This paper assesses the interplay between an institutional-level policy aimed at fostering inclusion through corporate philanthropic giving and the firm-level attributes that may affect strategic responses to this transition. Specifically, I analyze the effects of a policy designed to substantially reduce search costs for firms seeking sociocultural projects to support and explore how firm performance in the consumer market and ownership form influence investment decisions, with a particular focus on the allocation of resources to underserved localities. I hypothesize that reduced search costs enhance the inclusion of underserved groups compared to adequately served regions, as firms, motivated by either instrumental or normative reasons, find increased incentives to engage with these previously overlooked communities. Additionally, I suggest that high-performing firms and state-owned enterprises (SOEs) utilize this transition to promote greater value creation by tapping into these regions. I test these hypotheses within the Brazilian cultural sector, focusing on a policy implemented in 2017 intended to augment and equitably distribute philanthropic contributions. I analyze philanthropic giving of 148 public companies towards 5,616 cultural projects across the country from 2011 to 2021, yielding a dataset of 7,916 observations. Contrary to my initial hypothesis, I find no significant effect of the policy in attracting new investments or redirecting them to projects in underserved areas. However, a deeper analysis of firm-level attributes in response to the institutional change reveals that both high-performing firms (compared to low-performing ones) and SOEs (compared to private-owned firms) have increased their investments in these regions post-policy. High performers capitalize on their enhanced resources and capabilities to penetrate new markets and potentially increase private value creation, while SOEs align their philanthropic efforts with their mandate to foster social value creation. Despite these shifts, the overall market equilibrium remains largely unchanged due to competitive dynamics: other competitors take advantage of the transition to secure their share of the philanthropic market, preventing a comprehensive shift toward a more equitable distribution. Overall, this study underscores the importance of evaluating firm-level responses to properly understand how policies aimed at generating social value can effectively meet their intended inclusion goals of promoting inclusion.
