Dharmadasa Pradeep
This study investigates whether the consumer legitimacy of philanthropy initiatives by multinational enterprises mitigate the liability of foreignness (LoF) in the aftermath of a national disaster. A major disaster restructures the social landscape, creating an avenue for corporate contributions to play a role in recovery and relief efforts. This social restructuring offers multinational enterprises (MNEs) a valuable opportunity to establish strong local ties. In turn, MNE contributions at such times have a stronger impact on their local acceptance. Thus, MNEs can use these events to strengthen their position in the community and mitigate LoF. Using the vignette (scenario), which captures consumers' perception of post-disaster philanthropy initiatives regarding a domestic firm and an MNE, which implement and does not implement post-disaster philanthropy, we test hypotheses with responses of 383 undergraduate consumers from a State University in Sri Lanka. We found that in the aftermath of the disaster, the increase in MNE contributions was much larger and less strongly tied to promotional activities than the increase in contributions from domestic firms, and this difference persisted over time. Moreover, the performance implication of post-disaster philanthropy was stronger for MNEs than for domestic firms. These findings suggest that philanthropy plays a more strategic role for MNEs in the aftermath of a disaster, and it has a pronounced effect on mitigating LoF.