Does Ethical Activism Lead to Firm Relocation?

Abstract

The first generation of ethical activism has led policymakers to impose higher ethical standards on domestic industries. Because of the costs generated by these ethical pressures, firms may delocate their productive activities to 'unethical havens'. The second generation of ethical activism has targeted firms regardless of their location. We show that, in certain plausible circumstances, this generation of ethical pressures can lead firms to reconsider the location of their productive activities. A subsequent insight is that supporting ethical activists could be a way to discourage firms' migration or an incentive to induce relocation. The third generation of ethical activism relies on more constructive relationships and includes different forms of cooperation between activists and corporations. These partnerships are likely to reinforce firms' location because of more consensual decision making. We present several policy implications and stress the need for further theoretical and applied research.