Introduction The Link between Corporate Philanthropy and Organizational Strategy

Businesses are increasingly facing conflicting demands from the public on the one hand

demanding higher levels of CSR while shareholders on the other hand demanding the highest

return on their investments. Specifically, when Friedman (1970) declared that the firm’s only

social responsibility is to meet the interests of shareholders, it provided a compelling reference

point for all discussions of CSR (Sasse & Trahan, 2007). However, firms have come to realize

significant gains by making CSR strategic and not merely an altruistic CSR initiative. For

example, large corporations such as AT&T and Coca-Cola have started to match corporate

giving activities as part of CSR directly to business goals and objectives since the early 1990s

(McAlister & Ferrell, 2002). Thus, there has been a growing interest to uncover the relationship

between corporate philanthropy and corporate strategies. Smith (1994, p. 105) has summarized

the core arguments for the relationship as follows:

“Philanthropic and business units have joined forces to develop giving strategies

that increase their name recognition among consumers, boost employee

productivity, reduce R&D costs, overcome regulatory obstacles, and foster synergy

among business unit…the strategic use of philanthropy has begun to give

companies a powerful competitive edge.”

Indeed, corporate philanthropy can “only be strategic, if it fully aligns with the values,

core competencies and long-term plans of an organization” (McAlister & Ferrell, 2002, p. 690).

In other words, firms engage in corporate philanthropy in order to align economic expectations

with social obligations. Several scholars have argued that firms engage in their charitable giving

to improve their competitive context-the quality of the business environment in the locations

where they operate (Fioravante, 2010; Porter & Kramer, 2002). In addition, Smith (1994)

suggested that corporate philanthropy promises to be most effective for U.S. firms

internationally, particularly in emerging markets, where even small grant programs can have

large impact. Therefore, to examine the link between corporate philanthropy and organizational

strategies, it is important to look at how corporate philanthropy meets business objectivities.

This attempt can answer the notion that scholars (Maas & Liket, 2011; Porter & Kramer, 2002;

Sasse & Trahan, 2007) are interested in finding, “Is philanthropy becoming more strategic in its

orientation?”

Some scholars have indicated that corporate philanthropy can improve the ability to

attract and maintain high quality workforce. For example, Ricks & Williams (2005) argued that

effective philanthropic programs help a number of large U.S. corporations such as 3M attracts

highly-trained front line employees to their organizations. Similarly, Smith (1994) pointed out

that a number of large established corporations (e.g. IBM, AT&T) encourage their employees to

proactively participate in designing and managing the firm’s overall philanthropic activities by

rewarding volunteerism and choice in societal causes. More recent studies are examining the

importance of developing clear guidelines and approaches in measuring the impacts of corporate

philanthropy. For instance, Brammer and Millington (2006) argue that as giving activities appear

governed by formal budgeting processes and plans, corporate philanthropy directly involve main

board-level company representatives, employ specialist managers, or are managed through

externally-oriented business functions. Maas & Liket (2011), in their analysis of more than 500

firms in the Dow Jones Sustainability Index, found that a majority of them (62-76%) have

acknowledged using some type of measure of philanthropic impact on business goals and

stakeholder satisfaction.

Despite of the importance of corporate philanthropy as part of organizational strategies,

only a few studies have offered a deeper analysis. For example, in a survey of 226 U.S.

corporations, Marx (1999) noted that developing new markets and expanding new markets were

cited by 47.9% and 50.5% of the respondents respectively as important business goals for their

strategic philanthropic programs. He concluded that charitable giving made directly by

corporations are primarily used in less tangible ways to meet their responsibilities to employees

and communities. In addition, Gautier and Pache (2015, p. 12) argue that one of the challenges

for corporate philanthropy is to “find its place within the firm’s overall strategy, since it

represents a cost center, only indirectly adding to its profit, and thus commonly exposed to

budget cuts in difficult times.” Furthermore, Porter and Kramer (2002) argue that philanthropic

practices are diffused and unfocused so they are disconnected from the firm’s core business.

In sum, the literature reviewed suggested that that firms strive to integrate business

objectives and strategies with societal obligations by engaging in corporate philanthropy.

Proponents of corporate philanthropy consider it as a reasonable compromise between the

profitcentered and altruistic perspectives of business purpose. However, the concern, “Is

philanthropy becoming more strategic in its orientation?” has not been fully addressed by the

scholarly

literature.

2.5 A Contingency View of Corporate Philanthropy

During the past three decades, corporate philanthropy has developed into a vital

component of corporate strategic management and, with greater emphasis on maximizing a

return for the charitable giving (Brammer & Millington, 2006; McAlister & Ferrell 2002;

Mescon & Tilson, 1987; Porter & Kramer, 2002; Xueying, 2012). Specifically, corporate

philanthropy is part of a firm’s strategic decisions determined by organizational leaders (Wood,

1991; Godfrey, 2005) and their strategic choices could be influenced by various circumstances.

Therefore, it can be suggested that factors specific to each situation that firms face can influence

the extent to which firms engage in corporate philanthropy. Several contingency factors have

been extensively discussed in studies of corporate philanthropy (Buchholtz et al., 1999; Dennis

et at., 2009; Lev et al., 2010; Luo, 2005; Wang et al, 2008; Wang & Qian, 2011). Their main

concern is, “under what situations are firms more likely to engage in corporate philanthropy?” In

this section, I will look at major contingency factors, including moderating and mediating

variables that may influence corporate philanthropy.

Managerial discretion can function as a mediator that influences corporate philanthropy.

A firm’s philanthropic giving can provide an opportunity for CEOs to influence the image they

present to important stakeholders, thereby advancing their own interests For example, Haley

(1991) using Agency theory perspective found that the level of managerial discretion is a factor

in influencing philanthropic decisions. Buchholtz et al (1999) also found that CEO discretion

mediates the relationship between firm resources and corporate philanthropy. Second, customer

satisfaction can function as a mediator that influences the extent of corporate philanthropy.

Corporate philanthropy can enable firms to attract and retain customers, ultimately leading to

increased revenue. For instance, Lev et al (2010) using U.S. publicly firms found that customer

satisfaction mediates the relationship between corporate giving and sales (e.g., charitable

contributions by consumer-focused firms enhance sales growth). Third, a firm’s CSR reputation

can be an important mediator that explains whether the influence of corporate philanthropy on

firm performance would increase. Muller and Kräussl (2011) using U.S firms found that a

reputation for social irresponsibility is associated with the greatest drop in stock prices. Their

findings are consistent with Godfrey, Merrill and Hansen’s (2009) that the insurance value of

reputation through corporate philanthropy comes from committing fewer bad deeds, including

lower levels of negative social impact.

Three levels of moderating variables have been explored in studies of corporate

philanthropy: individual-level, firm-level, and industry-level. It has been suggested that

individual-level moderators, including gender and political connections, can influence the extent

to which firms engage in corporate philanthropy (Li et al., 2014; Wang & Qian, 2011; Williams,

2003). Williams (2003) using a sample of 185 Fortune firms found that firms having a higher

proportion of female serving on their boards engage in charitable giving to a greater extent than

firms having a lower proportion of female serving on their boards. Past research suggests that a

major benefit from charitable giving may be to enhance the reputations of firms who have

engaged in and to mitigate their involvement in certain illegal acts (Williams & Barrett, 2000).

Therefore, the fact that female directors may have a higher propensity toward giving should not

be viewed as neglecting the economic needs of the firm (e.g., having more female directors on

boards can be regarded as a firm’s strategically-driven philanthropy). In addition, recent studies

have argued that CEO political connections are regarded as a key factor that shape a firm’s

philanthropic activities in emerging economies where political interference is still prevalent (Li

et al., 2014; Wang & Qian, 2011). Their empirical evidence suggests that CEOs strategically use

corporate philanthropy as a means of gaining legitimacy in the eyes of the government and

benefits (such as bank loans and access to factor or capital resources). Accordingly, the level of a

firm’s philanthropic engagement can depend on whether CEOs have a political connection.

In addition, some scholars (Chiu & Sharfman, 2009; Dennis et al., 2009; Seifert et al.,

2004; Wang & Qian, 2011) have focused on firm-level moderators (such as organizational slack,

past performance, advertising intensity, and firm size). Organizational slack can be an important

factor that influences the extent of corporate philanthropy. Since CSR activities, including

corporate philanthropy, rely on firms’ allocation of resources to meet both social and economic

objectives (Chiu & Sharfman, 2009), firms with more slack resources are more likely to engage

in corporate philanthropy than those with little. For example, Dennis et al (2009) found that the

higher slack resources firms have, the more likely they engage in higher levels of corporate

giving. Second, as similar arguments on organizational slack, past performance can be

considered as an important constraint on corporate philanthropy. It is suggested that firms that

perform better can have more financial resources that can allow them to engage in corporate

philanthropy more. Dooley and Lerner (1994) argue that firm performance influences the extent

to which CEOs are concerned with the expectations of stakeholders. It has also been suggested

that members of the public expect better performing firms to contribute more to society (Wang

& Qian, 2011). Third, firms that do increase advertising intensity strategically are more likely to

benefit more from their corporate philanthropy. For instance, past research found that firms with

large advertising expenses will tend to have higher likelihood of giving and to donate larger

amounts (Wang & Qian, 2011; Zhang et al., 2010). Fourth, larger firms are more likely to

engage in corporate philanthropy. Since larger firms have more resources and may enjoy

economies of scale and scope, firm size has been shown to be affecting corporate philanthropy

(Seifert et al., 2003).

Furthermore, some scholars (Amato & Amato, 2012; Wang et al., 2008; Wang & Qian,

2011) have focused on industry-level moderators (such as industry competition, environmental

dynamism, and market development). They argue that the extent to which firms engage in

corporate philanthropy can be influenced by business cycle, industry (environmental)

dynamism, and the level of market development. For example, Amato & Amato (2012) using 36

industry groupings found no relationship between business cycle and charitable giving. They

argue that more spending on marketing and corporate philanthropy may better position retailers

in consumers’ minds when the economy turns around. To enhance customer loyalty, it might be

better to engage in corporate philanthropy during economic downturns (Amato & Amato, 2012).

Second, corporate philanthropy plays a crucial role in securing critical resources (stakeholder

support) under industry dynamism. Given the differences in the environment from industry to

industry, firms are more exposed to unexpected events with negative consequences. When firms

experience such events, stakeholders are more likely to withdraw their loyalty with the firm

(Wang et al., 2008). Gaining a positive public image resulting from corporate philanthropy can

help firms overcome these negative consequences (Godfrey, 2005). Third, market development

functions an important constraint on corporate philanthropy so firms strategically allocate

charitable resources to more developed markets. Wang and Qian (2011) suggest that

stakeholders in developed markets evaluate the firm’s charitable contributions more promptly.

This is because “firms located in “relatively developed markets are more transparent and thus

obtain higher visibility among the public and stakeholders” (Wang & Qian, p. 1163).

In sum, several contingency factors can influence the extent to which firms engage in

corporate philanthropy. For example, managerial discretion, customer satisfaction, and CSR

reputation can function as mediators. In addition, individual-level (gender and political

connections), firm-level (organizational slack, past performance, advertising intensity, and firm

size), and industry-level (industry competition, environmental dynamism, and market

development) can function as moderators that influence corporate philanthropy. Table 4 below

shows a contingency view of corporate philanthropy.

Table 4: A Contingency View of Corporate Philanthropy

Studies

Orientation

Focus

Moderators

Mediators

Key findings/Arguments

Amato &

Amato

(2012)

Empirical Industry

groupings

Business cycle There is no relationship between the business cycle and

charitable giving. Thus, giving proves to be resilient to

downward economic trends.

Buchholtz et

al (1999)

Empirical

CEOs and top

management

team

Managerial

discretion

The amount of managerial discretion would be a crucial

factor in philanthropic decision of CEOs. E.g., CEO

discretion mediates the relationship between firm resources

and corporate philanthropy.

Dennis et al

(2009)

Empirical

CEOs

Organizational

slack

Firm levels of corporate philanthropy influenced by the

extent to which the CEO upholds an identity of

philanthropy increase when the amount of slack resources is

high.

Edmondson

& Carroll

(1999)

Empirical Black-owned

U.S. firms

Community

engagement CEOs invest in philanthropic expenditures more when they

are linked with various types of community development

programs (e.g. youth activities and environmental

protection).

Hall (2006)

Conceptual

Consumer

awareness

Firms emphasize corporate philanthropy-community

relationship as legitimate business functions. The strength

of the relationship between corporate philanthropy and

community relationship increases with consumer awareness

of corporate philanthropy.

Jamali (2007) Conceptual Local

community

development

Firms invest in community philanthropic programs (local

community investment) through the creation of various

community training centers. Such efforts fulfill the needs of

different stakeholders, in fact influencing firm performance.

Lev et al

(2010)

Empirical U.S. publicly

firms

Customer

satisfaction

Charitable contributions by consumer-focused firms that

are highly sensitive to customer perception enhance sales

growth.

Li et al

(2014)

Empirical Chinese firms CEO political

connections

Political connections affect corporate philanthropic

behaviors and compared to state-owned firms, non-

stateowned firms are in greater need of political legitimacy

and benefit more from political connections.

Muller &

Kräuss

(2011)

Empirical U.S Fortune

firms

CSR

Reputation

Reputation for social irresponsibility was associated with

both the greatest drop in stock prices and the greatest

likelihood of making a subsequent charitable donation in

response to the disaster.

Turban &

Greening

(1997)

Empirical U.S. Fortune

firms

Employee

commitments Corporate social performance (CSP) can provide a

competitive advantage in attracting applicants, in fact,

resulting in firm’s reputation.

Wang et al

(2008)

Empirical U.S. firms Environmental

dynamism

The inverted U-shaped relationship between corporate

philanthropy and financial performance is stronger in more

dynamic industries.

Wang &

Qian

(2011)

Empirical Chinese firms Market

development

Political

connections

Government-owned firms or politically connected ones

have more benefit from philanthropy (e.g. financial

performance). Engagement in corporate philanthropy could

increase with the level of market development.

Zang et al

(2010)

Empirical Chinese firms

Advertising

intensity

The positive advertising intensity-philanthropic giving

relationship is stronger in competitive industries, and firms

in competitive industries are more like to donate.

2.6 Chapter Summary

Firms consider corporate philanthropy as part of their core corporate strategies and

organizational leaders are charged with the responsibility of formulating and implementing these

strategies. As such, understanding the relationship between leadership characteristics and

corporate philanthropy become increasingly important. Transformation leadership helps provide

empirical evidence to the relationship (McWilliams et al., 2006). In addition, it can be suggested

that corporate philanthropy, given its close link with corporate strategies, can be considered as

substantially different from traditional philanthropy.

The literature on corporate philanthropy has extensively explored the link between

organizational leaders’ backgrounds and values and their organizations’ commitment to corporate

philanthropy. CEOs’ economic attitude toward philanthropy can be a driver for influencing the

level of engagement in corporate philanthropy and understanding CEO network can explain the

relationship between corporate philanthropy and business legitimacy. In addition, understanding

board composition/diversity can explain why certain firms engage in more corporate

philanthropy than others. Furthermore, top managers with benevolence and integrity value can

motivate firms to engage in corporate philanthropy. Institutional pressures from social network

with which top managers are connected can also motivate them to engage in corporate

philanthropy. Organizational-level antecedents (organizational visibility and ownership structure)

and industry-level antecedents (public relation vulnerability and social externalities) play an

important role in influencing the level of engagement in corporate philanthropy. It can be argued

that firms engage in corporate philanthropy because it helps to develop consumer brand loyalty,

boost employee productivity, and enhance local community welfare, all of which can positively

contribute to financial performance.

This chapter reviewed the various contingency factors (such as moderators and mediators)

and intermediary processes that influence the extent of engagement in corporate philanthropy.

The literature review above has shown that employee involvement, customer satisfaction and

loyalty, local community development and government support are important mediators. In

addition, individual-level (gender and political connections), firm-level

(organizational slack, past performance, advertising intensity, and firm size), and industry-level

(industry competition, environmental dynamism, and market development) factors have been

found to be significant moderators of corporate philanthropy.

CHAPTER III

THEORY AND HYPOTHESIS DEVELOPMENT

This chapter provides the theoretical background and specific hypothesized relationships

among CEO background characteristics, corporate philanthropy, and firm diversification profile.

In the first section, I discuss the major theoretical foundations of the dissertation model. In the

second section, I propose specific hypotheses on the relationship between CEO background

characteristics and corporate philanthropy along with the moderating effect of firm age. In the

last section, I propose the hypothesized relationships between corporate philanthropy and the

firm’s diversification profile. The chapter concludes with a summary of all the proposed

hypotheses.

3.1 Theoretical Foundations

In this dissertation, I draw from the key arguments of the Upper Echelons and

Institutional theories to establish the theoretical foundation. The former can help explain how

CEO background characteristics can influence corporate philanthropy. The latter can help explain

how investing in corporate philanthropy (and overall CSR) helps improve corporate reputation

and brand recognition which in turn helps when the firm expands into new markets through

diversification.

3.1.1 Upper Echelons Theory and CEO Background Characteristics

The Upper Echelons Theory (UET) indicates that a firm’s strategic choices and

performance are influenced by managerial characteristics (Carpenter et. al, 2004; Hambrick &

Mason, 1984; Hambrick, 2007). Proponents of UET argue that leaders’ background

characteristics influence the way they collect, analyze and interpret certain market information

(i.e. selective perception) which in turn influences strategic decisions. Furthermore, Finkelstein

and Hambrick (1996) propose that observable demographic attributes, such as age, tenure,

functional background and education, serve as proxies of deeper cognitive phenomena. UET

perspective emphasizes the ways in which senior leaders’ characteristics influence the range of

strategic options and the decision-making process through which they evaluate these options

(Finkelstein et al., 2009). Among senior leaders, CEOs have traditionally held a prominent role in

shaping a firm’s behavior given the visibility and their structural position (Chatterjee &

Hambrick, 2007). Accordingly, past research has mainly focused on the relationship between a

broader set of CEO characteristics and strategic decisions (Barker & Mueller, 2002; Musteen,

Barker & Baeten, 2006). These scholars suggest that there are significant relationships between

demographic variables (such as tenure, age, functional background, and education) and strategic

decisions as well as organizational outcomes.

In this dissertation, I draw from the UET to argue that CEO background characteristics

influence a firm’s philanthropic engagement. Specifically, I argue that UET provides an

important theoretical foundation since traditionally corporate philanthropic decisions are the

responsibility of organization’s senior leaders (Galaskiewicz, 1997; Oba & Fodio, 2012, Marquis

& Lee, 2013). Pedersen and Neergaard (2009) suggest that managerial perceptions of top-level

managers on corporate social activities, including corporate philanthropy, can be influenced a

great deal by their background heterogeneity (e.g., age, gender, education, and functional

backgrounds). The premise of this line of argument is that corporate philanthropy is part of

organizational outcomes. Organizational actions, behaviors, and outcomes are viewed as

“reflections of the attributes and values of the powerful actors” (Hambrick & Mason, 1984, p.

193). Therefore, it can be suggested that just like other organizational actions, behaviors, and

outcomes, corporate philanthropy can be best viewed as a reflection of the attributes of the

organization’s upper echelon. Using the basic tenets of UET, past research has attempted to link

CEO background characteristics and corporate philanthropy (e.g. Thomas & Simerly, 1994;

Marquis & Lee, 2013).

3.1.2 Institutional Theory, Corporate Philanthropy, and Diversification

Institutional theory is one of the major theories of organizations that are founded on the

open system perspective (Scott & Davis, 2007). Proponents of this theory argue that the

institutional environment can have a significant impact on the development of formal structure in

an organization explaining why organizations look similar in the long term (DiMaggio & Powell,

1983; Frumkin & Galaskiewicz, 2004). Dimaggio and Powell (1983, p. 150) explain why

organizations become more homogenous by identifying “three mechanisms of isomorphic

change: coercive (political) isomorphism, normative (professionalism) isomorphism, and

mimetic (standardization) isomorphism.” For example, organizations strive to achieve external

legitimacy by conforming with the expectations and norms of the institutional environment and

that such adherence to institutional environment provides organizations with critical resources

they need to operate effectively. It has been suggested that organizations need to align with the

norm prevailing in the institutional environment (Meyer & Rowan, 1977) since institutional

isomorphism helps them maintain business legitimacy (acceptance by external actors). In

addition, scholars argue that “concern over legitimacy forces organizations to adopt managerial

practices that other organizations have” (Sherer & Lee, 2002, p. 103). Managers under the

institutional environment can have the less risky course of action by imitating the choices of their

counterparts in other organizations. Empirical evidence supports that some external factors,

including the media, serve as institutional intermediary and have a significant impact on a firm’s

public offerings’ legitimacy (Pollock & Rindova, 2003).

Notably, the society in general and the institutional environment in particular increasingly

accept the notion that a firm has a social responsibility to support various issues and causes

affecting its stakeholders and these concerns should be an important part of business operation

(Chiu & Sharfman, 2009; Donaldson, 1982). Campbell (2007, p. 962) also suggests that firms are

more likely to “act in socially responsible ways” the more they face institutional environment.

For example, since CSR has been rationalized and institutionalized in the business community,

majority of U.S. firms actively promote CSR (Boli & Hartsuiker, 2001; Lee, 2008). In addition,

past research has found that large firms institutionalized charitable giving by establishing

independent corporate foundations and CEOs continue to influence charitable giving decisions

through their involvement with these foundations (Bramme & Millington, 2006; Himmelstein,

1997). Corporate social performance has become “a legitimizing identity (brand)” in the business

and society field (Rowley & Berman, 2000, p. 397). Furthermore, Galaskiewicz and Burt (1991)

argue that “institutional pressures at the industry or community can shape corporate charitable

action which often extends beyond a firm’s immediate profit maximization goals because the

firm’s peers in the same industry do” (p. 103). From this phenomenon, it can be suggested that

firms engage in corporate philanthropy as a tool for maintaining business legitimacy and

institutional theory perspective helps explain why firms behave in socially responsible ways.

Past research suggests that institutional motivations; “the altruistic actions of social actors, the

strategic use of pubic police by charitable organizations, acquiescence to societal institutional

pressures, and responses to inter-organizational institutional pressures” help maintain the

legitimation of corporate philanthropy (Sharfman, 1994, p. 259). Corporate philanthropy has

nowadays become a well-accepted institutional norm, a recognized business principle, and a

source of legitimacy in the business field.

Many firms actively promote their philanthropic initiatives as an integral part of the

overall corporate branding process (Hoeffler & Keller, 2002). This is because corporate

philanthropy helps building a corporate reputation and brand name, as well as creating a

competitive advantage (Porter & Kramer, 2002; Smith, 1994). Corporate philanthropy can play a

role in making a business more attractive to stakeholders, enhancing a firm’s reputation,

employee loyalty, and brand recognition. For example, past research found that CSR initiatives,

such as sponsorship and corporate philanthropy, have a significant effect on customer-company

identification (reputation) and brand attitude (Brammer & Millington, 2005; Godfrey, 2005; Lii

& Lee, 2012). Importantly, reputation and brand recognition is an important source of

competitive advantage when firms enter new markets through diversification. Strong brand

recognition can help the market expansion succeed because it helps firms to secure ‘a social and

legal license to operate’ (Godfrey, 2005). It has been suggested that corporate philanthropy can

boost reputation assets in the new markets, strengthening marketing and branding initiatives

(Hess et al., 2002; Lii & Lee, 2012; Ricks Jr, 2005). Firms engage in corporate philanthropy as a

means to open new markets beyond their current operation and improve their competitive context

(Fioravante, 2010; Porter & Kramer, 2002). Consistent with the argument that corporate

philanthropy serves as “an insurance” (Godfrey, 2005), it can be concluded that favorable brand

image that acquired through an act of philanthropy helps make a firm’s diversification strategy

succeed. In other words, favorable brand image can have a positive impact on a firm’s market

expansion strategy.

3.2 Leadership Characteristics & Corporate Philanthropy

In this dissertation, I expand the discussion on CEO background characteristics and

corporate philanthropy by empirically examining why and to what degree CEOs determine

corporate philanthropy. In general, the notion, “who determines corporate philanthropy” has

received a growing attention among scholars (Huang, 2013; Ibrahim & Angelidis 1995; Marquis

& Lee, 2013). As discussed in detail in section 2.3.1., there is a relationship between individual

background characteristics and corporate philanthropy. Importantly, since CEOs are charged with

the responsibility of formulating corporate strategy (Wood, 1991), they are often deeply involved

in promoting the image of their respective firms through corporate philanthropy. It has been

suggested that corporate leaders’ individual decisions (e.g. CEOs) determine firms’ philanthropic

activities although their decisions are partly shaped by organizational objectives and processes

(Gautier & Pache, 2015). Despite of a growing interest on CEO background characteristics –

corporate philanthropy relationship, the relationship is under-developed. This inquiry aligns with

the notion that corporate social activities, including corporate philanthropy, research is virtually

absent from major scholarly journals devoted to organizational behavior and micro human

resources management (Aguinis & Glavas, 2012).

Past research has particularly focused more on CEOs’ moral dimensions to predict the

level of engagement in corporate philanthropy (Godfrey, 2005; Wang & Choi, 2007). Scholars

have, for example, proposed that the CEOs’ integrity and attitude toward altruism can affect a

firm’s philanthropic decision. However, these arguments have not adequately been explored. As I

discussed in detail in section 1.3., CEO engagement in corporate philanthropy can be motivated

by business-related issues that related to a firm’s strategic goals as well as by non-business issues

that related to CEO altruism. Some scholars have attempted to examine the relationship between

organizational leaders’ background characteristics, including CEOs and BODs, and corporate

philanthropy (Marquis & Lee, 2013; Oppedisano, 2004). They found that characteristics of

organizational senior leaders (e.g. CEO tenure, gender, and the director degree centrality) were

shown to affect a firm’s philanthropic decision. However, their studies did not consider other

important CEO characteristics (e.g. the level and type of educational attainment and civic

engagement).

By empirically examining CEOs’ educational level, CEO civic engagement along with

founder status as important predictors, I intend to expand scholarly understanding on the

influence of CEO background characteristics in studies of corporate philanthropy. CEO founder

status has received some scholarly attention particularly in the CSR literature. Block and Wagner

(2010), for instance, have attempted to find the relationship between CEO founder status and

CSR. They found that founder ownership is associated with a lower level of CSR concerns, while

ownership by institutional investors is associated with a higher level of CSR concerns. Their

finding, however, does not particularly pertain to the likelihood that founder CEOs engage in

corporate philanthropy. Past research suggests that founder CEOs have more of their wealth tied

to firm reputation so that they strategically invest more in CSR (Wiklund, 2006). In this

dissertation, I untangle debates by suggesting that founder CEOs are likely to hold a

psychological bond with their firm (Peterson et al., 2012) and their intrinsic motivation would

lead them to have a high degree of discretion to engage in corporate philanthropy.

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

motivated by self-interest, including a desire to create a more stable social and political

environment that ensures the profitability of their business. According to National Committee for

Responsive Philanthropy (2014), firms can make corporate philanthropy effective by addressing

specific needs of civic engagement. Despite the apparent link between CEO civic engagement

and corporate philanthropy, the relationship has neither been explained theoretically nor

empirically. I believe that this dissertation can help to offer unique discussion of the relationship

between CEO civic engagement and corporate philanthropy.

In this dissertation, I offer a unique contribution to studies of corporate philanthropy by

empirically examining four aspects CEO background characteristics (e.g. founder status,

functional background, civic engagement, and education level) and their relationship with

corporate philanthropy. More importantly, I can answer why and to what degree CEO

background characteristics influence corporate philanthropy.

3.3 The Link between Corporate Philanthropy and Firm Diversification Profile

One of the central arguments of this dissertation is that firms that actively engage in

corporate philanthropy will reap the benefit when pursuing aggressive market expansion

(diversification) strategies. Past research has extensively focused on a conceptual framework to

explain benefits of corporate philanthropy (e.g., favorable responses from stakeholders, brand

recognition among consumers, employee productivity, and government support) particularly

when a firm pursues market expansion strategies (Fioravante, 2010; Porter & Kramer, 2002;

Smith, 1994). However, the relationship between corporate philanthropy and a firm’s

diversification profile is under-studied with meager empirical or theoretical contributions in the

strategic literature (Gautier & Pache, 2015; Marx, 1999). Porter and Kramer (2002) also suggest

that studies of CSR seem to disconnect corporate philanthropy and the company’s business

strategy and as a result fail to highlight the meaningful social impact as well as strengthen the

firm’s long-term competitiveness. Gautier and Pache (2015) suggest that a special challenge for

corporate philanthropy is to find its place within the firm’s overall strategy. I believe that this

dissertation would help to connect the link between corporate philanthropy and business strategy.

Such attempt would help to untangle arising scholarly inquiry emerged in the past two decades,

“philanthropic efforts are not quite strategic in their impact” (Gautier & Pache, 2015; Mass &

Liket, 2011; Saiia et al., 2003; Sasse & Trahan, 2007; Smith, 1994).

In this dissertation, I focus on a firm’s diversification to examine the relationship between

corporate philanthropy and business strategy. A firm’s diversification is considered a core

business development strategy that enables substantial growth in the overall product market

portfolio. Past research has attempted to examine the relationship between a firm’s degree of

product diversification and CSR (McWilliams & Siegel, 2001; Strike, Gao & Bansal, 2006).

However, these studies have provided limited empirical or theoretical explanation so more effort

should be put into a more fine-grained theoretical and empirical analysis (Gautier & Pache,

2015). Drawing upon the institutional and stakeholder perspectives, this dissertation can

contribute to fulfilling scholarly interests by empirically examining the relationship between

corporate philanthropy as important part of CSR and a firm’s overall diversification strategy.

In addition, I expand the discussion on studies of CSR by suggesting that firms having

international presence with global strategic posture can reduce institutional and stakeholder

pressures by engaging in corporate philanthropy. Some research in the CSR literature has

empirically examined the link between diversification and CSR. Strike et al (2006) using a

sample of 222 U.S. firms found a positive relationship between international diversification and