Corporate Social Responsability and Foreign Ownership in a mixed Market

Given that the owners of a private firm might provide social responsibility incentives to their managers, this article examines how the presence of foreign investors alters the optimal degree of corporate social responsibility (CSR) in a mixed duopoly (public and private firms). Both modes of competition in terms of quantity (Cournot) and price (Bertrand) are analysed. We show that the private firm always engages in CSR when product market competition is less intense (Cournot) but will adopt a strategy of corporate social irresponsibility (CSIr) when the competition is more intense (Bertrand). In addition, we show that the presence of foreign investors leads to a decrease in the level of CSR under Cournot competition whereas the irresponsible practices are restricted under Bertrand competition. Furthermore, we show that, while CSIr is a strategy that is more profitable for the private firm, it results in a decline in social welfare.