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Offshoring with endogenous NGO activism

Author

Listed:
  • Sebastian Krautheim

    (University of Passau)

  • Thierry Verdier

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CEPR - Center for Economic Policy Research, PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

Abstract

The process of globalization is characterized by an impressive growth of global value chains, as well as the proliferation of non-governmental organizations (NGOs) interacting with multinational firms. This paper presents a model of offshoring and NGO–firm interactions in which offshoring to a low-regulation country allows a monopolist to implement a "dirty" technology undesired by consumers. Consumers can reduce the incentive for dirty production by financing an NGO monitoring the firm. NGO emergence and offshoring can arise as joint and interacting outcomes. For a range of trade costs, NGO emergence allows firms to capture gains from globalization, which would otherwise be unattainable. Somewhat paradoxically, NGO emergence can be at the expense of consumers possibly leading to welfare losses through offshoring.

Suggested Citation

  • Sebastian Krautheim & Thierry Verdier, 2016. "Offshoring with endogenous NGO activism," PSE-Ecole d'économie de Paris (Postprint) halshs-01509763, HAL.
    • Handle: RePEc:hal:pseptp:halshs-01509763
    DOI: 10.1016/j.jinteco.2016.03.009
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    Cited by:

    1. Herkenhoff, Philipp & Krautheim, Sebastian & Semrau, Finn Ole & Steglich, Frauke, 2024. "Corporate Social Responsibility along the global value chain," Journal of Development Economics, Elsevier, vol. 167(C).
    2. Pamina Koenig & Sandra Poncet, 2019. "Reputation and (un)fair trade: Effects on French importers from the Rana Plaza collapse," Post-Print halshs-02350112, HAL.
    3. Michela Limardi & Francesca Battista, 2022. "Global Supply Chain Sustainability: the Role of Non-governmental Enforcement Mechanisms," Documents de travail du Centre d'Economie de la Sorbonne 22013, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    4. Sophie Hatte & Pamina Koenig, 2020. "The Geography of NGO Activism against Multinational Corporations," The World Bank Economic Review, World Bank, vol. 34(1), pages 143-163.
    5. Pamina Koenig, 2017. "Notes on Sigwatch's NGO campaign database," PSE Working Papers halshs-01671758, HAL.
    6. Hang Thu Nguyen & Tra Thi Dan Vu & Hiep Manh Nguyen & Michael Troege, 2022. "Political embeddedness and the adoption of environmental management practices: The mediating effects of institutional pressures," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(4), pages 965-983, July.
    7. Koenig, Pamina & Poncet, Sandra, 2019. "Social responsibility scandals and trade," World Development, Elsevier, vol. 124(C), pages 1-1.
    8. Philipp Herkenhoff & Sebastian Krautheim, 2018. "The International Organization of Production in the Regulatory Void," CESifo Working Paper Series 6922, CESifo.
    9. Herkenhoff, Philipp & Krautheim, Sebastian & Semrau, Finn Ole & Steglich, Frauke, 2024. "Corporate Social Responsibility along the global value chain," Open Access Publications from Kiel Institute for the World Economy 301393, Kiel Institute for the World Economy (IfW Kiel).
    10. Michela Limardi & Francesca Battista, 2022. "Global Supply Chain Sustainability: the Role of Non-governmental Enforcement Mechanisms," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-03704334, HAL.
    11. Julien Daubanes & Jean-Charles Rochet, 2019. "The Rise of NGO Activism," American Economic Journal: Economic Policy, American Economic Association, vol. 11(4), pages 183-212, November.
    12. Pamina Koenig & Sandra Poncet, 2018. "Activism and Trade," Working Papers halshs-01959943, HAL.
    13. Michela Limardi & Francesca Battista, 2022. "Global Supply Chain Sustainability: the Role of Non-governmental Enforcement Mechanisms," Post-Print halshs-03704334, HAL.
    14. T. Gries & R. Grundmann & I. Palnau & M. Redlin, 2018. "Technology diffusion, international integration and participation in developing economies - a review of major concepts and findings," International Economics and Economic Policy, Springer, vol. 15(1), pages 215-253, January.
    15. Herkenhoff, Philipp & Krautheim, Sebastian, 2022. "The international organization of production in the regulatory void," Journal of International Economics, Elsevier, vol. 137(C).

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    More about this item

    Keywords

    NGOs; Offshoring; Credence goods; Globalization;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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