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Why Corporations Decide to Do Good?: Strategic Corporate Social Responsibility

Why Corporations Decide to Do Good?: Strategic Corporate Social Responsibility. Professor Donald Siegel Dean-School of Business University at Albany, SUNY Co-Editor- Academy of Management Perspectives Editor- Journal of Technology Transfer May 23 rd , 2012 JIMS Conference

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Why Corporations Decide to Do Good?: Strategic Corporate Social Responsibility

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  1. Why Corporations Decide to Do Good?: Strategic Corporate Social Responsibility Professor Donald Siegel Dean-School of BusinessUniversity at Albany, SUNY Co-Editor-Academy of Management Perspectives Editor-Journal of Technology Transfer May 23rd, 2012 JIMS Conference Jerusalem, Israel

  2. Outline • Shameless Self-Promotion: Plugs For Academy of Management Perspectives/Technology Transfer Society/Journal of Technology Transfer • Theory of the Firm/Economic/Strategic Perspective on CSR (McWilliams and Siegel (2000, 2001, 2006, 2011); Siegel and Vitaliano (2007) ; Siegel (2009)) • Lessons Learned From Studies Based on Theory of the Firm/ Supply and Demand Framework for CSR • New Research Questions

  3. CSR: Definition • CSR-Actions Taken by a Firm that Appear to Further Some Social or Environmental Objective, Beyond the Interests of the Firm and That Which is Required by Law (“Private Provision of Public Goods”)

  4. Some Theoretical Perspectives on CSR “Positive” Theories of CSR • Agency Theory (Friedman (1970)) • Stakeholder Theory (Freeman (1984), Donaldson and Preston (1995), Jones (1995))- “Instrumental” Use • “Resource-Based” Theory (Russo and Fouts (1997)) • Theory of the Firm/Supply and Demand/Strategic Perspective (McWilliams and Siegel (2001, 2002)) • Other Strategic Theories- (Baron (2001), Fedderson and Gilligan (2001), and Bagnoli and Watts (2003)) • Role of Information Asymmetry (Siegel & Vitaliano (2007) • Raising Rival’s Costs/Entry Barriers (Siegel (2009))

  5. CSR: Theory of the Firm/Demand for CSR: Components of Demand for CSR • Consumer Demand • Investor Demand (“Ethical”/”Social” Investing) • Additional Stakeholder Demand for CSR (e.g., Workers, Suppliers, Community)

  6. CSR: Theory of the Firm/ Demand for CSR (cont.) Consumer Demand for CSR Creation of New Product Categories: Organic Products “Free Range” Chicken and Beef “Made in America” Apparel “Dolphin-Free” Tuna “Cruelty-Free” Cosmetics Mix of Product and Process Innovations  Each CSR characteristic is Valued by Some Consumers, as well as Other Stakeholders

  7. Economic/IO/Strategic Theories of CSR Key Aspects/Assumptions • Firms Respond to Demand for CSR • They Engage in “Profit-Maximizing” CSR • For Firms That Choose to be CESR (PROFITCESR >PROFITNCESR) • For Firms That Choose Not to be CESR (PROFITNCSR >PROFITCESR) • Potential Benefits • Reputation Enhancement • Charge a Premium Price for its Output • Use of CSR to Recruit/Retain High Quality Workers • Role of Asymmetric Information Regarding Social Practices and Product Quality/Features/Reputation

  8. CSR: Supply and Demand Framework Consumer Demand for CSR Qy = f (Py , A, I, T, D, Px ) where Qy = quantity of the good with CSR attributes Py = the price of the good with CSR attributes Qx = quantity of the good without CSR attributes Px = the price of the good without CSR attributes A = advertising I = income T = tastes and preferences D = demographics

  9. CSR: Theory of the Firm/ Supply of CSR “Supply” of Goods and Services with CSR Characteristics: Qy =Qx+QCSR = f (Kx + KCSR, Lx + LCSR, Mx +MCSR,) where: Q=output K=capital L=labor M=materials  CSR characteristics entail higher costs because firms must devote additional resources or inputs to generate these social and environmental characteristics

  10. Lessons Learned From Studies Based on Theory of the Firm/ Supply and Demand Framework for CSR • Firms Use CSR Strategically-Integrated Into Business and Corporate-Level Strategies (e.g., Firms Selling “Experience” or “Credence” Goods Are More Likely to Engage in CSR) • Firms Weigh The Costs and Benefits Of Engaging In These Activities • Apply RBV Paradigm to CSR (Predictions Regarding Patterns of Investment in CSR Across Firms and Industries) • CSR is correlated with R&D and Advertising • CEO/Individual Managers Make These Strategic Choices

  11. Some Managerial and Policy Questions That Can Be Addressed Using the Theory of the Firm/ Supply and Demand/ Strategic Framework for CSR • How Should Managers Allocate Resources to CSR? • What is the Relationship Between Productivity and CSR? (Chen and Delmas (2011, 2012)) • How Do “Socially Responsible” Organizational Practices Affect Firm Performance? • How Much Are Consumers Willing To Pay For CSR Product Characteristics and “Socially Progressive” Production Processes?

  12. Additional Managerial and Policy Questions • How Do Corporate Boards Monitor/Influence “Strategic” CSR? • Closer Look at The Relationship Between Advertising/Media Attention and CSR (Informational vs. Persuasive Advertising) • Role of Individual Managers/CEOs and Implications for “Responsible” Leadership? • How Does CSR Affect Employee Commitment and Worker Productivity (special issue of Personnel Psychology on CSR and Human Resource Management/ Organizational Behavior with Waldman, Aguinis, and Morgenson)?

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