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Watchdogs of the Invisible Hand: NGO Monitoring, Corporate Social Responsibility, and Industry Equilibrium

Gani Aldashev (), Michela Limardi () and Thierry Verdier ()
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Gani Aldashev: Center for Research in the Economics of Development, University of Namur and ECARES, ULB
Michela Limardi: University of Lille and Paris School of Economics
Thierry Verdier: Paris School of Economics and CEPR

No 1404, Working Papers from University of Namur, Department of Economics

Abstract: Globalization has been accompanied by rising pressure from advocacy non-governmental organizations (NGOs) on multinational firms to act in socially-responsible manner. We analyze how NGO pressure interacts with industry structure, using a simple model of NGO-firm interaction embedded in an industry environment with endogenous markups and entry. We characterize the effect of NGO pressure on the industry equilibrium (intensity of competition, market structure, and the share of socially responsible firms), and the impact of industry-level changes (market size, consumer tastes) on NGO activism. In the long run, multiple equilibria might exist: one with fewer firms and a large share of them being socially-responsible, and the other with more firms but fewer of them acting socially responsibly.

Keywords: NGOs; corporate social responsibility; private regulation; monopolistic competition (search for similar items in EconPapers)
JEL-codes: L31 L13 D43 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2013-11
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