Corporate Social Responsible Strategy And Its Impact On Exporting Firms

Corporate Social Responsibility (CSR) belongs to Interdisciplinary research, which may involve the knowledge of Economics and Management. Its importance has been discovered in the international economics field under the background of a more integrated world. With a more liberalized international trade environment and more transparent market information, CSR activity is not merely firm’s implicit moral pursuit, but also firm’s endogeneous strategic behavior, aiming at expanding market share, lowering marginal cost and improving competitiveness. However, the more fierce competition confronted by exporting firm requires them to make both CSR strategy and exporting strategy based on international demand dynamics and trade cost. In order to figure out the influence of CSR strategy on export decision and exporting firm’s performance, this paper will give detailed economic analysis from the perspective of reputation effect and cost effct.This paper will utilize in knowledge of International trade Theory and Industrial Organization Theory to discuss the CSR strategy making process and its impact on export decision, productivity, export demand and revenue. Since CSR strategy could influence firms’ profit by both reputation effect and cost effect, this paper examin the effect of CSR strategy on productivity and export demand with data collected from Chinese listed companies. By constructing theoretical and empirical model, we get the following conclusions:In a basic Hotelling city, and analyse the optimum CSR investment volumn and CSR strategy making process. The CSR strategy making process is a balance sheet analysis of cost and benefit. Only when all the marginal benefit of CSR strategy we could get from every channel, is greater than the sunk cost and fixed cost associated with the implementation of CSR strategy, the firm will initiate CSR strategy volunteerly. we find CSR strategy could help cost advantageous firms to expand market share. When cost advantage is strong enough, the advantageous firm can obtain extra profit from higher pricing. Vise versa, CSR strategy could became strategic behavior of cost disadvantageous firms. Because initiating CSR strategy is the best strategic choice to cost disadvantageous firms, whose profit will be further squeezed by their social responsible rival firms.CSR strategy could influence exporting firms’performance through reputation effect, cost effect and their interaction. Reputation effect will have impact on consumer’s belif about firms’ product, by the way of corporate marketing, and eventually lead to changes in consumer preference and product demand. Reputation effct is positive on firms with good reputation, and is negative on firms with poor repution. In the theoretic model, we find (1) industry averagy level is an important factor in firm’s CSR strategy making process, and when it is low in the society, firms are more likely to involve in CSR strategy; (2) the natural difference in marginal cost or productivity is another important factor, greater productivity gap will increase the probability of low-cost firm to adopt CSR strategy; (3) repution effect will impct on consumer choice through repution gap among rival firms. In empirical analysis, using the advertising intensity and market development as mediator, we prove the existence of reputation effect from Chinese listed export companies.To ananlyse cost effect, we assume the outcome of cost effect is uncertain. Under the framework of International dumping, we find only the most efficient firms will involve in both export and CSR. With cost effect, the marginal benefit of CSR strategy is increasing in the expansion of firms’ market share. If the market structure is fixed, trade liberalization will lead to an increase in expected export volum. However, the expected total output may vary according to the trade cost. And if the market structure is endogeneous, trade liberalization will lead to an increase in expected export volum, and decreased domestic output.Since reputation effect and cost effect could have interactive effct on the relationship between CSR strategy and exporting firms’ revenue, by the dynamic evolution of productivity and export demand. We constructs a dynamic structural model and estimates all the parameters by using data collected Chinese listed industrial firms. According to our empirical result, we find export experience will increase proctivity by 3.5% and 4.9% in export demand, CSR strategy will increase proctivity by 13.5% and 3.2% in export demand, respectively.