Academic journal article Management International Review

The Impact of Internationalization on Home Country Charitable Donation: Evidence from Chinese Firms

Academic journal article Management International Review

The Impact of Internationalization on Home Country Charitable Donation: Evidence from Chinese Firms

Article excerpt

1 Introduction

Firm internationalization is the process "through which a firm expands the sales of its goods or services across the borders of global regions and countries into different geographic locations or markets" (Hitt et al. 2006, p. 251). Internationalization is an important strategy that firms from developing countries adopt in order to gain access to larger markets and critical resources (Ciravegna et al. 2014; Child and Rodrigues 2005; Gaur et al. 2014). Many researchers find internationalization contributes to these firms' financial capabilities and continuous growth (e.g. Graves and Shan 2014; Marano et al. 2016; Singla and George 2013). Then would they in turn make more contributions to the development of their home country, by means of donating to charitable organizations and the communities? This question regarding whether internationalization promotes or inhibits home country social performance of firms from developing countries has, unfortunately, remained poorly studied. The objective of this study is to shed light on this relationship by focusing on charitable donations made by firms from one developing country, China.

Prior research has provided some important insights in this relationship (Cheung et al. 2015; Kacperczyk 2009; Simerly and Li 2000), yet two important gaps remain in the literature. First, prior studies have mainly focused on the positive effect of internationalization on charitable donations of firms from developed countries such as the United States and United Kingdom (e.g. Brammer et al. 2009; Kang 2013). However, whether these findings still hold for firms from developing countries is largely unknown. To the extent that firms from developing and developed countries face distinctive institutional environments which have differing implications for their internationalization and charitable donation (Wright et al. 2005; Yang et al. 2009), the impact of internationalization on domestic donation could differ between firms from developing and developed nations.

Second, while scholars have recently started to examine the effect of internationalization on social performance of firms from developing countries, their findings are still inconsistent. For instance, Cheung et al. (2015) find that Chinese firms' corporate social responsibility performance is positively related to their internationalization, yet Attig et al. (2016) find such a relationship to be negative. In addition, firms' social performance is multifaceted, with different dimensions having distinctive attributes and charitable donation being only one of the dimensions (Attig et al. 2016; Carroll 1979, 1991). Thus, the extent to which existing findings can inform the relationship in question is arguably constrained.

Alternatively, this study approaches the relationship in question from the perspective of resource dependence theory (Pfeffer and Salancik 1978). We maintain that despite the positive effect of internationalization on Chinese firms' financial performance, it may negatively affect their charitable donation within home country. Specifically, we argue that the more a Chinese firm is dependent on overseas markets instead of domestic markets, the less important the domestic stakeholders are for its survival, and consequently it is less likely to make charitable donations within China. Furthermore, we study the boundary conditions of such a negative relationship. In particular, we focus on Chinese firms' state-ownership, arguing that it can provide alternative sources of critical resources for the firm's survival and therefore alleviate such a negative effect. We tested and supported our hypotheses using data collected from all companies listed in China's stock markets from 2008 to 2012.

This study contributes to the growing body of research integrating two streams of literature, namely firms' internationalization and social performance in the context of developing countries. …

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