Non‐cooperative and cooperative environmental R&D under environmental corporate social responsibility with green managerial coordination

Abstract We consider a polluting Cournot duopoly within a managerial delegation framework and examine conflicting environmental concerns in which the owners pursue strategic environmental corporate social responsibility (ECSR) while the managers undertake diverged environmental research and development (ER&D) investment. We investigate the effects of cooperation in both ECSR and ER&D on a firm's profitability and social welfare and find that managerial coordination has a critical effect on industry emissions, profits, and welfare. In the context of an optimal emissions tax, we show that managerial coordination failure might not occur, but it reduces welfare if the environmental damage is relatively high. We conclude that a pro‐environmental government should encourage cooperative ER&D, especially when owners adopt cooperative ECSR.