The Impact of Corporate Philanthropy on Firm Performance: The Moderating Effect of Corporate Life Cycle Stage

Abstract

Abstract: Corporate philanthropy is an important manifestation of corporate social responsibility, and can increase firm performance. However, the impact of corporate philanthropy on firm performance in the whole corporate life cycle has not yet been studied in depth. Employing resource-based theory and panel data between 2008 and 2015 retrieved from CSMAR, this paper investigates how the corporate philanthropy leads to heterogeneous performance at growth, mature and shake-out stages, and explores the influencing mechanism. The results show that corporate philanthropy has greater positive impact on firm performance at mature stage; due to the existence of resource constraints, corporate philanthropy for firms at growth stage has a crowding-out effect on investment resources, thus leading to limited impact on firm performance; due to the agency problem, corporate philanthropy for firms at shake-out stage has limited impact on firm performance. Introducing corporate life-cycle stage in philanthropy-performance relationship, this paper proves that corporate philanthropy has distinctive impact on firm performance at different stages. Integrating resource-based theory and agency theory, the paper explains the reason of insufficient contribution of philanthropy to firm performance at growth stage and shake-out stage. The conclusion of this paper extends the related literature, and also provides managerial suggestions.

Key words: corporate philanthropy, corporate life cycle, resource-based theory

Gu Leilei, Peng Yang. The Impact of Corporate Philanthropy on Firm Performance: The Moderating Effect of Corporate Life Cycle Stage[J]. Management Review, 2022, 34(3): 243-254.

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