Non-profit organizations as a nexus between government and business in an emerging market: Evidence from Chinese charities

Zheng, W, Ni, N and Crilly, D (2019) Non-profit organizations as a nexus between government and business in an emerging market: Evidence from Chinese charities. Strategic Management Journal, 40 (4). pp. 658-684. ISSN 0143-2095

Abstract

Research summary
Non-profit organizations in emerging markets frequently have to manage relations with governments and for-profit firms. We advance a multi-stakeholder perspective and develop propositions about how the political ties of charities influence their success in raising funds from corporate donors. Evidence from 2,054 Chinese charities during 2005-2012 shows that organizational political ties, established through formal affiliation with the government, aid fundraising from corporate donors, whereas personal political ties, formed through personal political services of senior leaders of charities, have no such effect. The positive effect of government affiliation is relevant for both foreign and domestic donors, but stronger for domestic ones. These results highlight the differential impact and contingent value of political embeddedness for charities’ ability to acquire resources from for-profit business, contributing to both stakeholder theory and the political embeddedness perspective.

Managerial summary
Non-profit organizations have to maintain productive relations with multiple stakeholders, including government and business. We focus on Chinese charities that seek to raise funds to fulfill their mission. We identify how their political relations influence the behavior of corporate donors. Evidence from 2,054 charities from 2005-2012 shows that political ties formed through organizational affiliation with a political body help charities attract corporate donors that seek legitimacy. In contrast, ties formed through personal connections with politicians have less influence on donors who perceive a high risk of connected insiders engaging in activities of dubious legality. The value of political ties is more pronounced for domestic corporate donors.