Strategic CSR, Spillovers, and First-Mover Advantage

Michael Kopel
2009 Social Science Research Network  
In this paper we study the conditions under which socially responsible firms can develop a first-mover advantage. We consider a price-setting duopoly market with vertically and horizontally differentiated products, where firms can engage in socially responsible activities and thereby increase the willingness to pay of consumers of their products. It is shown that a CSR leader, i.e. a firm which commits to a level of socially responsible activities prior to its competitor, achieves higher
more » ... . Hence, a first mover advantage arises. If however, the outcomes of investments in CSR are not perfectly specific to the CSR leader, i.e. they spill over to the CSR follower, then a second mover advantage arises for the CSR follower. We characterize the effects of competition and the level of spillovers on the relative and absolute level of CSR activities and the incentive to engage in CSR and thereby derive testable hypotheses.
doi:10.2139/ssrn.1408632 fatcat:puqhjxs2hfbfnkxb4mki6ystvm