Better late than never? Corporate social responsibility engagement after product-harm crises

Abstract

This study investigates whether corporate philanthropy is used as a countermeasure after product-harm crises in China, as a prime example of an emerging/transitional economy. From the lens of legitimacy theory, we argue that corporations may increase their post-crisis philanthropic giving for social legitimacy repair. By a difference-in-differences (DiD) design, we find significant increases in post-crisis philanthropic giving by corporations involved in product-harm crises. The positive relationship between philanthropic giving and product-harm crises is more pronounced for corporations with higher demand for social legitimacy repair (e.g. non-state-owned enterprises and corporations with scattered customer bases). We find that corporations’ philanthropic engagement in fact contributes to regaining support from customers and suppliers. Overall, we provide a perspective emphasizing the strategic significance of social legitimacy in the view of managers and extend the literature about legitimacy management, crisis management, and the drivers of corporate philanthropy. Our findings also suggest practical implications regarding crisis management and legitimacy repair for corporate managers.