Hostname: page-component-cb9f654ff-pvkqz Total loading time: 0 Render date: 2025-09-03T01:21:24.317Z Has data issue: false hasContentIssue false
  • English
  • Français

Cross-ownership and strategic environmental corporate social responsibility under price competition

Published online by Cambridge University Press:  11 March 2024

Mingqing Xing  and
Sang-Ho Lee Open the ORCID record for Sang-Ho Lee [Opens in a new window]
Mingqing Xing
Affiliation:
School of Economics and Management, Weifang University, Weifang, China
Sang-Ho Lee*
Affiliation:
Graduate School of Economics, Chonnam National University, Gwangju, Republic of Korea
*
*Corresponding author. E-mail: sangho@jnu.ac.kr
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper examines the impact of cross-ownership on the strategic incentive of environmental corporate social responsibility (ECSR) within a green managerial delegation contract in a triopoly market engaged in price competition. It demonstrates that bilateral cross-ownership between insiders provides weak incentives to undertake ECSR, which has a non-monotone relationship with cross-ownership shares, while it provides strong incentives for outsiders, which increases the ECSR level as cross-ownership increases. It also compares unilateral cross-ownership and finds that a firm that owns shares in its rival has a greater incentive to undertake ECSR than its partially-owned rival, while an outsider has more incentive than firms in bilateral scenarios. These findings reveal that a firm's incentive to increase a market price through ECSR critically depends on its cross-ownership share, while it decreases environmental damage and increases social welfare when the environmental damage is serious.

Keywords

bilateral cross-ownershipcross-ownershipenvironmental corporate social responsibilityprice competitiontriopoly marketunilateral cross-ownership

JEL classification

M14: Corporate Culture • Diversity • Social Responsibility H23: Externalities • Redistributive Effects • Environmental Taxes and Subsidies L13: Oligopoly and Other Imperfect Markets

Information

Type
Research Article
Information
Environment and Development Economics , Volume 29 , Issue 3 , June 2024 , pp. 234 - 256
Copyright
Copyright © The Author(s), 2024. Published by Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

Anton, M, Ederer, F, Gine, M and Schmalz, MC (2021) Innovation: the bright side of common ownership? Available at https://ssrn.com/abstract=3099578Google Scholar
Bárcena-Ruiz, JC and Sagasta, A (2021) Environmental policies with consumer-friendly firms and cross-ownership. Economic Modelling 103, 105612.CrossRefGoogle Scholar
Bayona, A and López, AL (2018) Silent financial interests and product innovation. Economics Letters 170, 109–112.CrossRefGoogle Scholar
Brand, B and Grothe, M (2015) Social responsibility in a bilateral monopoly. Journal of Economics 115, 275–289.CrossRefGoogle Scholar
Buccella, D, Fanti, L and Gori, L (2021) To abate, or not to abate? A strategic approach on green production in Cournot and Bertrand duopolies. Energy Economics 96, 105164.CrossRefGoogle Scholar
Buccella, D, Fanti, L and Gori, L (2022) ‘Green’ managerial delegation theory. Environment and Development Economics 27, 223–249.CrossRefGoogle Scholar
Buccella, D, Fanti, L and Gori, L (2023) Environmental delegation versus sales delegation: a game-theoretic analysis. Environment and Development Economics 28, 469–485.CrossRefGoogle Scholar
Chen, L, Matsumura, T and Zeng, CH (2023) Welfare consequence of common ownership in a vertically related market. Journal of Industrial Economics, https://doi.org/10.1111/joie.12380CrossRefGoogle Scholar
Cho, S and Lee, SH (2024) Cross ownership and environmental corporate social responsibility with environmental cooperation. Managerial and Decision Economics 45, 446–468.CrossRefGoogle Scholar
Cho, S, Kim, D and Lee, SH (2022) Free licensing strategy and ex post privatization policy with passive ownership. Economic Modelling 106, 105676.CrossRefGoogle Scholar
Colombo, S (2022) Prisoner dilemma in a vertical duopoly with managerial delegation. Managerial and Decision Economics 43, 1476–1481.CrossRefGoogle Scholar
Fanti, L and Buccella, D (2021) Strategic trade policy with interlocking cross-ownership. Journal of Economics 134, 147–174.CrossRefGoogle Scholar
Fanti, L, Gori, L and Sodini, M (2017) Managerial delegation theory revisited. Managerial and Decision Economics 38, 490–512.CrossRefGoogle Scholar
Fershtman, C (1985) Managerial incentives as a strategic variable in duopolistic environment. International Journal of Industrial Organization 3, 245–253.CrossRefGoogle Scholar
Fershtman, C and Judd, KL (1987) Equilibrium incentives in oligopoly. American Economic Review 77, 927–940.Google Scholar
Garcia, A, Leal, M, Lee, SH and Park, CH (2024) Merger incentive and strategic CSR by a multiproduct corporation. International Review of Economics and Finance, https://doi.org/10.1016/j.iref.2024.01.010CrossRefGoogle Scholar
Heywood, JS and Wang, Z (2020) Delivered pricing and endogenous delegation of contract type. Australian Economic Papers 59, 232–249.CrossRefGoogle Scholar
Heywood, JS, Wang, Z and Ye, G (2022) Strategic delegation in an international mixed oligopoly. Managerial and Decision Economics 43, 1888–1898.CrossRefGoogle Scholar
Hirose, K and Matsumura, T (2022) Common ownership and environmental corporate social responsibility. Energy Economics 114, 106269.CrossRefGoogle Scholar
Hirose, K, Lee, SH and Matsumura, T (2017) Environmental corporate social responsibility: a note on the first-mover advantage under price competition. Economics Bulletin 37, 214–221.Google Scholar
Hirose, K, Lee, SH and Matsumura, T (2020) Noncooperative and cooperative environmental corporate social responsibility. Journal of Institutional and Theoretical Economics 176, 549–571.CrossRefGoogle Scholar
Jansen, T, van Lier, A and van Witteloostuijn, A (2009) On the impact of managerial bonus systems on firm profit and market competition: the cases of pure profit, sales, market share and relative profits compared. Managerial and Decision Economics 30, 141–153.CrossRefGoogle Scholar
Kim, SL, Lee, SH and Matsumura, T (2019) Corporate social responsibility and privatization policy in a mixed oligopoly. Journal of Economics 128, 67–89.CrossRefGoogle Scholar
Leal, M, Garcia, A and Lee, SH (2018) The timing of environmental tax policy with a consumer-friendly firm. Hitotsubashi Journal of Economics 59, 25–43.Google Scholar
Lee, SH and Park, CH (2019) Eco-firms and the sequential adoption of environmental corporate social responsibility in the managerial delegation. The B.E. Journal of Theoretical Economics 19, 20170043.Google Scholar
Lee, SH and Park, CH (2021) Corporate environmentalism in a managerial delegation and abatement subsidy policy. Asia-Pacific Journal of Accounting & Economics 28, 546–561.CrossRefGoogle Scholar
Li, S, Ma, H and Zeng, C (2015) Passive cross holdings as a strategic entry deterrence. Economics Letters 134, 37–40.CrossRefGoogle Scholar
Liker, JK and Choi, TY (2004) Building deep supplier relationships. Harvard Business Review 82, 104–113.Google Scholar
Liu, CC, Wang, LFS and Lee, SH (2015) Strategic environmental corporate social responsibility in a differentiated duopoly market. Economics Letters 129, 108–111.CrossRefGoogle Scholar
Liu, L, Lin, J and Qin, C (2018) Cross-holdings with asymmetric information and technologies. Economics Letters 166, 83–85.CrossRefGoogle Scholar
López, A and Vives, X (2019) Overlapping ownership. R&D spillovers and antitrust policy. Journal of Political Economy 127, 2394–2436.CrossRefGoogle Scholar
Nakamura, Y (2015) Price versus quantity in a mixed duopoly: the case of relative profit maximization. Economic Modelling 44, 37–43.CrossRefGoogle Scholar
Ning, HK, Wang, LFS and Sun, J (2022) Cross ownership, “green” delegation and emission taxation. Available at https://ssrn.com/abstract=4210300Google Scholar
Pal, R (2015) Cournot vs. Bertrand under relative performance delegation: implications of positive and negative network externalities. Mathematical Social Sciences 75, 94–101.CrossRefGoogle Scholar
Park, CH and Lee, SH (2023 a) Environmental corporate social responsibility under price competition and the second-mover advantage: an endogenous timing approach. International Journal of Economic Theory 19, 817–829.CrossRefGoogle Scholar
Park, CH and Lee, SH (2023 b) Emission taxation, green R&D, and managerial delegation contracts with environmental and sales incentives. Managerial and Decision Economics 44, 2366–2377.CrossRefGoogle Scholar
Poyago-Theotoky, J and Yong, SK (2019) Managerial delegation contracts, “green” R&D and emissions taxation. The B.E. Journal of Theoretical Economics 19, 20170128.Google Scholar
Reynolds, R and Snapp, B (1986) The competitive effects of partial equity interests and joint ventures. International Journal of Industrial Organization 4, 141–153.CrossRefGoogle Scholar
Ritz, RA (2008) Strategic incentives for market share. International Journal of Industrial Organization 26, 586–597.CrossRefGoogle Scholar
Ritz, RA (2022) Linking executive compensation to climate performance. California Management Review 64, 124–140.CrossRefGoogle Scholar
Sato, S and Matsumura, T (2020) Free entry under common ownership. Economics Letters 195, 109489.CrossRefGoogle Scholar
Singh, N and Vives, X (1984) Price and quantity competition in a differentiated duopoly. Rand Journal of Economics 15, 546–554.CrossRefGoogle Scholar
Sklivas, S (1987) The strategic choice of managerial incentives. RAND Journal of Economics 18, 452–458.CrossRefGoogle Scholar
van Witteloostuijn, A, Jansen, T and van Lier, A (2007) Bargaining over managerial contracts in delegation games: managerial power, contract disclosure and cartel behavior. Managerial and Decision Economics 28, 897–904.CrossRefGoogle Scholar
Vickers, J (1985) Delegation and the theory of the firm. Economic Journal Supplement 95, 138–147.Google Scholar
Wang, X and Wang, LFS (2021) Vertical product differentiation, managerial delegation and social welfare in a vertically-related market. Mathematical Social Sciences 113, 149–159.CrossRefGoogle Scholar
Xing, MQ and Lee, SH (2023) Non-cooperative and cooperative environmental R&D under environmental corporate social responsibility with green managerial coordination. Managerial and Decision Economics 44, 2684–2696.CrossRefGoogle Scholar
Xing, MQ, Wang, LFS and Zhou, C (2024) Cross-ownership on R&D and social welfare in mixed oligopoly. Economics of Innovation and New Technology 33, 206–217.CrossRefGoogle Scholar
Xu, LL and Lee, SH (2022) Non-cooperative and cooperative environmental corporate social responsibility with emission taxes. Managerial and Decision Economics 43, 2846–2862.CrossRefGoogle Scholar
Xu, LL and Lee, SH (2023) Cournot-Bertrand comparisons under double managerial delegation contracts with sales and environmental incentives. Managerial and Decision Economics 44, 3409–3421.CrossRefGoogle Scholar
Xu, LL and Matsumura, T (2022) Welfare-reducing price competition under relative performance delegation with convex costs. Economic Modelling 112, 105871.CrossRefGoogle Scholar
Xu, LL, Chen, YY and Lee, SH (2022) Emission tax and strategic environmental corporate social responsibility in a Cournot-Bertrand comparison. Energy Economics 107, 105846.CrossRefGoogle Scholar
Supplementary material: File

Xing and Lee supplementary material

Xing and Lee supplementary material
Download Xing and Lee supplementary material(File)
File 236.3 KB