Discussion Paper Details

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Title: Strategic Leadership in Corporate Social Responsibility

Author(s): Rui Albuquerque and Luís M B Cabral

Publication Date: September 2021

Keyword(s): clean-energy technology, commitment, Corporate social responsibility, Externalities, leadership, mission statement, stakeholder model, stockholder model, Supply Chain and Wage setting

Programme Area(s): Financial Economics and Industrial Organization

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.

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Bibliographic Reference

Albuquerque, R and Cabral, L. 2021. 'Strategic Leadership in Corporate Social Responsibility'. London, Centre for Economic Policy Research.