Non‐cooperative and cooperative environmental R&D under environmental corporate social responsibility with green managerial coordination

Abstract

We consider a polluting Cournot duopoly within a managerial delegation framework and examine conflicting environmental concerns in which the owners pursue strategic environmental corporate social responsibility (ECSR) while the managers undertake diverged environmental research and development (ER&D) investment. We investigate the effects of cooperation in both ECSR and ER&D on a firm's profitability and social welfare and find that managerial coordination has a critical effect on industry emissions, profits, and welfare. In the context of an optimal emissions tax, we show that managerial coordination failure might not occur, but it reduces welfare if the environmental damage is relatively high. We conclude that a pro-environmental government should encourage cooperative ER&D, especially when owners adopt cooperative ECSR.

Cournot–Bertrand comparisons under double managerial delegation contracts with sales and environmental incentives

“…For example, Liu et al (2015), Hirose et al (2017, 2020), and Lee and Park (2019, 2021) examined firms' voluntary initiatives toward abatement activities and emission reduction. Poyago‐Theotoky and Yong (2019), Buccella et al (2021, 2022, 2023), Xu et al (2022), and Xing and Lee (2023) further incorporated an emission tax policy and demonstrated theoretical linkages between environmental incentives and firm performance. In particular, Poyago‐Theotoky and Yong (2019) compared a standard managerial delegation contract with sales incentives to an environmental delegation contract that rewards abatement activities, determining that firms' profits are higher under the latter.…”

“…Xu et al (2022) examined the strategic timing interaction between environmental incentives and emission taxes, demonstrating that Cournot firms can yield lower emission taxes and lower welfare than Bertrand firms, depending on the product substitutability. Finally, Xu and Lee (2022) and Xing and Lee (2023) compared non‐cooperative and cooperative environmental incentives between owners and managers within a green managerial coordination framework. However, the previous literature has not considered the impact of consumers' WTP for green products on incentives for a firm to adopt delegation contracts.…”

“…9 9 Note that the decisions of abatement and outputs (or prices) are completely exchangeable in the timing of the analysis, given the additive separability in the end‐of‐pipe technology. Reference Xu and Lee (2022), Xu et al (2022), Park and Lee (2023), and Xing and Lee (2023) for a similar analysis of environmental incentives.…”

“…Note that if , environmental incentives do not affect the consumers' WTP for green products, and thus, firms might not have interests in adopting environmental delegation in our model. Regarding the green managerial delegation model under an emission tax, see Lee and Park (2019, 2021), Poyago‐Theotoky and Yong (2019), Buccella et al (2021, 2023), Xu and Lee (2022), Xu et al (2022), Park and Lee (2023), and Xing and Lee (2023).…”

“…Note that the decisions of abatement and outputs (or prices) are completely exchangeable in the timing of the analysis, given the additive separability in the end-of-pipe technology. Reference Xu and Lee (2022),,Park and Lee (2023), andXing and Lee (2023) for a similar analysis of environmental incentives.10 Note that if a ¼ 0, then β C i ¼ 0. That is, if environmental incentives do not affect consumers' WTP for green products, firms do not have any interest in adopting environmental delegation in our model.11 The proofs of propositions are provided in Appendix A.12 Note that 0:293 < a 1 b ð Þ< 0:461 and a 1 b ð Þ increases with b.…”