Social labeling by competing NGOs: A model with multiple issues and entry

Anthony Heyes, Steve Martin

Research output: Contribution to journalArticlepeer-review

37 Citations (Scopus)

Abstract

In many settings firms rely on nongovernmental organizations (NGOs) to certify prosocial attributes embodied in their products. We provide a model of competition between NGOs in the provision of labeling services. Competition between a fixed number of NGOs features a "race to the top" in labeling standards, but entry of NGOs offering new labels pushes standards down. In a wide range of settings NGO entry and competition results in too many labels being adopted, with each label being too stringent. Compared to a setting in which firms can credibly communicate the social attributes of their products, labels demand greater prosocial behavior than is desired by firms, although with proliferation of the number of labels this discrepancy disappears. In contrast to existing models, firms may engage in excessive corporate social responsibility when they rely on an NGO as a certifying intermediary.

Original languageEnglish
Pages (from-to)1800-1813
Number of pages14
JournalManagement Science
Volume63
Issue number6
DOIs
Publication statusPublished - Jun 2017

Bibliographical note

Publisher Copyright:
© 2016 INFORMS.

Keywords

  • Corporate social responsibility
  • Eco-labels
  • Green labels
  • Label design
  • NGO certification

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research

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