Description of the Study

This paper studies philanthropy by multinational enterprises (MNEs) during institutional disruptions—the sudden and unexpected, temporary, and systemic breakdowns in economic institutions. The central argument is that, under institutional disruptions, MNEs aim to restore factors that are essential for market functioning, such as infrastructure and labor markets, and the strength of this motive rises in the economic importance of the affected country to the MNE. Analyses of donations from 2,000 MNEs headquartered in 63 countries in the aftermath of 265 major epidemics, natural disasters, and terrorist attacks affecting 129 countries suggest that the economic importance of the country to the firm strongly explains donations. Market concentration, public aid, and the country’s regulatory quality moderate this effect. These associations are robust to a matching method, a vector of firm-, country-, and event-specific time-varying and -constant variables, and confounders such as reputation, altruism, media salience, and market standing. They offer evidence that company philanthropy in the aftermath of institutional disruptions may deviate from predicted behavior under stable conditions. The results 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 during large disruptions.

Keywords: institutional economics, institutional disruptions, grand challenges, philanthropy, multinational enterprises