Charitable Contributions by Small Businesses

How active are small businesses in the area of charitable contributions? Few answers are available regarding this question because the research is quite limited. For the most part, studies of corporate donations have emphasized large firms and their contributions to society (Burke, Logsdon, Mitchell, Reiner, and Vogel 1986; Fry, Keim, and Meiners 1982; Useem 1988; Wokutch and Spencer 1987). In comparison, information available on charitable contributions by small businesses is exceedingly limited (Chrisman and Archer 1984). Consequently, small business owners and managers have little basis on which to assess their social contribution efforts or to construct strategies and policies which foster socially responsible actions. Haley (1991) argues that corporate contributions actually serve as a managerial masque; that is, primarily a mechanism to influence stakeholders or others. Small businesses generally have fewer stockholders, employees, and other constituents to impress compared to large corporations. Nonetheless, seminal work on corporate social performance argues persuasively that small businesses face numerous incentives to act responsibly (Wood 1991a, 1991b). In fact, prior research suggests that a wide variety of factors influence the nature, scope, and intensity of social performance by small businesses. For example, leading surveys have documented that consumer relations, product quality, employee concern, and profitability are viewed as fundamental social responsibilities of small business (Aupperle, Simmons, and Acar 1990; Chrisman and Archer 1984; Chrisman and Fry 1982; Gomolka 1978; Reeder 1978). Despite the prevailing evidence on social performance perceptions of small business owners and managers cited above, considerable work remains to be completed in the area of charitable contributions. This article examines the charitable donations of small businesses. Specifically, the study reports an exploratory investigation into social issues policies and programs, charitable contributions, and decision criteria surrounding contributions in small businesses. The implications for charitable contribution policies in small businesses are discussed. BACKGROUND AND RESEARCH QUESTIONS The underlying knowledge on charitable contributions by small businesses can be traced to a handful of studies. One report of small business contributions by banks suggests that charitable donations (i. e., donations as a percent of income before securities gains, losses, and taxes) are negatively associated with organization size (i.e., amount of assets) (Kedia and Kuntz 1981). Another study of Canadian small businesses found that a lower proportion of small businesses actually contribute to charitable organizations than large businesses, but as a group the small businesses donated more as a percentage of pre-tax income than larger firms (Martin 1985). Further, donation decisions in small businesses were found to be primarily a one-person decision; rarely are there written policies or guidelines concerning charitable donations (Martin 1985). Gomolka's (1978) research on minority-owned small businesses reported that minority ownership positively influences the extent of a firm's social involvement. Minority ownership may therefore be a critical variable explaining a firm's willingness to make charitable contributions and explaining the amount of charitable donations. Further insight on factors affecting charitable contributions is found in Reeder's (1978) study of 24 small businesses in San Antonio, Texas. According to Reeder, social issues activities are informally structured and lacking depth within small businesses. There is limited planning or policy formulation surrounding these activities. Consequently, it is expected that small businesses which do take a more planned approach to social performance are also those which are more active and which allocate more resources to social performance efforts. …