DP16564 Strategic Leadership in Corporate Social Responsibility
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.