Journal
MANAGEMENT SCIENCE
Volume 63, Issue 6, Pages 1800-1813Publisher
INFORMS
DOI: 10.1287/mnsc.2015.2419
Keywords
NGO certification; label design; corporate social responsibility; eco-labels; green labels
Funding
- Social Sciences and Humanities Research Council [435-2012-472]
- Canada Research Chairs program
- Canada Graduate Scholarship program
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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 ofNGOs features a race to the top in labeling standards, but entry ofNGOs 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.
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