The impact of social donation on firm innovation in China
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Tingtao Lu
College:
College of Business and Public Management
Major:
Finance
Faculty Research Advisor(s):
Jianing Zhang
Abstract:
This study investigates the impact of social donations on firm innovation in China, motivated by the evolving landscape of corporate social responsibility and its potential influence on corporate competitiveness. Analyzing data from 4501 Chinese A-share listed companies from 2009 to 2022, the research employs an ordinary least squares (OLS) regression model to explore the relationship between social donations and innovation metrics, specifically patent applications and grants. The findings reveal a significant positive correlation between the extent of social donations and an increase in patent applications, indicating that companies engaged in regular charitable activities are more likely to enhance their innovation capabilities. Notably, the study uncovers a threshold effect; excessive social donations could potentially divert resources from research and development, thus negatively impacting innovation. These conclusions remained consistent and robust even before the COVID-19 pandemic and during the COVID-19 pandemic. Furthermore, the study explores how different industry sectors and ownership structures impact this relationship, adding a layer of specificity to the findings. This research contributes significantly to the literature by establishing a clear link between social donations and corporate innovation within the Chinese context, considering endogeneity factors, offering valuable insights for investors and policymakers in understanding the strategic importance of corporate social responsibility in fostering innovation. By highlighting the nuanced implications of social donations, the study aids in formulating informed decisions and policies that balance social responsibility with corporate innovation.