Giving across Borders: Philanthropy or Business as Usual?

A large literature has examined the antecedents and consequences of charitable giving by corporations, but the results have been mostly inconclusive. One reason for the mixed empirical findings is that, when measured at the firm level, both the factors associated with charitable giving and the actual level of giving can be driven by the same set of unobserved firm characteristics. This study overcomes that problem by leveraging institutional differences across countries and focusing on within-firm variations in charitable giving. In particular, we examine whether overseas giving by U.S. firms is affected by local institutional environments and by firms’ local business interests, given firm characteristics. We find that multinational enterprises (MNEs) are more likely to donate to charities in a country plagued by an ineffective and corrupt government, suggesting that MNEs use charitable giving to navigate opaque business environments. Furthermore, we find that corporations are more likely to make cross-border donations when they are new entrants to the host country—hence having stronger need to reduce information asymmetry—and when their operations require stronger connections with local stakeholders. Our results are consistent with the view that MNEs engaged in corporate philanthropy are doing good for the purpose of doing well.