When high-stake organizational decisions that affect market competition have to be conducted in a short time intervals with information insufficiency of the social need, the probability of stakeholder reactions, and even the organizational capacity to respond, what is the relative economic efficiency of leading vis-à-vis following (i.e., imitating, abstaining, or choosing a different response)? I investigate this question using a specific form of non-market strategy: the organizational decision to donate to the relief fund of highly disruptive earthquakes. About 95 percent of corporate pledges to earthquakes come within a month of the disaster date, and because earthquakes are the most socially salient type of natural disasters, philanthropic responses to these shocks can generate media visibility and, in some cases, market rents. The original dataset is comprised by 10 years of donation behavior of 2,000 firms from 65 countries for earthquakes that affected 57 countries.
The management literature has emphasized the role that imitation plays on corporate strategy. Firms tend to align to the social norms observed by reference peers. A widely invoked argument is that the community where firms are originally headquartered imprints them with a longstanding influence toward similar patterns of behavior. In this paper, I suggest that this argument is not easily generalizable once the organization internationalizes. Using the context of philanthropic responses in the aftermath of natural disasters, I show that the non-market activity of multinational firms that share the metropolitan area as headquarters may be significantly different. I find that firms tend to mimic the characteristics of the response of peers from the same industry despite that such organizations have different countries of origin. Furthermore, organizations that share metropolitan region as headquarters show dissimilar responses in a frequency that is not explained by chance. This study extends the global strategy and community literatures by proposing that the influence of geographic location on organizational behavior is less stable than institutional scholars tend to suggest. The systems of social norms and beliefs that firms join as they internationalize become more salient for organizational decision making than those learned in their communities of origin. The study also provides a more nuanced awareness of the role of the non-market activity of multinational enterprises in the context of geographically located systemic shocks.
When firms decide to engage in the provision of collective goods that benefit social welfare (i.e., to behave pro-socially), they may consider the economic relevance of such goods for their own market operation. The bigger the stake of the firm in a given market, the greater its 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 strategic considerations. I test this argument by constructing a measure of corporate economic reliance on market systems based on the literature on club goods and analyzing data on corporations’ philanthropic responses to 3,115 natural disasters between 2003 and 2013, inclusive. 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 than widely invoked arguments rooted in the strategic philanthropy and institutional literatures, which neglect such firm-market connection.
This study examines the institutional role of transnational ethnic communities in MNEs’ location choice. Research has revealed that ethnic communities facilitate international expansion by serving as conduits of knowledge. We propose that ethnic communities also fulfill a governance role by facilitating entry into locations that present high transaction hazards for foreign firms. This effect is based on community norms and social enforcement, and becomes particularly helpful in places with weak formal institutions and high transaction hazards. We test these ideas on the location choices of Korean banks across Chinese provinces during 1992-2013. Taking advantage of a historical event that created a quasi-random distribution of Koreans across provinces, we find support for our ideas.