Which orientation of CSR disclosure can drive consumer benefits?

Abstract: This paper reveals the impact mechanism of corporate social responsibility (CSR) action and information disclosure on process R&D in a strategic approach. We compare the effects of different CSR strategies on R&D investment, corporate profits, and consumer welfare during the production and non-production decision-making stages (consumer-friendly behaviors in the R&D stage versus in the output stage) in a non-pure profit duopoly with perfect/imperfect substitute products. Firstly, it is shown that with homogeneous products, CSR is costly for the benevolent firm. The consumer-friendly behavior in the R&D stage does not necessarily bring about an R&D-shrinking effect when we look at the total level of R&D investment and is always more efficient than in the output stage from the viewpoint of consumer welfare. Secondly, if products are horizontally differentiated, the consumer-friendly firm has the chance to gain extra profits from its CSR initiatives and there exist circumstances where the “technology-oriented” CSR remains better than the “output-oriented” CSR for consumers. Finally, we show that firm’s implementation of CSR is always beneficial for consumer welfare and social welfare, regardless of the product-differentiation degree.