Discussion paper

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.

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Citation

Albuquerque, R and L Cabral (eds) (2021), “DP16564 Strategic Leadership in Corporate Social Responsibility”, CEPR Press Discussion Paper No. 16564. https://cepr.org/publications/dp16564-0