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The Strategic Adoption of Environmental Corporate Social Responsibility with Network Externalities

Authors
  • Xing, Mingqing
  • Lee, Sang-Ho
Type
Published Article
Journal
The B.E. Journal of Theoretical Economics
Publisher
De Gruyter
Publication Date
Jun 22, 2023
Volume
24
Issue
1
Pages
399–418
Identifiers
DOI: 10.1515/bejte-2022-0136
Source
De Gruyter
Keywords
Disciplines
  • Notes
License
Green

Abstract

This paper adopts a green managerial delegation model in a polluting network industry wherein consumers form fulfilled rational expectations of network externalities. We show that firms are consistently incentivized to undertake ECSR (environmental corporate social responsibility) under price competition, while positive network externalities can increase the strategic level of ECSR. We also show that product substitutability between network products can play an important role in determining a firm’s strategic level of ECSR and resulting profits. Finally, ECSR is conducive to increasing environmental quality and social welfare in a high-polluting network industry. Therefore, the strategic adoption of ECSR in a network industry is Pareto-improving as environmental damage becomes serious.

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