Philipp Herkenhoff, Sebastian Krautheim, Finn Ole Semrau, Frauke Steglich · 2021
CESifo Working Paper No. 9498 · CESifo, Munich, 2021

Corporate Social Responsibility along the Global Value Chain

Firms are under increasing pressure to meet stakeholders’ demand for Corporate Social Responsibility (CSR) along their global value chains. We study the incentives for and investments in CSR at different stages of the production process. We analyze a model of sequential production with incomplete contracts where CSR by independent suppliers differentiates the final product in the eyes of caring consumers. The model predicts an increasing CSR profile for suppliers along the value chain: from upstream suppliers with low CSR to downstream suppliers with higher CSR. We confirm this prediction using Indian firm-level data. We compute a firm’s value chain position combining product-level information in our data with the World Input-Output Database. We find that more downstream firms have higher CSR expenditures as measured by a combination of staff welfare spending and social community spending.

Contributors from our Network

Philipp Herkenhoff

Philipp Herkenhoff
Johannes Gutenberg University Mainz

Philipp Herkenhoff is a postdoctoral researcher at the Chair of International Finance at Johannes Gutenberg University Mainz. His research interests are in international trade, international finance, and global value chains. He holds a PhD from LMU Munich and a MSc in Economics from Goethe University Frankfurt.

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Sebastian Krautheim

Sebastian Krautheim
University of Passau

Sebastian Krautheim is a Professor of International Economics at the University of Passau. His research interests are in international trade, global value chains, and social activism. He is principle investigator of a DFG-funded research project on “Global Production and its Watchdogs: Firms and NGOs in the Regulatory Void”. He holds a PhD in Economics from the European University Institute.

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Frauke Steglich

Frauke Steglich
Kiel Institute for the World Economy

Frauke Steglich is a Researcher at the Kiel Institute for the World Economy (IfW), Managing Director of the Poverty Reduction, Equity and Growth Network (PEGNet) at IfW, and Research Fellow at the Kiel Centre for Globalization (KCG). Her research interests lie in the field of empirical international economics and development, with a focus on foreign direct investment, global value chains, and corporate social responsibility.

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