Corporate philanthropy and firm performance: the role of corporate strategies

Abstract

Purpose The purpose of this study is to empirically explore the interaction between corporate philanthropy and firm performance through the mechanism of corporate strategies, such as unrelated diversification and global strategic posture (GSP). Design/methodology/approach A theoretical framework was developed based on institutional theory to argue that GSP can play an important mediating role in the relationship between corporate philanthropy and firm performance. PROCESS macro for SPSS and SAS to test a mediation was conducted using data from 115 publicly traded US firms between 2010 and 2017. Findings This study verified that GSP acts as an indirect mediator that influences the relationship between corporate philanthropy and firm performance. However, unrelated diversification was not found to be a mediator of that relationship. Research limitations/implications This study has extended the current understanding of institutional theory to explain the relationship between corporate philanthropy and corporate strategies. Practical implications This study helps to provide corporate managers with a promising notion that corporate philanthropy can help firms with market entry strategies. Originality/value This study helps to provide empirical evidence on the relationships among corporate philanthropy, corporate strategies and firm performance. Specifically, the finding of this study indicates strategic conditions under which the firm’s philanthropic efforts are more likely to influence firm performance.