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ISTR Conference, Siena 10 July 2012

Individuals and corporations
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• 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 10 July 2012

The story today
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 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 10 July 2012

What’s the deal?
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ISTR Conference, Siena 10 July 2012

Why do corporations act prosocially?
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• 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.
ISTR Conference, Siena 10 July 2012

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

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

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

Definitions
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 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 July 2012

CP
ISTR Conference, Siena
CSR
Concepts
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Prosocial behavior
Direct
Individual
Philanthropy
Giving Volunteering
10 July 2012

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

Mechanisms driving CSR/CP activities
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 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 10 July 2012

4.
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Eight Mechanisms
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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 10 July 2012

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

Awareness of need
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 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 10 July 2012

Awareness of need
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 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 10 July 2012

Information through networks
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 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 10 July 2012

Organizational networks
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 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 10 July 2012

Networks of organizations
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 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 10 July 2012

Choice of recipients
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 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 10 July 2012

Costs and benefits
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 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 10 July 2012

Reputation
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 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 10 July 2012

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

Questions about reputation
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 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 10 July 2012

Testing, testing?
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 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 10 July 2012

Tools for a meta-analysis
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 Standardize effect sizes
 Data about sources: journal impact scores, peerreviewed, 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 10 July 2012

Stringent testing, please
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 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 10 July 2012

Even if…
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 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 10 July 2012

ISTR Conference, Siena
Thanks, says
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René Bekkers
Head of Research
Center for Philanthropic Studies
VU University Amsterdam r.bekkers@vu.nl
Twitter: @renebekkers http://renebekkers.wordpress.com
10 July 2012