Political dependence, social scrutiny, and corporate philanthropy: Evidence from disaster relief

• Author: Yongqiang Gao,Taïeb Hafsi
• DOI: http://doi.org/10.1111/beer.12144
• Date: 01 April 2017
• Published date: 01 April 2017

ORIGINAL ARTICLE

Political dependence, social scrutiny, and corporate

philanthropy: Evidence from disaster relief

Yongqiang Gao

1

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Taïeb Hafsi

2

1

School of Management, Huazhong

University of Science & Technology, Wuhan

430074, P. R. China

2

HEC, University of Montreal, 3000 C^

ote

Ste-Catherine, Montreal, QC H3T 2A7,

Canada

Correspondence

Yongqiang Gao, School of Management,

Huazhong University of Science &

Technology, Wuhan 430074, P. R. China.

Email: yqgao@hust.edu.cn

Funding information

National Natural Science Foundation of

China (NSFC), Grant/Award Numbers

71372131 and 71531009

Abstract

This study explores whyand how firms respond to social demands throughphilanthropic giving in

the context of a severe natural disaster. Drawing on Marquis and Qian’s organizational response

model to governmentsignals, we integrate resource dependence theory and institutional theory to

build a two-step model of organizational response to social needs, in situations of disaster relief.

We argue that firms depending more on the government for support are more likely to donate in

disaster relief,while firms who receive more scrutiny from the governmentand the general public

and firms having more slack resources are likely to donate more. Evidence from Chinese listed

companies’donations to the 2008 Sichuan earthquake largely supportsour predictions. This study

provides a more preciseunderstanding of the corporatephilanthropic decision process,decoupling

the drivers of philanthropic giving, andthose determining the amount given.Theoretical and prac-

tical implicationsare suggested.

1

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INTRODUCTION

Corporate philanthropy (CP) is a dominant corporate response to social

needs. Givingmoney or gifts to social or charitable causes, suchas edu-

cation, the arts,health care, and disaster relief (Godfrey, 2005; Wang &

Qian, 2011), has receivedmuch attention from business academia dur-

ing the past decades. Popular wisdom suggests that “doing good leads

to doing better”(e.g., Gardberg & Fombrun, 2006; Saiia, 2002; Sen &

Bhattacharya, 2001), but empiricalinvestigations suggest that the rela-

tionship between CP and financial performance is less straightforward

(e.g., Griffin & Mahon, 1997; Peloza, 2009). Some scholars argue that

CP does not necessarily increase a firm’sfinancial performance, but

acts as a strategic response to institutional pressures or expectations

(e.g., Brammer,Millington, & Pavelin, 2006; Gao,2011; Husted & Allen,

2006; Oliver, 1991; Sethi, 2003). As such, it is seen as a means to

increase the firm’s legitimacy and the likelihood of its long-term sur-

vival (DiMaggio& Powell, 1983; Scott, 1992).

If CP is a strategy for firms to demonstrate theirconcerns for social

expectations and legitimacy, an important question is: Which firms are

more likely to conduct CP? Further, among those firms giving, why do

some contribute little andthus conduct CP symbolically while othersdo

so substantially? Our reading of the CP literature suggests that these

questions have generally been overlooked, although there have been

attempts to discuss the moral and ethical justifications of corporate

social responsibility (see BEER 2011 special issue and, in particular, La

Cour & Kromann, 2011). Usually the decisions of whether to give or

not and how much to give are lumped together and treated as if they

were the same. There is very little attention to the process by which

giving decisions are made.The underlying assumption is thusthat when

managers makethe decision to give, they also make the decision about

the amount to give. We propose that it is more likely to see managers

make the decision of givingor not first, pe rhaps in relation to the ir need

for legitimacy. Then, otherconsiderations developedlater lead to decid-

ing about the amountto give. Factors affecting the decision to give are

different fromthose driving the decisionabout the amount to give.

In this study, following the lead of Marquis and Qian (2014), we

build a two-step decision model of firms’response to social needs

through CP. We argue that facing social demands, firms will first make

the decision of whether to give or not. In particular, firms depending

more on the government for political legitimacy and support are more

likely to give. This is particularly the case in countries where the gov-

ernment plays a significant role in providing political legitimacy and

scarce resources (e.g., land grant, subsidies). Further we argue that,

contrary to a generalizedimplicit assumption that whether to give and

how much are the same decision, they are distinct. Whether firms

donate little, thus showing only basic symbolic compliance, or donate

substantially more, is related to the level of scrutiny they are under

from the public (Marquis & Qian, 2014; Oliver, 1991) and to the

resources thatthey have available for social goals.This two-step model

of CP decisionis illustrated in Figure 1.

BusinessEthics: A Eur Rev. 2017;26:189–203 wileyonlinelibrary.com/journal/beer V

C2017 JohnWiley & Sons Ltd

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189

Received:18 December 2015

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Revised: 26 February2016

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Accepted:19 December 2016

DOI 10.1111/beer.12144