In an age of rapid globalization, it’s easy to shift focus from a local to a more macro view. But a new working paper out of Harvard University and the University of Toronto sets out to underscore the importance or retaining that community spotlight – even when dealing with large, Fortune 1000 companies.
The researchers, András Tilcsik, University of Toronto and Christopher Marquis, Harvard University, tracked the corporate philanthropy activity of various companies leading up to, during, and after major community events to find out how punctuating events in communities affected corporate decision-making.
According to Tilcsik and Marquis, large, planned mega-events like the Olympics had the biggest positive impact on corporate giving – before, during and after. Small-scale natural disasters also led to an uptick in local corporate giving. But large-scale natural disasters like Hurricane Katrina had a negative effect on corporate giving.
The authors say that the project is important because it reminds us of the influence that local events can have on institutional relations. They write, “…this paper speaks not only to the organizational literature on communities and institutions but also to a broader literature on place—a physical, geographic location that is invested with meaning and value.”
Community and Institution
Tilcsik and Marquis write that even without the bolstering effect that punctuating events have on corporate giving, the local environment in which a company’s headquarters is situated influences its giving behaviors. In places where it is common for local corporate leaders to serve on non-profit boards giving tends to be higher.
They also noted an interesting phenomenon – oftentimes when a new CEO comes into a company he or she will slash corporate donations that are seen to be excessive. But within a year, those charitable donations will rise back to the previous level as the CEO internalizes local norms (and learns what his or her peers are giving).
But the researchers wanted to study the impact of destabilizing events – large planned events like the Olympics, the Superbowl, or political conventions, or natural disasters like hurricanes or earthquakes. They studied corporate giving as recorded in the National Directory of Corporate Giving between 1980 and 2006.
Specifically regarding planned events, they write, “even before a mega-event begins, it can bring together local corporate and nonprofit actors and increase the salience of local identity, needs, and pressures for corporate giving.”
And they do – the study showed that large events did increase charitable donations before, during, and after, with the largest event – the Olympics – influencing corporate donations six years after the actual event.
Particularly interesting though, were the results of the portion of the study focused on natural disasters – unplanned events. The researchers separated the events into three categories: small scale disaster (below $1 billion in damage), medium scale disasters (between $1 billion and $5 billion in damage), and major disasters (over $5 billion in damage).
They found that for Fortune 1000 companies that were headquartered in communities that experienced a disaster, the size of the disaster influenced its corporate donations during the year of the disaster and the years following. Tilcsik and Marquis suggest the spillover is due to the fact that most of the disasters studied were hurricanes, and hurricane season occurs late in the year, so the effect on corporate donations wouldn’t be experienced until the following year.
The study showed that small scale disasters (less than $1 billion in damage) led firms to donate more money locally. On the other hand, large scale disasters caused firms to decrease corporate donations.
The researchers write:
“The more damaging a disaster, the more likely it is to undermine the local philanthropic infrastructure and to attract a philanthropic response from outside the community. Thus, while the most damaging disasters will have a negative effect on local firms’ philanthropic contributions, smaller-scale disasters will leave the philanthropic network of the community intact and put local firms at the forefront of disaster response.”
This is another way that the local influences the institutional – events have a varying level of influence on institutional decision-making, depending on their magnitude. It serves as a reminder that even in a global business environment facilitated by the World Wide Web, community does matter. It affects intuitions, leaders, and entire workforces, and reminds us that the local isn’t fading.