Economic activity is affected by interest and activist groups through
two mechanisms. One is through public politics, in which groups
attempt to in uence public ofÃ Â½ceholders to the beneÃ Â½t of the groups
themselves or those whom they support. The other is through private
politics, in which interest and activist groups attempt to in uence
economic activity directly without reliance on public institutions
or ofÃ Â½ceholders. This paper provides a theory of private politics in
which an activist seeks to change the production practices of a Ã Â½rm
for the purpose of redistribution to those whose interests it supports.
The source of the activist's in uence is the possibility of support for its
cause by the public. One objective of the paper is to explore the positive
implications of interest and activist groups in affecting economic
activity through private politics.
The subject of redistribution by Ã Â½rms has a long history in the
normative literature on corporate social responsibility (CSR).1
This research has been sponsored by NSF Grant No. SBR-9809177. I would like to thank
Peter Coughlan and Dennis Yao for their comments and David Ahn for his assistance.
1. See Carroll (1979), Freeman (1984), Preston and Post (1975), and Wood (1991).
ÃÂ© 2001 Massachusetts Institute of Technology.
Journal of Economics & Management Strategy, Volume 10, Number 1, Spring 2001, 7-45
8 Journal of Economics & Management Strategy
advocates argue both that normative principles demand redistribution
by Ã Â½rms and that if Ã Â½rms do not meet the expectations of society with
regard to their social performance they will be faced with government
action. The Ã Â½rst argument pertains to a moral motivation, whereas the
second argument pertains to a response to, or anticipation of, a threat.
A third argument is that Ã Â½rms that voluntarily take actions in the
name of CSR will be...