R&D, Corporate Philanthropy, and Cash Flow Volatility

ABSTRACT Although academic research in the recent two decades has increasingly focused on the drivers and consequences of CSR engagement for firms, the R&D and corporate philanthropy nexus has not been sufficiently explored, especially on a global scale. Thus, we investigate the association between R&D intensity and corporate philanthropy. Using a worldwide sample of 19,644 observations from 2002 to 2021 and executing country‐industry‐year fixed‐effects regression, we find that R&D intensity is positively associated with corporate philanthropy. However, this positive association becomes weaker for companies with more volatile cash flows. The findings are robust to alternative proxies, alternative samples, and endogeneity concerns. Our findings support a synergistic perspective rather than a tradeoff perspective, implying that R&D‐intensive firms that are innovative are public‐friendly. The negative moderating effect of cash flow volatility between R&D and corporate philanthropy supports the argument that cash flow uncertainty affects firms' investment behavior negatively. Finally, we complemented our linear relationships with a curvilinear analysis and found that a threshold effect exists between R&D intensity and corporate philanthropy.