Acquired Philanthropist: Research on Charitable Donation of Family Business in the Context of Succession

Abstract

The intrinsic relationship between intergenerational succession and charitable donation has drawn attention in family business research, but few studies care about the motive of “family” dimension. Therefore, it’s hard to deeply understand the strategic motivation behind the charitable donation of family firms. Based on the background of the inheritance of Chinese family business, this paper expands the motive of charitable donation of family business from the “social-firm” dimension to the “family” dimension. Thus, we propose several hypotheses of the family’s motivation for intergenerational inheritance of charitable donation in the view of family strategy and socioemotional wealth. We examine the hypotheses by analyzing the data of 620 listed Chinese family firms from 2004 to 2017 and get the following results.On the basis of controlling other relevant variables, we find that family firms with second generation involvement generally donate more than those without second generations, and firms exhibit an increasing trend in philanthropic donation after second generations join the business operation. The empirical results verify the family’s motivation for sustainable development strategy through philanthropic donation and reveal that family business with second generations involved is eager to cultivate family harmony, family identity and other social emotional wealth that will stir up higher motivation for charitable donation.Further research shows that the relationship between second generation involvement and charitable donation will be stronger when family ownership is higher, which indicates the heterogeneity in the motivations and abilities of family business to cultivate socioemotional wealth through charitable donation during the succession period. Family firms with higher family ownership are more inclined to cultivate socioemotional endowment through philanthropic donation and create a favorable family environment for the second generation. Finally, this paper also finds that when more family members of the second generation involved in the business during co-governance period of the first and second generations, the family are more generous to cultivate socioemotional wealth such as family harmony and family identity through charitable donation.This paper reveals that the “family” as a social organization has strong potential for charitable donation in the process of intergenerational inheritance. The conclusion of the study is not only helpful to deepen the understanding of intergenerational succession and charitable donation in family business, but also useful for people to comprehend the family motivation of sustainable development strategy in Chinese family firms.