Strategic Leadership in Corporate Social Responsibility

Abstract

We propose a strategic theory of Corporate Social Responsibility (CSR). Shareholder maximizers commit to a mission statement that extends beyond firm value maximiza- tion. This commitment leads firms (either product market competitors or complementors along the value chain) to change their actions in ways that ultimately favor shareholders. We thus provide a formal analysis of the "doing well by doing good" adage. We also pro- vide conditions such that the mission statement game has the nature of a pure coordination game. Our framework thus provides a natural theory of firm leadership in a CSR context: by selecting a CSR mission statement, a first mover effectively leads the industry to a Pareto optimal equilibrium.

Keywords: clean-energy technology, commitment, Corporate social responsibility, Externalities, leadership, mission statement, stakeholder model, stockholder model, Supply Chain, Wage setting

JEL Classification: D24, G32, G34, L20, M14