Giving a Little to Many or a Lot to a Few? The Returns to Variety in Corporate Philanthropy
64 Pages Posted: 3 Nov 2018 Last revised: 3 Aug 2019
Date Written: July 29, 2019
We examine the returns to specialization versus variety in corporate philanthropy. While specialization — donating a lot to a few causes — may allow for greater effectiveness in giving, variety — donating a little to many causes — enables firms to serve a wider range of supporter preferences. We argue that the separation between the recipients and supporters of corporate philanthropy, combined with multiplicity of supporter interests, means that the benefits of variety will dominate. Consistent with our theory, results from uniquely detailed data on 725 US firms’ donation from 2003 to 2011 show a positive association between philanthropic variety and firm profitability that is weaker when donations are more observable and firms are under greater scrutiny, and stronger for more distinctive giving and giving by diversified firms.
Keywords: Corporate philanthropy, moral hazard, market for social goods, intra-industry product variety, strategic CSR
JEL Classification: M14, L25, D64
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