THE TRADE-OFF BETWEEN CORPORATE SOCIAL RESPONSIBILITY AND COMPETITIVE ADVANTAGE: A BIFORM GAME MODEL

Xiaoyang Zhao,Shuxin Zhong,Justin Tan

doi:10.3846/tede.2022.16321

Abstract

This paper uses a biform game model to study firms’ trade-offs between corporate social responsibility (CSR) and competitive advantage. We focus on the context in which a competitive advantage may lead to a non-profitable scenario. It is possible that the first mover’s investment in competitive strength may deter itself from the market, which encourages firms’ investment in CSR over competitive strength. As a result, in some circumstances, firms may actively choose a CSR strategy over a competitive strategy. Our results show that (1) technological characteristics, (2) industrial structure, and (3) institutional environments are factors that influence the rational equilibrium of our model and the balance between competitive advantage and CSR. The mechanism and boundary on how firms make trade-offs between CSR activities and competitive strength are exhibited by our model, which provides a framework for decision-making and adds new insights into the strategic balance between market and non-market strategies.

Highlights

Corporate social responsibility (CSR) has become a central concept in strategic management research beyond economic profits because of the significance of legitimacy among stakeholders, such as consumers, investors, and governments (Aguinis & Glavas, 2012; Mellahi et al, 2016; Tan, 2009)
Industrial, and institutional environments impact the risk of the being deterred by improving competitive strength and when firms may choose corporate social responsibility (CSR) over competitive advantage
This study examines the interaction between CSR and competitive strength in a three-stage model, which provides insights into the trade-off between CSR strategy and competitive strategy

Summary

Introduction

Corporate social responsibility (CSR) has become a central concept in strategic management research beyond economic profits because of the significance of legitimacy among stakeholders, such as consumers, investors, and governments (Aguinis & Glavas, 2012; Mellahi et al, 2016; Tan, 2009). A focal firm must understand the relationship between CSR and competitive advantage and achieve strategic fit in a certain environment, leveraging both legitimacy and competitiveness Discussions about the complementarity and trade-off between CSR and competitive advantage have become important topics both in theory and practice (Margolis & Walsh, 2003; McWilliams & Siegel, 2011; Peloza, 2009) While important, these issues have not been well addressed in the literature (Du et al, 2011; Vilanova et al, 2009) because previous research focused on examining the relationship between CSR and firm performance or risk aversion (Burke & Logsdon, 1996; Galbreath, 2009; Kölbel et al, 2017; Shiu & Yang, 2017; Wang & Qian, 2011)

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