Corporate Social Responsibility, Corporate Philanthropy and Economic Performance

1. Corporate Social Responsibility, Corporate Philanthropy and Economic Performance René Bekkers ISTR Conference, Siena

2. Individuals and corporations • My research thus far has concentrated on philanthropy and volunteering by individuals and households. • It is an old prejudice of mine that corporations are more rational than individuals. • This belief has eroded in the past years. ISTR Conference, Siena

3. The story today • Is an application of theories developed for individual philanthropy to the behavior of corporations. • Let’s name the animals, get things organized. • Comments are very welcome. • No tables today. ISTR Conference, Siena

4. What’s the deal? ISTR Conference, Siena

5. Why do corporations act prosocially? • The merchantbanker acts according to Friedman’sprinciplethat “The business of business is business”. • Howmanycorporations act like the merchantbanker? • In the Netherlands, few corporationsactually have a CSR/CP policy, let alone a ‘rational’ one. • CP is usuallyreactiveratherthanpro-active. ISTR Conference, Siena

6. Philanthropybycorporations and households ISTR Conference, Siena

7. Volunteeringbyindividuals and employees ISTR Conference, Siena

8. Corporateorindividualphilanthropy? ISTR Conference, Siena

9. Definitions • CSR: direct contributions of corporations that help produce public goods or avoid public bads. • CP: indirect contributions of corporations that help produce public goods or avoid public bads through an intermediary organization – usually a nonprofit organization. ISTR Conference, Siena

10. Concepts ISTR Conference, Siena

11. Elements ISTR Conference, Siena

12. Mechanismsdriving CSR/CP activities • Perhaps the mechanisms that drive individual philanthropy are not so different from the mechanisms that drive CSR and CP activities. • 85% of donation acts by individuals occurs in response to direct solicitations. • 83% of corporations has no systematic policy with respect to philanthropy. ISTR Conference, Siena

13. EightMechanisms • Awareness of need • Solicitation • Costs/benefits • Altruism • Reputation • Psychological benefits • Values • Efficacy Bekkers, R. & Wiepking, P. (2011). A Literature Review of Empirical Studies of Philanthropy: Eight Mechanisms That Drive Charitable Giving. Nonprofit & Voluntary Sector Quarterly, 40 (5): 924-973. ISTR Conference, Siena

14. Hypothesis construction • Syllogisms: L: General law C: Conditions H: Hypothesis Explanans Explanandum ISTR Conference, Siena

15. Awareness of need • General law: Actors that are more aware of societal needs are more strongly engaged in philanthropy. • Condition: Firms with a larger workforce are more aware of societal needs. • Hypothesis: Firms with a larger workforce are more strongly engaged in philanthropy. ISTR Conference, Siena

16. Awareness of need • The same general law: Actors that are more aware of societal needs will be more strongly engaged in philanthropy. • Another condition: Firms with a more diverse workforce are more aware of societal needs. • Another hypothesis: Firms with a more diverse workforce are more strongly engaged in philanthropy. ISTR Conference, Siena

17. Informationthroughnetworks • Awareness of need is information about societal needs channeled and modified from potential recipients through social networks to potential helpers. • Nonprofit organizations intermediate between recipients and potential donors, giving recipients a voice, or advocating a cause when there are no recipients or victims who can speak for themselves. ISTR Conference, Siena

18. Organizationalnetworks • Organizations are connected to • Each other, • At the organizational level through: • Formal ties: joint ventures, alliances, memberships in branch organizations • At the individual level through: • Formal ties: memberships in unions and professional organizations • Informal ties: the ‘old boys network’ of CEOs and management executives, the networks of lower level employees ISTR Conference, Siena

19. Networks of organizations • Organizations are connected to • Recipients, • At the organizational level, • Formally through ties with nonprofit organizations and with clients (being recipients) • At the individual level, • Formally through employees’ participation in nonprofit organizations as volunteers or donors • Informally through employees’ ties to individual recipients ISTR Conference, Siena

20. Choice of recipients • To understand how and explain why corporations choose certain recipients for their CSR/CP activities, we need to know the composition of corporate networks. • Networks not only generate awareness of need by channeling information, but also generate solicitations and reputational advantage. ISTR Conference, Siena

21. Costs and benefits • L: The lower the costs of CSR/CP activities, the more strongly corporations are engaged in them. • C: Tax incentives lower the costs of CSR/CP activities. • H: The stronger the tax incentives for CSR/CP activities, the more strongly corporations are engaged in them. • C: Sponsoring yields more benefits than donating. • H. Corporations are more likely to sponsor than to donate. ISTR Conference, Siena

22. Reputation • The reputation mechanism refers to the social rewards of CSR and CP activities. • L: The higher the social rewards for CSR/CP activities, the more strongly corporations are engaged in them. • C: CSR/CP activities that are publicized to clients and employees yield more social rewards. • H: Corporations that publicize CSR/CP activities are more strongly engaged in CSR/CP. ISTR Conference, Siena

23. Reputation as a strategicadvantage ISTR Conference, Siena

24. Questionsaboutreputation • In which conditions and for which corporations does publication of CSR/CP activities generate higher reputational advantages? • When the costs are higher and benefits are smaller. • For firms in more competitive markets for clients and employees. • For firms that produce credence goods posing a trust problem to clients. ISTR Conference, Siena

25. Testing, testing? • The literature on CSR/CP is enormous: ‘Corporate Philanthropy’ yields 11,000 hits on Google Scholar; ‘Corporate Social Responsibility’ yields 117,000 hits. • Meta question: To what extent are the findings of previous research consistent with the hypotheses about the mechanisms driving CSR/CP activities? • Another literature review is required to answer this. ISTR Conference, Siena

26. Tools for a meta-analysis • Standardize effect sizes • Data about sources: journal impact scores, peer-reviewed, year of publication • Data about data: country, sector, sample size, measures, experimental, cross-sectional, longitudinal • Data about models: covariates, censoring, fixed effects ISTR Conference, Siena

27. Stringent testing, please • Corporations that expect higher benefits from CSR/CP activities will be more strongly engaged. • These expectations depend in part on previous economic performance. • Longitudinal panel data and appropriate statistical models are required to detect potential feedback loops (e.g., EP  CSR  EP). ISTR Conference, Siena

28. Even if… • Most of the literature on CSR/CP is correlational. • Causality or even the timing of events cannot be inferred. • Correlational data include an EPCSR/CP effect in the CSR/CP  effect estimate. • Hypothesis: the more stringent the statistical model applied to the data, the weaker the estimated effect of CSR/CP on EP. ISTR Conference, Siena

29. Thanks, says René Bekkers Head of Research Center for Philanthropic Studies VU University Amsterdam r.bekkers@vu.nl Twitter: @renebekkers http://renebekkers.wordpress.com ISTR Conference, Siena