Description of the Study

This paper studies philanthropic giving by multinational enterprises (MNEs) during severe, unexpected, and systemic breakdowns in economic institutions. We suggest that the key drivers of giving differ from widely accepted factors explaining philanthropy under stable institutional contexts. Our central argument is that, under institutional disruptions, MNEs aim to restore goods that are essential for market operation, such as infrastructure and labor markets, and the strength of this motive rises in the economic importance of the affected country to the MNE. We constructed the Global Database of Disaster Responses, which covers every reported monetary and in-kind donation to relief and recovery from firms, governments, multinational agencies, and non-governmental organizations reported in news media for all disasters that affected the world from 1990 to 2018. Analyses of donations from 2,000 MNEs from 63 countries in the aftermath of high-consequence epidemics, natural disasters, and terrorist attacks affecting 175 countries indicate that the economic importance of the country to the MNE substantially explains donation amounts. The degree of market concentration, public aid, and the country’s regulatory quality moderate this effect. The findings are robust to a vector of firm-, country-, and event-specific variables and alternative motives such as reputation, employee satisfaction, media salience, altruism, and poverty avoidance. Overall, the study offers evidence that company philanthropy under institutional disruptions deviates from predicted behavior under stable institutional contexts. Particularly, the findings contest the expectation that philanthropy grows in market competition. We find that monopolistic firms give the largest donations and may act as a stop-loss mechanism during large country catastrophes.
(Version of 1/31/20)
Keywords: institutional economics, institutional disruptions, grand challenges, philanthropy, multinational enterprises