Corporate Giving, Competition and the Economic Cycle
AbstractThis paper addresses firms' decisions on Corporate Social Responsibility (CSR) investments as a function of the prevailing macroeconomic context, namely under an economic crisis, a relevant scenario for many world economies nowadays. We focus on the corporate giving dimension of CSR. Under unfavorable macroeconomic conditions two possible situations may, a priori, occur: firms decide to restrict their CSR contributions in order to save resources, or they use CSR to differentiate more effectively. To address this issue, we derive a general theoretical framework comprising product differentiation and firm competition in two dimensions: price and corporate giving. Corporate giving as a share of firm’s revenues is found to be lower the less sensitive demand is to rivals’ pricing policies, and the more sensitive demand is to rivals’ CSR. We prove that, in equilibrium, all the rest equal, profit maximizing firms will make less CSR contributions when the business cycle is unfavorable, independently of the market structure. We then provide empirical testing and validation of the theoretical model’s results through a comprehensive battery of econometric tests and real data evidence. We also inspect the business cycle properties of corporate giving, as well as that of receipts, concluding for a procyclical relation with real
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon. in its series Working Papers with number 2012/15.
Date of creation: May 2012
Date of revision:
Contact details of provider:
Postal: Department of Economics, School of Economics and Management (ISEG), Technical University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL
Web page: https://aquila.iseg.utl.pt/aquila/departamentos/EC
corporate social responsibility; corporate giving; economic crisis; business cycle; demand sensitivity; competition.;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-22 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mark Bagnoli & Susan G. Watts, 2003. "Selling to Socially Responsible Consumers: Competition and The Private Provision of Public Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(3), pages 419-445, 09.
- Benabou, Roland & Tirole, Jean, 2009.
"Individual and Corporate Social Responsibility,"
IZA Discussion Papers
4570, Institute for the Study of Labor (IZA).
- Bénabou, Roland & Tirole, Jean, 2009. "Individual and Corporate Social Responsibility," TSE Working Papers 09-109, Toulouse School of Economics (TSE).
- Jean Tirole & Roland Bénabou, 2010. "Individual and Corporate Social Responsibility," Working Papers 2010.23, Fondazione Eni Enrico Mattei.
- Bénabou, Roland & Tirole, Jean, 2010. "Individual and Corporate Social Responsibility," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
- Catherine M. Paul & Donald Siegel, 2006.
"Corporate social responsibility and economic performance,"
Journal of Productivity Analysis,
Springer, vol. 26(3), pages 207-211, December.
- Catherine J. Morrison-Paul & Donald S. Siegel, 2006. "Corporate Social Responsibility and Economic Performance," Rensselaer Working Papers in Economics 0605, Rensselaer Polytechnic Institute, Department of Economics.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- James G. MacKinnon, 1995.
"Numerical Distribution Functions for Unit Root and Cointegration Tests,"
918, Queen's University, Department of Economics.
- MacKinnon, James G, 1996. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 601-18, Nov.-Dec..
- Markus Kitzmueller, 2008. "Economics and Corporate Social Responsibility," Economics Working Papers ECO2008/37, European University Institute.
- Lawrence J. Christiano & Terry J. Fitzgerald, 2003.
"The Band Pass Filter,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 435-465, 05.
- Tom Doan, . "CFFILTER: RATS procedure to perform band pass filter using Christiano-Fitzgerald method," Statistical Software Components RTS00034, Boston College Department of Economics.
- Lawrence J. Christiano & Terry J. Fitzgerald, 1999. "The Band Pass Filter," NBER Working Papers 7257, National Bureau of Economic Research, Inc.
- Lawrence J. Christiano & Terry J. Fitzgerald, 1999. "The Band pass filter," Working Paper 9906, Federal Reserve Bank of Cleveland.
- Scholtens, Bert, 2008. "A note on the interaction between corporate social responsibility and financial performance," Ecological Economics, Elsevier, vol. 68(1-2), pages 46-55, December.
- James G. MacKinnon & Alfred A. Haug & Leo Michelis, 1996.
"Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration,"
1996_07, York University, Department of Economics.
- MacKinnon, James G & Haug, Alfred A & Michelis, Leo, 1999. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(5), pages 563-77, Sept.-Oct.
- Mackinnon, J.G. & Haug, A.A. & Michelis, L., 1996. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," G.R.E.Q.A.M. 96a09, Universite Aix-Marseille III.
- Mark LeClair & Kelly Gordon, 2000. "Corporate Support for Artistic and Cultural Activities: What Determines the Distribution of Corporate Giving?," Journal of Cultural Economics, Springer, vol. 24(3), pages 225-241, August.
- repec:wop:humbsf:1999-88 is not listed on IDEAS
- Bryan W. Husted & José de Jesus Salazar, 2006. "Taking Friedman Seriously: Maximizing Profits and Social Performance," Journal of Management Studies, Wiley Blackwell, vol. 43(1), pages 75-91, 01.
- Louis Amato & Christie Amato, 2007. "The Effects of Firm Size and Industry on Corporate Giving," Journal of Business Ethics, Springer, vol. 72(3), pages 229-241, May.
- Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
- Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
- Mike Adams, 1998. "An Analysis of Corporate Donations: United Kingdom Evidence," Journal of Management Studies, Wiley Blackwell, vol. 35(5), pages 641-654, 09.
- Sandra Cavaco & Patricia Crifo, 2010. "The CSR-Firm Performance Missing Link: Complementarity Between Environmental, Social and Business Behavior Criteria?," Working Papers hal-00504747, HAL.
- Geoffrey Heal, 2005. "Corporate Social Responsibility: An Economic and Financial Framework," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 30(3), pages 387-409, July.
- David P. Baron, 2001. "Private Politics, Corporate Social Responsibility, and Integrated Strategy," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(1), pages 7-45, 03.
- Navarro, Peter, 1988. "Why Do Corporations Give to Charity?," The Journal of Business, University of Chicago Press, vol. 61(1), pages 65-93, January.
- Candelon, Bertrand & Lütkepohl, Helmut, 2000.
"On the reliability of chow type test for parameter constancy in multivariate dynamic models,"
SFB 373 Discussion Papers
2000,95, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Candelon, Bertrand & Lutkepohl, Helmut, 2001. "On the reliability of Chow-type tests for parameter constancy in multivariate dynamic models," Economics Letters, Elsevier, vol. 73(2), pages 155-160, November.
- Candelon, Bertrand & Lütkepohl, Helmut, 2001. "On the reliability of Chow-type tests for parameter constancy in multivariate dynamic models," Open Access publications from Maastricht University urn:nbn:nl:ui:27-19703, Maastricht University.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Vitor Escaria).
If references are entirely missing, you can add them using this form.