The contagion mechanism and governance strategy of corporate social irresponsibility of Chinese food companies

Abstract

From a global perspective, the incidents of food fraud are still increasing in recent years, which shows that the food safety issue has not been well addressed. As a major world food exporter and importer, egregious incidents of corporate social irresponsibility (CSI) for domestic food companies were discovered in China. Although the Chinese government has been strengthening the supervision on food companies, the governance effect is not obvious. This research focuses on the governance of the CSI behavior of food companies. As opposed to the existing literature based on Neoclassical economics, this article analyzes food companies' CSI by applying a behavioral economic framework. The system dynamics method is used to analyze the implementation effect of the corresponding governance strategy. Researchers discovered that the short-sighted cognitive bias of food companies is the primary reason for CSI, which results in the self-reinforcing effect and interactive contagion effect. Under the current imperfect institutional environment, these effects will be further amplified to present a crisis of collective irresponsibility. This study provides timely evidence and significant regulatory implications for the ongoing food safety crisis in China. In order to control the contagion of CSI in the food industry, the government should increase its sanctions on irresponsible food companies from the short-term perspective. The government should also establish a fair and standardized market competition order and improve the information disclosure mechanisms and third-party governance mechanisms in the long term. These actions will contribute to a more comprehensive research perspective on food safety governance and, additionally, and to develop more targeted strategic tools for the government to regulate the food market. Our insights can also provide a reference for other countries and industries facing similar challenges.