The literature posits that heightened transparency requirements in the nonprofit sector lead to more traceable organizational actions, thus promoting higher organizational accountability on social impact. We reveal how corporate foundations (CFs) react differently from conventional nonprofits and adopt mission ambiguity strategies to counteract the intended purpose of transparency regulations. Using a difference-in-differences design, we examine the impact of China’s 2016 Charity Law, a seminal piece of legislation intended to foster transparent operations in the nonprofit sector, on the organizational design of newly established CFs. We find a significant increase in mission ambiguity for newly-established CFs in regions subject to stricter policy enforcement post-legislation. This relationship is weaker for founding firms from caring industries whose stakeholders have a higher consensus on appropriate social missions and for firms with more preparatory philanthropic experiences. Our post-hoc analyses indicate that this strategic ambiguity incurs a social cost during CFs’ future operations, leading to lower support from other prosocial partners and engagement in inconsistent social actions. We contribute to scholarship on CFs and hybrid organizing, as well as to the literature on strategic ambiguity and transparency in corporate social responsibility.
