Environmental corporate social responsibility and endogenous R&D networks

Abstract

Environmental research and development (ER&D) collaboration is increasingly popular as firms seek to improve their environmental performance and meet regulatory standards. However, there is limited evidence on how firms strategically form ER&D networks in response to environmental pressures. This paper examines the endogenous formation of ER&D networks within a triopoly model under environmental corporate social responsibility (ECSR) and technological spillovers. Our findings demonstrate that when the ECSR intensity is high and the spillover rate is low, the partial network is both stable and socially optimal, effectively balancing production, abatement, and competition. While the complete network is stable, excessive link formation can lead to over-connected networks, increased pollution, and potential welfare loss. These results highlight the environmental risks of unregulated ER&D collaboration and underscore the importance of policy interventions to curb misaligned network structures under ECSR while promoting socially desirable market outcomes.