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Theoretical Development of Corporate Charitable Giving
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Corporate charitable giving refers to the unconditional provision of funds or materials by companies to governments or related institutions in a voluntary and non-reciprocal manner to solve social problems such as poverty, education, natural disasters and public health. Corporate charitable giving not only brings strategic resources and information channels needed for enterprise innovation, but also helps companies enhance their moral capital, improve their brand image and increase their political legitimacy.

corporate social responsibility corporate charitable giving theoretical framework enterprise innovation
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Subjects: Management
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View Times: 81
Revisions: 4 times (View History)
Update Date: 06 Dec 2022
Table of Contents

    1. Introduction

    Corporate philanthropy as a business practice has been on the rise since the early 1950s, when companies mainly made cash donations to nonprofit organizations through foundations, as an effective way to demonstrate their social responsibility (Eells, 1958; Honer, 1955) [1][2]. In the 1970s and 1980s, globalization led to a trend of increased corporate mobility, which had a negative impact on the long-term relationship between companies and the workforce. Companies begin to explore the use of corporate philanthropy to restore these labor relations (Kasper and Fulton, 2006) [3]. Since the early 1990s, companies have turned to charitable giving as a response to stakeholder demands for corporate social engagement (Marinetto, 1999) [4], and to using philanthropic initiatives to advance business interests through strategic alliances with marketing, government affairs, research and development, and human-resources functions (Porter and Kramer, 2002) [5]. Over the past few years, companies have increasingly turned to corporate philanthropy as a valuable strategy to increase their competitive advantage.
    With the growing interest in corporate charitable giving among industry and academia, there is a substantial body of literature on corporate philanthropy motivation. A number of studies on the motivation of charitable giving and its impact on financial performance have yielded rich results (Porter and Kramer, 2002; J. L. Campbell, 2007; Godfrey, 2005) [5][6][7]. In the complex and changing economic environment, the improvement of innovation performance is a manifestation of the enhanced technological strength of enterprises. Due to the scarcity of resources and the limitation of technology, the resources needed for enterprise innovation often cannot be obtained on their own, so external resource supplement and policy support is crucial. The essence of corporate profit-maximization determines that the motivation of corporate charitable giving is to obtain resource compensation, reduce government regulation and obtain better political resources. However, most of the existing literature always focuses on the determinants of corporate charitable giving and the motivations for giving, while few scholars relate the impact of charitable giving to the associated economic consequences. Whether charitable giving occurs out of altruism or strategic decision-making, it can lead to a mutual exchange of resources that can boost innovation. A general overview of research on corporate-charitable-giving motives is shown in Table 1.
    Table 1. A General Review of Research on Corporate-Charitable-Giving Motivations.

    2. The Altruism of Corporate Charitable Giving

    The altruistic model of corporate philanthropy (Sharfman, 1994; Useem, 1988) [9][10] is considered to be a non-strategic interpretation of corporate giving. According to this theory, companies use social standards as the basis for correct, good and just social action. Firms engage in altruistic philanthropy with the single goal of helping others, so philanthropy is considered independent of the operational pressures that generate profits. As previous researchers have pointed out (Shaw and Post, 1993) [12], there is an ethical element to the decision to engage in corporate philanthropy that cannot be ignored. Previous research has found that corporate philanthropy can be driven by factors such as the sense of aesthetic pleasure (File and Prince, 1998) [14] or altruism (Campbell et al., 1999) [15]. Firms have an obligation to engage in corporate philanthropy, rather than out of any self-interested financial considerations (Shaw and Post, 1993) [12]. In sum, there is a substantial body of literature that reveals the decision to engage in philanthropy is driven by moral obligation.

    As Sharfman (1994) [10] has pointed out in the altruistic model, the essence of philanthropy is ethical. Thus, managers have an ethical responsibility to allocate the firm’s resources in a way that promotes the overall welfare of society, regardless of whether these actions lead to specific results, such as increased profits or an enhanced image. Choi and Wang (2007) [17] asserted that corporate philanthropy may be the result of top management’s values of benevolence and integrity. In addition to economic reasons, pro-social behavior theorists claim that managers’ behavior is also motivated by ethical norms, which is a strong reason for corporate giving (Valor, 2006) [16]. From this perspective, the motivation for corporate charitable giving can be categorized as altruistic. Despite its noble goals, the altruistic model itself is often not a strong explanation for corporate philanthropy, even in the most diverse societies, because it ignores the profit-maximization goals and other strategic objectives of corporations (Neiheisel, 1994) [13].

    3. The Strategic Nature of Corporate Charitable Giving

    At the level of strategic nature, corporate philanthropy is strategically motivated by the intent to contribute to direct monetary benefits, in the same way as any other corporate function. From a strategic perspective, corporate philanthropy can be further divided into economic or political dimensions (Neiheisel, 1994; Young and Burlingame, 1996) [13][21]. The economics of strategic philanthropy suggests that firms engage in philanthropic activities as a means of improving the financial performance of their organizations (Sanchez, 2000) [23], while the political view is that firms engage in corporate philanthropy because of the political and institutional pressure exerted on them by key environmental actors (Neiheisel, 1994) [13].

    Based on the previous research, the strategic motivation of corporate philanthropy can be explained from the following two perspectives. Firstly, increased global competition requires firms to build a competitive advantage through various channels. Corporate philanthropy can help firms gain brand recognition and loyalty, promoting themselves as “socially responsible” firms. Secondly, the elimination of government agencies and cuts to state budgets that previously supported the arts and social services have stimulated the growth of voluntary agencies and private foundations. As government support dwindles, a growing number of private voluntary organizations are trying to raise money from private firms. In turn, these firms set up foundations to pass on these requests.

    In the research on corporate charitable giving, a number of studies have focused on the impact of charitable giving on corporate value, financial performance, and other factors as a means of enhancing corporate value. When charitable giving is taken as part of marketing related to firms, it is usually directly related to the improvement of corporate performance. Some scholars argue that corporate philanthropy has a positive impact on corporate financial performance because decisions about charitable giving can strategically enhance a firm’s image and reputation (Godfrey, 2005; Porter and Kramer, 2002) [5][7]. At the same time, corporate charitable giving often serves as a means for firms to reduce the risks associated with resource acquisition from the perspective of resource dependence (Haley, 1991) [20].

    Furthermore, firms also try to create a positive social image through charitable giving to mitigate or offset negative social impact in other areas. For instance, Williams and Barrett (2000) [24] examined the impact of corporate-charitable-giving programs on the association between the number of corporate violations of EPA (Environmental Protection Agency) and OSHA (Occupational Safety and Health Administration) regulations and their public image, and found that while corporate violations of environmental and labor regulations can reduce their public image, charitable giving can reduce the extent of the decline. Therefore, contrary to the CSR perspective (Carroll, 1991) [32], firms may increase charitable giving to maintain their positive social image, rather than devote resources to correcting negative social impact in other areas.

    References

    1. Eells, R. Corporate giving: Theory and policy. Calif. Manag. Rev. 1958, 1, 37–46.
    2. Horner, J.E. The Development of Corporate Giving to Private Higher Education: With Special Reference to the Rise and Growth of State and Regional College Foundations, Including the Ohio Foundation of Independent Colleges. Ph.D. Thesis, Electronic Thesis or Dissertation. The Ohio State University, Columbus, OH, USA, 1955.
    3. Kasper, G.; Fulton, K. The Future of Corporate Philanthropy: A Framework for Understanding Your Options; Monitor Institute Cambridge: Cambridge, UK, 2006.
    4. Marinetto, M. The historical development of business philanthropy: Social responsibility in the new corporate economy. Bus. His. 1999, 41, 1–20.
    5. Porter, M.E.; Kramer, M.R. The competitive advantage of corporate philanthropy. Harv. Bus. Rev. 2002, 80, 56–68.
    6. Campbell, D.; Slack, R. The Influence of mutual status on rates of corporate charitable contributions. J. Bus. Ethics 2007, 74, 191–200.
    7. Godfrey, P.C. The relationship between corporate philanthropy and shareholder wealth: A risk management perspective. Acad. Manag. Rev. 2005, 30, 777–798.
    8. Cowton, C.J. Corporate Philanthropy in the United Kingdom. J. Bus. Ethics 1987, 6, 553–558.
    9. Useem, M. Market and institutional factors in corporate contributions. Calif. Manag. Rev. 1998, 30, 77–88.
    10. Sharfman, M. Changing institutional rules: The evolution of corporate philanthropy, 1883–1953. Bus. Soc. 1994, 33, 236–269.
    11. Andreoni, J. Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence. J. Polit. Econ. 1989, 97, 1447–1458.
    12. Shaw, B.; Post, F.R. A moral basis for corporate philanthropy. J. Bus. Ethics 1993, 12, 745–751.
    13. Neiheisel, S.R. Corporate Strategy and the Politics of Goodwill: A Political Analysis of Corporate Philanthropy in America; Peter Lang: New York, NY, USA, 1994.
    14. File, K.M.; Prince, R.A. Cause related marketing and corporate philanthropy in the privately held enterprise. J. Bus. Ethics 1998, 17, 1529–1539.
    15. Campbell, L.; Gulas, C.S.; Gruca, T.S. Corporate giving behavior and decision-maker social consciousness. J. Bus. Ethics 1999, 19, 375–383.
    16. Valor, C. Why do managers give? Applying pro-social behaviour theory to understand firm giving. Int. Rev. Public Nonprofit Mark. 2006, 3, 17–28.
    17. Choi, J.; Wang, H. The promise of a managerial values approach to corporate philanthropy. J. Bus. Ethics 2007, 75, 345–359.
    18. Mescon, T.S.; Tilson, D.J. Corporate Philanthropy: A Strategic Approach to the Bottom-Line. Calif. Manag. Rev. 1987, 29, 49–61.
    19. Navarro, P. Why do corporations give to charity? J. Bus. Ethics 1988, 61, 65–93.
    20. Haley, U.C.V. Corporate contributions as managerial masques: Reframing corporate contributions as strategies to influence society. J. Manag. Stud. 1991, 28, 485–510.
    21. Young, D.R.; Burlingame, D.F. Paradigm lost: Research toward a new understanding of corporate philanthropy. In Corporate Philanthropy at the Crossroads; Indiana University Press: Bloomington, IN, USA, 1996; pp. 158–176.
    22. Collins, M. Corporate Philanthropy—Potential Threat or Opportunity? Bus. Ethics Eur. Rev. 1995, 4, 102–108.
    23. Sanchez, C.M. Motives for corporate philanthropy in El Salvador: Altruism and political legitimacy. J. Bus. Ethics 2000, 27, 363–375.
    24. Williams, R.J.; Barrett, J.D. Corporate philanthropy, criminal activity, and firm reputation: Is there a link? J. Bus. Ethics 2000, 26, 341–350.
    25. Saiia, D.H.; Carroll, A.B.; Buchholtz, A.K. Philanthropy as strategy: When corporate charity “begins at home”. Bus Soc. 2003, 42, 169–201.
    26. Patten, D.M. Does the Market Value Corporate Philanthropy? Evidence from the Response to the 2004 Tsunami Relief Effort. J. Bus. Ethics 2008, 81, 599–607.
    27. Gao, F.; Faff, R.; Navissi, F. Corporate Philanthropy: Insights from the 2008 Wenchuan Earthquake in China. Pac.-Basin Finance J. 2012, 20, 363–377.
    28. Masulis, R.W.; Reza, S.W. Agency Problems of Corporate Philanthropy. Rev. Financ. Stud. 2015, 28, 592–636.
    29. Xu, L.; Zhang, S.; Xu, P.; Liu, N.; Zhao, G.; Zhao, L. A Concealed Wrongdoing of Corporate Philanthropy: Evidence from China. Volunt. Int. J. Volunt. Nonprofit Organ. 2017, 28, 721–744.
    30. Oh, W.-Y.; Chang, Y.K.; Lee, G.; Seo, J. Intragroup Transactions, Corporate Governance, and Corporate Philanthropy in Korean Business Groups. J. Bus. Ethics 2018, 153, 1031–1049.
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    32. Carroll, A.B. The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Bus. Horiz. 1991, 34, 39–48.
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    View Times: 81
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    Update Date: 06 Dec 2022
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      Xu, L.; Guo, X.; Liu, Y.; Sun, X.; Ji, J. Theoretical Development of Corporate Charitable Giving. Encyclopedia. Available online: https://encyclopedia.pub/entry/37708 (accessed on 03 February 2023).
      Xu L, Guo X, Liu Y, Sun X, Ji J. Theoretical Development of Corporate Charitable Giving. Encyclopedia. Available at: https://encyclopedia.pub/entry/37708. Accessed February 03, 2023.
      Xu, Lei, Xiaoning Guo, Yan Liu, Xiaochen Sun, Jie Ji. "Theoretical Development of Corporate Charitable Giving," Encyclopedia, https://encyclopedia.pub/entry/37708 (accessed February 03, 2023).
      Xu, L., Guo, X., Liu, Y., Sun, X., & Ji, J. (2022, December 02). Theoretical Development of Corporate Charitable Giving. In Encyclopedia. https://encyclopedia.pub/entry/37708
      Xu, Lei, et al. ''Theoretical Development of Corporate Charitable Giving.'' Encyclopedia. Web. 02 December, 2022.
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