René Bekkers Corporate Social Responsibility, Corporate Philanthropy and Economic Performance 10 July ISTR Conference, Siena

Individuals and corporations 10 July 2012 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. 2 ISTR Conference, Siena

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. 10 July 2012 ISTR Conference, Siena 3

What’s the deal? 10 July ISTR Conference, Siena

Why do corporations act prosocially? 10 July 2012 The merchant banker acts according to Friedman’s principle that “The business of business is business”. How many corporations act like the merchant banker? In the Netherlands, few corporations actually have a CSR/CP policy, let alone a ‘rational’ one. CP is usually reactive rather than pro-active. 5 ISTR Conference, Siena

Philanthropy by corporations and households 10 July 2012 ISTR Conference, Siena 6

Volunteering by individuals and employees 10 July 2012 ISTR Conference, Siena 7

Corporate or individual philanthropy? 10 July 2012 ISTR Conference, Siena 8

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. 10 July 2012 ISTR Conference, Siena 9

Concepts Prosocial behavior CSRCPDirect Individual Philanthropy GivingVolunteering 10 July 2012 ISTR Conference, Siena 10

Elements Actions; Cost to actor; Benefit for others Actor: corporations Intermediary: Nonprofit organization Intermediary: none Actor: individuals Action: monetary gift Action: unpaid work 10 July 2012 ISTR Conference, Siena 11

Mechanisms driving 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. 10 July 2012 ISTR Conference, Siena 12

Eight Mechanisms 1. Awareness of need 2. Solicitation 3. Costs/benefits 4. Altruism 5. Reputation 6. Psychological benefits 7. Values 8. Efficacy 10 July 2012 ISTR Conference, Siena 13 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):

Hypothesis construction Syllogisms: L: General law C: Conditions H: Hypothesis 10 July 2012 ISTR Conference, Siena 14 Explanans Explanandum

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. 10 July 2012 ISTR Conference, Siena 15

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. 10 July 2012 ISTR Conference, Siena 16

Information through networks 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. 10 July 2012 ISTR Conference, Siena 17

Organizational networks 10 July 2012 ISTR Conference, Siena 18 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

Networks of organizations 10 July 2012 ISTR Conference, Siena 19 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

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. 10 July 2012 ISTR Conference, Siena 20

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. 10 July 2012 ISTR Conference, Siena 21

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. 10 July 2012 ISTR Conference, Siena 22

Reputation as a strategic advantage EP CSR / CP Reputation Employee performance Client loyalty EP 10 July 2012 ISTR Conference, Siena 23

Questions about reputation 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. 10 July 2012 ISTR Conference, Siena 24

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. 10 July 2012 ISTR Conference, Siena 25

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 10 July 2012 ISTR Conference, Siena 26

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). 10 July 2012 ISTR Conference, Siena 27

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. 10 July 2012 ISTR Conference, Siena 28

Thanks, says René Bekkers Head of Research Center for Philanthropic Studies VU University Amsterdam 10 July 2012 ISTR Conference, Siena 29