Merger incentive and strategic corporate social responsibility by a multiproduct corporation

This study investigates a multiproduct corporation's strategic corporate social responsibility (CSR) and the merger decisions by single-plant rival firms. We examine two different timings of choosing strategic CSR games, “merge-then-CSR” and “CSR-then-merge.” In the former case where the merger decision is made first, the subsequently adopted level of CSR increases in product substitutability while its level with a merger is lower than that without a merger. In the latter case where a multiproduct corporation establishes a higher CSR level before merging with rival firms, the committed CSR level decreases in product substitutability while it can increase consumer surplus unless the products are close substitutes. Our findings highlight that mergers can be profitable and benefit society when multiproduct corporation has higher level of CSR.