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Environmental Corporate Social Responsibility, The Organization of E-R&D and Environmental Regulations: Taxes Versus Standards

Author(s)

Weihua Pan1,2, Hang Cao3,*, Yuan Zhu1

Affiliation(s)

1School of Law and Business, Shangrao Normal University, Shangrao, China 2School of Foreign Studies and Trade, Hubei University of Automotive Technology, Shiyan, China 3School of Business Administration, Jiangxi University of Finance and Economics, Nanchang, China *Corresponding Author

Abstract

A substantial body of empirical research indicates a growing corporate engagement with Environmental Corporate Social Responsibility (ECSR). By integrating environmental damage into the firms' objective function, this study examines and contrasts two types of environmental regulation—emissions taxes (ET) and emissions standards (ES)—within a Cournot competition framework. The model incorporates product differentiation and three distinct organizational forms of “green” innovation (E-R&D). From a firm's perspective, it is crucial to align environmental instruments with both ECSR and market power. In a highly competitive market, where the level of social concern is minimal, the most profitable strategies are, in the case of ET and ES, respectively, Environmental Research Joint Venture (ERJV) cartelization and ERJV competition. When societal concern reaches a sufficiently high level, non-cooperative R&D emerges as the optimal choice for ET. On the other hand, for the ES scenario, engaging in ERJV competition is the most advantageous approach. In a monopolistic market with low social concern, firms achieve the highest profits under ET through ERJV cartelization, while under ES, non-cooperative R&D proves most beneficial. However, as societal concern intensifies, non-cooperative R&D emerges as the dominant strategy under both regulatory instruments. Additionally, we analyze the influence of environmental regulations on environmentally friendly innovation and derive implications for environmental instruments.

Keywords

E-R&D; Taxes; Standards; Cournot; ECSR; Production Differentiation

References

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