the 20th century. These days, sources report that over 70% of the Swedish population actively invests in mutual funds.

This thesis is an investigation into consumer decision making regarding one specific type of mutual fund: Socially Responsible Investment (SRI). SRI profiled mutual funds are different from "regular" mutual funds in that they incorporate social, ethical, and environmental (SEE) criteria. In this manner, SRI profiled mutual funds could be said to have two separate dimensions. The regular financial dimension has the purpose of generating a high level of financial return while managing risk. The socially responsible dimension, on the other hand, focuses on incorporating SEE issues into the investment process.

However, consumers that desire to choose mutual funds that will both perform well financially and have a good socially responsible dimension face a more difficult decision than consumers who choose to invest in "regular" mutual funds. As each of the dimensions come with its own set of challenges which the consumer must overcome, choosing an appropriate combination of these is a difficult task. In this manner, consumers of SRI profiled mutual funds have to navigate through a complex decision making environment to arrive at a good choice.

Based in this notion of decision making in complex environments, this thesis investigates how consumers combine their "traditional" financial objectives with their "additional" SEE consideration and examines the impact of personal factors related to these two areas on consumer investment in SRI profiled mutual funds. Four separate essays on these topics, each investigating a specific stage in the Engel-Kollat-Blackwell (1968) consumer decision making process, are presented. Moreover, in order to understand how complexity impacts consumer decision making in the area, the results of each study are analyzed against a conceptual framework focusing on the complexity of the market.

The results show that consumers of SRI profiled mutual funds care about both financial and SEE issues. However, how consumers combine these in their decision making differs. Factors, such as the stage of the purchase decision making process, personal abilities, preferences, and perceptions are found to impact consumer decision making.  Against this background, this thesis generates an increased understanding of consumer decision making in complex decision making environments in general and of SRI profiled mutual funds in particular.

Place, publisher, year, edition, pages
Umeå: Umeå School of Business, Umeå University , 2010. , 108 p.
Series
Studier i företagsekonomi. Serie B, ISSN 0346-8291 ; 73
Keyword [en]
Consumer decision making, complex decision making environments, socially responsible investment, ethical investment, mutual funds, private investment
National Category
Business Administration
Research subject
Business Studies
Identifiers
URN: urn:nbn:se:umu:diva-35607ISBN: 978-91-7459-035-7 (print)OAI: oai:DiVA.org:umu-35607DiVA: diva2:345495
Public defence
2010-09-17, Samhällsvetarhuset, Hörsal B, Umeå universitet, Umeå, 13:15 (English)
Opponent
Supervisors
Available from: 2010-08-27 Created: 2010-08-25 Last updated: 2011-11-07Bibliographically approved
List of papers
1. The information search process of socially responsible investors
Open this publication in new window or tab >>The information search process of socially responsible investors
2010 (English)In: Journal of Financial Services Marketing, ISSN 1363-0539, Vol. 15, no 1, 5-18 p.Article in journal (Refereed) Published
Abstract [en]

Largely fuelled by an increasing social and ethical concern among private investors, socially responsible investment (SRI) has, in many ways, gone from having a marginal role to becoming a ‘mainstream’ financial service in recent years. SRI is an investment process that, in addition to the ‘traditional’ financial objective of investment, also uses social, ethical or environmental (SEE) criteria when making investment decisions. However, despite the growth of the market for SRI profiled mutual funds, very little research has been carried out with the objective of understanding the decision-making process of private SR-investors. In order to address this gap in the literature, this article addresses one stage in the SR-investor decision-making process: consumer pre-purchase information search. Using a sample of 369 SR-investors, the results of the study indicate that SR-investors search more for SEE information, such as the criteria used for exclusion of stocks than for ‘regular’ financial information such as past financial return and level of risk. Moreover, the study also indicates that involvement and perceived knowledge with regard to both financial and SEE issues impact the nature of the information search process of private SR mutual fund investors.

Place, publisher, year, edition, pages
Hampshire, United Kingdom: Palgrave MacMillan, 2010
Keyword
Socially Responsible Investment; Ethical Investment; Information Search; Private Investors; Mutual Funds
National Category
Business Administration
Research subject
Business Studies
Identifiers
urn:nbn:se:umu:diva-34372 (URN)10.1057/fsm.2010.5 (DOI)
Available from: 2010-05-28 Created: 2010-05-28 Last updated: 2010-08-27Bibliographically approved
2. Segmenting socially responsible investors: The influence of financial return and social responsibility
Open this publication in new window or tab >>Segmenting socially responsible investors: The influence of financial return and social responsibility
2009 (English)In: International Journal of Bank Marketing, ISSN 0265-2323, Vol. 27, no 1, 5-31 p.Article in journal (Refereed) Published
Abstract [en]

Purpose – This article address reasons for consumer investment in socially responsible investment (SRI) profiled mutual funds. Specifically, the paper deals with the relative influence of financial return and social responsibility on the decision to invest in SRI profiled mutual funds.

Methodology/approach - A cluster analytic approach was used where 563 SR-investors were classified into different segments based on their perception of importance of financial return and social responsibility. Furthermore, discriminant analysis and chi2 tests were used to profile the segments.

Findings - Three segments of SR-investors were formed. The “primarily concerned about profit” SR-investors value financial return over social responsibility. The “primarily concerned about social responsibility” value social responsibility over financial return. The “socially responsible & return driven” SR-investors value both return and social responsibility when deciding to invest in SRI. The segments displayed distinct differences with regard to various profiling variables.

Research limitations/implications – As respondents were generated from one SRI provider, it is possible that the respondents are not fully representative of all SR-investors.

Practical implications - Since there are segments of SR-investors that invest in SRI because of different reasons, there is an opportunity for SRI providers to target and adapt communication to certain segments.

Originality/value - For both academia and the SRI industry this study provides useful knowledge on how private SR-investors handle the issue of financial return and social responsibility when investing in SRI. This understanding of the differing motivations of the SR-investor also holds practical importance for developing appropriate marketing strategies within the SRI industry.

Place, publisher, year, edition, pages
Emerald Group Publishing Limited, 2009
Keyword
Ethical investment, Unit trusts, Investors, Market segmentation
National Category
Business Administration
Research subject
Business Studies
Identifiers
urn:nbn:se:umu:diva-33924 (URN)10.1108/02652320910928218 (DOI)
Note
Most of the work on this paper was performed while the author was at the School of Business, Economics, and Law at Gothenburg University, Sweden.Available from: 2010-05-10 Created: 2010-05-10 Last updated: 2010-08-27Bibliographically approved
3. Investment with a conscience: Examining the impact of pro-social attitudes and perceived financial performance on socially responsible investment behavior
Open this publication in new window or tab >>Investment with a conscience: Examining the impact of pro-social attitudes and perceived financial performance on socially responsible investment behavior
2008 (English)In: Journal of Business Ethics, ISSN 0167-4544, E-ISSN 1573-0697, Vol. 83, no 2, 307-325 p.Article in journal (Refereed) Published
Abstract [en]

This article addresses the growing industry of retail socially responsible investment (SRI) profiled mutual funds. Very few previous studies have examined the final consumer of SRI profiled mutual funds. Therefore, the purpose of this study was to, in an exploratory manner, examine the impact of a number of pro-social, financial performance, and socio-demographic variables on SRI behavior in order to explain why investors choose to invest different proportions of their investment portfolio in SRI profiled funds. An ordinal logistic regression analysis on 528 private investors revealed that two of the three pro-social variables had a positive impact on how much the consumer invested in SRI profiled funds. Moreover, there was proof of a non-altruistic motive for investing in SRI as consumers who perceive that financial return of SRI is equal or better than “regular” mutual funds, invested a greater proportion of their portfolio in SRI profiled mutual funds. Furthermore, the results showed that women and better-educated investors were more likely to invest a greater proportion of their investment portfolio in SRI. Overall, the findings indicate that both financial perceptions and pro-social attitudes are connected to consumer investment in SRI.

Place, publisher, year, edition, pages
Springer, 2008
Keyword
consumer investment behavior, mutual funds, private investors, pro-social attitudes, socially responsible investment
National Category
Economics and Business
Identifiers
urn:nbn:se:umu:diva-10936 (URN)10.1007/s10551-007-9621-z (DOI)
Available from: 2008-11-06 Created: 2008-11-06 Last updated: 2010-08-27Bibliographically approved
4. Determinants of customer satisfaction with socially responsible investments: The influence of ethical quality perceptions and perceived financial return
Open this publication in new window or tab >>Determinants of customer satisfaction with socially responsible investments: The influence of ethical quality perceptions and perceived financial return
2010 (English)Manuscript (preprint) (Other academic)
Abstract [en]

The availability and marketing of products and services positioned as socially or environmentally responsible has grown significantly during the last few decades. Much of the previous research within this area has focused on what leads customers to purchase products and services that fill certain social, ethical and environmental (SEE) criteria. However, while research has focused on the initiation and the actual purchase of these products and services, literature on how satisfied customers are after the purchase has largely been neglected. To address this gap in the literature, this study examines how a set of technical and functional quality attributes contribute to customer satisfaction in a socially responsible investment (SRI) setting. The results indicate that perceived financial performance of the SRI profiled mutual fund is the most important predictor of customer satisfaction. However, perceived social, ethical, and environmental performance also had a positive impact on satisfaction for the SRI mutual fund. Based on these results, it is argued that, although SEE quality is important to customers, marketers of SEE profiled products are advised to focus on the conventional quality attributes such as financial performance, as a good SEE record alone is unlikely to generate customer satisfaction.

Keyword
Customer satisfaction, perceived quality, socially responsible investment, mutual funds, financial performance
National Category
Business Administration
Research subject
Business Studies
Identifiers
urn:nbn:se:umu:diva-35606 (URN)
Available from: 2010-08-25 Created: 2010-08-25 Last updated: 2014-10-29Bibliographically approved

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