Monday, April 22, 2013

Dare to Care? How Firms can (be made to) Help after a Disaster

It has been a week of tragedies. We have been shocked by the violence in Boston, with explosive devices made to maim and kill, and placed among marathon spectators. And much further from most news crews, nature struck coldly and fiercely: The earthquake in Sichuan this Saturday is known to have killed at least 186 people, and is estimated to have injured 11,000. Apart from the damage itself, it must have rattled nerves, because Sichuan also had an earthquake in 2008 that killed 70,000 people. Many deaths were from building collapses as a result of shoddy construction--some of those were primary schools.

How do communities react to disasters on a scale such as these earthquakes? We have seen the images of neighbors helping each other after disasters, often helped by highly trained (but few) disaster response crews flying in from abroad. But large-scale disasters usually overwhelm local resources, leaving the communities unable to recover on their own. Nor can they easily get help: the 2008 Sichuan earthquake, as well as the recent one, cut road links needed for help. Even Japan, with its modern infrastructure, was overwhelmed in the 2011 Tohoku earthquake and tsunami. A huge pool of volunteers was available in nearby Tokyo, but was unable to move to the disaster zone because of the need to keep roads clear for essential traffic.

What do people do when they watch such disasters unfold but are unable to help? Jianjun Zhang and Rose Luo studied the aftermath of the 2008 Sichuan earthquake in a paper forthcoming in Organization Science. Their focus was on how multinational corporations donated money to help earthquake victims, but the explanation for this philanthropy turned out to involve people, and the Internet.

As an authoritarian state, China has a tradition of state control and assistance, including in disasters, and low expectations that individuals or firms will help. But the market reforms have left China with a progressive increase in the strength of private corporations and some weakening of the state. When the earthquake overwhelmed the state, some multinational corporations started funding the relief efforts. But most did not, not right away.

What happened next was a mass movement of individuals. On the Internet, lists of donating companies appeared – and so did lists of prominent companies that did not donate. Internet forums were filled with commentary, critique, and praise. And just as the communist party has on a number of occasions been surprised by the speed and strength of Internet activism in China, so were the multinational firms. Responding to the volume of internet articles on donations, and stung by seeing their company appear on lists of stingy corporations, managers donated – and donated again if the first donation was seen as too small for the company. It started and ended quickly: the main donation period was over in a month. But in that brief month, firms made decisions that helped victims of the disaster (or not); those decisions established their reputation as supporters of the community in which they did business (or not).  

It is an interesting effect of the Internet that corporations can now learn about community reactions to their actions, or non-actions, very rapidly. When a disaster strikes, the speed of Internet activism is what it takes to match the speed of help to the quick response that the situation calls for.