Working Paper: NBER ID: w27493
Authors: Wenzhi Ding; Ross Levine; Chen Lin; Wensi Xie
Abstract: Theory offers differing perspectives and predictions about the impact of product market competition on corporate social responsibility (CSR). Using firm-level data on CSR from 2002 through 2015 and panel data on competition laws in 48 countries, we discover that intensifying competition induces firms to increase CSR activities. Analyses indicate that (a) intensifying competition spurs firms to invest more in CSR as a strategy for strengthening relationships with workers, suppliers, and customers and (b) the competition-CSR effect is stronger in economies where social norms prioritize CSR-type activities, e.g., treating others fairly, satisfying implicit agreements, protecting the environment, etc.
Keywords: Corporate Social Responsibility; Competition Laws; Social Norms
JEL Codes: K21; L41; M14; Z13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Intensifying competition laws (K21) | increase in CSR activities (M14) |
| Competition law index (K21) | CSR activities (M14) |
| Social norms index (Z13) | CSR activities (M14) |
| Competition law index (K21) | CSR activities (M14) |
| Firms with greater market power (L11) | increase in CSR activities following stronger competition laws (L49) |