Corporate Philanthropy and Productivity: Evidence from an Online Real Effort Experiment

• Published in: Management science Vol. 61; no. 8; pp. 1795 - 1811
• Main Authors: Tonin, Mirco, Vlassopoulos, Michael
• Format: Journal Article
• Language: English
• Published: Linthicum INFORMS 01.08.2015; Institute for Operations Research and the Management Sciences
• Subjects: Charity; Compensation; Corporate governance; corporate philanthropy; corporate social responsibility; Donations; Financial incentives; gender; Incentives; Philanthropy; Productivity; prosocial behavior; real effort experiment; Social aspects; social incentives; Social networks; Social responsibility
• ISSN: 0025-1909; 1526-5501
• DOI: 10.1287/mnsc.2014.1985

Contributing to a social cause can be an important driver for workers in the public and nonprofit sectors as well as in firms that engage in corporate philanthropy or other corporate social responsibility policies. This paper compares the effectiveness of a social incentive that takes the form of a donation received by a charity of the subject’s choice to a financial incentive. We find that social incentives lead to a 13% rise in productivity, regardless of their form (lump sum or related to performance) or strength. The response is strong for subjects with low initial productivity (30%), whereas high-productivity subjects do not respond. When subjects can choose the mix of incentives, half sacrifice some of their private compensation to increase social compensation, with women more likely to do so than men. Furthermore, offering subjects some discretion in choosing their own payment schemes leads to a substantial improvement in performance. Comparing social incentives to equally costly increases in private compensation for low-productivity subjects reveals that the former are less effective in increasing productivity, but the difference is small and not statistically significant. Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2014.1985 . This paper was accepted by Uri Gneezy, behavioral economics .