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Corporate social responsibility, vertical product differentiation and international competition

Author

Listed:
  • Jie Li
  • Xingtang Wang
  • Baomin Dong
  • Eden S. H. Yu

Abstract

Would a foreign firm’s consumer‐oriented corporate social responsibility (CSR) activities be rewarded by an importing country’s voluntary tariff reduction? The current paper addresses this question in an import‐competing duopoly model with vertical product differentiation. It is shown that the tariff will decrease if the foreign firm switches from a purely profit‐driven firm to a CSR firm. A consumer‐oriented CSR strategy will always hurt the domestic firm’s profit, whereas the relationship between the foreign firm’s profit and CSR sensitivity (the degree to which a firm cares about consumer welfare) is invertedly U‐shaped. When firms’ decisions to switch to CSR are endogeneized, only the foreign firm will become a CSR firm.

Suggested Citation

  • Jie Li & Xingtang Wang & Baomin Dong & Eden S. H. Yu, 2019. "Corporate social responsibility, vertical product differentiation and international competition," Review of International Economics, Wiley Blackwell, vol. 27(4), pages 1108-1125, September.
    • Handle: RePEc:bla:reviec:v:27:y:2019:i:4:p:1108-1125
    DOI: 10.1111/roie.12408
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    Cited by:

    1. Zhang, Qidi & Wang, Leonard F.S., 2022. "Corporate social responsibility, entry and optimal privatization in an international mixed market," International Review of Economics & Finance, Elsevier, vol. 77(C), pages 14-24.
    2. Wang, Xingtang & Wang, Leonard F.S., 2021. "Vertical product differentiation, managerial delegation and social welfare in a vertically-related market," Mathematical Social Sciences, Elsevier, vol. 113(C), pages 149-159.
    3. Xingtang Wang & Leonard F. S. Wang, 2022. "Corporate social responsibility, vertical product differentiation, and privatization policy," The Japanese Economic Review, Springer, vol. 73(2), pages 403-425, April.

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