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Doing well and doing good: a multi-dimensional puzzle

  • Vanina Forget

    (Department of Economics, Ecole Polytechnique - Polytechnique - X - CNRS, AgroParisTech)

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    Socially responsible firms are expected by European regulators to create shared value for their shareholders, their stakeholders and society. Yet how to generate profits while providing public good is still academically debated. This paper argues that corporate social responsibility encompasses many diversified policies with variant effects on profitability. Which policy most matters economically? As theoretical guidance lacks, this multidimensional puzzle typically encounters model uncertainty. To account for it, model averaging is presented and applied to a unique database matching the economic and social performances of large European firms. Resultssupport that socially responsible corporate policies do not equally matter to do well and do good. In particular, good business behaviors with customers and suppliers appear core. Strong support is also brought to the co-existence of policies monotonically related to profitability (human resources) and policies with an optimal level (environmental policies). Consequences for business and policy makers are discussed.

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    Date of creation: 25 Jul 2012
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    Handle: RePEc:hal:wpaper:hal-00672037
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