A Research on the Crisis Spillover Effect of Food Safety Incidents on Competitive Firms: The Influence of Political Connections and Charitable Donations.

Taking the perspective of corporate social responsibility and institutional theory, this research establishes an innovative relationship between variables such as charitable donation, political connection and crisis spillover effect of firms through quantitative analysis using the event study method, regression analysis and the Heckman two-stage model. Taking 8 food safety incidents from 2011 to 2016 as research samples, this paper studies the impact of food safety incidents on the market value of both firms under crisis and their competitive firms, as well as the influence of political connection and charitable donation. Based on the current situation that the product crisis or reputation crisis of a firm will, inevitably, affect the market performance and value of its competitive firms in the same industry, this paper attempts to answer questions such as "what kind of firms are capable of minimizing this negative influence?" "will the political connection of competitive firms exert a positive or negative impact?" and "can actions taken before the crisis, such as charitable donation of competitive firms, help these firms in reducing the harm?" The conclusions are as follows: first, the occurrence of food safety incidents not only has a negative impact on the market value of the crisis firm, but also has a negative spillover effect on the competitive firm; second, charitable donations made by the competitive firm before the crisis demonstrates a positive competitive effect on the competitive firm, and the intensity of such charitable donations is positively correlated with this positive competitive effect; third, the political connection of the competitive firm has no significant impact on the crisis spillover effect. These findings provide enlightenment for the operation and management of firms in the food industry.