Frederick L. Bereskin

Corporate Philanthropy, Research Networks, and Collaborative Innovation

Using a unique dataset of corporate philanthropy, we find that direct giving activities are positively associated with more collaborative and original innovation. In contrast, our results do not hold for corporate foundations’ contributions. Our results suggest that much of what is ostensibly promoted as philanthropy actually reflects research-related networking activities. The effect of direct giving on innovation is more pronounced in more opaque firms and more innovative and competitive industries. These findings provide evidence of the distinct motives by which firms choose between direct giving and foundation giving. This study suggests that firms can use direct philanthropy to expand firm-boundaries by developing innovation with research partners.

The Real Effects of Real Earnings Management: Evidence from Innovation

We examine the consequences of real earnings management from an innovation perspective and investigate the patent output of firms likely to be managing earnings through altering their R&D expenditures. We find that R&D cuts related to earnings management lead to fewer patents, less influential patent output, and lower innovative efficiency compared to other R&D cuts. Our results thus suggest that real earnings management may obstruct firms’ technological progress and highlight the potential costs of managerial manipulation of R&D expenditures in order to alter reported earnings.

Corporate Philanthropy and Innovation: The Case of the Pharmaceutical Industry

For decades now, pharmaceutical companies have engaged in corporate social responsibility (CSR) initiatives to strengthen their reputations, brand names, marketing, and public relations. But evidence from the authors’ recent study suggests that one particularly effective form of corporate philanthropy has been direct contributions to universities and other non-profit research organizations, many of which have led to relationships that have developed into highly productive research partnerships. Such direct industry support for academic institutions and other research partners has ranged from unrestricted gifts to fee-for-service, and has taken the form of joint ventures and new research institutions as well as research contests and other types of collaborations. Moreover, such corporate giving should be viewed as an important, and highly productive, part of these companies’ innovation strategies. In support of this argument, the authors report that direct contributions by big pharma result in a greater quantity and quality of innovations—as measured by new patents—than the research that results from other forms of corporate philanthropy, notably grants made to and administered by the companies’ own foundations. Such direct contributions are also associated with patents that are more likely to broaden the corporate scope beyond the firms’ traditional areas of expertise, and that tend to have greater success in obtaining FDA drug approvals, than the patents resulting from R&D conducted by corporate-sponsored foundations.

Corporate Philanthropy, Employees and Misconduct

Corporate charitable programs help attract and retain socially aware employees and directors. As these employees and directors are likely to be conscious of the social harm caused by corporate misconduct, they are less likely to tolerate wrongdoing. Consistent with this notion, we document that employees at philanthropic firms are more likely to whistle blow when they observe wrongdoing. Moreover, directors at giving firms are more likely to force out a CEO after misconduct is revealed. The higher likelihood of whistle blowing along with greater penalties upon discovery should lower the propensity to engage in misconduct. In line with this, we find that corporate philanthropy is associated with less misconduct. To address the endogeneity of corporate giving, we instrument it by peer giving, with qualitatively similar results. The results are robust to differing approaches for defining misconduct and employer attractiveness, and also in different subsamples of the data. Our findings highlight the role of non-financial imperatives of employees and directors in mitigating misconduct.