Strategic CSR and merger in multiproduct mixed markets with state-holding corporation

We consider two differentiated products mixed markets, comprised of a state holding corporation (SHC) and private firms, which decide strategic corporate social responsibility (CSR) and merger between the multiple plants. In the model of managerial delegation, we show that the level of unilateral CSR by a single plant under merger is higher than that under non-merger, but merged (non-merged) private firms can generate higher social welfare when products are low (high) substitutes. We also show that the level of bilateral CSR by both plants is lower than that of unilateral CSR under non-merger competition, and partial privatization is always optimal regardless of merger decisions but its degree under merger is lower than that under non-merger. Finally, we discuss policy implications of the firm’s strategic alliance in the case that merger is not voluntarily supportive.