Corporate Social Responsibility, Environmental Regulations, and Firms Performance

This chapter analyzes the drivers of corporate social responsibility (CSR thereafter), the relations between environmental regulations and firms' behavior, and the interactions between such regulations and CSR. It is shown how CSR may be a profit-enhancing strategy but also a direct response to the nonmarket environment of the firm. Integrated strategies should take into account potential issues raised by stakeholders to protect firms' reputation and image. Information asymmetries and strategic behavior of firms (and activists) are key to understand CSR dynamics. The literature on the pollution haven hypothesis is used to see how firms react to environmental regulations. Lastly, the chapter questions how the relation between environmental regulations and firms' CSR affects the location decision of firms. Firms may behave strategically in a context of strong information asymmetries. National regulations and reputation may be used by firms to convince consumers. This international dimension of CSR raises new issues and challenges for future researches.