The influence of board directors' institutional and business relationships on philanthropic foundation performance

DOIhttps://doi.org/10.1108/JIC-09-2019-0230
Publication Date19 June 2020
Pages1209-1228
Date19 June 2020
AuthorYuting Zhang,Jiebing Wu,Tachia Chin,Xiaofen Yu,Ning Cai
SubjectInformation & knowledge management,Knowledge management,HR & organizational behaviour,Organizational structure/dynamics,Accounting & Finance,Accounting/accountancy,Behavioural accounting
The influence of board directors
institutional and business
relationships on philanthropic
foundation performance
Yuting Zhang
School of Management, Zhejiang University of Technology, Hangzhou, China
Jiebing Wu
School of Public Affairs, Zhejiang University, Hangzhou, China
Tachia Chin and Xiaofen Yu
School of Management, Zhejiang University of Technology, Hangzhou, China, and
Ning Cai
School of Public Affairs, Zhejiang University, Hangzhou, China
Abstract
Purpose The effect of board intellectual capital on non-profit organizational performance in non-western,
less developed economies has been an important yet under-researched area. Given that the institutional and
business relationships of a board account for the majority of board intellectual capital, the purpose of this paper
is to fill the previously mentioned research gap by addressing how the interactions of the two relationships of
board directors influence Chinese philanthropic foundation performance.
Design/methodology/approach Following Creswells (2014) explanatory sequential mixed-methodology,
a qualitative study (Study 1) was first conducted to pre-test the assumptions, and then a quantitative study
(Study 2) was carried out based on a secondary database of 1,405 Chinese philanthropic foundations to further
examine the hypotheses. Several regression models were built for analyzing the results.
Findings Study 1 confirmed that Chinese philanthropic foundations gained greater revenues and hosted
more public welfare activities by leveraging the reinforcing or complementary effects of board directors
intellectual capital to improve organizational performance. Study 2 further examined the hypotheses that the
interactions of intellectual capital increased the total revenue and public welfare expenditure of the
foundations; however, significant positive relationships were only identified in foundations at the local level,
and no significant associations were found in those at the national level.
Practical implications The research indicates that the intellectual capital of board directors may influence
the performance of their philanthropic foundations. Thus, Chinese philanthropic foundations should be more
aware of the importance of this influence when determining which candidates will join the board.
Originality/value The study makes significant contributions to the existing knowledgeof the development
of non-governmental organizations; it incorporates the resource dependence theory and agency theory into
understanding how the intricate interactions between the institutional and business relationships of board
directors affect foundation performance and how the jurisdiction affiliations act as a boundary condition for
such relationships in a non-western setting such as China.
Keywords Philanthropy, Board members, Intellectual capital, China
Paper type Research paper
Philanthropic
foundation
performance
1209
The authors would like to thank the anonymous referees for their valuable comments. This study was
supported by the National Social Science Fund of China (No.71673246 and 71774139), the Ministry of
Education of Humanities and Social Science project (19YJC630224), the China Postdoctoral Science
Foundation (2018M642481) and Pre-research Fund for Humanities and Social Sciences of Zhejiang
University of Technology.
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1469-1930.htm
Received 29 September 2019
Revised 15 February 2020
14 April 2020
Accepted 22 May 2020
Journal of Intellectual Capital
Vol. 21 No. 6, 2020
pp. 1209-1228
© Emerald Publishing Limited
1469-1930
DOI 10.1108/JIC-09-2019-0230
1. Introduction
With the emergence and spread of non-governmental organizations (NGOs) in non-western,
less-developed economies in recent years, the degree to which the intellectual capital (IC) of a
board influences the performance of NGOs has drawn increasing attention (Ni and Zhan,
2017;Dill, 2014). In general, NGOs in emerging or developing countries lack ideal operating
and fundraising mechanisms to achieve long-term competitive advantages, primarily
because they often face more stringent, restrictive institutional environments with less
opportunities to obtain external resources in comparison to their developed-economy
counterparts. However, to date, there has been limited empirical evidence probing into
relevant issues in such contexts. For example, Zhan and Tang (2016) argued that
environmental NGOs with leaders who used to be government officials or legislative body
members were more likely to engage in policy advocacy. Song and Yin (2019) found that work
experience in a company that key leaders of an NGO had was to the benefit of its
rationalization. Even through some research has discussed the effects of institutional or
business factors on the development of NGOs, our knowledge of how they jointly affect the
performance of NGOs in China is fairly limited. Thus, the purpose of this research is to fill this
knowledge gap by investigating how the various ICs of a board affect the performance of
philanthropic foundations in China, the worlds largest emerging economy, where the number
of philanthropic foundations has expanded with an average annual growth rate of 27.94%
and a recorded high in 2019 of 7,500 foundations in total.
According to the literature (Berezinets et al., 2016;Sun et al., 2016), the institutional and
business relationships of board directors account for the majority of a boards IC, namely, two
of the three elements (i.e. human, social and structural capitals). The former, as a collaborative
relationship, characterizes to what extent NGOs depend on political resources; the latter, as a
transactional relationship, embodies to what extent NGOs reduce their operation costs. More
specifically, the institutional and business relationships of a board not only reflect the board
directorsknowledge, reputation and experience in doing business and handling political
affairs (i.e. their human capital), but also their social connections to government
decision-makers and external partners (i.e. their social capital). Following this line of
thought, this research focuses on discussing the two key components of board IC. To more
easily and clearly articulate our research questions, the business relationships of a board will
hereafter be referred to as business IC (BIC) and the institutional relationships of a board will
be identified as institutional IC (IIC).
BIC and IIC are recognized as crucial determinants for NGOs to successfully promote
fundraising and charity activities, as NGOs cannot pursue profits like for-profit firms and
may lack professionalism in management and operation (Hillman and Dalziel, 2003;Dill, 2014;
Berezinets et al., 2016). Too often, their board members play an important role in helping
NGOs obtain resources and capabilities for survival and growth (Ruggiano and Taliaferro,
2012). As far as our research setting is concerned, 49.2% of Chinese philanthropic
foundations had both government officials and corporate executives as their directors.
However, although BIC and IIC were each found to affect NGO performance (Saxton and
Benson, 2005;Fredette and Bradshaw, 2012;Johnson and Ni, 2015), the interacting effects of
BIC and IIC on performance as well as the boundary of such effects seem to be largely ignored
in prior studies. For these reasons, this research focuses on investigating how the interactions
of BIC and IIC affect organizational performance based on the resource dependence and
agency theories.
This study makes unique contributions to the existing literature. First, we respond to
scholarscalls for more solid empirical evidence on philanthropic foundations under
institutional environments of a weak tradition of civic society or an autocratic regime
(Barroso-Castro et al., 2016). Second, we enrich the existing knowledge in board IC research by
incorporating the resource dependence and agency theories to elucidate the interacting
JIC
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