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The Strategic Adoption of Environmental Corporate Social Responsibility with Network Externalities

Author

Listed:
  • Xing Mingqing

    (School of Economics and Management, Weifang University, Weifang, China)

  • Lee Sang-Ho

    (Graduate School of Economics, Chonnam National University, Gwangju, Republic of Korea)

Abstract

This paper adopts a green managerial delegation model in a polluting network industry wherein consumers form fulfilled rational expectations of network externalities. We show that firms are consistently incentivized to undertake ECSR (environmental corporate social responsibility) under price competition, while positive network externalities can increase the strategic level of ECSR. We also show that product substitutability between network products can play an important role in determining a firm’s strategic level of ECSR and resulting profits. Finally, ECSR is conducive to increasing environmental quality and social welfare in a high-polluting network industry. Therefore, the strategic adoption of ECSR in a network industry is Pareto-improving as environmental damage becomes serious.

Suggested Citation

  • Xing Mingqing & Lee Sang-Ho, 2024. "The Strategic Adoption of Environmental Corporate Social Responsibility with Network Externalities," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 24(1), pages 399-418, January.
    • Handle: RePEc:bpj:bejtec:v:24:y:2024:i:1:p:399-418:n:5
    DOI: 10.1515/bejte-2022-0136
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    References listed on IDEAS

    as
    1. Lee Sang-Ho & Park Chul-Hi, 2019. "Eco-Firms and the Sequential Adoption of Environmental Corporate Social Responsibility in the Managerial Delegation," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 19(1), pages 1-9, January.
    2. Kosuke Hirose & Sang-Ho Lee & Toshihiro Matsumura, 2020. "Noncooperative and Cooperative Environmental Corporate Social Responsibility," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 176(3), pages 549-571.
    3. Sang-Ho Lee & Chul-Hi Park, 2021. "Corporate environmentalism in a managerial delegation and abatement subsidy policy," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 28(5), pages 546-561, September.
    4. Liu, Chih-Chen & Wang, Leonard F.S. & Lee, Sang-Ho, 2015. "Strategic environmental corporate social responsibility in a differentiated duopoly market," Economics Letters, Elsevier, vol. 129(C), pages 108-111.
    5. Hoernig, Steffen, 2012. "Strategic delegation under price competition and network effects," Economics Letters, Elsevier, vol. 117(2), pages 487-489.
    6. Buccella, Domenico & Fanti, Luciano & Gori, Luca, 2021. "To abate, or not to abate? A strategic approach on green production in Cournot and Bertrand duopolies," Energy Economics, Elsevier, vol. 96(C).
    7. Chirco, Alessandra & Scrimitore, Marcella, 2013. "Choosing price or quantity? The role of delegation and network externalities," Economics Letters, Elsevier, vol. 121(3), pages 482-486.
    8. Lili Xu & Sang‐Ho Lee, 2022. "Non‐cooperative and cooperative environmental corporate social responsibility with emission taxes," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(7), pages 2849-2862, October.
    9. Choi Kangsik & Lee Ki-Dong & Lim Seonyoung, 2020. "Managerial Delegation of Competing Vertical Chains with Vertical Externality," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 20(2), pages 1-18, June.
    10. Daniel Birke, 2009. "The Economics Of Networks: A Survey Of The Empirical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 23(4), pages 762-793, September.
    11. Poyago-Theotoky Joanna & Yong Soo Keong, 2019. "Managerial Delegation Contracts, “Green” R&D and Emissions Taxation," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 19(2), pages 1-10, June.
    12. Bhattacharjee Trishita & Pal Rupayan, 2014. "Network Externalities and Strategic Managerial Delegation in Cournot Duopoly: Is There a Prisoners’ Dilemma?," Review of Network Economics, De Gruyter, vol. 12(4), pages 343-353, January.
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    Cited by:

    1. Chen, Junlong & Sun, Chaoqun & Xu, Bo & Kong, Yan, 2024. "Emission reduction technology R&D and sharing with environmental corporate social responsibility," Technological Forecasting and Social Change, Elsevier, vol. 207(C).
    2. Silvia Leoni & Marco Catola, 2025. "Green Transition and Environmental Policy in Imperfectly Competitive Markets: Insights from Agent-Based Modelling," Discussion Papers 2025/326, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    3. Sumi Cho & Sang-Ho Lee, 2025. "Strategic merger decisions under environmental corporate social responsibility," Economics Bulletin, AccessEcon, vol. 45(3), pages 1397-1405.

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    Keywords

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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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