CSR leadership, spillovers, and first-mover advantage

Michael Kopel

Decisions in Economics and Finance, 2021, vol. 44, issue 2, No 2, 489-505

Abstract: Abstract In this paper, I study the conditions under which a CSR leader, that is a firm which commits to invest in socially responsible activities prior to its competitor, can develop a first-mover advantage. A price-setting duopoly market with horizontally differentiated products is considered, where firms can increase the willingness to pay of the consumers of their products by investing in socially responsible activities. It is shown that if the investment in CSR is perfectly specific to the CSR leader and does not spill over to the CSR follower, the CSR leader achieves higher profits. Hence, a first-mover advantage arises. If however, CSR investment spills over to and hence benefits also the CSR follower by increasing the follower sales, then a second-mover advantage might arise for the follower. A characterization is provided for the influence of the intensity of competition and the level of spillovers on the relative and absolute level of CSR activities and the firms’ incentives to engage in CSR.

Keywords: First-mover advantage; Corporate social responsibility; Intensity of competition; CSR spillovers; CSR leadership (search for similar items in EconPapers)
JEL-codes: D21 L13 M14 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10203-021-00328-9

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