On firm investment in innovation and corporate social responsability in the presence of activists
Ramani, Shyama V.
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Defining firm investment in reduction of damages generated in the process of innovation as a form of corporate social responsibility (CSR), the paper identifies the determinants of such CSR investment, the emergence of an activist group and welfare consequences. It demonstrates that the presence of an activist group motivates CSR. The higher the innovation profit, the lower the CSR. An activist group emerges only if the innovation profit is high but the social costs of innovation and the fixed costs of activist group formation are not too high. Finally, CSR investment may not always improve welfare in the innovation context.