The 9 research areas

In this first subproject we review and update existing research on enterprise foundations as reported in Thomsen (2017).  In as far as information is publicly available we provide updated figures for enterprise foundation research in Denmark, Sweden and Germany including share of market capitalization, contribution to R&D, employment, value added and economic performance. We also lay the theoretical foundations for subsequent empirical research. We review existing research on value creation and provide new broader measures of value creation based on shared value and added value (Kay 2003, Porter and Kramer 2011, Rajan, 2019).

This subproject will map enterprise foundations in Europe and collect accounting information or subsequent analysis. In parallel a similar mapping of enterprise foundation law will be undertaken at the country level by legal scholars. The objective will be to identify both commonalities and differences in foundation ownership across Europe, including different allocations of voting rights, foundation charter purpose and legal structure. The mapping will enable us to provide an overview of the economic importance of enterprise foundations in Europe, including their share of employment, output, and value added and R&D and market capitalization in different EU member nations. In the absence of systematic register information, such evidence must be hand collected. The identification of foundation-owned companies and relevant control groups (family-owned and investor-owned companies) will enable subsequent analysis of the effects of enterprise foundation ownership on company growth, profitability and value creation.

This subproject will seek to identify all listed companies in which foundations have controlling influence. Using the same methodology as above we construct control groups of family-owned and investor-owned companies in the same industry and size category. This enables us to compare the financial performance of foundation-owned companies to the respective control group based on stock return and market valuation. Using the same samples we will also be able to assess stock market reactions to events like changes in ownership share, acquisitions or dividend announcements which will provide market assessments of these events.

This subproject will focus on long-term ownership as exercised by families, foundations, mutuals and cooperatives compared to other ownership categories like government owners, financial investors, private equity and hedge funds. We test the hypothesis that long-term ownership is associated with better financial and social performance.  We examine stock holding periods and what consequences long-term ownership has for firm behavior and value creation, including financial performance, employment, acquisitions and R&D. The project will make use of the data collected in previous subprojects, i.e. in both publicly listed and private companies.

This subproject examines how foundation governance influences firm behavior and value creation.  We focus on measurable aspects of foundation governance like board independence, the tenure of directors and executives, stated foundation objectives and founding family representation. We study the effects of foundation governance on measurable aspects of firm behavior (e.g. executive succession, acquisitions and stability of employment) and value creation including financial performance.  Where possible we use changes in foundation law to identify causal effects. Again, we build on datasets gathered in the previous part of the projects.

This subproject examines the social effects of philanthropy and business activities by enterprise foundations. We will make use of existing data set on the effects of foundation donations subjected to statistical analysis seeking to identify effects per donated euro and taking into consideration relevant control groups such as projects which did not receive funding.  Finally we will examine how enterprise foundation business activity influences philanthropy, e.g.  how donations by enterprise foundations differs from those charitable foundations.

This subproject examines whether foundation ownership is systematically associated with corporate social responsibility and sustainability. Structural factors (such as a long time horizon and charitable foundation objectives) as well as anecdotal evidence indicate that foundation-owned companies could have more socially responsible and sustainable business practices. However, this hypothesis still needs to be tested empirically. We test whether foundation ownership is associated with CSR and sustainability ratings and examine their validity. Again the project will rely on previously collected data.

The project will be concluded by a non-technical book that summarizes the findings and make them accessible to a broader audience.

Research topics – overview

  • Foundation-owned businesses in the Corona Crisis.
  • Enterprise foundation philanthropy in the Corona Crisis.
  • New interfaces between enterprise foundations and the public sector.

Foundation-owned businesses in the Corona Crisis

This subproject will examine how foundation-owned companies reacted to the Corona crisis and how they well they have coped compared to companies with other ownership structures. Previous research has found that foundation-owned companies have lower leverage (more equity reserves), more stable employment, less fluctuating  and greater R&D intensity (Thomsen 2017). The Corona crisis provide natural experiment to test the robustness of these observations.  For Danish companies we will have access to unique register data which can track their employment and other characteristics in great detail.  We can compare their behaviour to control groups of companies in the same industries and size ranges. For non-Danish companies we will use publicly available accounting data with a similar methodology. A qualitative, case-based approach will seek to identify the decision criteria and decision processes involved.

Enterprise foundation philanthropy in the Corona Crisis

This subproject will examine how the donations of enterprise foundations in Denmark and Europe adapted to the Corona crisis, including reorientation of grant making and grant making procedures. A preliminary study from the Danish foundation research center has indicated that many foundation increased their support for COVID-19 projects and their overall donations in 2020 (Fondenes Videnscenter 2020).  This project will be partly quantitative and partly qualitative seeking to examine both how much the granting making was influenced quantitatively by the new situation and how the reorientation was decided on. Based on data on the economic significance of Danish business funds and their financial results, it is investigated how the corona crisis influences their capital structure, dividend potential from subsidiary companies, financial yield and donation capacity.

New interfaces between enterprise foundations and the public sector

This subproject will seek to identify to what extent enterprise foundations contributed to the solution of traditional public sector activities and how this may have changed their role in society. One hypothesis may be that foundations have a special role to play in addressing existential risk because of their long-term time horizons, public benefit objectives and relative lack of bureaucracy (Ord, 2020). This subproject will be qualitative using mainly interviews and publicly available administrative resources.