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Eco-Firms and Sequential Adoption of Environmental Corporate Social Responsibility in the Managerial Delegation

Lee, Sang-Ho and Park, Chul-Hi (2017): Eco-Firms and Sequential Adoption of Environmental Corporate Social Responsibility in the Managerial Delegation. Forthcoming in: B.E. Journal of Theoretical Economics , Vol. 18, No. 2 (June 2018)

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Abstract

This article investigates the strategic environmental corporate social responsibility (ECSR) of polluting firms in the presence of eco-firms. When the firms decide ECSR sequentially within the framework of the managerial incentive design and then face simultaneous price competition, we show that firms will adopt ECSR and purchase abatement goods to mitigate competition if the products are more substitutable, but the late adopter chooses lower ECSR and thus earns higher profit. It can partially explain the current expansive adoption of ECSR as an industry-wide wave.

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