Giving a Little to Many or a Lot to a Few? The Returns to Variety in Corporate Philanthropy
52 Pages Posted: 3 Nov 2018 Last revised: 23 Apr 2021
Date Written: April 21, 2021
We examine the returns to specialization versus variety in corporate philanthropy. Acknowledging the theoretical rationale for both a specialist and a generalist approach to philanthropy, we took a question-driven, abductive approach and found a robust positive association between philanthropic variety and firm profitability for donations by large US public corporations from 2003 to 2011. This association held for variety across causes but not within causes, for non-local giving and for giving by diversified firms, and was weaker for firms whose donations faced greater scrutiny. These findings are consistent with a moral hazard explanation whereby firms take advantage of the relatively inelastic support for philanthropy within a cause area by strategically spreading their donations across a wide range of supporter interests, thus maximizing profits.
Keywords: Corporate philanthropy, moral hazard, market for social goods, strategic CSR, abductive approach
JEL Classification: M14, L25, D64
Suggested Citation: Suggested Citation