Winning Us With Trifles

——Adverse Selection in the Use of Philanthropy as Insurance

Department of Organisation Management    2017-06-28

Winning us with trifles: Adverse selection in the use of philanthropy as insurance

Speaker: Luo Jiao, Assistant Professor of Strategic Management and Entrepreneurship at the Carlson School of Management, University of Minnesota

Host: Jiang Yuan, Associate Professor from Department of Organisational Management, ACEM

Time: Jul 5, 2017, Wednesday, 13:30-15:00

Venue: A407 Antai College Building 


We study the use of corporate philanthropy as a form of reputation insurance, developing a formal model of such insurance in a market with clean and dirty firms, and examining how the equilibrium conditions change depending on how active and informed social stakeholders are, how altruistic firms are, and how much control firms have over the probability of accidents. We then test the predictions from this model in the U.S. Petroleum industry, and find that philanthropic donations offer insurance-like benefits but are also positively associated with subsequent oil spills: firms that give more, spill more. These results are consistent with an adverse selection / moral hazard equilibrium and suggest that the use of philanthropy as reputation insurance may benefit firms at the cost of society.

Speaker Introduction: 

Dr. Luo Jiao is Assistant Professor of Strategic Management and Entrepreneurship at the Carlson School of Management, University of Minnesota. Jiao's research is at the intersection of organisation theory and non-market strategy. Building on the notion that non-market activities may benefit firm performance, her work addresses the question of why firms engage in these activities, under which conditions might nonmarket activities benefit shareholders, and what may be the impact of firms' nonmarket actions on society separate from the impact on firms.

Her research contexts include both collective governance arrangements and corporate social responsibility (CSR) activities. Jiao’s research has been published or forthcoming at peer-reviewed outlets such as Administrative Science Quarterly and Strategic Management Journal, and was profiled in popular media outlets such as Financial Times.

Jiao sits on the editorial board of Strategic Management Journal. Her work has been recognised by a number of awards, including Strategic Management Society (SMS) Best Conference Paper Prize (Honorable Mention), Academy of Management Meeting OMT Best Paper on Environmental and Social Practices Award (Finalist), and LBS Transatlantic Doctoral Conference Best Paper Award (Winner of the Strategy Track). Jiao earned her Bachelor's degree in Economics from Renmin University of China, joint Master's degree in Public and Economic Policy from London School of Economics and Political Science and Columbia University, and Ph.D. in Management and Organisational Theory from Columbia Business School.

Welcome to attend!