When Necessity Becomes a Virtue: The Effect of Product Market Competition on Corporate Social Responsibility

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...

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Bibliographic Details
Published in:Journal of economics & management strategy 2010-06, Vol.19 (2), p.453-487
Main Authors: Fernández-Kranz, Daniel, Santaló, Juan
Format: Article
Language:English
Subjects:
Business ethics
Business strategies
Competition
Competitive equilibrium
Competitive firms
Competitive products
Corporate social responsibility
Correlation analysis
Social responsibility
Strategic management
Studies
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Summary: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.
ISSN:1058-6407
1530-9134
DOI:10.1111/j.1530-9134.2010.00258.x