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Market-Based Solutions to Vital Economic Issues


Kenan Institute 2022 Annual Theme: Stakeholder Capitalism
Market-Based Solutions to Vital Economic Issues
Jul 31, 2018

The Effect of Market and Nonmarket Competition on Firm and Industry CSR


We contribute to the emerging literature on strategic corporate social responsibility (CSR) and its antecedents by undertaking a systematic analysis of the effect of rivalry on firm and industry CSR. We deal with the codetermination of competition and CSR by using instrumental variables in the firm-level analysis and by modeling it directly in the industry-level analysis. We find that higher intensity of rivalry and CSR of competitors increase firm CSR, ceteris paribus; however, in a more dynamic setting when firms can change their production output, more competition in fact decreases aggregate industry CSR. While seemingly contradictory, these findings suggest interesting implications for both managers and public policy makers.

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