Photo of Luis Ballesteros

Luis Ballesteros

PhD Candidate

Research Interests: non-market strategy, organizational decision-making under uncertainty, firm-performance implications of corporate philanthropy, social-welfare implications of business strategy, organizational learning and knowledge management, business provision of collective goods, organizational responses to systemic risks

I am interested in the drivers and consequences of non-market strategy under risk and uncertainty. I focus on contexts of high-magnitude, low-probability shocks that disrupt the status quo in market systems, such as natural disasters. I believe that high-stake choices that affect significantly the availability of rents and business performance are often made during these time intervals. Likewise, the implications of non-market behavior on society at large may be exarcerbated.
Currently, I am focused on three lines of research: how firm-market linkages affect non-market decision-making in the aftermath of systemic shocks, how organizations overcome information scarcity during such time spans, and how the characteristics of the organizational choice, external stakeholders' needs, and the institutional context drive firm performance and social welfare. More information on these studies can be found in my Research.

 

DISSERTATION

(SRF Dissertation Scholar)

Non-Market Choices under Uncertainty, Market Rents, and Social Efficiency:

The Case of Global Corporate Disaster Giving

In this dissertation I contribute to the understanding of the firm-market dynamics that characterize organizational decision making under uncertainty in the non-market sphere and the consequences of those organizational choices both for the firm and for society. I do this by focusing in a growing phenomenon in non-market strategy: the corporate provision of collective goods in the aftermath of disasters.

The first chapter is a study of the drivers of corporate disaster giving. It centers on the argument that firms consider the economic relevance of collective goods for their own market operation when they decide to engage in their provision (i.e., to behave pro-socially). The bigger the stake, the greater the firm’s reliance on the market’s collective goods (e.g., communication networks, transportation infrastructure). Therefore, a market’s relative importance for a firm should be a significant predictor of corporate pro-social behavior—an association that is not explained by theories on social preferences or the extant literature on strategic considerations. Using a quasi-natural experimental design, I test this argument by constructing a measure of corporate economic reliance on market systems based on the literature on club goods. I show that accounting for variation in economic reliance leads to a more accurate prediction of the frequency and magnitude of corporate pro-social behavior after the shock of a disaster than widely invoked arguments rooted in the strategic philanthropy and institutional literatures.

The second chapter presents a comparative analysis of the economic efficiency of leading versus following or abstaining when a non-market choice that can affect firm performance has to be made in conditions of high uncertainty and little decision time. Drawing upon work on the social construction of preferences in the behavioral economics literature and institutional logics in the organizational literature, I develop a model where optimization and the possession of knowledge are not sufficient factors to predict rent capture. Instead, the market response is driven by the interaction of the characteristics of the organizational choice with the firm’s social standing in an institutional group and the social expectations on the organization. Analyzing philanthropic responses of multinational corporations in the aftermath of earthquakes, I test predictions of the effect of the donation magnitude and timing (at the minute-level granularity) on the availability and duration of competitive advantages. Thus, I contribute to the literatures on strategic CSR and philanthropy where the association between pro-social behavior and firm performance is equivocal and pro-social behavior is traditionally treated as a binary choice—neglecting importance variance.

The final chapter studies the effect of corporate disaster giving on social welfare proxied by the magnitude of total aid received across different types of disasters. Over 90 percent of the deaths from natural disasters have occurred in low- and middle-income countries, yet more than 85 percent of in-kind and monetary relief coming from business organizations worldwide has gone to high-income economies. From the perspective of social welfare, does this mean a suboptimal allocation of economic resources? Is this a failure of the doing well by doing good argument given that corporate giving is misdirecting scarce goods and increasing income inequality? The extant literature has produced little systematic evidence to answer these questions and understand whether society at large benefits more by the intervention of firms in such areas as education, social infrastructure, and disaster relief, than by limiting such responsibility to the state. I examine the causal effect of corporate disaster giving in the efficiency of disaster relief and recovery. I argue and provide evidence that business giving efficiently specializes in black swans, highly unexpected and costly phenomena that maximize the incapacity of the state to finance the economic hardship. In such contexts, corporate giving acts as a stop-loss mechanism and complements public funding in nations that have been historically deprived of public multilateral aid.

The main empirical instrument for studying these questions is an original dataset comprised by all organizational responses reported in news media (i.e., firms and foundations, non-profit organizations, national and multilateral organizations) to the relief and recovery fund of all the major sudden natural disasters that affected the world in the last 20 years. I match this dataset to data on the geographic location and sales of the 10,000 largest multinational corporations. I also use news media reports to track firm visibility one year before and after the event. In addition to taking advantage of the exogenous characteristic of the timing of sudden disasters, I contribute to the organizational literature in addressing the econometric challenge posed by endogeneity by bringing novel methods to evaluate the private and social efficiency of organizational choices.