Heterogeneous Producers’ Cooperatives and Corporate Social Responsibility

Cooperation and CSR have various facets in common since CSR represents an integral part of cooperatives’ values. Indeed, cooperatives have a long tradition in combining economic viability with social responsibility, as their organization generates a more immediate relationship between shareholders and stakeholders thus making it is easier to achieve the necessary balance between their diverse interests. In the paper we set out a model that considers producer cooperatives engaged in strategic CSR. Our focus is on the role of consumers’ demand for CSR products, according to the so called “bottom-up pressure”, that is consumers’ initiative in appreciating CSR. We enrich the above approach with the idea that the adoption of socially and environmentally responsible practices in production is a specific feature of goods improving their “quality” and represents a novel type of product differentiation. Hence, our model builds on the strand of literature about heterogeneous firms in monopolistic competition, developed by the recent “new-new” trade theory, that incorporates quality product differentiation. In a closed economy with CSR option in production, we derive each producer cooperative’s optimal choices with reference both to prices and the level of ethical standards. Albeit cooperatives differ with respect to the productivity of their members/workers, the solutions to both optimization problems are the same for all cooperatives, pointing to heterogeneity in the net income per member. In addition, our analysis confirms the role of consumers’ “bottom-up pressure”, since cooperatives’ optimal level of ethical standards is positively linked to the intensity of the preference of “concerned” consumers for CSR goods.