Can Socially-Responsible Firms Survive Competition? An Analysis of Corporate Employee Matching Grants

Employee matching grant schemes are coordination mechanisms that reduce free-riding by socially-conscious employee-donors. Their prevalence demonstrates that socially-responsible firms can survive market competition. When socially-conscious employees are more productive or value working together, matching schemes can enhance employee welfare and raise more for charities without reducing investor profits. We document higher labor productivity at firms with matching schemes and that matching firms are more likely to be ranked as one of the “100 Best Companies to Work For.” The relation is robust to managerial entrenchment concerns and is not simply a reflection of productivity and preferences in the high-tech sector.