Strategic CSR and merger decisions in multiproduct mixed markets with state-holding corporation

Abstract

We consider mixed markets with two differentiated products, comprised of a state holding corporation (SHC) and private firms, which decide strategic corporate social responsibility (CSR) and merger between the multiple plants. In the managerial delegation model, we show that the level of unilateral CSR by a single plant under merger is higher than that under non-merger, but merged (non-merged) private firms can generate higher social welfare when products are low (high) substitutes. We also show that competitive level of bilateral CSR is lower than that of unilateral CSR under non-merger competition. We then show that partial privatization is always optimal regardless of merger decisions, but its degree under merger is lower than that under non-merger. Finally, we examine CSR-firm’s strategic alliance and its policy implications if the merger is not voluntarily supportive.