Institutional Disruptions and the Philanthropy of Multinational Firms

Luis Ballesteros (George Washington University)
Catherine Magelssen (London Business School)

Abstract : This paper studies philanthropy by multinational enterprises (MNEs) during sudden, unexpected, and systemic breakdowns in economic institutions. We suggest that the drivers of this behavior differ from motives explaining philanthropy to chronic conditions under stable institutional contexts. The central argument is that, under institutional disruptions, MNEs aim to restore goods that are essential for market operation, such as infrastructure and labor markets, and the strength of this motive rises in the economic importance of the affected country to the MNE. We constructed the Global Database of Disaster Responses covering every monetary and in-kind donation reported in news media to relief and recovery from firms, governments, multinational agencies, and non-governmental organizations for all disasters that affected the world in the last 30 years. Analyses of donations from 2,000 MNEs headquartered in 63 countries in the aftermath of high-consequence epidemics, natural disasters, and terrorist attacks affecting 125 countries suggest that the economic importance of the country strongly explained donations. Market concentration, public aid, and the country’s regulatory quality moderated this effect. These associations are robust to a matching method, a vector of firm-, country-, and event-specific variables, and alternative motives such as reputation, altruism, media salience, market standing, and poverty-gap avoidance. They offer evidence that company philanthropy in the aftermath of institutional disruptions may deviate from predicted behavior under stability. Particularly, the findings contest the expectation that philanthropy rises in market competition. We find that monopolistic firms are comparatively large donors and may act as a stop-loss mechanism during large country disruptions.

The Assessment Paradox: Practices Dissemination and Impact Evaluation

Fernando D. Domingos (Insper)
Bertrand V. Quelin (HEC Paris)
Sandro Cabral (Insper)
Sergio G. Lazzarini (Insper)

Abstract : Strategy scholars have investigated how cross-sector collaborations (CSCs) promote value creation generating positive externalities to private, nonprofit, and public domains. CSCs commonly promote these externalities through dissemination of practices beyond the primary targets. However, there has been scant attention to inherent tensions that may emerge when CSC partners would like to promote such dissemination and at the same time measure the performance of collaborative efforts. This tension creates what we refer to as the assessment paradox in the context of CSCs. Arguably, allowing for practices dissemination beyond the target units may severely distort the assessment of causal impact if they also increase the performance of untargeted units serving as control groups. To scrutinize the assessment paradox, we develop a set of hypotheses that are tested in the context of a CSC in the Brazilian educational sector. Our econometric analyses confirm our hypothesized mechanism that the learning-side partner (public managers) may have been able to disseminate knowledge beyond the scope of primary collaboration, even without additional external aid by the transferring-side partner (private/nonprofit). We further investigate heterogeneities related to schools’ traits and social networks moderating the effect of knowledge dissemination.

Desert Places: Cooperatives As Infrastructure Providers in Marginalized Areas

Hyoju Jeong (University of Minnesota)
Aseem Kaul (University of Minnesota)
Jiao Luo (University of Minnesota)

Abstract : In this study, we examine the comparative advantage of cooperatives relative to for-profit firms in infrastructure provision. We argue that infrastructure projects generate positive local externalities for the communities in which they are located, and that cooperatives, being able to internalize these benefits, may be willing to provide higher quality infrastructure than for-profits, especially in marginalized communities where the costs of provision are high relative to revenues. We test and find support for this argument in US internet broadband provision from 2014 to 2017, showing that cooperatives are more likely to provide internet in communities where for-profits offer only poor quality service, with these effects being stronger in rural communities, communities with persistent poverty, and communities with high social cohesion.

Shareholders and Stakeholders Around the World: the Role of Values, Culture, and Law in Directors’ Decisions

Amir N. Licht (Interdisciplinary Center Herzliya)
Renee B. Adams (University of Oxford)

Abstract : This study sets out to examine the relative importance of legal and cultural institutions and of personal values in directors’ discretion. We present evidence on the way personal and institutional factors could together guide public company directors in decision-making concerning shareholders and stakeholders. In a sample comprising more than nine hundred directors from over fifty countries of origin, we confirm that directors around the world hold a principled, quasi-ideological stance towards shareholders and stakeholders, called shareholderism. We theorize and find that in addition to personal values, directors’ shareholderism level associates with cultural norms that are consistent with entrepreneurship. Among legal factors, only creditor protection exhibits a negative correlation with shareholderism, while general legal origin and proxies for shareholder and employee protection are unrelated to it.