An Economic Case for CSR: The Comparative Efficiency of For-Profit Firms in Meeting Consumer Demand for Social Goods

Strategic Management Journal, Forthcoming

67 Pages Posted: 1 May 2015 Last revised: 5 Sep 2016

See all articles by Aseem Kaul

Aseem Kaul

University of Minnesota - Minneapolis

Jiao Luo

University of Minnesota - Twin Cities - Carlson School of Management

Date Written: July 28, 2016

Abstract

We develop a formal model of CSR, with both a for-profit and a non-profit organization providing social goods to needy recipients and competing for resources from consumers. We show that CSR results in financial benefit if it is either related to the firm’s core business, or non-overlapping with non-profit efforts, but only leads to social benefit if both conditions apply, with these relationships being moderated by the firm’s core business capabilities. Our paper thus makes a case for CSR based on the comparative efficiency of for-profits in providing social goods relative to non-profits, while also highlighting the potential divergence between the financial and social impact of CSR. In addition, it offers new insights into the heterogeneity of CSR, and the role of non-profits and hybrids.

Keywords: corporate social responsibility; market for social goods; Pareto optimality; nonprofit; formal model

JEL Classification: M14, L3, D21, D6

Suggested Citation

Kaul, Aseem and Luo, Jiao, An Economic Case for CSR: The Comparative Efficiency of For-Profit Firms in Meeting Consumer Demand for Social Goods (July 28, 2016). Strategic Management Journal, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2600780 or http://dx.doi.org/10.2139/ssrn.2600780

Aseem Kaul (Contact Author)

University of Minnesota - Minneapolis ( email )

321, 19th Avenue S
3-412 Carlson School of Management
Minneapolis, MN 55455
United States

Jiao Luo

University of Minnesota - Twin Cities - Carlson School of Management ( email )

321 19th Ave. S
CSOM 3-360
Minneapolis, MN 55455
United States
1-612-626-1907 (Phone)

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