Profitable Environmental Corporate Social Responsibility with a Public Eco-Firm

Sang-Ho Lee and Chul-Hi Park

Chapter 4 in Green Innovation and Industrial Organization, 2026, pp 77-97 from World Scientific Publishing Co. Pte. Ltd.

Abstract: We consider a vertical structure scenario with a public eco-firm producing abatement goods under mixed ownership and a polluting firm that adopts environmental corporate social responsibility (ECSR). In examining the strategic interaction between the degree of private ownership and ECSR incentives, we find that the efficiency of abatement technology crucially affects profitable ECSR and its welfare effects. Where there is a high degree of private ownership in a public eco-firm, as the degree of private ownership increases, ECSR can be used to reduce an emission tax, which increases ECSR’s possible strategic role. Furthermore, an increase in ECSR can improve (decrease) social welfare with an inefficient (efficient) abatement technology. However, where there is a low degree of private ownership, the increased input price under privatisation can crowd out the ECSR incentive and reduce its possible space, while an increase of ECSR always improves social welfare regardless of the efficiency of abatement technology. Our findings suggest that green technology development in an eco-industry determines the feasible design of green policy through privatising a public eco-firm under the strategic ECSR incentive.

Keywords: Green Innovation; Industrial Organization; R&D Smoothing; Emissions Tax; Porter Hypothesis; Corporate Social Responsibility; Public Eco-Firm; Foreign Direct Investment (FDI); Environmental Taxes; Voluntary Agreements; Mandatory Regulation; Green Consumers; Green R&D Organization; Environmental Regulation; Sustainable Development (search for similar items in EconPapers)
JEL-codes: F18 L16 L51 Q5 Q55 (search for similar items in EconPapers)
Date: 2026
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