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Modeling Cognitive Social Capital and Corporate Social Responsibility (CSR) as Preconditions for Sustainable Networks of Relations

  • Giacomo Degli Antoni

    ()

    (University of Milano-Bicocca)

  • Lorenzo Sacconi

    ()

    (University of Trento - Department of Economics)

The paper studies the relationship between social capital (SC) and Corporate Social Responsibility (CSR) by investigating the idea of a virtuous circle between the level of SC and the implementation of CSR practices that favours the creation of cooperative networks between the firm and all its stakeholders by promoting the spread of social norms of trust, trustworthiness and cooperation. Following the literature on SC that stresses its multidimensional character (e.g. Paldam 2000), we consider two dimensions of this notion. Starting from the distinction introduced by Uphoff (1999), we take into account a cognitive and a structural idea of SC. The first one essentially refers to the dispositional characters of agents that affect their propensity to behave in different ways. The latter refers to social networks connecting agents.With regard to the concept of CSR, we adopt a contractarian approach and consider CSR as an extended model of corporate governance, based on the fiduciary duties owed to all the firm's stakeholders. Among stakeholders, we distinguish between strong and weak stakeholders. Both these two categories have made specific investments in the firm. However, strong stakeholders are precious for the firm because they bring in strategic assets. They are, for example, skilled workers or institutional investors. On the contrary, weak stakeholders do not bring strategic assets into the firm and firms have material incentives at defecting in the relationship with them. They are, for example, unskilled workers. By using the tools of psychological game theory, the paper shows the role of cognitive social capital and the adoption of CSR practices in promoting the emergence of social norms of trust, trustworthiness and cooperation which favour the creation of cooperative networks between the firm and all its stakeholders (structural social capital). In particular, we show that: a) the level of cognitive SC plays a key role in inducing the firm to adopt and observe CSR practices that respect all the stakeholders; b) the decision of adopting formal instruments of CSR contributes to create cognitive SC that is endogenously determined in the model; c) the level of cognitive SC and the decision of adopting CSR practices creates structural SC in terms of a long term relationship between the firm and the weak and strong stakeholders.

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Paper provided by Econometica in its series Econometica Working Papers with number wp19.

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Length: 42
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:ent:wpaper:wp19
Contact details of provider: Postal: Università degli Studi di Milano-Bicocca, Edificio U9, Viale dell'Innovazione, 10, 20126 Milano
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Web page: http://www.econometica.it
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  1. Lorenzo Sacconi & Marco Faillo, 2008. "Conformity, reciprocity and the sense of justice. How social contract-based preferences and beliefs explain norm compliance: the experimental evidence," Department of Economics Working Papers 0814, Department of Economics, University of Trento, Italia.
  2. Giancarlo Spagnolo & Steffen Lippert, 2004. "Networks of Relations," Econometric Society 2004 North American Winter Meetings 496, Econometric Society.
  3. Lippert, Steffen & Spagnolo, Giancarlo, 2011. "Networks of relations and Word-of-Mouth Communication," Games and Economic Behavior, Elsevier, vol. 72(1), pages 202-217, May.
  4. Lorenzo Sacconi, 2010. "A Rawlsian View of CSR and the Game Theory of its Implementation (Part I): the Multistakeholder Model of Corporate Governance," Econometica Working Papers wp22, Econometica.
  5. Oliver Hart & John Moore, 1988. "Property Rights and the Nature of the Firm," Working papers 495, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Lorenzo Sacconi, 2004. "A Social Contract Account for CSR as Extended Model of Corporate Governance (Part II): Compliance, Reputation and Reciprocity," Department of Economics Working Papers 0411, Department of Economics, University of Trento, Italia.
  7. Lorenzo Sacconi, 2010. "A Rawlsian View of CSR and the Game Theory of its Implementation (Part II): Fairness and Equilibrium," Econometica Working Papers wp23, Econometica.
  8. Lorenzo Sacconi, 2004. "Corporate social responsibility (CSR) as a model of "extended" corporate governance. an explanation based on the economic theories of social contract, reputation and reciprocal conformism," LIUC Papers in Ethics, Law and Economics 142, Cattaneo University (LIUC).
  9. Lorenzo Sacconi, 2006. "A Social Contract Account for CSR as an Extended Model of Corporate Governance (I): Rational Bargaining and Justification," Journal of Business Ethics, Springer, vol. 68(3), pages 259-281, October.
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