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Regulation, Corporate Social Responsibility and Activism

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  • Aleix Calveras
  • Juan‐JosÉ Ganuza
  • Gerard Llobet

Abstract

This paper analyzes the interplay between firms' self‐regulation (often denoted as corporate social responsibility) as opposed to the formal regulation of a negative externality. Firms respond to increasing activism in the market (conscious consumers that take into account the external effects of their purchase) by providing more socially responsible goods. However, because regulation is the outcome of a political process, an increase in activism might imply an inefficiently high externality level. This may happen when a majority of non‐activist consumers collectively free‐ride on conscious consumers. By determining a softer than optimal regulation, they benefit from the behavior of firms, yet they have access to cheaper (although less efficient) goods.

Suggested Citation

  • Aleix Calveras & Juan‐JosÉ Ganuza & Gerard Llobet, 2007. "Regulation, Corporate Social Responsibility and Activism," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(3), pages 719-740, September.
    • Handle: RePEc:bla:jemstr:v:16:y:2007:i:3:p:719-740
    DOI: 10.1111/j.1530-9134.2007.00155.x
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    References listed on IDEAS

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