”Green” Managerial Delegation and Environmental Corporate Social Responsibility in Different Market Structures


Purpose: Assuming a duopoly industry with pollution producing processes, the aim of this work is to study the firms’ choice to engage in Environmental Corporate Social Responsibility (ECSR) by means of “green” managerial delegation, i.e. hiring managers with preferences for environ mental concerns to whom owners delegate both sales and decisions to adopt green technology.

Methodology: Depending on the firms’ strategic choices, a two/three-stage game takes place solved by the backward induction method to obtain sub-game perfect Nash equilibria.

Results: When the market structure is a Cournot duopoly, and the environmental sensitivity of “green” managers is extremely low, then the engagement in ECSR is the firms’ dominant strategy, regardless of the efficiency level of the available abatement technology. Nonetheless, firms are cast into a prisoner’s dilemma. On the other hand, if “green” managers have low-intermediate to intermediate environmental sensitivity, then either no ECSR, multiple symmetric equilibria, or ECSR engagement can emerge as a result in equilibrium. Finally, if managers’ environmental sensitivity is adequately high, then firms do not engage in ECSR. When a market entry game is considered with the Stackelberg competition in which the incumbent adopts ECSR while the entrant does not, socially responsible behaviors cause the market to be more contestable. However, the incumbent’s owners can use ECSR to secure a dominant position in the market, provided that they hire “green” managers with adequate environmental concerns.

Implications: In the case of entry, non-trivial policy implications arise. Due to increased competition, the welfare of consumers improves (lower prices for the goods). However, the entry of a polluting firm increases emissions. Higher emissions damage consumers and lower the overall social welfare of an environmentally concerned government. Thus, a complete welfare analysis is required prior to the design of a government’s regulatory intervention.

Originality/Value: This paper is the first that introduces the figure of the “green” manager who shows, in its utility function, an environmental concern.

If the inline PDF is not rendering correctly, you can download the PDF file here.

  • Asproudis, E. and Gil-Moltó, M.J. (2015). Green Trade Unions: Structure, Wages and Environmental Technology. Environmental and Resource Economics, 60(2), 165–189, https://doi.org/10.1007/s10640-014-9768-x.

  • Antweiler, W. (2003). How effective is green regulatory threat? American Economic Review, 93(2), 436–441, https://doi.org/10.1257/000282803321947489.

  • Dixit, A. (1980). The role of investment in entry-deterrence. The Economic Journal, 90(357), 95–106, https://doi.org/10.2307/2231658.

  • Fanti, L. and Meccheri, N. (2013). Managerial Delegation under Alternative Unionization Structures. Labour, 27(1), 38–57, https://doi.org/10.1111/labr.12005.

  • Fershtman, C. and Judd, K. (1987). Equilibrium incentives in oligopoly. American Economic Review, 77, 927–940.

  • Gal-Or, E. (1985). First mover and second mover advantages. International Economic Review, 26(3), 649–653, https://doi.org/10.2307/2526710.

  • Graf, C. and Wirl, F. (2014). Corporate social responsibility: a strategic and profitable response to entry? Journal of Business Economics, 84(7), 917–927, https://doi.org/10.1007/s11573-014-0739-z.

  • Hirose, K., Lee, S.H. and Matsumura, T. (2017). Environmental corporate social responsibility: A note on the first-mover advantage under price competition. Economics Bulletin, 37(1), 214–221.

  • Jansen, T., van Lier, A. and van Witteloostuijn, A. (2007). A note on strategic delegation: the market share case. International Journal of Industrial Organization, 25, 531–539, https://doi.org/10.1016/j.ijindorg.2006.04.017.

  • 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, https://doi.org/10.1002/mde.1437.

  • Lee, S.H. and Park, C.H. (2019). Eco-firms and the sequential adoption of environmental corporate social responsibility in the managerial delegation. The BE Journal of Theoretical Economics, 19(1), 1–9, http://doi.org/10.1515/bejte-2017-0043.

  • Maxwell, J.W., Lyon, T.P. and Hackett, S.C. (2000). Self-regulation and social welfare: The political economy of corporate environmentalism. Journal of Law and Economics, 43(2), 583–617, https://doi.org/10.1086/467466.

  • McAfee, R.P., Mialon, H.M. and Williams M.A. (2003). Economic and Antitrust Barriers to Entry. Mimeo, http://vita.mcafee.cc/PDF/Barriers2Entry.pdf

  • McAfee, R.P., Mialon, H.M. and Williams M.A. (2004). What is a barrier to entry? American Economic Review, 94(2), 461–465, https://doi.org/10.1257/0002828041302235.

  • Milgrom, P. and Roberts, J. (1982). Predation, reputation, and entry deterrence. Journal of Economic Theory, 27(2), 280–312, https://doi.org/10.1016/0022-0531(82)90031-X

  • Poyago-Theotoky, J. and Yong, S.K. (2019). Managerial Delegation Contracts, “Green” R&D and Emissions Taxation. The BE Journal of Theoretical Economics, 19(2), 1–19, https://doi.org/10.1515/bejte-2017-0128.

  • Riillo, C.A.F. (2017). Beyond the question “Does it pay to be green?”: How much green? And when? Journal of Cleaner Production, 141, 626–640, https://doi.org/10.1016/j.jclepro.2016.09.039

  • Salop, S.C. (1979). Strategic entry deterrence. The American Economic Review, 69(2), 335–338.

  • Shy, O. (1995). Industrial Organization: Theory and Application. Cambridge, MA: MIT Press.

  • Sklivas, S.D. (1987). The strategic choice of managerial incentives. RAND Journal of Economics, 18, 452–458, https://doi.org/10.2307/2555609.

  • Spence, A.M. (1977). Entry, capacity, investment and oligopolistic pricing. The Bell Journal of Economics, 8(2), 534–544, https://doi.org/10.2307/3003302.

  • The Economist (2019). Big business is beginning to accept broader social responsibility, https://www.economist.com/briefing/2019/08/22/big-business-is-beginning-to-accept-broader-social-responsibilities.

  • Vickers, J. (1985). Delegation and the theory of the firm. Economic Journal, 95, 138–147, https://doi.org/10.2307/2232877.

  • Wright, C., Nyberg, D. and Grant, D. (2012). “Hippies on the third floor”: Climate change, narrative identity and the micro-politics of corporate environmentalism. Organization Studies, 33(11), 1451–1475, https://doi.org/10.1177/0170840612463316.


Journal + Issues