Competitive CSR in a strategic managerial delegation game with a multiproduct corporation

Abstract

We study the firm’s strategic choice of corporate social responsibility (CSR) in a managerial delegation framework where a multiproduct corporation competes against a single plant firm. We examine simultaneous-move versus sequential-move in output choices when CSR’s strategic level is simultaneously chosen in the first stage. We show that both firms adopt (asymmetric) CSR in a simultaneous-move game, whereas only the follower firm adopts CSR (but not the leader firm) in sequential-move games. In an endogenous timing game in output choices, we also show that a simultaneous-move is an equilibrium when the products are substitutes or weak complements, while a single plant firm’s leadership is otherwise wherein the multiproduct corporation might choose negative CSR. Our findings can explain the observed phenomenon of different industries in which firms’ CSR activities are more or less (even non-CSR or negative CSR), commonly widespread in the real world. It also partially helps us understand CSR’s strategic motives and its policy relations with the firm’s profits.