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Firms’ social responsibility and workers’ motivation at the industry equilibrium

Victor Hiller () and Natacha Raffin

Journal of Economic Behavior & Organization, 2020, vol. 174, issue C, 131-149

Abstract: We consider an industry in which firms compete at two levels: the labor market and the product market. In the labor market, two types of workers coexist: socially responsible workers or not. Firms may strategically use responsible activities (CSR) to screen and elicit greater effort from responsible workers. By doing so, virtuous firms lower their production costs and display a competitive advantage in the product market. As a consequence, CSR strategies by firms shape the toughness of the competition in that market. In turn, incentives that firms have to invest in CSR are dampened when competition becomes harsher. Hence, we identify a twofold relationship between CSR and competition. Given the feedback effects on the competitive pressure, an increase in workers’ social awareness may reduce the overall level of socially responsible investment in the industry. We also show that an exogenous increase in competition may positively or negatively affect the corporate social performance depending on pre-existing market conditions.

Keywords: Moral motivation; Corporate Social Responsibility; Screening; Market competition; Industry equilibrium (search for similar items in EconPapers)
JEL-codes: D64 D86 L13 M14 Q50 (search for similar items in EconPapers)
Date: 2020
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Working Paper: Firms’ social responsibility and workers’ motivation at the industry equilibrium (2020)
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DOI: 10.1016/j.jebo.2020.03.017

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