Strategic Leadership in Corporate Social Responsibility

Paper Authors: Rui Albuquerque, Luis Cabral

We propose a strategic theory of Corporate Social Responsibility (CSR). Shareholder maximizers commit to a mission statement that extends beyond firm value maximization. This commitment leads firms (either product market competitors or complementors along the value chain) to change their actions in ways that ultimately favor shareholders. We thus provide a formal analysis of the “doing well by doing good” adage. We also provide conditions such that the mission statement game has the nature of a pure coordination game. Our framework thus provides a natural theory of firm leadership in a CSR context: by selecting a CSR mission statement, a first mover effectively leads the industry to a Pareto optimal equilibrium.