When Does the Family Matter? Institutional pressures and corporate philanthropy in China

Abstract

This paper investigates whether family firms display corporate giving practices significantly different from nonfamily firms. Our two-stage model theorizes, and finds empirical support from a survey of 3,075 Chinese private firms, that firms sensitive to institutional pressures (as a result of firm visibility and political linkages) are more likely to engage in philanthropy (stage 1) and to donate larger amounts (stage 2). In stage 1, family and nonfamily firms display similar conforming behaviors, aimed at maintaining sociopolitical legitimacy. In stage 2, family ownership intensifies the effect of institutional pressures on firms’ philanthropic giving, as reputational motives overlay legitimacy concerns. Our study integrates institutional analyses of socially responsible practices and family business theories to yield insights on the role of the family variable as a key moderator of institutional effects.