Institutional Disruptions and the Philanthropy of Multinational Firms
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.
