When Do Firms Invest in Corporate Social Responsibility?: A Real Option Framework

Danny Cassimon, Peter-Jan Engelen and L. Liedekerke

No 14-06, Working Papers from Utrecht School of Economics

Abstract: In this paper, the process for firms to decide whether or not to invest in corporate social responsibility is treated from a real option perspective. We extend the Husted (2005) framework with an important extra parameter that allows us to understand the timing of CSR investment and explain why some companies drag their feet over CSR investments. Our model explicitly allows for the impact of the opportunity cost of delaying the CSR investment decision, providing firms with tools to determine the optimal moment of exercising the CSR investment option. We illustrate our timing model through a case study and analyze governmental support strategies for CSR from a real options perspective.

Keywords: Real options; CSR; stakeholder management; reputational risk; optimal timing (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-cfn
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: When do Firms Invest in Corporate Social Responsibility? A Real Option Framework (2016)
Working Paper: When do firms invest in corporate social responsibility? A real option framework (2014)
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