Social responsibility, corporate giving and the tide

Abstract

Purpose

The purpose of this paper is to address firms’ decisions on corporate social responsibility (CSR) as a function of the economic environment. The paper focuses on corporate giving, a CSR dimension that is especially important in an economic downturn such as the one experienced by many European economies since 2007-2008.

Design/methodology/approach

A theoretical framework comprising product differentiation and market competition is proposed. The paper investigates whether adverse economic conditions refrain corporate giving or, alternatively, stimulate it as a differentiation and demand enhancing instrument. Econometric empirical testing on the business cycle properties of giving at an aggregate level is also conducted.

Findings

According to theoretical results, firms seem to refrain giving under adverse economic conditions in the short run. Empirically, the paper concludes for a pro cyclical contemporaneous relation of corporate giving with real gross domestic product, supporting the theoretical finding. In a dynamic perspective, however, giving causes revenues and firms tend to donate more than a few years after the downturn.

Originality/value

The paper examines the behaviour of an under researched component of corporate social responsibility, which is especially important in economic downturns - giving. It considers continuous degrees of market competition and differentiation.

Citation

Catalão-Lopes, M., Pina, J.P. and Branca, A.S. (2016), "Social responsibility, corporate giving and the tide", Management Decision, Vol. 54 No. 9, pp. 2294-2309. https://doi.org/10.1108/MD-12-2015-0553