Associate Professor of Economics Abigail Hornstein, together with Minyuan Zhao of The Wharton School, University of Pennsylvania, has coauthored an article on corporate philanthropy published in the Aug. 1 issue of Strategic Management Journal.
Corporate philanthropy has long been recognized as an important part of multinational strategy, but little is known about how it is allocated across different countries. Using data from a sample of more than 200 U.S.-based corporate foundations from 1993 to 2008, Hornstein and Zhao examined how foundation giving is associated with the funding firm’s need to navigate the local business environments.
They found that foundations give more in countries characterized by weak rule of law and high levels of corruption, as well as when funding firms have newly-established subsidiaries or a stronger need to connect with local stakeholders. Donations to countries with weak institutions are more likely to go through international intermediaries to avoid potential liabilities. The results are consistent with the view that corporate foundations support corporate diplomacy and help obtain the social license to operate in the host countries.