MNEs and Strategic Philanthropy: Evidence from the Wenchuan (汶川) Earthquake Relief Efforts

This paper argues that the philanthropic actions by multinational enterprises (MNEs) serve strategic purposes as well as charitable causes. By utilizing the data from 206 MNEs who actively engaged in philanthropic efforts in helping the 2008 Wenchuan (汶川) earthquake victims, we demonstrate the strategic nature of corporate philanthropy by MNEs. We hypothesize that the amount of donation is determined by various firm characteristics, such as the size of the MNE, cultural distance between its home country and China, industry characteristics, and the MNE’s level of establishment in China. In other words, there exist a size effect, a home country effect, an industry effect, and a guanxi effect that influence the amount of donation in the relief effort for this high-profile tragedy. We find that the size of the donation will be larger when the size of the company is larger, the cultural distance is closer, the industry is consumer oriented, and the entry to China is earlier. These findings imply that MNEs conduct philanthropic actions strategically, in order to gain competitive advantage in this important host country.