Reconciling Corporate Citizenship and Competitive Strategy: Insights
from Economic Theory |
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Authors: | Sylvia Maxfield |
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Institution: | (1) School of Management, Simmons College, 409 Commonwealth Ave., Boston, MA, 02445, U.S.A. |
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Abstract: | Neoclassical and Austrian/evolutionary economic paradigms have different implications for integrating corporate social responsibility
(corporate citizenship) and competitive strategy. Porter’s “Five Forces” model implicitly rests on neoclassical theory of
the firm and is not easily reconciled with corporate social responsibility. Resource-based models of competitive strategy
do not explicitly embrace a particular economic paradigm, but to the extent their conceptualization rests on neoclassical
assumptions such as imperfect factor markets and profits as rents, these models also imply a trade-off between competitive
advantage and corporate social responsibility. Differences in Austrian/evolutionary economic model’s assumptions about equilibrium,
profits, and other economic concepts allow this paradigm to embrace alternative views of strategy such as the activities or
dynamic capabilities views. These alternative views of strategy focus on learning and adaptation; they align more easily with
corporate social responsibility. In practice this alignment comes about because social engagement facilitates the learning
and adaptation that are a source of competitive advantage. Among the many business arguments for CSR such as improved employee
morale/productivity or brand differentiation, this view prioritizes innovation. |
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Keywords: | corporate social responsibility competitive strategy incomplete markets economic theory of the firm neoclassical economics Austrian/evolutionary economics |
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