Private Politics, Corporate Social Responsibility, And Integrated Strategy

8658 words - 35 pages

1. IntroductionEconomic activity is affected by interest and activist groups throughtwo mechanisms. One is through public politics, in which groupsattempt to in uence public ofŽceholders to the beneŽt of the groupsthemselves or those whom they support. The other is through privatepolitics, in which interest and activist groups attempt to in uenceeconomic activity directly without reliance on public institutionsor ofŽceholders. This paper provides a theory of private politics inwhich an activist seeks to change the production practices of a Žrmfor the purpose of redistribution to those whose interests it supports.The source of the activist's in uence is the possibility of support for itscause by the public. One objective of the paper is to explore the positiveimplications of interest and activist groups in affecting economicactivity through private politics.The subject of redistribution by Žrms has a long history in thenormative literature on corporate social responsibility (CSR).1 CSRThis research has been sponsored by NSF Grant No. SBR-9809177. I would like to thankPeter Coughlan and Dennis Yao for their comments and David Ahn for his assistance.1. See Carroll (1979), Freeman (1984), Preston and Post (1975), and Wood (1991).© 2001 Massachusetts Institute of Technology.Journal of Economics & Management Strategy, Volume 10, Number 1, Spring 2001, 7-458 Journal of Economics & Management Strategyadvocates argue both that normative principles demand redistributionby Žrms and that if Žrms do not meet the expectations of society withregard to their social performance they will be faced with governmentaction. The Žrst argument pertains to a moral motivation, whereas thesecond argument pertains to a response to, or anticipation of, a threat.A third argument is that Žrms that voluntarily take actions in thename of CSR will be rewarded in the marketplace, for example, byincreased demand for their products. Firms thus can adopt policieslabeled as CSR for a variety of reasons. Some may do so because theybelieve it will increase proŽts. Others may do so for altruistic reasons.Others may do so defensively to avoid external pressure from interestgroups and activists that can affect market performance. A secondobjective of the paper is to distinguish among corporate redistributionas motivated by self-interest, normative principles, and threats.Private politics and corporate social responsibility also affectintegrated market and nonmarket strategy.2 Corporate social responsibilityis often advocated as a normative component of the socialcontract between business and society, yet competition and marketsdemand efŽciency. To the extent that private politics and CSR imposecosts on a Žrm, its competitive position relative to its rivals can suffer.Private politics and CSR thus not only have a direct effect, but theyalso have a strategic effect by altering the competitive positions ofŽrms in an...

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