Corporate Social Responsibility Vs. Government Regulation: Institutional Analysis with an Application to Russia

Leonid Polishchuk (Higher School of Economics)

Abstract: Societies have a choice between different institutions serving similar purposes, and exercise it depending on costs and benefits of various alternatives. One example of such selection from an “institutional menu” is corporate social responsibility (CSR) – a contemporary pattern of corporate behavior which requires companies to be guided not only by narrow financial objectives, but by broader societal interests in sustainable development, clean environment, ethical conduct, protection of social and economic rights etc. Corporate social responsibility has become a standard practice in the modern world, and yet its purpose, rationales, mechanisms and outcomes are still intensely debated. CSR is considered in the paper as Coasean bargains between companies and their external stakeholders, reached over externalities that companies produce. CSR is thus treated as a private institutional alternative to government regulation, and the choice between these two options depends on their relative costs and benefits. We identify and analyze several factors that affect comparative advantages of CSR vs. regulation, and offer a simple model to illustrate their interplay. The proposed approach can be used to explain, assess and map various CSR models, and we consider the Russian case as an illustration. Our analysis reveals strong institutional complementarity between CSR, on the one hand, and protection of property rights and availability of social capital, on the other.


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