Standardization Vs. Localization of Firms’ Corporate Philanthropy Strategies when Entering Foreign Markets

Abstract

Corporate social responsibility (CSR) has become a key component of a firm's reputation (Argenti and Dmckenmiller, 2004; Fombrun, 2005). Further, a strong reputation can afford the firm many advantages, and is generally associated with higher levels of financial performance (e.g., Orlitzky, Schmidt, and Rynes, 2003). The pressures for CSR (and related vulnerabilities from a lack of CSR) are perhaps greatest among multinational firms with business activities across countries and cultures. Although recent research demonstrates that consumers hold global firms to a higher CSR standard than local firms and that CSR explains a significant portion of brand preferences worldwide (Holt, Quelch, and Taylor, 2004), Meyer (2004) argues that relatively little is known about the management of CSR by global firms. One of the strategies used by firms to demonstrate their CSR is corporate philanthropy, which can include a range of options from monetary support, employee volunteerism, donations of assets or facilities to social cause advertising. Despite the extensive body of literature examining firms’ strategies for corporate philanthropy, the majority of this research has examined the activity from either a local or a national level. Little insight exists into the international aspect of corporate philanthropy. Our paper seeks to address this gap by examining issues surrounding corporate philanthropy faced by businesses entering foreign markets. Specifically, we examine the question of whether global firms in their effort to enter new, international markets should standardize or localize their corporate philanthropy program. Firms have successfully used both strategies. For example, McDonald’s maintains its Ronald McDonald House program across dozens of countries in the Americas, Europe, Asia, and Australia, with each location dedicated to the health and well-being of children and their families. Abbott Pharmaceuticals, conversely, tackles a myriad of issues in the many countries in which it operates: HIV/ATOS, responsible advertising to consumers, and access to clean drinking water to name a few.