Corporate Social Responsibility -- A Strategic and Profitable Response to Entry?

Abstract

This paper investigates whether an incumbent has an incentive to introduce corporate social responsibility (CSR) activities only as a response to entry by a competitor who cannot provide CSR (credibly) due to its lack of recognition, at least at the outset. More precisely, this paper shows that monopolistic firms can have indeed this incentive. Whether they use this strategy depends on the costs of entry deterrence, consumers valuations of CSR and on the costs of providing it. Therefore, turning a firm or product green can provide a win-win.

Keywords: CSR, Entry, Monopoly

JEL Classification: D21, L12