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Doing extreme by doing good

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Abstract

Firms adopting deviant strategies are generally subject to impaired legitimacy and heightened risk. Based on the legitimacy literature, we hypothesize that strategically deviant firms are motivated to engage in corporate social responsibility activities as protection from a potential legitimacy loss. Using a sample of Chinese-listed firms during the 2003–2011 period, we find that firms with deviant strategies are more likely to engage in charitable donations. In addition, the positive effect of strategic deviance on donations is alleviated when firms communicate effectively with financial analysts, and when block holders largely own these firms.

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Notes

  1. We searched the dataset of Web of Science (by Clarivate Analytics) and believe that our paper is the first study to identity the causal relationship between strategy deviance and donation.

  2. Here we define “firms with more financial analysist following” as firms that followed by more financial analysist than other firms.

  3. The U.S. data come from Giving USA 2008 (http://givinginstitute.org/giving-usa/); the China data are from the Statistics Bulletin of Civil Affairs Development (2008), published by the Ministry of Civil Affairs, China.

  4. Charities Aid Foundation (2011), World Giving Index 2011 https://www.cafonline.org/publications/2011-publications/world-giving-index-2011.aspx.

  5. http://www.cncf.org.cn/Public/Uploads/user/20150919/1442657103128346.pdf

  6. These results are available upon request.

  7. This result is available upon request.

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Acknowledgements

We thank Shengping Tang (CEO of Morefood.com), Roberto Santos, and two anonymous reviewers of this journal for their helpful comments. We also thank the editor Vikas Kumar for excellent guidance.

Funding

This study is supported by the National Natural Science Foundation of China (No. 71790602, 71132004, and 71302157), China Ministry of Finance (No. 2015KJA009), the Fundamental Research Funds for the Central Universities, the Research Funds of Renmin University of China (No.16XNF020), and the Doctoral Research Start-Up Foundation of Henan Normal University (No.5101089171146). All errors are our own.

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Authors and Affiliations

  1. Zhengzhou University of Aeronautics, Zhengzhou, China

    Xueyan Dong

  2. School of Business, Renmin University of China, Beijing, 100872, China

    Jingyu Gao & Kangtao Ye

  3. Robert J. Manning School of Business, University of Massachusetts Lowell, One University Ave, Lowell, MA, 01854, USA

    Sunny Li Sun

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Correspondence to Jingyu Gao.

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Appendix: Interview questionnaires

Appendix: Interview questionnaires

We thank you for taking time from your busy schedule to assist us. Its purpose is to help researchers to better understand business strategies and operations in practice. The high level of confidentiality is provided so you can respond openly and honestly to the following study questions.

  1. 1.

    Does your company implement a strategy that is different from most other companies within the same industry? Have you heard about any company that implements the deviant strategy? Could you please give us some examples?

  2. 2.

    Compared to most other companies in your industry, does your company allocate much more or much less resources in advertising?

  3. 3.

    Compared to most other companies in your industry, does your company allocate much more or much less resources in R&D?

  4. 4.

    Compared to most other companies in your industry, does your company introduce more or less new techniques and instrument to the operations?

  5. 5.

    Compared to most other companies in your industry, is the company’s capital intensity very different from the industry average?

  6. 6.

    Compared to most other companies in your industry, is the company’s operating efficiency very different from the industry average?

  7. 7.

    Compared to most other companies in your industry, is the company’s financial leverage also very different from the industry average?

  8. 8.

    Why your company implements strategy that differentiate from most others in the industry? As far as you know, what will be reasons that motivate other companies to employ deviant strategy?

  9. 9.

    When the firm carry out deviant strategies, will they encounter any serious conflicts with stakeholders? What will be the best solution for those conflicts?

  10. 10.

    Do you acknowledge and support those deviant strategies? If you don’t, in which condition you will be more likely to change your mind?

  11. 11.

    According to your previous experience, if the company implement deviant strategy, will this company be questioned by financial analysts following your company? What will they write in their analysis report?

  12. 12.

    If the company implements deviant strategy, have you observed its increased effort in corporate social responsibility activities? What kind of charity activities did they participate in? Which kind of charitable donations? Why do they invest in these activities? How do you see these charity events?

  13. 13.

    From the traditional Chinese Confucian thought, activities that pursuing profit have its legitimate value, but these activities must be guided by moral norms and social ethics. How do you see the problem between ethics and profit? Are they in conflict with each other? Or are they balanced?

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Dong, X., Gao, J., Sun, S.L. et al. Doing extreme by doing good. Asia Pac J Manag 38, 291–315 (2021). https://doi.org/10.1007/s10490-018-9591-y

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