When Does the Family Matter? Institutional pressures and corporate philanthropy in China

Abstract

This paper investigates whether family firms display corporate giving practices significantly different from nonfamily firms. Our two-stage model theorizes, and finds empirical support from a survey of 3,075 Chinese private firms, that firms sensitive to institutional pressures (as a result of firm visibility and political linkages) are more likely to engage in philanthropy (stage 1) and to donate larger amounts (stage 2). In stage 1, family and nonfamily firms display similar conforming behaviors, aimed at maintaining sociopolitical legitimacy. In stage 2, family ownership intensifies the effect of institutional pressures on firms’ philanthropic giving, as reputational motives overlay legitimacy concerns. Our study integrates institutional analyses of socially responsible practices and family business theories to yield insights on the role of the family variable as a key moderator of institutional effects.

Keywords

China corporate philanthropy family firms institutional pressures

Introduction

Scholars in the family business domain have shown great interest in exploring firms’ engagement in corporate social responsibility (CSR) and proactive stakeholder engagement. Given their unique characteristics (e.g., desire to preserve socioemotional wealth, importance of community relationships), family-controlled firms are typically considered more CSR-sensitive than companies with a different ownership structure (Cennamo, Berrone, Cruz, & Gómez-Mejía, 2012; Filatotchev & Nakajima, 2014; McGuire, Dow, & Ibrahim, 2012). Research in this area, however, has “yielded contrasting theoretical arguments and empirical results” (Bingham, Dyer, Smith, & Adams, 2011, p. 565), and “there is lack of agreement about whether family firms are more or less socially responsible” (Cruz, Larraza-Kintana, Garcés-Galdeano, & Berrone, 2014, p. 1295).

Prior studies found that family firms are more concerned about negative evaluations than nonfamily firms. Thus, they respond more saliently to external pressures and stakeholder demands (Berrone, Cruz, Gómez-Mejía, & Larraza-Kintana, 2010; Cruz et al., 2014). Other studies have shown that family firms engage in positive social initiatives, such as charitable giving and philanthropy (Campopiano, Massis, & Chirico, 2014; Feliu & Botero, 2016), but whether they do it to a greater extent than nonfamily firms remains unclear (Bingham et al., 2011; Cruz et al., 2014; Dyer & Whetten, 2006). Research on philanthropic giving reveals the same inconsistent findings (Feliu & Botero, 2016). We suggest that these mixed findings result from the prevalent focus of extant research on the direct effect of the family variable on CSR practices, which overlooks the influence of the institutional context on firms’ decisions (Soleimanof, Rutherford, & Webb, 2018).

This paper addresses this limitation by investigating the effect of institutional pressures (in our case primarily of a sociopolitical nature) on philanthropic giving and potential differences between family and nonfamily firms (Berrone et al., 2010; Cruz et al., 2014; Zhang, Yang, Wang, & Wang, 2012). Theoretically, we draw on institutional analyses that consider social responsibility as institutionally demanded (e.g., Aguilera, Rupp, Williams, & Ganapathi, 2007; Filatotchev & Nakajima, 2014; Marquis & Qian, 2014; Zhang & Luo, 2013) and the recent dialogue on conformity and differentiation in family business research (e.g., Berrone et al., 2010; Mazzelli, Kotlar, & De Massis, 2018). From this vantage point, giving is a legitimacy-seeking practice, although not all organizations are equally susceptible to pressure (Greenwood, Raynard, Kodeih, Micelotta, & Lounsbury, 2011). We theorize firm visibility and political linkages as channels through which institutional pressures are exerted. Family ownership acts as a filter through which “institutional prescriptions are interpreted and from which firms’ decisions then can be formed differently compared with nonfamily firms” (Soleimanof et al., 2018, p. 32). Thus, we ‘flip’ the model as we investigate direct institutional effects of giving practices and family ownership as a key moderator.

Our study examines a large sample of privately owned Chinese firms. In this context, corporate giving is an institutional expectation and a legitimacy-seeking behavior (Wang & Qian, 2011). Our hypotheses test the influence of institutional pressures on corporate giving and the differences between family and nonfamily firms (Aguilera et al., 2007; Arora & Dharwadkar, 2011; Chiu & Sharfman, 2011). We found empirical support for the differential effect of family ownership on two decisions. Firms sensitive to legitimacy pressures in terms of firm visibility and political linkages engage more in corporate giving (stage 1) and donate larger amounts (stage 2). Family ownership does not affect the giving decision in stage 1 as conformity prevails. In stage 2, however, family involvement has an amplifying effect. Driven by reputational and social identity motives, family firms donate more in order to ‘stand out’.

Our paper contributes to integrating organization and family business theories in three ways. First, we advance knowledge on corporate philanthropy and socially responsible practices in family-controlled firms (Berrone et al., 2010; Campopiano et al., 2014; Cennamo et al., 2012), by revealing key insights on how family involvement interacts with institutional demands. Second, we extend research on organizational characteristics that channel or amplify institutional influences (e.g., Kodeih & Greenwood, 2014; Lee & Lounsbury, 2015) by pointing attention to the key role of the ownership structure, and specifically family ownership. Third, our study increases conceptual and theoretical clarity to studies of corporate philanthropy (Feliu & Botero, 2016). We highlight the usefulness of considering engagement in philanthropy practices as a set of two separate decisions (to give and how much to give), on the basis that family involvement has a differential moderating effect on these decisions.

Theory and Hypotheses

Firm engagement in socially responsible activities as responses to institutional pressures

A key research theme in the CSR domain is the investigation of the drivers that encourage firms to address the concerns of multiple stakeholders and engage in “actions that appear to further some social good, beyond the interests of the firm and that which is required by law” (McWilliams & Siegel, 2001, p. 117). One important form of such engagement is philanthropy—which involves gifts or monetary contributions to charitable causes (Saiia, Carroll, & Buchholtz, 2003; Sharfman, 1994). Whereas, early on, scholars examined corporate giving as primarily motivated by altruistic motives and citizenship behavior (Campbell, Gulas, & Gruca, 1999; Carroll, 1991), recent developments in the literature advance the view that socially responsible practices may be driven by instrumental and strategic motives (Brammer & Millington, 2005; Godfrey, 2005). That is, corporate philanthropy may help companies maintain their “license to operate” in society (Chiu & Sharfman, 2011), act as an insurance against social opprobrium after a negative event (Godfrey, Merrill, & Hansen, 2009), or be part of sociopolitical strategies to gain political access and improve performance (Marquis & Qian, 2014; Wang & Qian, 2011).

Notably, some scholars have elaborated this idea to suggest that, in some institutional contexts, corporate philanthropy and other CSR practices may be a response to the expectations of salient stakeholders. These studies mostly build on institutional theory, which focuses on how institutions shape organizational actions and drive conformity (DiMaggio & Powell, 1983; Scott, 2014). Constituencies (e.g., government, industry peers, competitors, activists) exert pressures on firms based on social, political, and cultural macro-factors (Aguilera et al., 2007; Chiu & Sharfman, 2011; Matten & Moon, 2008). As organizations seek approval and thus try to avoid negative discounts from nonconformity, they tend to adopt similar behaviors and exhibit socially valuable practices within their environments. From this vantage point, social responsibility consists of “values, norms, and rules that result in (mandatory and customary) requirements for corporations to address stakeholder issues and that define proper obligations of corporate actors in collective rather than individual terms” (Matten & Moon, 2008, p. 409).

Critically, the idea that institutional environments exert pressures on companies does not entail that all organizations exhibit passive and homogeneous isomorphic behaviors (Oliver, 1991; Pache & Santos, 2010). Organizations have leeway to engage in a wide array of strategic responses and some firms bow to institutional pressures more than others. Some firms, for instance, may be able to ignore institutional pressures because of their elite status and central position, which insulates them from regulatory, normative, and sociocultural pressures (Greenwood & Suddaby, 2006). Other firms may feel more pressure to conform because of higher visibility, e.g., publicly traded firms (Chiu & Sharfman, 2011; Miller, Breton-Miller, & Lester, 2013), dependence on resources critical for their long-term survival and success, or the need to maintain goodwill from the audiences that confer sociopolitical legitimacy (Filatotchev & Nakajima, 2014).

This line of research is particularly insightful to understand corporate giving in China where institutional expectations are particularly strong. As Wang and Qian (2011, p. 1162) noted, “Chinese stakeholders expect corporate philanthropy because of the influence of traditional values (i.e., Confucianism) and recent sociopolitical factors.” We build on these arguments to theorize the organizational factors that affect firm sensitivity to institutional pressures and influence their decisions in two ways: whether to engage in giving (stage 1) and how much to give (stage 2). Then, we predict how corporate philanthropy may vary between family and nonfamily firms.

Organizational factors affecting firm sensitivity to institutional pressures in China

China’s complex institutional environment provides an ideal research context. Since the mid-1990s, China’s institutions have been shaken by dramatic economic reforms and social change. After the dismantling of the socialist command economy, markets have become increasingly important. However, Chinese firms are still significantly influenced by traditional Chinese culture, especially the devotion to family values (familism) (Leung, 2008; Wong, 1985). Moreover, the government still holds enormous regulatory power and maintains a key role in economic life, directly through state-owned enterprises, and indirectly through political linkages to corporations (Dou, Zhang, & Su, 2014; Wang & Qian, 2011; Zhang, Rezaee, & Zhu, 2009).

Importantly, institutional stakeholders in China have strong expectations that corporations will provide swift and substantial contributions, especially during catastrophes (e.g., the Sichuan earthquake in 2008; see Luo, Zhang, & Marquis, 2016). These powerful normative pressures contribute to making corporate giving a prescribed practice that, as institutional theory suggests, helps firms maintain legitimacy and ensure their survival and success (Deephouse & Suchman, 2008; Suddaby, Bitektine, & Haack, 2017). Corporate philanthropy, in particular, “helps (Chinese) firms obtain sociopolitical legitimacy, which enables them to elicit positive stakeholder responses and gain political access” (Wang & Qian, 2011, p. 1160). Although all Chinese firms are subject to similar pressures and normative expectations (Wang & Qian, 2011), prior research suggests that certain organizational features increase firm sensitivity to these expectations and, thus, the likelihood of their engagement in philanthropy. Specifically, we focus on two factors that operate as channels through which stakeholders exert sociopolitical pressures and will increase the propensity of firms to bow to institutional pressures: (a) firm visibility and (b) the presence of political linkages.

Firm visibility and corporate giving

Prior research shows that “firms that are more in the public eye are more likely to face legitimacy pressures than firms the public does not know” (Chiu & Sharfman, 2011, p. 1560). Not only are highly visible firms subject to greater scrutiny, but the plethora of information about them also enables stakeholders to monitor their behaviors. The attention they attract and the development of pervasive media (e.g., micro blog and internet activism) put them at a higher risk of being discovered and sanctioned if they deviate from normative expectations (Luo et al., 2016). Firms with high visibility will also suffer stronger negative consequences from the loss of legitimacy because of their public prominence. Thus, we expect highly visible firms to feel more compelled toward social responsibility to fulfill stakeholder expectations and avoid negative outcomes (Chiu & Sharfman, 2011).

This relationship will prove true in our context. The Chinese government actively promotes CSR as an important practice and companies typically comply even without laws and mandates (Marquis & Qian, 2014). We expect that the motivations that strongly encourage highly visible companies to give will also affect how much to donate. In China, highly visible firms are expected to offer contributions commensurate to their position in the community. We therefore expect them to donate generously compared to less visible companies to avoid being considered miserly and therefore penalized (Wang & Qian, 2011).

Political linkages and corporate giving

Second, we focus on the government influence over corporate decision-making through the channel of political linkages. Understanding how political institutions affect corporate philanthropy is crucial in the Chinese context (Aguilera et al., 2007; Detomasi, 2008; Zhao, 2012). The government’s dominant role as regulator and owner of many firms makes political linkages profoundly influential in shaping firms’ practices (Dou et al., 2014; Du, 2015; Wang & Qian, 2011) to the point that government mandates philanthropy (Ge & Zhao, 2017; Moon, Kang, & Gond, 2010).

Rooted in the traditional danwei (i.e., work units) institutions (Francis, 1996), the Chinese government often shifts responsibilities for social management onto firms, especially when local authorities lack resources to undertake community and social welfare projects (Dickson, 2003; Wang & Qian, 2011). Local governments incentivize donations, but more often they first turn to politically connected firms to demand corporate philanthropy (Okhmatovskiy, 2010). Firms closer to the political sphere (as denoted by their political linkages) are more likely to acquiesce to demonstrate loyalty and secure benefits derived from close government ties. Being responsive to government’s demands is, in fact, an effective way to nurture the connection with local and national branches of government and thus secure the firms’ status within the political hierarchy (Wang & Qian, 2011).

Whereas donations connote appropriateness, firms with political linkages also have an interest in strengthening their ties to the government by acting as “generous volunteers” beyond simple compliance with state demands (Ge & Zhao, 2017). Organizations with linkages to the state will make more substantial contributions to further enhance their position and reap the benefits of a preferential status (Zhao, 2012, p. 440).

Based on these arguments, we propose:

Hypothesis 1a: Firms more sensitive to institutional pressures (i.e., high visibility and political linkages) are more likely to engage in corporate giving.

Hypothesis 1b: Firms more sensitive to institutional pressures (i.e., high visibility and political linkages) will engage more substantially in corporate giving.

How family firms respond to institutional pressures compared to nonfamily firms

Our first set of hypotheses theorizes that Chinese companies that are more sensitive to institutional pressures will be more likely to engage (substantially) in corporate giving. In this section, we investigate whether family firms are equally, more, or less susceptible to giving than nonfamily firms. The distinctive configuration of family enterprises—at the intersection between family, business, and society—has made these practices particularly interesting to study. A growing body of work has begun to examine whether this distinctive ownership structure influences the adoption of practices aimed at (proactively or reactively) addressing stakeholder demands (Cennamo et al., 2012; Dyer & Whetten, 2006; Feliu & Botero, 2016; Marques, Presas, & Simon, 2014). These studies emphasize that internal factors such as a family enterprise’s long-term commitments, desire to preserve the socioemotional wealth, intergenerational succession etc. will make engaging in socially responsible practices particularly valuable for family firms (Cruz et al., 2014; Gómez-Mejía, Cruz, Berrone, & De Castro, 2011).

Although important, insights from these studies have been selective. First, there have been limited attempts to integrate macro-theoretical lenses that examine external factors affecting family firms’ agency and decisions, such as conformity to peers’ behaviors or responses to institutional pressures (see Mazzelli et al., 2018, for an elaboration of this argument). With a few exceptions (e.g., Banalieva, Eddleston, & Zellweger, 2015; Cruz et al., 2014; Labelle, Hafsi, Francoeur, & Ben Amar, 2018; Peng, Sun, Vlas, Minichilli, & Corbetta, 2018), scholars have dramatically neglected the role played by the institutional context in which family firms operate and the ways in which it may affect their decisions. Additionally, much of the research on CSR and philanthropy has not directly compared family and nonfamily firms. In fact, Feliu and Botero (2016, p. 135) found that “only six studies compare family and nonfamily firms, and four of them find no differences between the extents to which ownership affects the practice of philanthropy.” Finally, we also contend that the choice of how much to donate is qualitatively different from the choice to make a contribution (Zhang et al., 2009). This nuance is particularly relevant to appreciate whether family matters and how the effect of family involvement may be contingent on the decisions to be made.

Next, we theorize whether family ownership—as a key organizational characteristic that affects decision-making—interacts with organizational factors (i.e., firm visibility and political linkages) to influence the decisions to engage in corporate giving (stage 1) and the amount to donate (stage 2). We build our second set of hypotheses on the literature on conformity and distinctiveness (Zhao, Fisher, Lounsbury, & Miller, 2017; Zuckerman, 2016) and its recent application to the family business domain (Mazzelli et al., 2018; Miller et al., 2013). In line with Mazzelli et al. (2018, p. 207), we suggest that “family firms have greater motivation and commitment to engage in legitimized behaviors to solidify the firm’s social standing in the eyes of external constituencies.” Specifically, we highlight the important difference between behaviors that seek legitimacy and reputation, two key distinct mechanisms of social evaluation (Bitektine, 2011; Bitektine & Haack, 2015; Deephouse & Suchman, 2008). While legitimacy refers to social desirability resulting from adherence to institutional norms and expectations, reputation derives from a social comparison of organizations on certain attributes (i.e., differentiation) (Deephouse & Carter, 2005, p. 332). Reputation thus differentiates legitimate firms from the outstanding ones. We see these mechanisms unfolding in China.

We argue that the choice of giving vs. not giving clearly demarcates companies in the public eye as ‘good guys’ who rise to the occasion and the ‘bad guys’ who do not. As Bitektine (2011, p. 162) suggests, “in a sociopolitical legitimacy judgment, observed organizational features and performance on a set of relevant dimensions are benchmarked against the prevailing social norms and regulations.” In an institutional environment characterized by strong normative expectations about corporate giving, both family and nonfamily firms seek sociopolitical legitimacy in the eyes of the Chinese government and local authorities and want to avoid social sanctions from nonconformity. We thus expect both family and nonfamily firms to feel hard-pressed to donate (stage 1) in order to meet stakeholders’ expectations. In other words, we expect isomorphic forces to prevail and similarities, rather than differences, between the behaviors of family and nonfamily firms to be observed (Matten & Moon, 2008).

Hypothesis 2a: The effects of sensitivity to institutional pressures on engagement in corporate giving, as stated in H1a, will not differ between family and nonfamily firms.

Having established legitimacy through conformity (i.e., engagement in corporate giving in stage 1), we suggest that reputation will become the salient mechanism of social evaluation that drives firms’ decisions in stage 2 (Deephouse, 1999). We expect a difference between the giving behaviors of family and nonfamily firms in stage 2. Based on insights from the family business literature (Sageder, Mitter, & Feldbauer-Durstmüller, 2018), we know that family businesses take into account a broader spectrum of noneconomic goals than nonfamily firms (Gómez-Mejía, Haynes, Núñez-Nickel, Jacobson, & Moyano-Fuentes, 2007; Labelle et al., 2018). These include projecting and perpetuating a positive family image and reputation and garnering prestige in the community (Berrone et al., 2010; Cennamo et al., 2012; Cruz et al., 2014; Deephouse & Jaskiewicz, 2013). Compared to nonfamily firms, who have less propensity to perceive the strategic benefits of giving, family firms will be more sensitive to the organizational benefits they earn (Aguinis & Glavas, 2012; McWilliams & Siegel, 2001; McWilliams, Siegel, & Wright, 2006; Wang, Choi, & Li, 2008; Wang & Qian, 2011). Additionally, social identity theory suggests that family owners are deeply invested in their companies and are interested in pursuing the preservation of the family’s good name for future generations (Kets de Vries, 1993).

These identity and reputational dynamics are particularly salient in the Chinese context. Confucianism emphasizes the family as the key basic social unit and the nexus of social relationships. Ancestor worship (zuxian chongbai), filial piety (xiao), and familism (jiazu zhuyi) are highly regarded values. These enduring beliefs are reflected in the social support for family-owned and family-run organizations, in particular in the relationship with the community (Chau, 1991; Wijaya, 2008; Wong, McReynolds, & Wong, 1992). Contributing greatly to public welfare (through infrastructure, schools, and other community projects for example) is a common approach to achieve family prestige (guang yao men mei and guang zong yao zu), especially locally (zao fu xiang li). In the Chinese context, it is also particularly evident that “family firm founders view their business operations as an extension of themselves—their identity, or self-view” (Dyer & Whetten, 2006, p. 789). The identity of the firm (especially when privately owned) is inextricably tied to the family identity and “Chinese merchants habitually equate the business name, the name of the firm’s founder or present head, and the business family as a group” (Wong, 1985, p. 60). Because of this tight link, the firm is seen both by internal and external stakeholders as an extension of the family itself (Berrone, Cruz, & Gómez-Mejía, 2012) and engaging substantially in corporate giving is likely a way to maintain the good name of their family.

Based on these considerations, we expect that family firms will be more inclined than nonfamily firms to pursue reputation through corporate giving as a way to stand out, even if this entails economic costs (Cruz et al., 2014; Deephouse & Jaskiewicz, 2013). They will therefore donate more compared to nonfamily firms because they have additional reputational incentives. Thus, we predict family ownership to amplify the effects of high visibility and political linkages in stage 2.

Hypothesis 2b: The effects of sensitivity to institutional pressures on the degree of engagement in corporate giving (i.e., amount of donation), as stated in H1b, are stronger for family firms compared to nonfamily firms.

Methods

Data

This project utilized data collected through a nationwide survey of Chinese firms in the private sector conducted in 2010 and focused on family businesses. The survey was organized by the All-China Federation of Industry and Commerce and the State Administration of Industry and Commerce, both operating at the national, provincial, city, and county/urban district levels. Since 1993, these organizations have conducted surveys every two years to investigate topics relevant to private firms and understand organizational and institutional changes. The research team first generated a nationwide random sample of private firms using multistage stratified sampling across all provinces and industries and then used a questionnaire to conduct face-to-face structured interviews with the owner(s) of each firm. Interviews with 4,614 firms in 19 different industries were completed from all 31 provinces and metropolitan areas of China, representing around 0.55% of the population of Chinese private firms in 2010. After excluding observations with extensive missing values, the final sample consisted of 3,075 firms. A set of t-tests were conducted to examine the nonresponse bias (Armstrong & Overton, 1977), and we found no significant mean differences in salient firm-level characteristics between respondents and non-respondents.

Measurement

Dependent variable

This study focuses on corporate giving as two separate decisions, for which we use two variables: the giving behavior and the giving amount. Giving behavior was measured as a dummy variable that equals 1 when the firm donated in the previous years (2009 and 2008) and 0 otherwise. The giving amount was measured as the average monetary amount of a firm’s charitable contributions during the past two years. The amount variable was highly skewed; we thus computed its natural logarithm as our dependent variable.

Independent variables

A firm’s visibility is captured by firm size, which is widely used in the literature as a proxy for visibility, especially for private companies (Chiu & Sharfman, 2011; Edelman, 1990; Greenwood, Díaz, Li, & Lorente, 2010). Firm size was measured as the logarithm of the number of employees of the firm, which is appropriate given our sample of small-medium private firms. The variable political linkages was measured by assessing whether there is an internal party cell in the firm. The party cells in private enterprises are a powerful vehicle the party-state utilizes to co-opt the private sector in China (Dickson, 2008). This variable was measured as a dummy variable. If the firm has an internal branch of Communist Party committees, it equals 1 and 0 otherwise.

To capture family firms, we adopted both a dummy variable and a continuous variable (Chrisman & Patel, 2012). Our binary family firm measure distinguishes family firms (= 1) from nonfamily firms (= 0) on the basis of both family ownership and family management (Anderson & Reeb, 2003; Chrisman & Patel, 2012; Gómez-Mejía, Makri, & Kintana, 2010). A firm was coded as a family firm when a family owns a minimum of 30% of the shares and at least one family member serves as a member of the top management team. For the continuous measure of family involvement, we also stipulate that at least one family member serves on the top management team and at least 30% of the shares be held by the family. When the conditions are met, family involvement is measured as the percentage of ownership held by the family. Firms that do not meet this condition are considered nonfamily firms and are coded as 0, making this variable left-censored (Chrisman & Patel, 2012; Patel & Chrisman, 2014). No consensus exists as to a precise ownership cutoff point to define a firm as family-owned (Cruz, Gómez-Mejía, & Becerra, 2010; Gómez-Mejía et al., 2011, 2014). Studies focusing on public firms have used 20% ownership as the threshold in categorizing family and nonfamily firms (e.g., Cruz et al., 2010, 2014; Gómez-Mejía et al., 2014). Since the majority of the firms in our sample are private small and medium firms, we adopt a higher threshold of 30% (Gómez-Mejía et al., 2011). In robustness checks, we used 20% and 50% as thresholds (Li, Au, He, & Song, 2015), and the proportion of firms in our sample that fall into the category of family firms changes only slightly (around 4%) when these threshold values are used.

Control variables

We controlled for a set of firm, intra-firm, and environmental variables. First, firm age was included as old firms founded in earlier periods may hold different attitudes toward corporate philanthropy because of their distinct organizational identity and organizational inertia (Marquis & Lee, 2013). Prior research has demonstrated that a firm’s financial performance and resources (e.g., profitability) can positively affect its CSR activities (e.g., Chiu & Sharfman, 2011; Johnson & Greening, 1999). Accordingly, we controlled for firm profitability measured by return on sales (ROS), calculated as net income over sales, a common measure of corporate performance. In addition, a firm’s investment in R&D can potentially affect its investment in philanthropy (McWilliams & Siegel, 2000). We controlled for R&D intensity, calculated as a firm’s investment in R&D over its total sales in the past year. Corporate philanthropy is also influenced by connections with other peer firms due to normative pressures and social learning channeled through their networks and interactions (Galaskiewicz & Burt, 1991; Galaskiewicz & Wasserman, 1989). As such, we controlled for firms’ membership in industry associations. If the firm has participated in any industry association, this variable was coded as 1 and 0 otherwise.

Second, we controlled for several factors that may influence organizational orientations toward philanthropy. Because the owner holds a central position in a firm’s decision-making process, his or her commitment to philanthropy may be a key factor (Waldman, Siegel, & Javidan, 2006; Weaver, Treviño, & Cochran, 1999). As such, we controlled for the owner’s demographic characteristics, including gender (male 1 and female 0), age, educational background, which was coded as an ordinal variable ranging from 1 to 6 (1 = “elementary school and below”, 2 = “middle school”, 3 = “high school”, 4 = “junior college”, 5 = “university”, 6 = “graduate school”). We also controlled for the owner’s party membership (1 if in party membership and 0 otherwise) as the top leader’s political ideology may potentially affect corporate behavior (Chin, Hambrick, & Treviño, 2013). Also, the owner’s religious faith is influential in corporate behavior including corporate philanthropy (Atkinson & Galaskiewicz, 1988; Du, Jian, Du, Feng, & Zeng, 2013; Jiang, Jiang, Kim, & Zhang, 2015). We included a dummy variable that equals 1 if the owner has any religious faith and 0 otherwise.

Third, we controlled for regional and industrial factors. The local institutional and market environment can influence firm practices and philanthropy in particular (Campbell, 2007; Wang & Qian, 2011). We included a set of dummy variables to capture all 31 Chinese provinces, municipalities, and autonomous regions. Differences in corporate philanthropy may also exist among industries since the extent of government regulation, contact with the market, and visibility to the public may vary. We controlled for industries as a set of dummy variables.

Models

Our proposed model of corporate giving involves two stages (i.e., whether to contribute and, if the ﬁrst decision is afﬁrmative, the amount of the contribution). Since factors affecting firms’ decisions in stage 1 (giving behavior, our first dependent variable) are probably related to the second dependent variable (i.e., giving amount), firms’ self-selection raises the concern of selection bias. We used Heckman’s two-stage selection model to address this issue (Heckman, 1979). In the first stage, our dependent variable is giving behavior, a dummy variable; we thus used probit regression models. As firms may mimic peers within the same field when they decide whether to adopt a practice (DiMaggio & Powell, 1983), we also include a variable measuring industry-level giving (proportion of firms that donated in a certain industry) in the first stage regression (Wang & Qian, 2011) to meet the exclusion restrictions in Heckman’s model. We then calculated the inverse Mills ratio from the first-stage probit regression and included it as a control variable in second-stage OLS regression models. To check for multicollinearity between independent and dependent variables, we examined the variance inflation factor (VIF) in the models. The maximum VIF was 3.40 and the mean VIF was around 1.60, which is substantially less than the rule of thumb of 10, indicating that multicollinearity is not a significant concern (Greene, 2011).

Results

Table 1 reports the descriptive statistics and correlations of the variables. Panel A includes the variables in the first-stage probit regressions. The mean of the dependent variable of giving behavior is 0.87. Such wide adoption of giving practices supports our argument about the institutionalization of corporate philanthropy practices, as we have discussed above. As expected, the giving behavior is positively correlated with both the indicator of firm visibility (i.e., firm size) and political linkages (i.e., internal party cell). Over 70% of firms in our sample are family firms, and the average degree of family involvement is 61% in terms of family ownership, a value typically observed in small and medium-size enterprises (e.g., Chrisman, Chua, Pearson, & Barnett, 2012). The variables in the second-stage model are presented in panel B. Giving amount has positive correlations with both the indicator of firm visibility (i.e., firm size) and political linkages (i.e., internal party cell), lending preliminary support to our arguments. We now turn to the results of the regression models that formally test our hypotheses.

Table 1.

Descriptive Statistics and Correlations.

Panel A: Variables in First-Stage Model.
Variable		Mean	S.D.	1	2	3	4	5	6	7	8	9	10	11	12	13	14
1.	Giving behavior (1=yes)	0.87	0.34
2.	Firm visibility (logged size)	3.89	1.54	0.17
3.	Political linkages (internal party cell)	0.30	0.46	0.12	0.54
4.	Family firm (1=yes)	0.70	0.46	0.04	0.06	0.01
5.	Family involvement	0.61	0.43	0.05	0.02	–0.03	0.92
6.	Firm age	2.01	0.63	0.15	0.31	0.22	0.07	0.08
7.	ROS	0.10	0.21	0.01	–0.09	–0.08	0.00	0.00	–0.06
8.	R&D intensity	0.03	0.43	0.01	0.00	0.00	0.01	0.01	0.02	0.01
9.	Industry association	0.74	0.44	0.17	0.41	0.31	0.09	0.08	0.33	–0.05	–0.02
10.	Owner gender (1=male)	0.86	0.35	0.05	0.11	0.09	0.07	0.06	0.07	–0.02	0.01	0.11
11.	Owner age	45.92	8.63	0.03	0.23	0.20	0.07	0.05	0.28	–0.09	–0.01	0.19	0.09
12.	Owner education	3.83	1.10	0.00	0.20	0.20	–0.06	–0.10	0.02	–0.03	0.03	0.09	–0.01	–0.16
13.	Owner party membership	0.47	0.50	0.06	0.22	0.28	0.01	–0.02	0.10	–0.01	–0.01	0.19	0.11	0.19	0.17
14.	Owner religious faith (1=yes)	0.23	0.42	–0.01	0.07	0.04	0.01	0.01	0.07	0.05	0.03	0.11	0.01	0.03	–0.05	0.02
15.	Industry-level giving	0.84	0.05	0.14	0.31	0.17	0.11	0.10	0.14	–0.07	0.00	0.17	0.13	0.14	–0.04	0.05	0.02

Notes: N = 3075. Correlations larger than 0.04 are significant at p < 0.05.

Panel B: Variables in Second-Stage Model.
Variable		Mean	S.D.	1	2	3	4	5	6	7	8	9	10	11	12	13	14
1.	Giving amount (logged)	9.33	2.16
2.	Firm visibility (logged size)	3.99	1.52	0.61
3.	Political linkages (internal party cell)	0.32	0.47	0.39	0.54
4.	Family firm (1=yes)	0.71	0.46	0.12	0.05	0.00
5.	Family involvement	0.62	0.43	0.10	0.00	–0.04	0.92
6.	Firm age	2.05	0.61	0.30	0.27	0.19	0.07	0.08
7.	ROS	0.10	0.20	–0.07	–0.11	–0.08	–0.01	0.00	–0.06
8.	R&D intensity	0.03	0.46	–0.03	0.00	0.00	0.01	0.01	0.02	0.01
9.	Industry association	0.77	0.42	0.41	0.39	0.29	0.08	0.07	0.29	–0.05	–0.03
10.	Owner gender (1=male)	0.86	0.34	0.10	0.11	0.09	0.07	0.06	0.07	–0.01	0.01	0.11
11.	Owner age	46.01	8.46	0.16	0.23	0.20	0.09	0.06	0.26	–0.10	–0.01	0.18	0.10
12.	Owner education	3.84	1.09	0.22	0.20	0.19	–0.07	–0.11	0.02	–0.02	0.03	0.08	–0.01	–0.17
13.	Owner party membership	0.48	0.50	0.17	0.20	0.28	–0.01	–0.05	0.08	–0.01	–0.01	0.16	0.10	0.21	0.15
14.	Owner religious faith (1=yes)	0.23	0.42	0.11	0.06	0.03	0.02	0.01	0.06	0.05	0.03	0.09	0.03	0.01	–0.05	0.01
15.	Inverse Mills ratio	0.22	0.13	–0.46	–0.58	–0.42	–0.14	–0.12	–0.47	–0.01	–0.04	–0.59	–0.15	–0.09	–0.01	–0.19	0.05

Notes: N = 2674. Correlations larger than 0.04 are significant at p < 0.05.

First-stage models predicting giving behavior

Table 2 presents the results of first-stage probit regression models predicting whether a firm donates. Model 1 is the baseline model that includes control variables. Models 2 to 4 test hypotheses 1a and 1b by examining the effects of firm visibility and political linkages on giving behavior. Models 5 to 7 and models 8 to 10 investigate whether family matters in the institutional effects on giving behavior, with the binary family firm measure and the continuous family involvement measure, respectively. Regarding the control variables, as anticipated, firm age, industrial association membership, and industry level of giving show positive effects on giving behavior consistently across the models. For our hypotheses, firm visibility and political linkages both have a positive and significant effect on giving behavior (both at p < 0.001), as shown in models 2 and 3 respectively. In model 4, when firm visibility and political linkages are included in the model at the same time, they both have positive effects while the statistical significance with the effect of political linkages becomes marginal. Hypothesis 1a is therefore supported.

Table 2.

Results for Probit Regression Models Predicting Giving Behavior.

Variable	Giving Behavior
	Family Firm							Family Involvement
	1	2	3	4	5	6	7	8	9	10
Controls
Firm age	0.25***	0.21***	0.23***	0.21***	0.21***	0.21***	0.21***	0.21***	0.21***	0.21***
	(0.05)	(0.05)	(0.05)	(0.05)	(0.05)	(0.05)	(0.05)	(0.05)	(0.05)	(0.05)
ROS	0.22	0.26†	0.23†	0.26†	0.27†	0.27†	0.27†	0.26†	0.27†	0.26†
	(0.14)	(0.14)	(0.14)	(0.14)	(0.14)	(0.14)	(0.14)	(0.14)	(0.14)	(0.14)
R&D intensity	0.12	0.08	0.10	0.08	0.08	0.08	0.08	0.08	0.08	0.08
	(0.31)	(0.17)	(0.26)	(0.16)	(0.16)	(0.17)	(0.17)	(0.16)	(0.16)	(0.16)
Industry association	0.40***	0.32***	0.35***	0.30***	0.30***	0.30***	0.30***	0.30***	0.30***	0.30***
	(0.07)	(0.07)	(0.07)	(0.08)	(0.08)	(0.08)	(0.08)	(0.08)	(0.08)	(0.08)
Owner gender (1 = male)	0.03	0.03	0.03	0.03	0.03	0.02	0.02	0.02	0.02	0.02
	(0.08)	(0.08)	(0.08)	(0.08)	(0.08)	(0.08)	(0.08)	(0.08)	(0.08)	(0.08)
Owner age	–0.01*	–0.01**	–0.01**	–0.01**	–0.01**	–0.01**	–0.01**	–0.01**	–0.01**	–0.01**
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)
Owner education	–0.04	–0.08*	–0.06+	–0.08**	–0.08**	–0.08**	–0.08**	–0.08**	–0.08**	–0.08**
	(0.03)	(0.03)	(0.03)	(0.03)	(0.03)	(0.03)	(0.03)	(0.03)	(0.03)	(0.03)
Owner party membership	0.09	0.08	0.05	0.06	0.06	0.06	0.06	0.06	0.06	0.06
	(0.06)	(0.07)	(0.07)	(0.07)	(0.07)	(0.07)	(0.07)	(0.07)	(0.07)	(0.07)
Owner religious faith	–0.10	–0.15†	–0.11	–0.15†	–0.15†	–0.15†	–0.15†	–0.15†	–0.15†	–0.15†
	(0.07)	(0.08)	(0.07)	(0.08)	(0.08)	(0.08)	(0.08)	(0.08)	(0.08)	(0.08)
Industry-level giving	3.88***	3.33***	3.71***	3.31***	3.29***	3.29***	3.29***	3.27***	3.28***	3.27***
	(0.81)	(0.82)	(0.81)	(0.82)	(0.83)	(0.83)	(0.83)	(0.83)	(0.83)	(0.83)
Hypotheses testing
Firm visibility (size)		0.12***		0.11***	0.12**	0.10***	0.10*	0.12**	0.11***	0.12**
		(0.03)		(0.03)	(0.04)	(0.03)	(0.04)	(0.04)	(0.03)	(0.04)
Political linkages (internal party cell)			0.29***	0.15†	0.16†	0.23	0.23	0.16†	0.20	0.16
			(0.08)	(0.09)	(0.09)	(0.15)	(0.16)	(0.09)	(0.14)	(0.15)
Family firm (1 = yes)/involvement					0.09	0.06	0.06	0.17	0.08	0.17
					(0.16)	(0.08)	(0.17)	(0.18)	(0.08)	(0.19)
Firm visibility * family firm/involvement					–0.02		–0.00	–0.03		–0.03
					(0.04)		(0.05)	(0.05)		(0.05)
Political linkages * family firm/involvement						–0.10	–0.10		–0.07	–0.01
						(0.16)	(0.19)		(0.17)	(0.20)

Constant	–2.14**	–1.72*	–1.80**	–1.59*	–1.62*	–1.60*	–1.60*	–1.64*	–1.60*	–1.64*
	(0.69)	(0.70)	(0.70)	(0.71)	(0.71)	(0.71)	(0.71)	(0.71)	(0.71)	(0.71)
χ²	196.47	219.35	209.54	222.33	222.75	223.05	223.05	223.56	223.26	223.56
Log-likelihood	–1121.00	–1080.84	–1114.46	–1079.35	–1079.14	–1078.99	–1078.99	–1078.73	–1078.88	–1078.73

Notes: N = 3075; standard errors in parentheses. Dummy variables of provinces and industries are included in all models. The industries include agriculture, mining, manufacturing, utility, construction, transportation, IT, retail, restaurant, real estate, education, health care, and others.

†

p < 0.10; * p < 0.05; ** p < 0.001; *** p < 0.001.

Further, to discern whether the institutional effects proposed in hypothesis 1 are contingent on family involvement in the firm, we constructed the interaction terms of firm visibility, political linkages, and the variables of family firm and family involvement. As shown in models 5 to10, we did not find any discernible moderating effects. We also examine the moderating effects of family firm and family involvement following the simulation-based approach developed in King, Tomz, and Wittenberg (2000) and Zelner (2009) because the interaction term in probit models may not represent the true interaction effect (Norton, Wang, & Ai, 2004). These tests yield similar results, thus supporting our hypothesis 2a.

Second-stage models predicting giving amount

We followed the same procedures to test the hypotheses regarding giving amount. Table 3 reports the results of second-stage Heckman estimation models. Model 1 is the baseline model. Models 2 to 4 add the variables indicating firm visibility and political linkages. Models 5 through 10 present the results of models testing moderating effects of family firm and family involvement in sequence.

Table 3.

Results for OLS Regression Models Predicting Giving Amount.

	Giving Amount
	Family Firm							Family Involvement
Variable	1	2	3	4	5	6	7	8	9	10
Controls
Firm age	–0.18**	0.27***	–0.11	0.31***	0.32***	0.32***	0.32***	0.31***	0.31***	0.31***
	(0.07)	(0.07)	(0.07)	(0.07)	(0.07)	(0.07)	(0.07)	(0.07)	(0.07)	(0.07)
ROS	–0.67***	–0.05	–0.58***	–0.01	–0.00	–0.01	–0.01	0.01	–0.00	0.01
	(0.17)	(0.17)	(0.17)	(0.17)	(0.17)	(0.17)	(0.17)	(0.17)	(0.17)	(0.17)
R&D intensity	–0.28***	–0.13†	–0.25***	–0.12†	–0.12†	–0.12†	–0.12†	–0.11†	–0.12†	–0.11†
	(0.07)	(0.07)	(0.07)	(0.07)	(0.07)	(0.07)	(0.07)	(0.07)	(0.07)	(0.07)
Industry association	–0.04	0.58***	0.06	0.63***	0.63***	0.64***	0.63***	0.62***	0.64***	0.62***
	(0.11)	(0.11)	(0.12)	(0.11)	(0.11)	(0.11)	(0.11)	(0.11)	(0.11)	(0.11)
Owner gender	–0.04	0.04	–0.03	0.05	0.04	0.04	0.05	0.04	0.04	0.05
	(0.10)	(0.09)	(0.10)	(0.09)	(0.09)	(0.09)	(0.09)	(0.09)	(0.09)	(0.09)
Owner age	0.04***	0.01†	0.03***	0.01	0.00	0.00	0.00	0.01	0.00	0.01
	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)	(0.00)
Owner education	0.54***	0.26***	0.50***	0.24***	0.24***	0.24***	0.24***	0.25***	0.24***	0.25***
	(0.03)	(0.04)	(0.04)	(0.04)	(0.04)	(0.04)	(0.04)	(0.04)	(0.04)	(0.04)
Owner party membership	–0.09	0.03	–0.12†	0.01	0.03	0.03	0.03	0.03	0.03	0.03
	(0.07)	(0.07)	(0.07)	(0.07)	(0.07)	(0.07)	(0.07)	(0.07)	(0.07)	(0.07)
Owner religious faith	0.72***	0.33***	0.67***	0.31***	0.29***	0.29***	0.29***	0.29***	0.29***	0.29***
	(0.08)	(0.08)	(0.09)	(0.08)	(0.08)	(0.08)	(0.08)	(0.08)	(0.08)	(0.08)
Inverse Mills ratio	–9.61***	–1.64*	–8.41***	–1.07	–0.80	–0.72	–0.82	–0.83	–0.72	–0.84
	(0.50)	(0.65)	(0.57)	(0.69)	(0.69)	(0.69)	(0.69)	(0.69)	(0.69)	(0.69)
Hypotheses testing
Firm visibility (size)		0.62***		0.61***	0.51***	0.62***	0.53***	0.52***	0.63***	0.53***
		(0.04)		(0.04)	(0.05)	(0.04)	(0.05)	(0.05)	(0.04)	(0.05)
Political linkages (party cell)			0.39***	0.23**	0.24**	–0.07	0.09	0.25**	0.01	0.17
			(0.09)	(0.09)	(0.09)	(0.14)	(0.15)	(0.09)	(0.13)	(0.15)
Family firm (1 = yes)/involvement					–0.25	0.24**	–0.18	–0.26	0.29**	–0.21
					(0.19)	(0.09)	(0.20)	(0.20)	(0.09)	(0.21)
Firm visibility * Family firm/involvement					0.16***		0.12*	0.17***		0.15**
					(0.04)		(0.05)	(0.05)		(0.06)
Political linkages * Family firm/involvement						0.43**	0.21		0.40*	0.13
						(0.15)	(0.17)		(0.16)	(0.19)

Constant	7.90***	4.92***	7.78***	4.90***	5.00***	4.66***	4.95***	4.95***	4.61***	4.92***
	(0.38)	(0.40)	(0.38)	(0.40)	(0.42)	(0.40)	(0.42)	(0.41)	(0.40)	(0.42)
F	37.39	47.26	37.24	46.54	46.22	46.07	45.37	46.35	46.11	45.46
R ²	0.40	0.46	0.41	0.46	0.47	0.47	0.47	0.47	0.47	0.47

Notes: N = 2674; Standard errors in parentheses. Dummy variables of provinces and industries are included in all models. The industries include agriculture, mining, manufacturing, utility, construction, transportation, IT, retail, restaurant, real estate, education, health care, and others.

†

p < 0.10; *p < 0.05; **p < 0.001; ***p < 0.001.

As shown in Table 3, firm age and industrial association membership also positively affect giving amount. In addition, an owner’s level of education has a positive effect on giving amount. When the owner has a religious faith, the giving amount is also higher. The effects of these control variables are consistent with prior findings (Du et al., 2013). In models 2, 3, and 4, both firm visibility and political linkages have positive impacts on giving amount. Hence, hypothesis 1b is supported.

Models 5 through 7 report the moderating effect of a family firm, and models 8 through 10 show the results of family involvement. Specifically, the positive effect of firm visibility is strengthened by the family firm dummy variable (model 5, p < 0.001) and the family involvement continuous variable (model 8, p < 0.001). The effect of political linkages on giving amount is also strengthened by the dummy family firm variable (model 6, p < 0.01) and the continuous family involvement variable (model 9, p < 0.05). Figure 1 visualizes the moderating effects. In the full models, these findings still hold while the family effects on political linkages are no longer significant (models 7 and 10). Generally, these results suggest that family ownership indeed matters as it amplifies the strength of the relationship between factors that heighten the sensitivity to sociopolitical pressures and corporate giving amount. Hypothesis 2b is supported.

Figure 1.

The Moderating Effect of Family Firms vs. Nonfamily Firms.

Robustness checks

We tested the robustness of our results in several ways. We used alternative thresholds of family ownership, 20% and 50%, to construct the variables of family firm and family involvement (Cruz et al., 2010, 2014; Gómez-Mejía et al., 2014; Li et al., 2015). The results did not differ in a meaningful way with these measures. We also created a family management variable to capture family involvement (i.e., the proportion of family members in the firm’s top management team) and found very similar results. To account for industrial differences, we standardized firm size by industry; scaled by the net profits in the same period, we also reassessed the giving amount. We obtained the same findings using these adjusted variables.

Prior studies with samples of Chinese firms have used the owner or CEO’s positions in Chinese political councils (e.g., People’s Congress) as measures of a firm’s political linkages/connections (e.g., Jia, 2014; Wu, Wu, Zhou, & Wu, 2012). We chose the “internal party cell” measure for two reasons. First, compared to the owner’s political positions, the presence of a party cell in a firm is more appropriate to account for the channels through which institutional pressures from the party-state penetrate organizations. Party cells “are designed to allow the party to monitor its environment as well as provide leadership over it” (Dickson, 2008, p. 20). Second, studies have suggested that entrepreneurs may pursue political positions by “doing good” (e.g., Ma & Parish, 2006). This raises the possibility of reverse causality in the relationship between owners’ positions in the political councils and the firm’s philanthropic giving. Although our cross-sectional data is limited in addressing the concern of potential endogeneity, our measure is less susceptible to this problem. Our findings hold when we include the owner’s position in the most prominent political councils in China—People’s Congress and People’s Political Consultative Conference (both at a provincial or national level)—as political linkages.

We further assessed the effect of political linkages by conducting propensity score matching to generate a subset of firms without political linkages that have comparable observable covariates to the set of firms having political linkages in the sample (Angrist & Pischke, 2009; Rosenbaum & Rubin, 1983). Conditional on the propensity score, the matching estimates of the effects of treatment can somehow diminish the selection bias on observables and alleviate endogeneity concerns. We used probit models to predict the likelihood of selection into treatment with all the control variables. With the matched sample, the average treatment effects of political linkages on giving behavior and giving amount are both significant as hypothesized.

We also included the two-way interaction between firm visibility and political linkages as well as the three-way interaction among firm visibility, political linkages, and family firm in the models. These interactions are not statistically significant and the results in these models are consistent with what we report.

Discussion and Conclusion

In this study, we investigated whether and how engagement in corporate philanthropy of family firms and nonfamily firms significantly differs in a context where institutional pressures demand it. Extant studies have primarily focused on the direct effect of family ownership and management on socially responsible practices and found mixed results (Bingham et al., 2011; Cruz et al., 2014). Conversely, we brought the institutional context to the fore and suggested that both family and nonfamily firms engage in these practices as legitimacy-seeking behaviors (e.g., Aguilera et al., 2007; Filatotchev & Nakajima, 2014) and in response to sociopolitical pressures (e.g., Marquis & Qian, 2014). Our results confirm that conformity is the most likely response by both family and nonfamily firms when corporate giving is institutionally demanded (Oliver, 1991; Pache & Santos, 2010). When engagement in giving is part of a set of institutional expectations that prescribe such behavior to both family and nonfamily firms, family involvement is not a critical factor shaping a firm’s decision to engage in corporate giving.

However, differences between family and nonfamily firms emerge when the decision of how much to contribute is made. Drawing on recent theoretical discussions on conformity and differentiation in family business research (e.g., Berrone et al., 2010; Mazzelli et al., 2018), we theorized and found support for a positive moderating effect of family involvement on the effect of firm visibility and political linkages on the level of firm engagement in giving (i.e., amount donated). This finding helps clarify the inconsistent results of prior studies comparing corporate giving practices in family and nonfamily firms (e.g., Cruz et al., 2014; Feliu & Botero, 2016). Under strong institutional pressures to give, legitimacy acts as an impetus, but a family firm’s generosity points to the influence of reputation. Family firms are more likely to consider offering a more substantial contribution as a fruitful avenue to gain or maintain a positive image and reputation (Cruz et al., 2014; Sageder et al., 2018). Being a family firm does matter in corporate giving behaviors (Campopiano et al., 2014; Dou et al., 2014; Litz & Stewart, 2000); yet, the ‘family’ variable is only salient in the decision about how much to give, not about whether to engage. This insight clarifies the conditions under which family and nonfamily firms may (or may not) differ.

As our study shows, the integration of macro-level institutional theories and firm-level theories is essential to explain how the combination of organizational and institutional variables influences firms’ behaviors. Specifically, we offer three important contributions to the literature. First, our study extends family business research by flipping the model and evaluating the conditions in which family and nonfamily firms may have similar, rather than different, behaviors. Rather than focusing on the internal factors that undergird the distinctiveness of family firms’ rationales and their idiosyncrasies, we put front and center in our analysis institutional arguments about conformity that have been thus far relatively overlooked in family business research (Chua, Chrisman, Steier, & Rau, 2012; Feliu & Botero, 2016; Peng et al., 2018). By examining the Chinese context, where conformity is normatively expected and socially supported, we assessed whether family ownership represents a key source of differentiation. It is fruitful to examine the effect of this variable in interaction with other organizational and institutional factors that shape firms’ responses to environmental demands (Greenwood, Oliver, Suddaby, & Sahlin-Andersson, 2008; Greenwood et al., 2011; Thornton, Ocasio, & Lounsbury, 2012).

Family business are complicated entities, and different theoretical perspectives are needed to explain and predict whether their behaviors are unique and when (Campopiano et al., 2014; Deephouse & Jaskiewicz, 2013; Dou et al., 2014; Reay, Jaskiewicz, & Hinings, 2015). Our study moves in this direction. To us, the primary advantage of layering institutional arguments about legitimacy (that drive conformity) with reputational arguments (that drive differentiation) is the potential to reveal how internal and external drivers generate—or amplify—similarities and differences between family firms and nonfamily firms (Feliu & Botero, 2016; Miller et al., 2013). We encourage the exploration of institutional effects on family firms’ behavior and the testing of moderating—in addition to direct—effects of family ownership. This approach can shed light on a wide array of behaviors in family firms (e.g., positive behaviors such as other CSR practices and innovation, but also ‘dark’ behaviors such as misconduct). It can also offer interpretations that more explicitly account for the heterogeneity of the contextual conditions that shape family firms’ behaviors, in addition to the heterogeneity of firms themselves (Steier, 2009; Wright, Chrisman, Chua, & Steier, 2014).

Second, by blending family business with institutional arguments, we provide new insights on how the family business literature can offer important contributions to organization studies. Similar to Berrone et al. (2010, p. 102), we also examine firms in a “homogeneous and strong institutional field, and therefore holding constant the nature and context of institutional pressures” in order to shed light on heterogeneous responses instead of isomorphic compliance. We build on this research by applying similar theoretical arguments to another important socially responsible practice (i.e., corporate giving) and by theorizing how legitimacy concerns and reputational motives underpin observed variation in the behaviors of family and nonfamily firms. We confirm that the ownership and control structure of the organization is a key variable that moderates the predictions of organizational theories (e.g., behavioral agency models, sociopolitical explanation of compliance) and show when this filtering amplification is most salient. We thus contribute to a burgeoning line of work that has begun to bridge the organizational and family business realms (Berrone et al., 2010; Chrisman & Patel, 2012; Greenwood et al., 2010; Mazzelli et al., 2018). Future research can refine our insights by testing our predictions in other institutional contexts, or investigating different sets of decisions in the Chinese context. Some areas of decision-making may be less influenced by institutional pressures, giving organizations more leeway to articulate different responses (Greenwood et al., 2011; Reay et al., 2015).

Finally, our study contributes to corporate philanthropy research by suggesting an alternative to the interchangeable use of dummy variables (to give or not to give) and amount of donation to measure corporate giving (Feliu & Botero, 2016). In our theorizing, different mechanisms (legitimacy vs. reputation) underpin these decisions and therefore it is appropriate to distinguish them, both empirically and theoretically. From a theoretical vantage point, our study also points to how legitimacy and reputation motivate socially responsible practices. In our sample, corporate giving is an institutionalized practice that drives conformity independently of ownership. The amount to donate, however, remains relatively discretionary and thus offers family firms a reputational tool to stand out. Conceptually, separating the two decisions further clarifies how the institutional context (i.e., what practices are deeply institutionalized) shapes some behaviors more than others (Evert, Martin, McLeod, & Payne, 2016).

We recognize the limitations of our study. We have not been able to capture institutional pressures directly but we have theorized the organizational factors that are likely to increase the sensitivity of organizations to these pressures. Direct measures of institutional pressures (e.g., regulatory, normative, and cognitive pressures) can reveal their direct effect on family and nonfamily firms. Similarly, future research can corroborate whether and how different measures of family involvement may affect our findings. We also acknowledge that the cross-sectional nature of our data restricts our interpretation of causality. Collecting longitudinal data may alleviate endogeneity concerns.

To conclude, this article extends research on corporate philanthropy in family firms and heeds the call to integrate organizational and family business literature (Chrisman, Sharma, & Taggar, 2007; McKenny, Payne, Zachary, & Short, 2014). Our investigation of what drives corporate giving in Chinese private family businesses sheds light on the importance of understanding the interaction between institutional norms and demands, firm-level characteristics that lead to greater sensitivity to such pressures, and the distinctive rationales that derive from family ownership. We believe that the integration of different theoretical perspectives will continue to yield important insights to the domain of organization and family business research.

Footnotes

Acknowledgements

We would like to thank the participants in the seminar held at the University of Tennessee for their helpful comments and suggestions. We also thank Gabrielle Dorian and Casey Poe for their excellent editorial assistance.

Funding

This work was supported by the Fundamental Research Funds for the Central Universities and the Research Funds of Renmin University of China (18XNB021).

Author biographies

Jianhua Ge is Associate Professor of Management in the Business School at Renmin University of China. He received his PhD in Organizational Science from the University of North Carolina at Charlotte. His research centers on organizations, networks, entrepreneurship, and family business in China. His work has appeared in Journal of Business Venturing, Entrepreneurship Theory and Practice, Management and Organization Review, and Journal of World Business.

Evelyn Micelotta is Assistant Professor of Strategic Management in the Anderson School of Management at the University of New Mexico. She received her PhD in Strategic Management and Organization from the University of Alberta. Her research focuses on institutional complexity and institutional change, professional organizations, and family business. Her works have been published in international journals such as Organization Studies, Academy of Management Annals, Journal of Management, and Family Business Review.

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