Working Paper: CEPR ID: DP16564
Authors: Rui Albuquerque; Lus M. B. Cabral
Abstract: We propose a strategic theory of Corporate Social Responsibility (CSR). Shareholder maximizers commit to a mission statement that extends beyond firm value maximiza- tion. This commitment leads firms (either product market competitors or complementors along the value chain) to change their actions in ways that ultimately favor shareholders. We thus provide a formal analysis of the “doing well by doing good” adage. We also pro- vide conditions such that the mission statement game has the nature of a pure coordination game. Our framework thus provides a natural theory of firm leadership in a CSR context: by selecting a CSR mission statement, a first mover effectively leads the industry to a Pareto optimal equilibrium.
Keywords: commitment; leadership; corporate social responsibility; stockholder model; stakeholder model; externalities; mission statement; clean-energy technology; supply chain; wage setting
JEL Codes: D24; G32; G34; L20; M14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| CSR mission statement (M14) | increased profits (L21) |
| CSR mission statement (M14) | competitors follow suit (L19) |
| CSR mission statement (M14) | coordination game (C72) |
| CSR commitment (M14) | clean technology adoption (Q55) |
| CSR policies (M14) | higher equilibrium profits (D53) |