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Watchdogs of the Invisible Hand: NGO Monitoring, Corporate Social Responsibility, and Industry Equilibrium

Author

Listed:
  • Gani Aldashev

    () (Center for Research in the Economics of Development, University of Namur and ECARES, ULB)

  • Michela Limardi

    () (University of Lille and Paris School of Economics)

  • Thierry Verdier

    () (Paris School of Economics and CEPR)

Abstract

Globalization has been accompanied by rising pressure from advocacy non-governmental organizations (NGOs) on multinational firms to act in socially-responsible manner. We analyze how NGO pressure interacts with industry structure, using a simple model of NGO-firm interaction embedded in an industry environment with endogenous markups and entry. We characterize the effect of NGO pressure on the industry equilibrium (intensity of competition, market structure, and the share of socially responsible firms), and the impact of industry-level changes (market size, consumer tastes) on NGO activism. In the long run, multiple equilibria might exist: one with fewer firms and a large share of them being socially-responsible, and the other with more firms but fewer of them acting socially responsibly.

Suggested Citation

  • Gani Aldashev & Michela Limardi & Thierry Verdier, 2013. "Watchdogs of the Invisible Hand: NGO Monitoring, Corporate Social Responsibility, and Industry Equilibrium," Working Papers 1404, University of Namur, Department of Economics.
  • Handle: RePEc:nam:wpaper:1404
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    File URL: http://www.fundp.ac.be/eco/economie/recherche/wpseries/wp/1404.pdf
    File Function: First version, 2013
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    References listed on IDEAS

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    7. Andrei Shleifer, 2004. "Does Competition Destroy Ethical Behavior?," American Economic Review, American Economic Association, vol. 94(2), pages 414-418, May.
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    Cited by:

    1. Anthony Heyes & Marcel Oestreich, 2017. "The Optimal NGO Chief: Strategic Delegation in Social Advocacy," Working Papers 1701, Brock University, Department of Economics.
    2. repec:kap:regeco:v:54:y:2018:i:3:d:10.1007_s11149-018-9370-1 is not listed on IDEAS

    More about this item

    Keywords

    NGOs; corporate social responsibility; private regulation; monopolistic competition;

    JEL classification:

    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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