The relative value of firm and nonprofit experience: Tackling large‐scale social issues across institutional contexts

Research Summary Nonprofit organizations (NPOs) are often identified as a natural vehicle for the engagement of firms in large‐scale social issues. We evaluate this argument by examining the conditions under which NPO experience is more valuable than firm experience in overcoming the key challenges associated with corporate disaster giving. Findings from a quasi‐experiment across the 4,396 natural disasters worldwide between 2003 and 2015 demonstrate that firms could donate more by implementing the aid through NPOs (on their own) in countries with low (high) institutional development, especially where they lack (have) market operations. However, we also observe that firms more frequently than not opted into the allocation mode that yielded comparatively low aid, raising questions about incentive alignment and communication across the business and nonprofit sectors. Managerial Summary Firms are increasingly tackling social issues across the world. Nonprofit organizations (NPOs) are often identified as natural channels for facilitating such engagement, but we have no systematic evidence to confirm this. We tackle this question by outlining the conditions under which allocating company aid for disaster relief and recovery through NPOs results in greater donations than when the firms disburse its aid directly to victims. We analyze all major natural disasters that affected the world between 2003 and 2015 and observe that firms would have donated more through an NPO (directly) in countries with low (high) institutional development where they lacked (had) local operations. Yet, firms frequently chose the channel that yielded lower donations. A video abstract is available at https://youtu.be/C8Xg6gqRabQ.