Who Gives Back? Evidence from India on Successful Entrepreneurial Exit and Involvement in Philanthropy

Abstract

Although successful commercial entrepreneurship has beneficial consequences for the economy, it is unclear whether it is unequivocally good for broader society. We shed light on this macro-issue by delving into a specific micro-pathway linking commercial entrepreneurship with positive spillover effects for broader society. We ask which commercial entrepreneurs who have experienced economic success through a financial exit event from their for-profit venture engage in philanthropy – defined as systematically stimulating, supporting and shaping social change efforts - after exit. Utilizing the status characteristics framework, we conceptualize how hierarchical positions on ascribed social status characteristics (caste and gender in our setting) and achieved social status characteristics (elite-ness of Indian tertiary educational attainment and overseas tertiary educational attainment in our setting) regulate successful commercial entrepreneurs’ subsequent involvement in philanthropy. We argue that successful commercial entrepreneurs from disadvantaged ascribed-status groups or privileged achieved-status groups are more likely to transition to philanthropic activities because they more keenly perceive the need for societal change and are also more motivated to take action. Quantitative analyses on a sample of 673 Indian entrepreneurs who experienced a successful financial exit from their for-profit venture during 2003 – 2013, supplemented by qualitative interviews support our theorizing. We advance management research by highlighting founder transitions from successful commercial entrepreneurship to philanthropy as a hitherto under-studied mechanism driving positive social change. We thus open-up new research avenues around the less-studied exit stage of entrepreneurship that allows for the integration of currently unconnected literatures around corporate philanthropy, elites, entrepreneurship and social impact.

Keywords: Entrepreneurship, Organization and Management Theory, Social Responsibility, Economic Sociology, Leadership