Abstract
We examine corporate philanthropic decisions in response to the local spread of COVID-19. From a strategic perspective, firms may proactively undertake philanthropic efforts to limit the spread of the pandemic and avoid a degraded business environment. From the perspective of non-trivial costs, increased economic uncertainty can raise concerns about business survival and lead to conservative philanthropic strategies. Following the proverb “prosperity makes friends, adversity tries them,” at the provincial level, our results support the second perspective. Specifically, when the spread of the pandemic worsens in a province, local firms are less likely to make COVID-19-related donations in terms of likelihood and amount. Investors also react negatively, not only to the local spread of COVID-19 but also to COVID-19-related philanthropic donations. At the organizational level, our evidence indicates that there is at least some level of cost–benefit analysis underlying corporate philanthropic decisions. Specifically, corporate philanthropic donations, especially those made to the local business environment, are significantly affected by organizational-level factors, such as pre-existing resource availability and motives to acquire political and reputational resources. Overall, our multilevel study presents a comprehensive picture of corporate philanthropic decisions amid the COVID-19 crisis.
Highlights
The 2019 novel coronavirus outbreak (COVID-19 hereinafter) has led to a public health crisis and to a global economic crisis (World Bank 2020)
From this perspective, when the local business environment deteriorates, firms have an incentive to proactively allocate corporate resources to limit the spread of COVID-19 and to reduce the economic uncertainty induced by the pandemic
The results show that when the number of confirmed COVID-19 cases in the previous three days increases in a province, firms headquartered in this province are less likely to donate in terms of both likelihood and amount
Summary
The 2019 novel coronavirus outbreak (COVID-19 hereinafter) has led to a public health crisis and to a global economic crisis (World Bank 2020). As the quality of the business environment is important for a firm’s competitive advantage, corporate philanthropy can be viewed as an investment to improve the business environment even though it represents an outflow of economic resources (Porter and Kramer 2002; Gautier and Pache 2015) From this perspective, when the local business environment deteriorates, firms have an incentive to proactively allocate corporate resources to limit the spread of COVID-19 and to reduce the economic uncertainty induced by the pandemic.. From this perspective, when the local business environment deteriorates, firms have an incentive to proactively allocate corporate resources to limit the spread of COVID-19 and to reduce the economic uncertainty induced by the pandemic.2 While this strategic perspective predicts a positive corporate philanthropic response to the local spread of COVID-19, it may have underestimated the effect of the non-trivial costs imposed by adverse events (Godfrey et al 2009). The final section concludes the study and discusses its implications, contributions, and limitations, as well as outlines avenues for future research
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