Citations (1)



Does Product Market Competition Foster Corporate Social Responsibility?

Caroline Flammer

Boston University

January 2014

This study examines whether product market competition affects corporate social responsibility (CSR). To obtain exogenous variation in product market competition, I exploit a quasi-natural experiment provided by large import tariff reductions that occurred between 1992 and 2005 in the U.S. manufacturing sector. Using a difference-in-differences methodology, I find that companies react to tariff reductions by increasing their engagement in CSR. This finding supports the view that CSR is a valuable resource that allows companies to improve their competitiveness. I further argue and provide evidence that the increase in CSR depends on the institutional environment as well as CSR- and firm-specific characteristics. Specifically, I find that the increase in CSR is larger for companies operating in industries where the CSR-sensitivity of customers is higher such as the business-to-consumer sector and durable experience goods markets. I also find that companies focus their additional CSR investments on their core stakeholders such as customers and employees. Finally, I find that the increase in CSR, albeit smaller, remains significant for companies facing higher financing constraints.

Number of Pages in PDF File: 35

Keywords: Corporate Social Responsibility, Product Market Competition, Import Tariffs

JEL Classification: M14, F13

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Date posted: September 14, 2012 ; Last revised: February 9, 2014

Suggested Citation

Flammer, Caroline, Does Product Market Competition Foster Corporate Social Responsibility? (January 2014). Available at SSRN: https://ssrn.com/abstract=2146280 or http://dx.doi.org/10.2139/ssrn.2146280

Contact Information

Caroline Flammer (Contact Author)
Boston University ( email )
Boston University Questrom School of Business
595 Commonwealth Avenue, Office 634A
Boston, MA 02215
United States
HOME PAGE: http://sites.bu.edu/cflammer/
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