RESEARCH ARTICLE
The Impact of Internationalization on Home CountryCharitable Donation: Evidence from Chinese Firms
Heng Liu1 • Jin-hui Luo2 • Victor Cui3
Received: 26 September 2016 / Revised: 7 December 2017 / Accepted: 15 January 2018 /
Published online: 19 February 2018
� Springer-Verlag GmbH Germany, part of Springer Nature 2018
Abstract Does internationalization promote or inhibit home country charita-
ble donation for firms from developing countries? This is an important question that
remains poorly studied. This paper aims to address this question by focusing on
Chinese internationalizing firms. We maintain that while broadening overseas
markets brings financial returns to Chinese firms, their domestic charitable donation
may decrease with the level of internationalization. Drawing on the resource
dependence theory, we argue that the more Chinese firms depend on overseas sales,
the less important domestic stakeholders are for their survival, and therefore they
are less likely to make charitable donations within China. Further, we maintain that
this negative relationship between internationalization and home country charita-
ble donation is attenuated by Chinese firms’ state-ownership. This is because state-
ownership provides the firms with alternative sources of critical resources that
alleviate their dependence on the international markets. We tested and supported our
theory using data collected from all public firms in China between 2008 and 2012.
Theoretical and policy implications are provided.
Keywords Internationalization � Charitable donation � Developingcountries � China � Resource dependence theory
& Jin-hui Luo
1 Lingnan (University) College, Sun Yat-sen University, Guangzhou, People’s Republic of China
2 School of Management, Xiamen University, Xiamen, Fujian, People’s Republic of China
3 Asper School of Business, University of Manitoba, Manitoba, Canada
123
Manag Int Rev (2018) 58:313–335
https://doi.org/10.1007/s11575-018-0343-5
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-
314 H. Liu et al.
123
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. These two streams of literature have traditionally evolved
independently (e.g. Luo and Tung 2007; Wood 1991). Only recent years have seen
an increasing interest in the interplay between these two research domains (e.g.
Aguilera-Caracuel et al. 2015; Brammer et al. 2009; Kang 2013). Our study
contributes to this area of research by being the first to study the effect of
internationalization of firms from a developing country on their home country
charitable donations, which is distinctive from prior research focusing on firms from
developed countries. In addition, distinct from many studies in this line of research
that focus on the overall social performance of firms, our study focuses on
charitable donation, a specific yet critical dimension of social performance. In this
aspect, this study provides a more nuanced perspective that helps to reconcile the
controversy regarding the relationship between firms’ internationalization and social
performance in developing countries. Moreover, our study identifies an important
boundary condition of the main relationship by focusing on a unique factor in the
emerging-market context, i.e., firms’ state-ownership, which further sheds lights on
the aforementioned controversy.
2 Theoretical Background and Hypotheses Development
2.1 Corporate Charitable Donation
Charitable donation refers to voluntary or discretionary activities that are ‘‘guided
only by business’ desire to engage in social activities that are not mandated, nor
required by law, and not generally expected of business in an ethical sense’’ (Carroll
1991, p. 36). It is the primary form of corporate philanthropy in China (e.g. Du
2015; Gao 2011; Kolk et al. 2010). Broadly speaking, corporate philanthropy is one
key category of CSR based on the theory of Carroll’s four categories of CSR
(Carroll 1979, 1991). This four-part dimension of CSR has been stated as follows:
‘‘the social responsibility of business encompasses the economic, legal, ethical, and
discretionary (later referred to as philanthropic) expectations that society has of
organizations at a given point in time’’ (Carroll 1979, p. 500, 1991, p. 283). Carroll
contends that economic (be profitable) and legal (obey the law) responsibilities are
‘required’, the ethical (be ethical) responsibilities are ‘expected’, and the
philanthropic (be a good corporate citizen) responsibilities are ‘desired’ (Carroll
1991). Carroll’s four category of CSR model has enjoyed wide popularities among
scholars and remained a leading paradigm in the field (Frynas and Yamahaki 2016).
According to the literature review, prior studies often suggest three distinctive
views on corporate philanthropy: normative motivation, cost reduction, and
strategic and political view (e.g. Campbell et al. 1999; Porter and Kramer 2002;
The Impact of Internationalization on Home Country… 315
123
Li and Zhang 2010). First, altruistic responsibility theory (Sanchez 2000) attributes
charitable donation largely to a sense of altruism and high-order calling for morality
and recognizes that EMFs may show rising donation levels, to some extent, because
their top management members may be influenced and social learned by the ‘‘firm-
citizen’’ ideas of CSRs from peers in developed economies (Campbell et al. 1999).
Second, cost reduction view suggests that firms donate as long as direct economic
benefit can be gained, such as tax benefits enjoyed by US firms. Yet tax benefits are
less likely to be a major motivator for donation in China at present, as only less than
3% of all the charity organizations in China are tax exempt (Su and He 2010). Third,
the strategic and/or political view (e.g. Orlitzky et al. 2011; Porter and Kramer
2002) argues that donations are used as a strategic purpose to avoid disturbing
stakeholder interests and enhance stakeholder support, or as a publicity strategy for
attracting strategic resources from outside stakeholders and for good reputation-
building.
Notably, researchers find that corporate charitable donations in China are more
explained by strategic or political considerations than other causes (Jia and Zhang
2013; Li and Zhang 2010; Zhang et al. 2010a, b). For instance, Zhang et al. (2010a, b)
suggest that Chinese firms’ response to philanthropy is mainly strategic driven.
Similarly, Li and Zhang (2010) conclude that Chinese firms’ response to CSR is both
politically and economically motivated. These studies collectively emphasize that
Chinese firms tend to utilize donation as a strategic weapon to manage stakeholder
relations. In particular, it is worthy to note that the political consideration is largely
strategic because the government is a critical source of external uncertainty and
interdependence facing EMFs in China (Du and Luo 2016; Hillman et al. 2009).
Statistics provided by the Ministry of Civil Affairs of China show that corporate
charitable donation in China has risen consistently from year 2000 and reached its
peak in 2008, largely resulting from people’s philanthropic reaction to the major
earthquake that struck China’s Sichuan province in that year (see Fig. 1). On May
12, 2008, a catastrophic earthquake of immense magnitude (8.0 on the Richter
scale) struck Wenchuan County, Sichuan province of China. Official figures state
that 69,227 people were dead, 17,923 were missing and 374,643 were injured. It was
0
10
20
30
40
50
60
70
80
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
RM
B (b
illio
n)
Year
Fig. 1 Corporate charitable donation in China. Source: Ministry of Civil Affairs of China
316 H. Liu et al.
123
both the most deadly and the strongest earthquake to hit China since the 1970s. This
disaster immediately called for more financial and social disaster relief efforts from
governments, individuals as well as firms. Almost half of the listed companies
pledged to donate money, supplies and other relief efforts. According to the China
Charity Foundation, both the number of firms donating and the amount of donation
were unprecedented (see the report from http://Sina.com). Therefore, this catas-
trophic event greatly stimulated the subsequent corporate philanthropic disaster
response (Zhang et al. 2010a), and these philanthropic involvements could be
treated as a strategic tool to obtain social reputation and an important relationship
cultivation method with local government authorities (Gao et al. 2012). In addition,
if a company has been defined as a social responsible one for the past generous, it
will more likely to be supposed to keep giving in the future to maintain their social
reputation, brand recognition and loyalty (Hurtado and Agudelo 2013). After 2 year
later (2010), another disastrous earthquake of 7.1 on the Richter scale struck Yushu
Country, Qinghai province of China. A large number of corporations also joined this
donation campaign. Collectively, we can see the disaster response of Wenchuan
earthquake is a starting point for Chinese firms’ actively participation in charita-
ble donations to show their citizenship and build good social and political rela-
tionships with various stakeholders.
2.2 Corporate Charitable Donation: A Resource Dependence Logic
Based on resource dependence theory, we argue that the extent of Chinese firms’
internationalization, reflecting their dependence on overseas markets, partly
determines their strategic choices regarding where to allocate their charitable do-
nations in order to maximize their legitimacy and acquisition of other critical
resources.
Resource Dependence Theory (RDT) asserts that organizations are ‘‘not
autonomous, but rather are constrained by a network of interdependencies with
other organizations’’ (Pfeffer 1987, p. 26). Because an organization normally
depends on their environment for resources, those external groups that provide such
resources can make claims on the organization, and the organization attempts to
satisfy the concerns of these external groups (Pfeffer and Salancik 1978). The extent
to which the organization depends on the external stakeholders is determined by the
importance of the resources to the organization’s survival as well as the availability
of alternative sources of such resources. If the organization is in great need of the
resources and there are few alternative sources, then the organization is heavily
dependent on these external stakeholders providing these resources (Pfeffer and
Salancik 1978; see Hillman et al. 2009; Mizruchi and Yoo 2017 for comprehensive
reviews). Those in need of key resources often attempt to secure those resources by
taking strategic actions such as mergers and acquisitions (Reuer and Ragozzino
2006) as well as establishing joint ventures and alliances with firms having those
resources (Park et al. 2002), or to alleviate their dependence upon others by
pursuing alternative sources of the resources (Hillman et al. 2009).
In this vein of literature, corporate charitable donation is considered to be an
important way to secure vital resources, such as endorsement from key stakeholders
The Impact of Internationalization on Home Country… 317
123
in the community (Wang and Qian 2011) and political connections (e.g. Du and Luo
2016; Saiia et al. 2003). Firms with negative social performance with respect to
environmental protection and product safety could also use charitable donation as a
critical means to rebuild their legitimacy and reputation (Chen et al. 2008).
2.3 Internationalization and Home Market Charitable Donation
Following the RDT logic, we maintain that a Chinese firm’s internationalization
may have a negative effect on its domestic charitable donation. When a firm sells a
larger proportion of its products/services to international markets, the international
markets become strategically more important to the firm’s survival and growth
while its dependence on domestic markets is proportionally reduced (Finkelstein
1997). Consequentially, stakeholders in international markets gain stronger
influence over the firm (Agle et al. 1999; Hillman et al. 2009) and the influence
from home market stakeholders are reduced.
We argue that the location choice of corporate charitable donations is likely
dependent on the relative importance of various groups of stakeholders (i.e.
international vs. local) to the firm’s survival. If international stakeholders present
more salient threats or opportunities to the achievement of the firm’s core
objectives, the firm will likely prioritize their claims over those of other
stakeholders (Agle et al. 1999; Griffin and Mahon 1997). The more a firm is
dependent on overseas sales, the more important it is that the firm seeks to enhance
its legitimacy and other vital resources from its international stakeholders.
In contrast, the need to do so among its domestic stakeholders declines as they
become relatively less salient for a firm’s survival. Ceteris paribus, given a certain
budget for charitable donation, a Chinese firm will place less strategic importance to
its domestic stakeholders as it is more dependent on international sales. Given
charitable donation is made mainly out of strategic considerations by Chinese firms,
they are less likely to make charitable donation to domestic stakeholders as they
become more internationalized. We therefore predict:
Hypothesis 1: Chinese firms’ internationalization is negatively associated with
their home country charitable donation.
2.4 The Moderating Role of Firms’ State-Ownership
We further argue that the negative effect of firms’ internationalization on their
domestic charitable donation may be alleviated if alternative sources of critical
resources are available to the firms. Specifically, we focus on the role of Chinese
firms’ ownership structure, in terms of state vs. non-state ownership (Gaur and
Delios 2015; Zhang et al. 2007). In emerging economies such as China,
governments including central and local governments are among the most salient
institutions that influence firms’ behaviors, because they (a) have critical impact on
the development of regulatory policies, and (b) control financing and other key
scarce resources (Du and Luo 2016; Zhou et al. 2017). The institutional influence of
governments on firms is mainly manifested in state-ownership of firms (Park and
318 H. Liu et al.
123
Luo 2001; Sun et al. 2010). State-owned enterprises (SOEs) which are either wholly
or partially owned by the government have a significant presence in Chinese
economy, accounting for approximately 17% of urban employment and 22% of
industrial income (Curran 2015).
Firms in emerging economies normally ‘‘receive different treatment and resource
allocations from the government depending on their institutional and organizational
orientations, such as ownership’’ (Park and Luo 2001, p. 459). As government-
owned entities, SOEs in China are granted by the government and related agencies
privileges of gaining access to key factor resources, such as funding, land, and
infrastructure, to which Non-State-Owned enterprises (NSOEs) do not have access
(Peng et al. 2004; Sheng et al. 2011). For example, SOEs are normally provided
with exclusive benefits in terms of accessing large-scale loans from state-owned
banks (Xu and Zhang 2008) which control most of the lending capital (Chen et al.
2014), at low costs (Khwaja and Mian 2005) and with government subsidies
(Cuervo-Cazurra et al. 2014). In addition, SOEs are beneficiaries of government
policies that enable them to occupy a dominant or exclusive position in strategically
important and highly profitable sectors within China, such as telecommunication,
hydro, energy, petroleum processing, etc. (Musacchio and Lazzarini 2014).
In contrast, NSOEs are very disadvantaged in gaining key resources and policy
support domestically. For example, NSOEs typically face higher barriers to capital
from state-owned financial institutions in China because of their lack of political
backing and legitimacy (Park and Luo 2001). As a result, they have to incur much
higher costs to raise capital by turning to private financial institutions within China
or resorting to resources from abroad (Nee 1992). In addition, the entry barriers to
certain industries are substantially higher for NSOEs within China, forcing them to
rely more heavily on international markets for survival.
Because SOEs are provided with more abundant resources domestically than
NSOEs, which can be an alternative to the key resources that firms obtain
internationally, SOEs are comparably less dependent on international markets than
NSOEs. Utilizing of these restricted state-controlled resource is thus an important
way by which SOEs are able to find alternative resource supports that may alleviate
their dependence on foreign stakeholders. Because of the state ownership, SOEs are
typically endorsed by the central and local government, and tend to have better
connections with local networks, which gives them advantages of obtaining critical
resources such as capitals, lands, technologies, and subsidies. Since these SOEs are
provided with more abundant resources domestically, which can be an alternative to
resources obtained internationally, as such, the strategic importance of international
stakeholders to SOEs is reduced compared with NSOEs, which accordingly has an
implication for a firm’s location choice of charitable donations.
Meanwhile, state ownership may also create a political linkage between a firm
and its home-country institutions, when they enter overseas markets, they can be
perceived by their foreigner partners not simply as business entities, but also
political actors (He and Lyles 2008). Thus, state ownership as a form of third-party
coalition may alter the power dependence condition between Chinese internation-
alizing firms and their foreign stakeholders (Benito et al. 2016). Accordingly, at a
given level of internationalization, the negative effect of firms’ internationalization
The Impact of Internationalization on Home Country… 319
123
on their domestic charitable donation is likely smaller if they are state-owned than
non-state-owned. Therefore, we hypothesize,
Hypothesis 2: A firm’s state-ownership negatively moderates the relationship
between its internationalization and home country charitable donation such
that the negative main effect is attenuated if the firm is state-owned than
otherwise.
3 Methodology
3.1 Sample
Our sample includes all public firms listed in the two Chinese stock markets,
Shanghai and Shenzhen, from 2008 to 2012. Our observation window starts from
2008 because public firms were formally required to report their social responsi-
bility activities from 2008 by the China Securities Regulatory Commission (CSRC),
equivalent to the Securities Exchange Commission (SEC) in the United States. To
control for unobserved heterogeneities, we focus on firms issuing only A-shares,
i.e., those traded within China using Chinese currency (Arquette et al. 2008).
Following prior studies, we excluded (a) financial firms, (b) firms whose transaction
status is ‘‘special treatment’’ (ST) or ‘‘suspended from trading’’ (*ST), and (c) firms
with negative net assets (Du and Luo 2016; Luo et al. 2017). The final data is an
unbalanced panel, with 7415 firm-year observations from 2099 firms: 1163
observations in year 2008, 1241 in 2009, 1352 in 2010, 1692 in 2011 and 1967 in
2012. We collected these firms’ internationalization information from the Wind
database and other information from the CSMAR database. Both Wind and CSMAR
are leading financial information providers specializing in Chinese public firms.
3.2 Measurement
3.2.1 Dependent Variable
Following prior studies (Jia and Zhang 2013; Zhang et al. 2010a, b), we measured
the dependent variable, a firm’s home country charitable donation (Donation_size)
as the actual amount of home country donation made by a firm in a given year. We
took the logarithm of Donation_size to reduce its distribution skewness. For
robustness checks, we also used three alternative measures, which will be discussed
in the section on robustness checks.
3.2.2 Independent Variable
Following prior studies, we calculated the level of internationalization using the
proportion of overseas sales in a firm’s total sales (Cheung et al. 2015; Fernandez
and Nieto 2006), and we treated sales to Hong Kong, Macao, and Taiwan as
320 H. Liu et al.
123
overseas revenue due to their substantially distinctive institutional environments
from Mainland China (Cheung et al. 2015; Tan et al. 2008).
3.2.3 Moderator
Following prior studies, we created a dummy variable SOE, which equals one if the
state has a firm’s majority ownership, and zero otherwise (Park and Luo 2001; Zhou
et al. 2017).
3.2.4 Control Variables
Following prior studies, we controlled for firm characteristics that may influence its
charitable donation decisions: firm size, measured as the logarithm of a firm’s total
assets, because it is usually positively associated with a firm’s charitable donations
(Brammer and Millington 2008; Cheung et al. 2015); leverage, measured as the
ratio of total liabilities to total assets of a firm, reflecting the firm’s need to pay off
debt interest with cash, which then reduces its capacity to make charitable donations
(Adams and Hardwick 1998); institutional ownership, measured as the ratio of all
institutional investors’ shares to a firm’s total shares, because institutional
investment is positively related to a firm’s corporate social performance (Carroll
1991; Cox et al. 2004); board characteristics, including board size (the number of
directors on the board), board independence (the proportion of independent
directors on the board), and CEO duality (a dummy variable which equals one if the
same individual serves as both the CEO and the chairman of the board, and zero
otherwise), because it is the board of directors that makes critical decisions such as
charitable donations in China (Brown et al. 2006; Coffey and Wang 1998; Jia and
Zhang 2013); political connections, a dummy variable equaling one if the CEO or
chairman of board of directors had political experiences including serving in the
government, the Communist Party committee, the People’s Congress, the People’s
Political Consultative committee, the People’s Court, the People’s Procuratorate, or
the People’s Bank at state or local levels, and zero otherwise, because politically
connected firms tend to donate more in China (Li et al. 2015; Luo et al. 2017). In
addition, we also controlled for industrial competitive conditions, Industry HHI,
measured as the Herfindahl–Hirschman Index of sales revenue for all listed firms
within an industry, because the level of industrial competition negatively affects a
firm’s decisions to donate (Bhambri and Sonnenfeld 1988; Brammer and Millington
2008). Following previous studies indicating that a firm’s charitable donations are
affected by its institutional environment (Wang and Qian 2011; Luo et al. 2017), we
controlled for institutional variations across the 31 provinces or equivalent regions
in China using the National Economic Research Institute’s marketization index,
coded as formal institutions (Fan et al. 2011). Finally, we included 12 industry
dummies coded according to CSRC’s Guidelines for Classification of Listed
Companies, as well as year dummies to control for unobserved industry and year
effects respectively.
The Impact of Internationalization on Home Country… 321
123
3.3 Statistical Models
As the value of dependent variable Donation_size is equal to or greater than zero
and thus does not follow a normal distribution, we would draw biased and
inconsistent estimations if we employ OLS regression models. In this case, a Tobit
estimator is more appropriate, which generates unbiased and consistent estimations.
We lagged the dependent and predicting variables by 1 year, winsorized all
continuous variables at the 1 and 99% levels to reduce the noise of outliers, and
reported robust (Huber-White) standard errors (White 1980). In addition, we also
conducted the 2SLS model to address potential concerns of endogeneity, which is
discussed in detail in the section on Robustness Checks. When we use Donation_-
dummy as an alternative measure of the dependent variable, we applied Logistic
regressions for estimation (Wooldridge 2009).
3.4 Results
Table 1 reports the means, standard deviations, and zero-order correlations of the
variables. Consistent with our expectations, corporate charitable donation (i.e.
Donation_dummy and Donation_size) is negatively correlated with international-
ization, but positively correlated with SOE, institutional ownership, and political
connections. The correlation coefficients among key variables are relative small. We
also investigated potential multicollinearity problem using variance inflation factors
(VIFs). The maximum VIF value obtained is 9.27, and its mean is 4.56, both lower
than the rule-of-thumb cut-off of 10 (Ryan 1997), suggesting that multicollinearity
is not a serious concern in our model.
Table 2 reports the regression results for testing Hypothesis 1. In Models 1–4, the
dependent variable is Donation_size. We adopted the hierarchical regression
approach to test our hypotheses. Models 1 is the base-line model, which includes
only control and moderating variables.
In Model 2 we included the independent variable internationalization to test
Hypothesis 1. The result shows that internationalization is negatively associated
with Donation_size (b = - 6.624, p\ 0.05), supporting Hypothesis 1.
In Models 3 and 4, we test Hypothesis 2, regarding the moderating effect of SOE.
We separated the full sample into two subgroups according to the value of SOE: the
SOE subgroup with SOE = 1 and the NSOE subgroup with SOE = 0, and then ran
the regression model in each subgroup. Results in Models 3 and 4 indicate that the
negative effect of internationalization on Donation_size is stronger in the NSOE
subgroup (Model 3: b = - 7.741, p\ 0.05) than in the SOE subgroup (Model
4:b = - 3.323, p[ 0.10). These results suggest that SOE negatively moderates the
main effect. Following Aiken and West (1991), we plotted this moderation effect in
Fig. 2. Both the statistical test and figure support Hypothesis 2.
3.5 Robustness Checks
We conducted two robustness checks. First, we checked whether our findings are
robust to alternative measures of the dependent variable, a firm’s home country
322 H. Liu et al.
123
Table
1Descriptivestatistics
andPearsoncorrelationcoefficients(N
=7415)
Variables
Mean
SD
12
34
56
78
910
11
12
1Donation_dummy
0.085
0.279
1
2Donation_size
1.178
3.893
0.992***
1
3Internationalization
0.089
0.184-
0.035***-
0.036***
1
4State-owned
enterprises
0.448
0.497
0.028**
0.027**
-0.048***
1
5Form
alinstitutions
8.864
1.983
0.027**
0.025**
0.162***-
0.204***
1
6Firm
size
21.571
1.085
0.281***
0.295***-
0.066***
0.251***-
0.026**
1
7Leverage
0.447
0.210
0.047***
0.053***-
0.033***
0.259***-
0.129***
0.439***
1
8Industry
HHI
0.046
0.067
0.019
0.020*
-0.126***
0.074***-
0.059***
0.096***
0.012
1
9Institutional
ownership
0.467
0.229
0.087***
0.094***-
0.022*
0.218***-
0.079***
0.294***
0.119***
0.047***
1
10Boardsize
9.079
1.793
0.079***
0.083***-
0.014
0.203***-
0.089***
0.279***
0.149***
0.052***
0.163***
1
11Board
independence
0.364
0.049
0.033***
0.038***-
0.043***-
0.065***-
0.008
0.017
-0.027**
0.016
-0.048***-
0.312***1
12CEO
duality
0.203
0.402-
0.025**
-0.025**
0.044***-
0.254***
0.147***-
0.183***-
0.209***-
0.017
-0.131***-
0.138***0.071***
1
13Political
connections
0.462
0.499
0.075***
0.078***-
0.022*
-0.067***
0.044***
0.078***-
0.022*
-0.047***
0.025**
0.032***0.017
-0.038***
*p\
0.10;**p\
0.05;***p\
0.01
The Impact of Internationalization on Home Country… 323
123
Table
2Regressionresultsfortestinghypotheses
Dependentvariable:Donation_size
Dependentvariable:Donation_dummy
Model
1Model
2Model
3Model
4Model
5Model
6Model
7Model
8
Fullsample
Fullsample
SOE=
0SOE=
1Fullsample
Fullsample
SOE=
0SOE=
1
Firm
size
11.064***
11.001***
10.282***
11.681***
1.007***
1.003***
0.907***
1.117***
[21.862]
[21.731]
[13.368]
[17.743]
[18.315]
[18.231]
[11.469]
[13.958]
Leverage
-21.053***
-20.681***
-9.381**
-35.174***
-1.816***
-1.793***
-0.673*
-3.325***
[-7.423]
[-7.315]
[-2.363]
[-8.999]
[-6.719]
[-6.636]
[-1.875]
[-8.009]
Industry
HHI
-71.828
-72.640
16.334
-153.143
-6.747
-6.777
-0.353
-12.678
[-0.859]
[-0.870]
[0.129]
[-1.479]
[-0.815]
[-0.820]
[-0.029]
[-1.151]
Institutional
ownership
3.920*
3.891*
3.559
2.408
0.332
0.329
0.303
0.213
[1.779]
[1.769]
[1.202]
[0.729]
[1.591]
[1.578]
[1.099]
[0.640]
Boardsize
0.306
0.306
0.305
0.150
0.025
0.025
0.031
0.003
[1.114]
[1.118]
[0.691]
[0.421]
[0.962]
[0.986]
[0.778]
[0.080]
Boardindependence
7.560
7.451
15.147
-3.633
0.880
0.857
1.590
0.002
[0.817]
[0.804]
[1.092]
[-0.299]
[0.988]
[0.957]
[1.194]
[0.001]
CEO
duality
0.909
0.897
0.131
4.119*
0.113
0.113
0.049
0.393
[0.684]
[0.675]
[0.081]
[1.763]
[0.881]
[0.879]
[0.319]
[1.609]
Politicalconnections
4.944***
4.886***
5.421***
4.886***
0.434***
0.429***
0.468***
0.454***
[5.081]
[5.021]
[3.894]
[3.616]
[4.652]
[4.594]
[3.586]
[3.280]
Form
alinstitutions(M
KT)
0.224
0.321
0.569
0.073
0.028
0.036
0.058*
0.019
[0.923]
[1.300]
[1.628]
[0.209]
[1.233]
[1.573]
[1.812]
[0.550]
Intercept
-264.710***
-264.094***
-266.312***
-257.204***
-24.132***
-24.102***
-23.514***
-24.744***
[-22.734]
[-22.689]
[-15.210]
[-17.211]
[-19.220]
[-19.210]
[-12.796]
[-14.084]
State-owned
enterprises(SOE)
-0.196
-0.185
––
0.021
0.020
––
[-0.183]
[-0.174]
––
[0.203]
[0.193]
––
324 H. Liu et al.
123
Table
2continued
Dependentvariable:Donation_size
Dependentvariable:Donation_dummy
Model
1Model
2Model
3Model
4Model
5Model
6Model
7Model
8
Fullsample
Fullsample
SOE=
0SOE=
1Fullsample
Fullsample
SOE=
0SOE=
1
Internationalization
-6.624**
-7.741**
-3.323
-0.590**
-0.596*
-0.382
[-2.250]
[-1.986]
[-0.718]
[-2.087]
[-1.682]
[-0.784]
N7415
7415
4096
3319
7415
7415
4096
3263
PseudoR2
9.43%
9.48%
8.76%
11.50%
18.58%
18.67%
17.12%
22.26%
Leftcensoredobs.
6784
6784
3776
3008
Loglikelihood
-3970.4067
-3968.0584
-2055.6167
-1882.9415
-1757.2164
-1755.1584
-930.7161
-798.1374
Z/T-statistics,based
onstandarderrors
adjusted
forHuber-W
hite,
arein
parentheses
Two-tailedtests
Industry
andyeardummieswereincluded
butnotreported
*p\
0.10;**p\
0.05;***p\
0.01
The Impact of Internationalization on Home Country… 325
123
charitable donation. We used three other measures: (a) a dummy variable,
Donation_dummy, which equals one if a firm made a donation in a given year in
China, and zero otherwise; (b) the ratio of home country donations to a firm’s total
assets, and (c) the ratio of home country donations to a firm’s total operating
revenues (Brammer and Millington 2008; Brown et al. 2006; Jia and Zhang 2015);
all of the results are robust. To save space, we only reported the results using
Donation_dummy as the dependent variable in Models 5–8. Other results are
available upon request.
Second, we also checked whether our findings are robust to a potential
endogeneity problem, and specifically the reverse causality, that is, whether Chinese
firms with lower propensity to donate domestically tend to go global. We conducted
a two-stage least square (2sls) model to address this concern. In the first stage, we
ran a Probit model to predict the likelihood that a firm will go international by using
all control variables and an instrument, the firm’s geographic distance to ports.
Theoretically, a firm is more likely to go global if it is closer to ports, yet its
geographic proximity to ports has no direct relationship with its decision to make
charitable donation. Thus, a firm’s geographic distance to ports is a proper
instrumental variable for the likelihood of the firm’s internationalization.
We measured geographic distance to ports as the distance between a firm and
one of the top 20 ports in China that is the closest to the firm geographically. We
generated inverse Mills ratio from the first stage model and included it in the second
stage models. Table 3 reports the results of the 2sls analysis. The results are
consistent with our main findings, suggesting that reverse causality is not a major
concern in our study.
Don
ation_
size
0 .2 .4 .6 .8 1
Internationalization
SOE=0 SOE=1
Fig. 2 The moderation effect of firms’ state ownership
326 H. Liu et al.
123
Table
3RegressionresultsbyusingHeckman
two-stageselectionmodel
Dependentvariable:Donation_size
Dependentvariable:Donation_dummy
Model
1Model
2Model
3Model
4Model
5Model
6
Fullsample
SOE=
0SOE=
1Fullsample
SOE=
0SOE=
1
Firm
size
12.009***
12.175***
11.884***
1.114***
1.114***
1.124***
[12.979]
[8.585]
[9.865]
[11.850]
[7.854]
[8.749]
Leverage
-15.903***
0.071
-34.221***
-1.270***
0.339
-3.294***
[-3.370]
[0.010]
[-5.190]
[-2.804]
[0.514]
[-4.800]
Industry
HHI
-54.086
55.474
-149.952
-4.692
4.115
-12.572
[-0.633]
[0.426]
[-1.409]
[-0.556]
[0.328]
[-1.115]
Institutional
ownership
3.016
1.924
2.242
0.234
0.126
0.208
[1.311]
[0.615]
[0.652]
[1.068]
[0.427]
[0.600]
Boardsize
0.354
0.443
0.159
0.031
0.046
0.003
[1.283]
[0.990]
[0.440]
[1.177]
[1.112]
[0.086]
Boardindependence
2.207
6.757
-4.798
0.281
0.664
-0.035
[0.218]
[0.453]
[-0.363]
[0.290]
[0.465]
[-0.026]
CEO
duality
0.783
-0.069
4.080*
0.103
0.033
0.392
[0.591]
[-0.043]
[1.743]
[0.805]
[0.213]
[1.605]
Politicalconnections
1.289
2.429**
0.262
0.338***
0.294*
0.449***
[1.637]
[2.035]
[0.247]
[3.074]
[1.837]
[2.839]
Form
alinstitutions(M
KT)
4.030***
3.792**
4.710***
0.142*
0.258**
0.025
[3.506]
[2.237]
[3.009]
[1.884]
[2.278]
[0.236]
Intercept
-312.440***
-359.878***
-266.565***
-29.419***
-33.661***
-25.047***
[-7.917]
[-5.896]
[-5.181]
[-7.561]
[-5.628]
[-4.751]
Inverse
MillsRatio
13.477
26.154
2.673
1.483
2.823*
0.087
[1.276]
[1.605]
[0.189]
[1.452]
[1.805]
[0.061]
The Impact of Internationalization on Home Country… 327
123
Table
3continued
Dependentvariable:Donation_size
Dependentvariable:Donation_dummy
Model
1Model
2Model
3Model
4Model
5Model
6
Fullsample
SOE=
0SOE=
1Fullsample
SOE=
0SOE=
1
State-owned
enterprises(SOE)
0.817
––
0.130
––
[0.621]
––
[1.030]
––
Internationalization
-6.856**
-8.365**
-3.340
-0.617**
-0.660*
-0.382
[-2.319]
[-2.130]
[-0.721]
[-2.166]
[-1.841]
[-0.786]
N7415
4096
3319
7415
4096
3263
PseudoR2
9.50%
8.81%
11.50%
18.72%
17.27%
22.26%
Leftcensoredobs.
6784
3776
3008
Loglikelihood
-3967.3554
-2054.4418
-1882.9276
-1754.2059
-929.0856
-798.1359
Z/T-statistics,based
onstandarderrors
adjusted
forHuber-W
hite,
arein
parentheses
Two-tailedtests
Industry
andyeardummieswereincluded
butnotreported
*p\
0.10;**p\
0.05;***p\
0.01
328 H. Liu et al.
123
4 Discussion
While prior research has found that firms’ internationalization has a positive effect
on their home country charitable donation in developed countries (e.g. Adams and
Hardwick 1998; Brammer et al. 2009), this paper contributes to the literature by
finding that this relationship is negative in an emerging economy, China. Following
the resource dependence logic, we maintain that the more Chinese firms
internationalize, the more they depend on the international market for survival
and therefore less likely to donate domestically. The different effect we found in
China is consistent with prior studies on cultural and economic drivers of
charitable donation, which differ between emerging and developed economies.
While corporate charitable donation has a long history in Western developed
countries, it has yet to become a culture in China. Firms in developed countries may
be mainly motivated to make charitable donation due to high-order calling for
morality and altruism (Campbell et al. 1999; Sanchez 2000), whereas Chinese firms
donate primarily out of economic considerations, at least in the past 10 years (Jia
and Zhang 2013; Luo et al. 2017; Zhang 2010a, b). If a market weighs less for
maximizing a firm’s profitability, then Chinese firms tend to reduce their investment
in maintaining stakeholder relationships in that market.
This paper further complements prior studies by investigating whether the
relationship between internationalization and a firm’s charitable donation is
influenced by important institutional characteristics featuring emerging economies.
In particular, we focus on firms’ state ownership. We found that NSOEs are less
likely to donate than SOEs, given the same level of internationalization. We argue
that this is mainly because NSOEs normally have more constrained access to
alternative sources of critical resources, which are normally controlled by the state
in emerging economies. Our findings indicate that even though internationalization
may improve firms’ financial performance, it does not always result in more
charitable contribution to their home countries, especially for NSOEs. These
findings contribute to the literature by showing the importance of institutional
context in determining the relationship between firms’ globalization strategy and
domestic charitable donation.
This paper also adds to the debate on whether firms’ internationalization has a
positive or negative effect on their social performance in general. Many studies have
come to different conclusions regarding this relationship by focusing on firms’
overall CSR performance. Recognizing the multifaceted nature of firms’ social
performance, this study focuses on only corporate charitable donation, one
important dimension of social performance. Our findings suggest that this
controversy may be reconciled by taking a more fine-tuned approach such as
examining this debatable relationship along various dimensions of firms’ social
performance. Future investigations about the impacts of internationalization upon
other dimensions of social performance are warranted.
In addition, our paper has made some suggestions for policymakers in developing
countries. We observed that because of state ownership and the unequal access to
state-controlled resources, NSOEs are less likely or able to make
The Impact of Internationalization on Home Country… 329
123
charitable donations to their home country, even though they might be willing to do
so. Given the large percentage of NSOEs in emerging countries such as China (e.g.
Chen and Feng 2000) and the greater social roles that they have been playing (e.g.
Kolk et al. 2010), the government may consider readjusting its policies that have
been biasedly favoring SOEs in resource allocation. With resources more easily
obtained from home countries, NSOEs could make a greater contribution to local
societal and community development, which is in line with the objectives of
developing countries.
Our study has several important limitations that call for future investigations.
First, we tested our hypotheses using Chinese listed firms only, therefore we must be
cautious about the extent to which our findings can be generalized to private firms
and to other developing countries. As noted before, the relationship in question may
vary in different institutional contexts. Future studies may prove fruitful by
extending our research framework to samples containing other types of Chinese
firms or from other emerging or developing economies.
Second, our study does not distinguish between different modes of internation-
alization such as export, joint venture, and foreign direct investment (Zahra et al.
2000). To the extent that different modes are associated with distinct decision logics
and relationships with foreign and domestic stakeholders (Benito et al. 2011), their
impact on firms’ domestic charitable donation may vary as well. Future research
along this line may be able to make further contribution to the literature.
Third, while our focus is domestic donation, future studies may also probe the
influences upon international donation. For instance, we may argue that political
ownership may have a moderating effect upon the internationalization—interna-
tional market donation linkage. Specifically, as we indicated before, state ownership
may create a political linkage between a firm and its home-country institutions, and
they can be perceived by their foreigner partners not simply as business entities, but
also political actors (He and Lyles 2008). Accordingly, state ownership as a form of
third-party coalition alters the power dependence between Chinese firms and their
foreign stakeholders, thus the pressure to satisfy foreign stakeholders is reduced
since the firm with state ownership may be perceived by foreign partners as more
powerful. In contrast, due to the reason that managers with sufficient skills to run
global business is comparatively rare in SOEs, the employment risk for these
managers is quite low that these managers are more likely to have discretions to
make international charitable donations. Since these two logics suggest different
directions, future empirical studies are needed to probe this issue more thoroughly.
Finally, we did not examine whether and how internationalization may affect
other important dimensions of firms’ social performance, such as environmental
protection, fair compensation to employees, diversity, political accountability, etc.
(Dyer and Whetten 2006). A more comprehensive examination of firms’ interna-
tionalization and these different sub-dimensions in the context of developing or
developed economies may generate more insights that can further shed light on the
debate about this internationalization—social performance relationship. Meanwhile,
the possible relations between donations with three other categories of CSR also
deserves future investigation. The economic responsibility is ‘to produce goods and
services that society desires and to sell them at a profit’ (Carroll 1979, p. 500),
330 H. Liu et al.
123
which provides a return to shareholders and creates jobs. While in short term
speaking, the donation often indicates a cost which may negatively affect
maximizing shareholders; in long term speaking, donations may sometimes
contribute to better shareholders’ interests by strengthening legitimacy and
reputation, attracting employees (Evans and Davis 2011) as well as building
idiosyncratic competitive advantage. The legal responsibility is the codified
obligations put on businesses by the laws. The China’s central government
officially promulgated the charity law of PRC in 2016, which clearly encourages
firms to carry out charitable activities in accordance with the law. While the
relations between legal responsibility and philanthropic responsibility are not
theoretically determined, future empirical studies are needed to explore the impact
of this newly issued law upon the subsequently corporate charitable donations. The
ethical responsibility encompasses activities that are not codified into laws, but are
expected of business for fair and justice by societal members such as respecting
people, avoiding social harm, preventing social injury, and protecting environments
(Carroll 1991). Theoretically, we may propose that if the CSR is mainly driven by
the altruistic value, we could see a positive association between donation and ethical
responsibilities since they are activated by similar altruistic motivations. In contrast,
if the firm’s CSR is mainly driven by strategic and political reasons, we may see a
substitutive role between donation and other ethical responsible behaviors since
these publicity strategies for attracting resources and support from outside
stakeholders can play substitutive roles to fulfill the legitimacy-building goals.
5 Conclusion
This research examines the relationship between firms’ internationalization and
domestic charitable donation in the Chinese context. From a RDT perspective, we
maintain and find that Chinese public firms’ internationalization negatively affects
their domestic donation. This negative effect is stronger for non-state owned than
state-owned enterprises. This paper highlights the roles of resource dependence and
institutional difference in determining the relationship in question, and calls for a
more nuanced approach to reconciling the debate regarding the effect of
internationalization on firms’ social performance.
Acknowledgements We would like to thank valuable comments and suggestions from two anonymous
reviewers, as well as participants at the 2015 AOM annual meeting and the AIB 2017 Dubai conference.
We acknowledge financial support from the Chinese National Science Funds (Grant No. 71572160 and
71672197) and the Key Research Project of Guangdong Province (Grant No. 2016WZDXM001). All
remaining errors are our own.
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