Introduction CEO Corporate Philanthropy

The literature reviewed so far suggests that CEOs, as the primary decision-makers of the

organization, think strategically about corporate philanthropy in order to enhance brand name

recognition, employee productivity, and overcome regulatory obstacles (Seifert et al., 2003;

Smith, 1994). In addition, the literature suggests that the relationship between CEOs and

corporate philanthropy has been on leadership (Barnard, 1996; Buchholtz et al., 1999; Saiia et

al., 2003), integrity (Godfrey, 2005; Wang & Choi, 2007), and demographic characteristics

(Marquis & Lee, 2013; Oppedisano, 2004).

Some scholars have proposed a theoretical link between CEO attributes and corporate

social activities (Freeman, 1984; Jenson, 2001). For example, managers should make decisions

so as to take account of the interests of all stakeholders in a firms and favorable social

performance is a requirement for business legitimacy, and tends to be positively associated over

the long term. Therefore, it is reasonable to expect that CEOs put more effort to maintain

favorable association with stakeholder groups. In the following section, four aspects of CEO

background characteristics (namely, founder status, functional background, civic engagement,

and education level) and corporate philanthropy will be discussed.

3.5.1 CEO Founder Status and Corporate Philanthropy

CEO founder status refers to whether or not the CEO is a founder or co-founder of the

firm. CEO founder status is an important executive attribute that has been shown to influence

both a firm’s strategic decisions and performance (e.g. Adams, Almeida & Ferreira, 2009;

Fahlenbrach, 2009). In this dissertation, I suggest that CEO founder status is positively related to

corporate philanthropy such that the level of corporate philanthropy by firms led by

founderCEOs is higher than the level of corporate philanthropy by firms led by non-founder

CEOs for the following reasons.

First, founder CEOs might have more freedom to determine a firm’s strategic choice than

non-founder CEOs so that they care about corporate philanthropy more. For example, recent

research suggests that founder CEOs can enjoy more freedom in making decisions and crafting

firm strategies than non-founder CEOs because founder CEOs are less likely to be constrained by

organizational routines (Wu et al., 2013). This is mainly due to their high credibility and social

capital that they amassed as the firm’s founders (Fischer & Pollock, 2004; Nelson, 2003). On the

other hand, non-founder CEOs may be constrained by highly developed organizational routines,

existing organizational decision-making processes (Peterson, Walumbwa, Byron & Myrowitz,

2008). Corporate philanthropy requires firms to allocate significant resources to various social

and community issues (causes) with which their businesses are connected.

Importantly, founder CEOs have more freedom than non-founder CEOs in making decisions

(e.g., resource allocation) such that founder CEOs are more likely to engage in corporate

philanthropy than non-founder CEOs.

Second, founder CEOs’ intrinsic bond with the firm can lead them to engage in corporate

philanthropy more than non-founder CEOs. It is generally accepted that founder CEOs’ interest

is directly connected with their firms so their intrinsic motivation is better motivated to affect

shareholders in a long term perspectives. Therefore, it might be anticipated that founder CEOs

have continuing commitment to places where their businesses are located in through corporate

philanthropy. In addition, founder CEOs’ commitment to ethics can be the driving force behind

the firm’s philanthropic policy. Past research suggests that it is particularly important to have

founder CEOs with a deep sense of commitment to the institution (e.g. corporate philanthropy)

because they can model ethical behaviors for their employees (Mackie, Taylor, Finegold, Daar &

Singer, 2006). The logic is that founder CEO’s concern in corporate philanthropy can boost

employee commitment and loyalty, which is invaluable asset to the firm.

Stewardship approach (O'Boyle, Rutherford & Pollack, 2010) infers that founder CEOs

having more commitment to the firm tend to give more effort to CSR for society as well as for

their organizations, which lead to a long-term value of their firms. Developed from stewardship

perspective, it can be suggested that founder CEOs are likely to have more commitment to their

firms so their interest is directly connected with the firm. Their intrinsic motivation can be

transferred to a high degree of discretion to engage in corporate philanthropy that meets various

stakeholders’ demands. On the other hand, non-founder CEOs are more likely to be obsessed by

managerial hubris so they may not have as much commitment to the firm as founder CEOs, and

thus they might neglect to pay attention to the continuing commitment to society (Arthurs &

Busenitz, 2003). Non-founder CEOs might give corporate fund to local, well-publicized causes

to advance their personal agenda to achieve prestige in a short term (Galaskiewicz, 1985) or

mitigate their managerial wrongdoing in past (Koehn & Ueng, 2010). Their purposes, however,

might not align with a firm’s giving purpose (e.g., a firm’s giving activities should benefit the

firm’s strategic position in a long term). Given the above arguments, I propose the following

hypothesis:

Hypothesis 1(H1): Firms led by founder CEOs have a higher level of corporate

philanthropy than those led by non-founder CEOs.

3.5.2 CEO Functional Background and Corporate Philanthropy

CEO functional background is an important executive characteristic that has been

extensively studied in the strategic leadership literature (e.g. Cho & Hambrick, 2006; Michel &

Hambrick, 1992; Smith, Smith, Olian, Sims, O’Bannon & Scully, 1994). Research in strategic

leadership literature has shown that executives’ dominant functional background (such as

marketing, engineering, R&D and Finance) influences the way they gather, analyze and interpret

business information which in turn bias their strategic decision-making (Carpenter et al., 2004;

Finkelstein & Hambrick, 1996). In this dissertation, I argue that the professional functional

background of CEOs plays a prominent role in determining the level of corporate philanthropy.

To the extent that corporate philanthropy constitutes a resource allocation decision, I propose that

CEO functional background will make CEOs more or less inclined to pursue aggressive

philanthropic engagements. Following the extensive research on UET, I specifically examine two

functional backgrounds, including output functional background and throughout functional

background, and their relationship with corporate philanthropy. Output functional backgrounds

refer to “executives’ dominant work experience in the areas of marketing, sales and product

R&D” while throughput functional backgrounds include “work experiences in the areas of

production, process engineering and accounting” (Hambrick & Mason, 1984, p. 199).

UET infers that a firm’s strategic choices can be seen as a reflection of the values and

cognitions of its CEOs and top management teams (TMT) and demographic and that observable

characteristics of executives (e.g. age, functional experience, and education) can often be used as

indicators of their cognitive (Hambrick & Mason, 1984; Manner, 2010). Upper echelons’

perspective has been on examining the relationship between the observable characteristics of the

top executives and various organizational outcomes (Barker & Mueller, 2002; Finkelsten &

Hambrick, 1990; Musteen et al., 2006). They argue is that CEO functional background can

reflect his or her perception of events in the external and internal environments as well as

influence strategic choice in organizations.

Notably, several scholars have attempted to examine the relationship between executive

functional backgrounds and CSR. For example, Thomas and Simerly (1994) suggest that

managerial attributes can be crucial determinants in which CEOs choose to satisfy an

organization’s social responsibilities and that different CEOs make different decisions based on

their own experiences (functional background) and values. Therefore, it can be said that

individualistic perception developed from functional background significantly reflects CSR

performance. In addition, Maon et al (2008) suggest that CEO perceptions about CSR might

reflect their functional orientation and field of managerial knowledge. Huang (2013) offers

empirical evidence that firms’ CSR performance (measured by the consistency of their CSR

rankings) is associated with CEO functional background. From this phenomenon, I suggest that

there is a certain relationship between CEO functional background and corporate philanthropy.

Specifically, output functional background and throughput functional background are examined

to further examine the relationship between CEO functional background and corporate

philanthropy.

Past research suggests that organizational strategies tend to be led by executives with

output functional backgrounds while firms that emphasize internal efficiency are led by

executives with throughput functional backgrounds (Thomas, Litschert, & Ramaswamy, 1991).

Output functional backgrounds would be more externally oriented functional backgrounds, such

as marketing, sales, merchandizing, product R&D, and entrepreneurship (Bigley & Wiersema,

2002; Thomas et al., 1991). Output functional backgrounds emphasize externally oriented

activities to meet new market trends and search for new domain opportunities, and include the

tracks of marketing. On the other hands, throughout functional backgrounds would be more

internally functional backgrounds, such as operations, production, accounting, and finance

(Bigley & Wiersema, 2002). Therefore, throughout functional backgrounds emphasize the

efficient transformation of inputs to outputs.

I propose that CEO functional background explains why some firms are more likely

engage in corporate philanthropy than other firms for the following reasons. First, it might be

that CEOs with output functional backgrounds are more in tune with the external market

environment and would be able to better recognize the multiple demands of their stakeholders

and multiple stakeholders’ concerns can be managed through firms’ social activities, such as

corporate philanthropy. The logic is that CEOs with a dominant marketing career might have

managed a wide range of stakeholder groups as opposed to those with a dominant accounting or

internal operations career. Therefore, CEOs with output functional backgrounds can have more

opportunities in recognizing the relationship between stakeholders and corporate philanthropy.

Second, CEOs with output functional backgrounds (e.g., marketing, sales, and R&D) can

support new ways of expanding market and operating notions of a corporation’s role in

competitive business context as well as in society. Corporate philanthropy can boost reputation

assets in the new market and strengthen marketing and branding initiatives (Ricks Jr, 2005). As

such, CEOs with output functional background will more likely engage in corporate

philanthropy. On the other hands, CEOs with throughput functional backgrounds would be more

task-oriented (Simerly, 2003) so they may not as sensitive to the needs of stakeholders both

within and outside their organizations. For example, CEOs with a dominant functional

background in throughput functions may specifically resort to established rules, regulations and

procedures. They are less likely to be willing to broaden or deepen a firm’s commitment to

corporate social performance (Slater & Dixon-Fowler, 2009). Therefore, as opposed to CEOs

with output functional backgrounds, CEOs with throughout functional backgrounds will less

likely to engage in corporate philanthropy. Given the above arguments, I propose the following

hypothesis:

Hypothesis 2 (H2): Firms led by CEOs with output functional backgrounds have a higher

level of corporate philanthropy compared to those led by CEOs with throughput functional

backgrounds.

3.5.3 CEO Civic Engagement and Corporate Philanthropy

Civic engagement refers to “the ways in which citizens participate in the life of a

community in order to improve conditions for others and to help shape the community’s future”

(Adler & Goggin, 2005, p. 236). Following this definition, I define CEO civic engagement as the

participation of a CEO through interactions with various individual and organizational entities

(such as public, for-profit and non-profit institutions and business establishments) to improve the

economic and social circumstances of the community at large. Civic engagement can be

described in several ways (Adler & Goggin, 2005; Ekman & Amnå, 2012) depending on its

purposes of being served, including 1) the sense of personal responsibility individuals feel to

uphold their obligations to actively participate in volunteer service activities that strengthen the

local community, 2) collaboration with others in a variety of venues (joint activity and pursing

community issues) through work in all sectors, influencing the larger civil society, and 3)

collective action in solving problems through political process. In sum, it can be said that civic

engagement means working to make a difference in the civic life of the communities and

developing the combination of knowledge, skills, values, and motivation to make that difference.

I believe that CEOs participate in civic engagement in order to influence and control over

priority setting, policy making, resource allocations and access to public goods and services. In

this dissertation, I suggest that there is a significant relationship between CEO civic engagement

and corporate philanthropy for the following reasons.

First, firms are aware that giving back to the community on a corporate level can be a big

boost for their businesses and they tend to incorporate civic engagement and social responsibility

into their company culture. For example, it has been suggested that firms interpret CSR focusing

on the important role of civic engagement for the purpose of achieving business legitimacy

(Palazzo & Scherer, 2006). Consistent with this trend, it is suggested that CEOs emphasize the

importance of civic engagement on the firm. For instance, Chairman and CEO Patrick Brandt

expresses in Business News Daily that civic engagement creates bonds among employees,

encourage a value-based company culture, increase the overall morale of the organization, and

benefit to the firm itself (Fallon, 2014). Second, civic engagement helps contribute to the social,

economic development of the local community in which their firms seek to operate. In this sense,

CEOs attempt to participate in civic affairs as part of their strategic mission. Doing so could be

motivated by a desire to create the local community development and a more stable political

environment that ensures the profitability of their business.

Extending this line of argument, it can be said that CEOs who engage in civic

associations in a variety settings are more likely to engage in corporate philanthropy in order to

achieve business legitimacy as well as develop local community in which their firms seek to

operate. In an effort to coopt labor or local politicians, CEOs can make philanthropic initiative to

community improvement projects through civic engagement in the city where their firm’s plant

or facility is located in. This is because CEOs believe that addressing specific needs of civic

engagement can make corporate philanthropy more effective. From this, it can be said that CEOs

actively participate in civic engagement in order to maximize the impact of philanthropic

expenditures. Given the above arguments, I propose the following hypothesis:

Hypothesis 3 (H3): There is a positive relationship between the level of CEO civic

engagement and the level of corporate philanthropy.

3.5.4 CEO Education Background and Corporate Philanthropy

Using the upper echelons theory (UET) approach, past research has suggested that

observable CEO characteristics influence selective perception, interpretations, decision making,

and ultimate, firm outcomes (Hambrick & Mason, 1984; Simerly, 2003; Slater & Dixon-Fowler,

2009). Extending this line of argument, I suggest that there is a certain relationship between CEO

education level and corporate philanthropy. To further support this relationship, I categorize CEO

educational background into the level and type of education. In this dissertation, the level of

education refers to the number of years of formal education the CEO received (e.g. 12 years for

high school, 16 for Bachelors, and etc.) while the type of education refers to the nature of the

CEO’s education (i.e. business vs. other types of educational training).

Past research has suggested that individuals with higher education are more likely to be

donors and to engage more in philanthropic activities (Harvey, 1990; Jones & Posnett, 1991).

Why are the educated more likely to engage in philanthropy? This is presumably because the

better educated are more likely to have wider mental horizons and broader societal concern that

caused them to recognize the value of charities concerned with the external environment

(Bennett, 2012). Therefore, it can be argued that a person’s education background plays an

important role in influencing corporate philanthropy. Several scholars suggest that education

background has been an indicator of executives’ knowledge and skill in strategic management

(Bantel & Jackson, 1989; Hambrick & Mason, 1984). They typically equate attained education

level with attributes, such as cognitive ability, tolerance for ambiguity, and propensity to

innovation. For example, Bantel and Jackson (1989) found that more innovative firms tend to

have more highly educated top managers. Extending this line of argument, it is anticipated that

firms emphasize and value education attainment in selecting CEOs so that CEOs having higher

education background can implement competitive strategies (including high R&D, innovation,

and market expansion). Specifically, CEOs having higher education level could have impact on

corporate philanthropy which can be used as a means to open new markets and as part of long-

term competitiveness. Given the above arguments, I propose the following hypothesis:

Hypothesis 4a (H4a): The level of CEO formal education is positively related to the level

of corporate philanthropy.

In addition to the level of CEO education background, I suggest that there is a certain

relationship between CEO education type and corporate philanthropy. Classical economic theory

suggests that business organizations have sole purpose – profit seeking, and that this purpose is

best served through internally generated skill and efficiency skills (O’Neill, Saunders &

McCarthy, 1989). Extending this line of argument, it can be that CEOs who earned business

related degrees (e.g., an MBA) might be less willing to manage various stakeholders’ issues by

engaging in CSR activities. For example, it has been suggested that people with business related

education are more likely than others to free-ride, keep more resource to them, donate less to

charity, and make choices that benefit themselves (Ferraro, Pfeffer & Sutton, 2005). Thus, CEOs

who earned business related degrees (e.g., an MBA) are more likely to behave in a

selfcenteredness manner and therefore are less likely to engage in corporate philanthropy.

However, there are different arguments against traditional economic perspectives for the

following reasons. First, since the high profile CEO scandals and unethical behaviors in the last

decade (including Enron, WorldCom and Tyco), corporate social activities have been recognized

as a core business mission in Corporate America. Second, when social issues are discussed in

business school, it is not the normative or altruistic perspective being taught, but rather the

business case that profits can be gained from engaging in socially responsible activities

(Giacalone & Thompson, 2006). For example, research found that business education

significantly enhances students’ belief that a firm’s social concerns and economic responsibility

is an important element of firm performance (Neubaum, Pagell, Drexler, McKee-Ryan & Larson,

2009). Extending this line of argument, it is anticipated that CEOs having an MBA can be more

aware of the business case related to social issues so they can make a rational choice to pursue

philanthropic initiatives in an effort to enhance profits. Therefore, CEOs with business related

education (with an MBA) might actively seek out and take advantage of any opportunity to

enhance business profits for their firm by engaging in corporate philanthropy. Given the above

arguments, I propose the following hypothesis:

Hypothesis 4b (H4b): The level of corporate philanthropy by firms led by CEOs with

business related education (with an MBA) is significantly higher than those firms led by CEOs

without business-related education (without an MBA).

Alternatively, it might be anticipated that CEOs with technical education (e.g. science or

engineering degree) are less likely to engage in corporate philanthropy. Barker and Mueller

(2002) suggest that CEOs with those degrees have a more understanding of technology so that

they would be more likely to favor high levels of R&D spending. They might increase

philanthropic expenditure if they are confident that philanthropic engagement benefits their

businesses only. However, corporate philanthropy requires firms to allocate their resources to

social issues/causes which might not directly related to firm’s business objectives to some extent.

Engagement in corporate philanthropy once might not incur a positive image to the firm (if it

does, it might happen once). The effect of corporate philanthropy on the firm takes time. In

addition, CEOs having technical education might not actively respond to a firm’s philanthropic

engagement because they prefer to use more rationalized approach when implementing a firm’s

strategic decisions, including a firm’s philanthropic initiatives. Given the above arguments, I

propose the following hypothesis:

Hypothesis 4c (H4c): The level of corporate philanthropy by firms led by CEOs with a

technical education (such as science and engineering) is significantly lower than those firms led

by CEOs without a technical education.

In sum, it can be argued that understanding CEO background characteristics (founder

status, functional background, civic engagement, and education level) can explain why some

firms engage in corporate philanthropy more than others. Next section, I will explore the role of

firm age on CEO background characteristics and corporate philanthropy.

3.6 The Moderating Effect of Firm Age

The previous section suggests that there is a certain relationship between CEO

background characteristics (founder status, functional backgrounds, civic engagement, and

education level) and the level of corporate philanthropy. I anticipate that CEOs might have a

significant impact on corporate philanthropy and such impact might be restrained as a firm

grows. In addition, the relationship between firm age and corporate philanthropy is still

underdeveloped. To examine this phenomenon, I first look at the relationship between firm age

and corporate philanthropy. And then, I specifically examine the moderating role of firm age. I

think that the extent to which CEOs background characteristics influence corporate philanthropy

might vary depending on firm age. Specifically, I propose that firm age moderates the

relationship between CEO background characteristics and corporate philanthropy for the

following reasons.

Benefits of engaging in corporate philanthropy vary depending on firm age. Older firms

are often well-known, and have greater visibility (Brammer & Millington, 2006) so that they are

more likely to experience of investing in philanthropy. Older firms have a more formalized

structure, processes and decision-making processes in general (Mintzberg, 1983) and corporate

philanthropy is part of formalized corporate strategic plans. Extending this line of argument, it is

plausible that as firms mature, they are more likely to depend on formal and pubic instruments

when engaging in corporate philanthropy as opposed to younger firms. In addition, older firms

might be required to commit more philanthropic expenditures from various stakeholders and the

larger institutional environment. As firms mature, their “reputation and history on involvement in

social responsible activities can become entrenched" (Roberts, 1992, P. 605) because of raising

stakeholder expectations about corporate community involvement and sponsorship. As opposed

to younger firms, older firms may be obligated to engage in various types of commitments (e.g.

philanthropic endeavors to community development). Past research has suggested that firm age

might be significant in explaining placement of corporate philanthropy (Logsdon et al., 1990).

Some scholars have argued that older firms are expected to be more likely to have long-term

sponsorships with nonprofit organizations and charities, resulting in larger level of giving, on

average, than younger firms (Chen et al., 2008; Marquis & Lee, 2013).

Despite the overall positive influence of firm age on corporate philanthropy, I anticipate

that firm age might reduce the relationship between CEO background characteristics and

corporate philanthropy for the following reasons. First, older firms tend to become increasingly

complex and inflexible so that firm age may be an important indicator of reduced executive

discretion (Finkelstein et al., 2009). In other words, older firms may have organizational inertia

(e.g. a resistance to change) so that CEOs in mature firms might be forced to operate under

severe inertial constraints. Therefore, the impact of the individual CEO on strategic decisions

might be weaker as a firm matures because of the restricted managerial discretion he or she is

given. Miller (1991) suggests that CEOs in older firms might be less powerful than the ones in

younger firms. Extending this line of argument, it can be suggested that the influence of the

individual CEO on corporate philanthropy might be weaker as a firm matures. Second, past

research has suggested that the focus for older firms shifts from growth to stability, just

maintaining the current firm’s market position so that they tend to make strategic plans toward

stable and predictable rather than uncertain environments (Burns & Stalker, 1961; Dodge,

Fullerton &Robbins, 1994), and focusing on cost leadership (Porter, 1980). Particularly, old firms

tend to have more formalized internal governance structures, including investors, board of

directors, and top management teams. Extending this line of argument, it can be suggested that as

a firm matures, CEOs may not enjoy a complete authority to allocate firm resources to worthy

societal causes in the long term. If any philanthropic initiatives championed by CEOs are not

related to only the firm’s current market position and business operation, the extent of their

choice might be restricted by others (such as board of directors, top management teams, and

investors). Given the above arguments, I propose the following hypothesis:

Hypothesis 5 (H5): Firm age negatively moderates the relationship between CEO

background characteristics and corporate philanthropy such that these relationships are weaker

for older firms.

Specifically, I propose the following hypotheses with corresponding explanations. It

might be suggested that the influence of founder CEOs on a strategic choice will be less for older

firms than younger ones. Swiercz and Lydon (2002) argue that as a firm matures, founder CEOs

are more likely to be replaced by a professional manager (e.g. investors’ demand for removal of

the founding CEO). The logic would be that investors and stockholders want professional CEOs

to have more efficient leadership in the short term as a firm matures. Therefore, founder CEOs

engagement in philanthropy in the long term might not be preferable as a firm matures.

Hypothesis 5a (H5a): Firm age negatively moderates the relationship between CEO

founder status and corporate philanthropy.

It is suggested that older firms tend to focus on minimizing the cost of capital while

making sure that they have enough financial resources to run their operations (Custódio &

Metzger, 2014). For example, older firms tend to hire financial experts who can plan optimal

level, less investment in R&D. Extending this line of argument, it might be anticipated that CEOs

whose functional background is not related to finance might experience limiting their discretion

on corporate philanthropy as a firm matures.

Hypothesis 5b (H5b): Firm age negatively moderates the relationship between CEO

functional background and corporate philanthropy.

Despite the popularity of engaging in civic activities among older firms (e.g. it might be

preferable to employee voluntary actions), a CEO participation in civic activities in specific

platforms (e.g. political and religious reasons) might not be as powerful in older firms. The logic

would be that there might be a mismatch between a CEO’s preference on civic engagement and a

firm’s overall civic engagement in older firms, in particular.

Hypothesis 5c (H5c): Firm age negatively moderates the relationship between the level of

CEO civic engagement and the level of corporate philanthropy such that this relationship is

weaker for older firms.

Similar to the overall logic in H5 above, it is important to mention again that firms are

less flexible and have organizational inertia that reduces CEO discretion (i.g. latitude of action)

(Finkelstein et al., 2009). Although there seems to be no relationship between firm age and CEO

education level, I propose that a CEO educational level-corporate philanthropy relationship will

decrease with firm age. Past research suggests that CEOs engage in corporate philanthropy more

as they complete more formal education (Neubaum et al., 2009). However, their action might be

restricted while their firms get older and more decision-making parties, such as the board and

powerful stakeholders, are involved. Such environment surrounding older firms can limit the

CEO’s educational level-corporate philanthropy relationship.

Hypothesis 5d1 (H5d1): Firm age negatively moderates the relationship between the level

of CEO formal education and the level of corporate philanthropy.

Hypothesis 5d2 (H5d2): Firm age negatively moderates the relationship between the level

of corporate philanthropy and firms led by CEOs with business related education (with an MBA).

Hypothesis 5d3 (H5d3): Firm age negatively moderates the relationship between the level

of corporate philanthropy and firms led by CEOs with technical education (such as science and

engineering).

In sum, it can be suggested that the relationship between CEO background characteristics

and corporate philanthropy can vary depending on firm age. In the next section, I will explore the

role of two corporate strategies (including unrelated diversification and global strategic posture)

on corporate philanthropy and firm performance. In doing so, I will specifically examine the link

between corporate philanthropy and two corporate strategies, which in turn, influencing firm

performance.

3.7 Corporate Philanthropy & Firm Diversification Profile

In this section, I will specifically discuss how philanthropy boosts firm performance

through unrelated diversification and global strategic posture. Despite some pessimistic

perspectives on the relationship between corporate philanthropy and firm performance, the

predominant discussion has supported that corporate philanthropy can generate more positive

stakeholder responses which influence a firm’s financial performance (Brammer & Millington,

2005; Godfrey, 2005; Lev et al., 2010; Wang & Qian, 2011). Notably, it has been suggested that

when firms launch diversification strategy, they experience various challenges (social, legal, and

regulatory) which result in various stakeholder pressures (Brammer et al., 2006). These

challenges increase more when firms launch unrelated diversification (e.g., the local government

pressures, competitors’ intervene, and various stakeholder expectations) and when firms expand

their businesses in foreign market as part of internationalization strategy (Sharfman et al., 2004).

In addition, it has been suggested that firms engage in corporate philanthropy as a means of

reducing these challenges and boosting reputation so that they can maintain a firm’s position of

power and business legitimacy from various stakeholders (Li et al., 2014).

Developed from literature reviewed above, I suggest that there will be a certain role of

unrelated diversification and global strategic posture on corporate philanthropy and firm

performance. Such attempt, I believe, can offer a rationale behind how corporate philanthropy

enhances firm performance through business strategies and, in addition, helps justify the notion,

“Corporate philanthropy can become strategic if it is aligned with strategic goals” (McAlister &

Ferrell, 2002, p. 690).

Some scholars have proposed a theoretical link between CEO attributes and corporate

social activities (Freeman, 1984; Jenson, 2001). For example, managers should make decisions