Sporting Events, Natural Disasters and Corporate Philanthropy
According to research undertaken by András Tilcsik and Christopher Marquis, Large-scale events like the Olympics lead to a dramatic, albeit short-term increase in otherwise steady charitable-giving patterns among corporations headquartered near the event’s host city. The research was first appeared on the HBS Working Knowledge website.
Natural disasters also have a strong effect on firms’ giving patterns, according to the study Punctuated Generosity: How Mega-events and Natural Disasters Affect Corporate Philanthropy in US Communities, which was published in the March issue of Administrative Science Quarterly.
The study adds to a growing line of academic research highlighting the importance of a firm’s main location, even in an era of globalization.
“In the 1990s and early 2000s, the general thought was that globalization was making the world so similar that [location] didn’t matter,” says Christopher Marquis, an associate professor at Harvard Business School, who coauthored the paper with András Tilcsik (HBS PhDOB ’12), an assistant professor of strategic management at the University of Toronto. “But more recent research shows how culture endures in spite of globalization. Networks and local regulations also significantly influence how companies react to their local environments.”
Historically, though, such research has neglected to consider how firms are affected by major local events, whether they be planned (the Super Bowl or FIFA World Cup, for instance) or unplanned (an earthquake or hurricane). Marquis and Tilcsik set out to address that issue in the context of corporate philanthropy because even global companies tend to focus corporate giving on local nonprofits. Charitable behavior is a key area of interest for Marquis, whose research and teaching focuses on businesses’ social strategies and activities.
Using data from the National Directory of Corporate Giving, the research team looked at how major events affected the philanthropic activity of 2,571 firms in 157 metropolitan areas, between 1980 and 2006.
In assessing the effects of natural disasters, the researchers anticipated two possibilities. On the one hand, communities tend to band together in the wake of tragedy—a phenomenon known as “post-crisis benevolence.” Hence, it’s logical to assume that a firm would go out of its way to contribute to local relief and rebuilding efforts. On the other hand, disasters may cause so much damage to a company’s own operations that money originally earmarked for philanthropy ends up going toward efforts to rescue the firm itself (Call it a case of securing your own oxygen mask first).
As it turned out, the researchers’ findings more or less split the difference. In cases of small- or medium-scale natural disasters (those that did less than $5 billion in damage to the local community), local corporate philanthropy did increase in the short term. But in cases of large disasters such as Hurricane Katrina, donations from local firms decreased in the aftermath. “After a threshold of $5 billion in damage, the effect actually reverses itself,” Marquis says. “The devastation is so large that the economic impact of the disaster overwhelms the firm.”
Timing requests around planned events
To assess the effect of planned events, focusing on national political conventions, the Olympics, and the Super Bowl, the researchers looked at giving patterns in the years leading up to the event, the year of the event, and the years after. All the events had definite effects on giving patterns, but the magnitude of the event determined the magnitude of the charity spike.
For instance, in years when the Olympics occurred, firms located in the host city increased their overall charitable donations by an average 30 percent. Super Bowls corresponded with a 10 percent increase in donations.
“If you’re a philanthropic leader, the time to hit up a company is around these events,” Marquis says. “We focused on only a few events in the paper, but there are tons of sporting events and other events that occur in cities. For philanthropic leaders, connecting to these things is a really good strategy.”
The researchers did not find significant charitable-giving effect in years directly preceding Super Bowls or national political conventions, but firms based in Olympics host cities started ramping up the philanthropy up to four years before the Games actually took place. Marquis attributes this to a combination of goodwill and good public relations. “Because of the organization needed to put the event together, and because of the magnitude of the event, the whole community starts thinking early on, ‘Hey, we’re going to be highlighted, and we want to look good,’ ” Marquis says.
Firms headquartered in Olympics or convention host cities continued to give more than usual for a little while after the events were over, but the increased generosity tended to taper off and disappear after a few years. Thus, even the most majestic sporting events don’t seem to have the power to change a locally-headquartered firm’s philanthropic behavior everlastingly—something city planners should keep in mind when assessing the pros and cons of hosting a mega-event. “ You’ll hear city leaders making the pitch that something like the Olympics helps the community in the long term,” Marquis says. “But here there’s evidence that actually, no, it doesn’t.”
In addition to providing practical advice for nonprofit organizations and city planners, the researchers hope their study will provide a jumping-off point for broader discussion about the importance of location to organizational behavior.
“The English language is expressive in this regard,” they write in the conclusion of the paper. “When an event occurs, it takes place—it prevails in a particular locale, introducing its own dynamics. We hope our study will stimulate more research into how such dynamics affect organizations.”
Author, Carmen Nobel senior editor, Harvard Business School Working Knowledge