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When Necessity Becomes a Virtue: The Effect of Product Market Competition on Corporate Social Responsibility
Author(s) -
FernándezKranz Daniel,
Santaló Juan
Publication year - 2010
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/j.1530-9134.2010.00258.x
Subject(s) - corporate social responsibility , competition (biology) , industrial organization , business , variance (accounting) , product market , product (mathematics) , social responsibility , market competition , marketing , microeconomics , economics , market economy , accounting , incentive , public relations , ecology , geometry , mathematics , political science , biology
We test whether Corporate Social Responsibility (CSR) is driven by strategic considerations by empirically studying the link between competition and firms' social performance. We find that firms in more competitive industries have better social ratings. In particular, we show that (i) different market concentration proxies are negatively related to widely used CSR measures; (ii) that an increase in competition due to higher import penetration leads to superior CSR performance; (iii) that firms in more competitive environments have a superior environmental performance, measured by firm pollution levels; and (iv) that more product competition is associated to a larger within‐industry CSR variance. We interpret these results as evidence that CSR is strategically chosen.