American Journal of Industrial and Business Management, 2012, 2, 184-193

doi:10.4236/ajibm.2012.24024 Published Online October 2012 (http://www.SciRP.org/journal/ajibm)

Socially Responsible Supply Chain Partnership Based-On
CSR Equity Model
Rong Wang

Antai College of Economics & Management, Shanghai Jiao Tong University, Shanghai, China.
Email: rwang@sjtu.edu.cn

Received May 24
th
, 2012; revised June 25
th
, 2012; accepted July 23
rd
, 2012
ABSTRACT
Although China has become the worlds second largest economy, a serious urgent issue of global consequences as well
as the major obstacle in the process of Chinas economic development is the lack of CSR. Through CSR initiatives,
enterprises of all sizes, in cooperation with their stakeholders, can help to reconcile economic, social and environmental
ambitions. Socially responsible supply chain partnership that integrates all efforts of CSR activities from socially re-
sponsible enterprises to upstream partner-suppliers shall be surely needed within the uncertainly globalizing and net-
worklizing knowledge economy era. This paper develops a five-step CSR Equity framework based-on socially respon-
sible customer perspective for modeling and analysis of socially responsible supply chain partnership and shows rele-
vant optimal coordination strategies to improving the social and environmental performance of all partners in the supply
chain system. The findings suggest that the share rate of the total investment of partner-suppliers CSR efforts shall be
the critical contract clause to coordinate the socially responsible supply chain partnership to implement Pareto optimal
policy with cost sharing contract. Moreover, the share rate has a strong positive relativity with the ratio of marginal
revenues between supply chain members, whereas negative relativity with the partner-suppliers leverage rate of CSR
efforts.

Keywords: Socially Responsible Supply Chain; Supply Chain Partnership; Cost Sharing Contract; CSR Equity
1. Introduction
Even in recent years, nearly 70 or so percent of Chinas
top enterprises which lack corporate social responsibili-
ties (CSR) and play the roles of bystanders on promoting
CSR exhibited in Table 1.
According to the latest research released by Chinese
Academy of Social Sciences, the 2011 annual report on
CSR of China, estimating the CSR development level of
top 100 state-owned enterprises, as well as top 100 pri-
vate enterprises and top 100 foreign-invested enterprises
on their market responsibility, social responsibility, and
environmental responsibility credentials, shows the sur-
vey findings in 2011 dont seem to have improved since
the first report in 2009. The 2011 report estimates the
market responsibility involved in customer responsibility,
partner responsibility, and stockholder responsibility
while the social responsibility embracing government
responsibility, employee and community responsibility.
Notably, it critically finds that the general level of Chi-
nese CSR developing index in 2011 is still very low, only
with the average score of 19.7 points on a scale of one
hundred points [1].

Table 1. Phrase distribution of Chinese CSR development of top enterprises in 2010-2011.
2010 2011
Phrase of CSR Development Qty of Firms % of Total Qty Qty of Firms % of Total Qty
Elites (>80 points) 1 0.3% 1 0.3%
Leaders (60 - 80) 13 4.3% 23 7.7%
Pursuers (40 - 60) 33 11.0% 36 12.0%
Beginners (20 - 40) 35 11.7% 35 11.7%
Bystanders (<20) 218 72.7% 205 68.3%

Copyright 2012 SciRes. AJIBM
Socially Responsible Supply Chain Partnership Based-On CSR Equity Model 185

Although China has become the worlds second largest
economy with Japan surrendering its 42-year-old ranking
after its economy shrank in the final months of 2010, one
serious urgent issue of global consequences as well as a
major obstacle in the process of Chinas economic de-
velopment is the lack of CSR involving in customer re-
sponsibility, transaction process responsibility, employee
responsibility, suppliers responsibility, community re-
sponsibility, environment responsibility, and so forth. It
is urgent time for enterprises to be aware of global re-
sponsibility and harmonious social consciousness to sus-
tainable development, and voluntarily integrate the CSR
into their business strategy to pursue a natural fit between
economic values and environmental and social benefits.
1.1. Nature of CSR and Its Conceptual Model
The father of CSR Bowen whose landmark book Social
Responsibilities of the Businessman is argued to mark
the beginnings of the modern period of literature on the
issue of social responsibility, and sets forth an initial
definition of the social responsibilities of businessmen:
It refers to the obligations of businessmen to pursue
those policies, to make those decisions, or to follow those
lines of action which are desirable in terms of the objec-
tives and values of our society [2]. In 1971 the Com-
mittee for Economic Development used the Three Con-
centric Circles Model for depicting the concept of CSR:
The inner circle included basic economic functions such
as products, jobs and growth; The intermediate circle
suggested that the economic functions must be exercised
with a sensitive awareness of changing social values and
priorities; And the outer circle outlined newly emerging
and still amorphous responsibilities that business should
assume to become more actively involved in improving
the social environment [3]. Carroll traced the evolution
of the CSR concept and proposed a universal four-part
definition of CSR as following: The social responsibil-
ity of business encompasses the economic, legal, ethical,
and discretionary expectations that society has of or-
ganizations at a given point in time [4,5].
From the viewpoint of stakeholder theory, the nature
of CSR is that the enterprises should be responsible for a
broader set of stakeholders and the business environment
in a way that ensures the long-term sustainable success of
the enterprises. Freeman defined the stakeholders as any
group or individual who is affected by or can affect the
achievement of an organizations objectives [6]. War-
tick and Coghran traced the evolution of the corporate
social performance model by focusing on three chal-
lenges to the concept of CSR: Economic responsibility,
public responsibility, and social responsiveness [7]. The
green business guru Elkington convincingly argues as
well that 21st century business leaders should satisfy the
triple bottom line that is economic, social and environ-
mental sustainability [8]. For promoting CSR, the United
Nations Global Compact is launched in 2000 as a strate-
gic policy initiative for businesses that are committed to
aligning their operations and strategies with ten univer-
sally accepted principles in the four areas of human
rights, labor, environment and anti-corruption [9]. Ac-
cording to the standard definition of the European Com-
mission which describes CSR as a two-dimensional con-
cept whereby companies integrate social and environ-
mental concerns in their business operations and in their
interaction with their stakeholders on a voluntary basis
[10].
In short, this paper outlines the conceptual model of
CSR embraced three kinds of social responsibilities:
Economic, social and environmental. It is attributed to
the value creation of any kind of corporate social respon-
sibilities will be depended on the fulfillments by enter-
prises and supervisions of all relevant stakeholders of
CSR. To be sure, the core values of the harmonious and
sustainable society, that is, our human being wish to live
in a harmonious world which respects all the people and
nature. Through CSR initiatives, enterprises of all sizes,
in cooperation with their stakeholders, can help to recon-
cile economic, social and environmental ambitions.
1.2. CSR Initiatives in the Socially Responsible
Supply Chain System
Nowadays the general agreement on the new notion of
product is defined not only embedding with goods and
services, but also social and environmental behaviors and
obligations. And the enterprises, large or small, shall
commit to social accountable conduct, full compliance to
applicable national and international laws and respect for
human rights in the spirit of internationally recognized
social accountable standards, such as SA8000 [11]. The
SAIs first social accountability system, SA8000, is a
way for retailers, distributors, manufacturers, suppliers
and other organizations to maintain just and decent
working conditions throughout the supply chain. Fur-
thermore the SA8000 firms are required to apply these
same standards to their own suppliers and to support this
through monitoring social accountable practices.
CSR issues surrounding the supply chains have only
recently come to the fore, especially, in the context of
conceptual and survey studies. Carter and Dresner ex-
amined environmental risks in supply management [12].
Roberts concerned labor practices of ethical sourcing
initiatives [13]. Carter and Jennings empirically studied
the role of purchasing in corporate social responsibility
[14]. Wang focused on social responsible supply coordi-
nating relationship and strategies based on the social re-
sponsible relational rent [15]. Cruz considered the be-
Copyright 2012 SciRes. AJIBM
Socially Responsible Supply Chain Partnership Based-On CSR Equity Model 186
haviors of various decision makers on the impact of cor-
porate social responsibility in supply chain management
and showed that social responsibility activities can po-
tentially reduce transaction costs, risk and environmental
impact [16]. Nevertheless, socially responsible supply
chain partnerships that integrate all efforts of CSR from
socially responsible enterprises to upstream partner-sup-
pliers shall be surely needed within the uncertainly glob-
alizing and networklizing knowledge economy era. The
purpose of this paper is to develop a CSR Equity frame-
work based-on socially responsible customer perspective
for modeling and analysis of socially responsible supply
chain partnership and show relevant optimal coordination
strategies to the economic, social and environmental
performance of all partners in the socially responsible
supply chain system.
The remainder of the paper is organized as follows. In
the next section, we will firstly examine the potential
relationship between the CSR initiatives and perform-
ances with an eye toward developing a CSR Equity
framework based-on socially responsible customer per-
spective. The third section will explore the basic models
and assumptions of socially responsible supply chain
partnership based-on the CSR Equity model. Then, the
fourth and fifth sections will analyze and present the key
finds of the study on socially responsible supply chain
coordination strategy with cost sharing contract, followed
by the concluding remarks in the last section.
2. CSR Equity Framework Based-On
Socially Responsible Customer Perspective
A variety of theories and methodologies has been em-
ployed to study the potential relationship between the
CSR initiatives and performances.
2.1. Literature Review in CSR
Initiatives-Performances Relationship
Griffin and Mahon categorized 62 research results as
reported in 51 articles (spanning 25 years of research)
and created a table with three categories of the relation-
ship between CSR and corporate financial performance:
a positive correlation; a negative correlation; and no ef-
fect. As a result, they concluded that there were 20 stud-
ies showing a negative correlation, 9 studies in the posi-
tive relationship and the others in the no effect/incon-
clusive relationship. Obviously, the overall impact of the
studies reviewed is showing a negative correlation be-
tween CSR and corporate financial performance [17].
Instead, based on the above study of Griffin and Mahon,
Roman, Hayibor and Agle recategorized the same 51
articles and reconstructed Griffin and Mahons table and
showed 33 studies in the positive relationship, 14 studies
in the no effect/inconclusive relationship, and 5 studies in
the negative relationship. It can be seen that most of the
studies reviewed show positive relation between CSR
and corporate financial performance [18].
Preston and OBannon have analyzed the relationship
between indicators of CSR and financial performance
within a comprehensive theoretical framework. They
firstly have distinguished between the direction of the
CSR-financial performance relationship (positive, nega-
tive or neutral) and the causal sequence: Does CSR in-
fluence financial performance, does financial perform-
ance influence CSR, or is there a synergistic relationship
between the two? And then they have developed six pos-
sible causal and directional hypotheses involved in trade-
off hypothesis, social impact hypothesis, slack resources
hypothesis, managerial opportunism hypothesis, positive
synergy hypothesis and negative synergy hypothesis [19].
Kapoor and Sandhu have examined the impact of CSR
on corporate financial performance in terms of profitabil-
ity and growth and concluded significant positive impact
of CSR on corporate profitability and insignificant posi-
tive impact on corporate growth [20].
The trade-off hypothesis supposes a negative impact of
CSR on financial performance. This hypothesis deals
with the neoclassical economists position which holds
that socially responsible behavior will net few economic
benefits while its numerous costs will reduce profits and
shareholder wealth [21]. Makni, Francoeur and Bella-
vance find that, at least in the short run, with the trade-off
hypothesis and, in part, with the negative synergy hy-
pothesis which states that socially responsible firms ex-
perience lower profits and reduced shareholder wealth,
which in turn limits the socially responsible investments
[22].
Whereas, the social impact hypothesis is based on the
stakeholder theory which suggests that meeting the needs
of various corporate stakeholders will lead to favorable
financial performance. Orlitzky, Schmidt and Rynes ap-
ply the Meta-Analysis to theorize on the relationship
between corporate social/environmental performance
(CSP) and corporate financial performance (CFP). And
their meta-analytic findings suggest that CSP reputation
indices are more highly correlated with CFP than are
other indicators of CSP [23]. Proponents of the stake-
holder theory of the corporation argue that favorable so-
cial performance is a requirement for business legitimacy
and that social and financial performances tend to be
positively associated over the long term.
2.2. CSR Equity Model
The CSR efforts mirror the core values of the harmoni-
ous society, that is, our human being wish to live in a
harmonious world which respects all the people and na-
ture. In the early literatures on CSR, Webster determines
Copyright 2012 SciRes. AJIBM
Socially Responsible Supply Chain Partnership Based-On CSR Equity Model 187
the characteristics of the socially conscious consumer
and provides the most comprehensive definition of the
socially conscious consumer as a consumer who takes
into account the public consequences of his or her private
consumption or who attempts to use his or her purchas-
ing power to bring about social change [24]. On the
basis of Websters significant research, Roberts and
Mohr set forth the concept of socially responsible con-
sumer behavior and define socially responsible consumer
behavior as a person basing his or her acquisition, usage,
and disposition of products on a desire to minimize or
eliminate any harmful effects and maximize the long-run
beneficial impact on society. And then, the socially re-
sponsible consumer behavior requires the inclusion of
CSR as one of the criteria influencing a persons con-
sumption patterns [25,26].
CSR has a strong relativity with corporate reputation
just like the two sides of a same coin, for example, the
developments depart from the more voluntary forms of
CSR favored in the USA and are having a significant
effect on the reputation-building strategies of global
companies in many countries [27-29]. Specially, the
qualitative study of Hillenbrand and Money suggest that
there is considerable similarity between the concepts of
responsibility and reputation. Implications may include
the use of reputation models as potential measures for
many of the aspects conceptualized as responsibility.
While the corporate reputation is a multi-stakeholder
concept that is reflected in the perceptions that stake-
holders have of an organization [30]. Brown and Dacin
recognize that Negative CSR associations can have a
detrimental effect on overall product evaluations, where-
as positive CSR associations can enhance product eva-
luations [31]. Sen and Bhattacharya examined consu-
mer reactions to CSR initiatives with finding that CSR
efforts can affect consumers intentions to purchase its
products both indirectly and directly and highlighting the
mediating roles of consumers perceptions of congruence
between their own characters and that of the company in
their reactions to its CSR initiatives [32].
As a consequence, on the basis of the fore research lit-
eratures, this paper proposes a five-step CSR Equity
framework based-on socially responsible customer per-
spective in Figure 1 for modeling and analysis of so-
cially responsible supply chain partnership, which maps
out component analysis and management of CSR eq-
uity.
It is clearly seen from Figure 1, the CSR Equity model
is thought of five steps. The starting steps are to build
and enhance the positive and trustworthy corporate repu-
tation in virtue of voluntary and sustainable CSR efforts
to reconcile economic, social and environmental benefits.
Then the third step is to create the strong and favorable
CSR associations through corporate reputation transmis-
sion. The fourth step is to elicit and spread intense and
desirable customer reactions to CSR initiatives. And the
final step is to forging and foster socially responsible
customer loyalty, which can be broken down into two
key dimensions: Behavioral loyalty (as well as purchase
loyalty) and attitudinal loyalty [33]. Both attitudinal loy-
alty and behavioral loyalty link to better socially respon-
sible consumer intentions and consumer behavior. As a
result, the socially responsible consumer would avoid
buying products from companies that harm society and
actively seek out products from companies that help so-
ciety.
3. Basic Models and Assumptions
Consider a socially responsible supply chain consists of
two members: One socially responsible manufacturer and
one upstream partner-supplier. Firstly, the notations and
assumptions in the models developed will be stated in
details as follows.
According to the above CSR Equity model in Figure 1,
the voluntary and sustainable CSR efforts to reconcile
economic, social and environmental benefits are founda-
tions in building the CSR equity regarded as vital intan-
gible assets to corporate equity, which is determined by
the positive and trustworthy corporate reputation linking
to better socially responsible consumer intentions and
consumer behavior, that is, with greater market share and
premium in the marketplace.
Suppose the socially responsible manufacturer and the
upstream partner-supplier can exert the total investment


Voluntary, sustainable
CSR Efforts
Intense, desirable
Customer Reactions
Socially responsible
Customer Loyalty
Positive, trustworthy
Corporate Reputation
Strong, favorable
CSR Associations
Social
Initiatives
Environmental
Initiatives
Attitudinal
Loyalty
Behavioral
Loyalty

Figure 1. CSR equity framework based-on socially respon-
sible customer perspective.
Copyright 2012 SciRes. AJIBM
Socially Responsible Supply Chain Partnership Based-On CSR Equity Model 188
on CSR efforts e
m
and e
s
, respectively. Clearly the market
demand functions about aggregate impact of both of the
above investment parameters can be given by D(e
m
, e
s
),
where letting D(e
m
, e
s
) be continuously differentiable on
and using right-hand deriva-
tives at 0, strictly increasing in both investment parame-
ters. And then we can find the socially responsible
manufacturer expected market demand under the positive
and trustworthy corporate reputation is
( ) ( ) ( , 0, 0,
m s
e e e )
( )
0
,
m s m s
D e e D e e
o |
= (1)
where D
0
, o and | are constants; o and | are the leverage
rate of CSR efforts e
m
and e
s
, respectively, o > 0, | > 0;
D
0
is the potential market demand which is implemented
relying on both CSR efforts e
m
and e
s
, that is, either e
m
or
e
s
is 0, the actual market demand shall turn to
be disappeared due to the infinitely negative leverage
rate of CSR efforts e
m
or e
s
, which can be attribute to
those socially responsible consumers would avoid buying
products from bystanders and companies that harm soci-
ety and prefer actively to seek out products from the so-
cially responsible enterprises.
( ,
m s
D e e )
m
Finally, consider the socially responsible manufacturer
and the upstream partner-supplier can gain the marginal
revenue MR
m
and MR
s
, respectively, and suppose MR
m

and MR
s
are constants for simplifying the analysis further.
Thus, we now define that the socially responsible manu-
facturers and the upstream partner-suppliers expected
revenue function under the positive and trustworthy cor-
porate reputation is as shown by expresses (2) and (3),
respectively:
( ) ( )
( )
0
, ,
m m s m m s m
m m s
e e MR D e e e
MR D e e e
o |
=
=
(2)
( ) ( )
( )
0
, ,
s m s s m s s
s m s s
e e MR D e e e
MR D e e e
o |
=
=
(3)
At first, the solution concept used in this section is
from the view in non-cooperative static games: The two
supply chain members choose optimally strategies si-
multaneously and are thereafter committed to their cho-
sen strategies, i.e., these are simultaneous move, one-shot
games. So we have the following:
( )
0
, ,
max max
. .0 1, 0
s s
m m m s
r e r e
s
m
MR D e e e
s t r e
o |

s s >
(

(4)
( )
0
, ,
max max
. .0 1, 0
m m
s s m s
r e r e
m
s
MR D e e e
s t r e
o |

s s >
(

(5)
From differentiation using the first order condition for
e
m
and e
s
, respectively,
1

1 0
m
m m s
m
MR e e
e
o |
o

c
=
c
= (6)
1

1 0
s
s m s
s
MR e e
e
o |
|

c
=
c
= (7)
Thus the Nash equilibrium in non-cooperative static
games is obtained
( )
( )
1
1
*
1
1
1
1
m
m s
m
s
e
MR e
MR
MR
o
|
|
o |
|
o
o
|

+
+ +
| |
=
|

\ .
(

= (
(

(8)
( )
( )
1
1
*
1
1
1
1
s
s m
s
m
r
e
MR e
MR
MR
|
o
o
o |
o
|
|
o

+
+ +
| |
=
|

\ .
(

( =
(

(9)
As o > 0, | > 0, observe the above expresses (8) and
(9) that the optimal CSR efforts strategy and
*
m
e
*
s
e are
positive relevant with the members marginal revenue
(i.e. MR
m
, MR
s
) and the leverage rate of CSR efforts (i.e.
o, |), respectively, whereas negative relevant with the
partners marginal revenue (i.e. MR
s
, MR
m
) and the lev-
erage rate of CSR efforts (i.e. |, o), respectively. Thus, it
is easy to see that
[Proposition 1] No one of supply chain members has
incentive to implement Pareto optimal policy for socially
responsible supply chain partnership in non-cooperative
static games.
4. Cost Sharing Contract Coordination
In this section, considering in the case of socially respon-
sible supply chain coordination strategy with cost sharing
contract, the socially responsible manufacturer shall pro-
vide seriously a share rate of r (0 s r s 1) of the total
investment of upstream partner-suppliers CSR efforts e
s
,
while the upstream partner-supplier will be proposed a
share proportion of (1 r) as 0 s r s 1.
The solution concept used in this section is subgame
perfect equilibrium. Consequently, as the Stackelberg
follower, the upstream partner-supplier makes the own
investment strategy of the CSR efforts is dependent upon
the corresponding share rate r of coordination strategy
with cost sharing contract of the downstream partner. For
the socially responsible manufacturer may offer a share
rate r as the incentive for the upstream partner-supplier
to increase CSR efforts and to be socially responsible
partner integrated into the social responsible supply chain
Copyright 2012 SciRes. AJIBM
Socially Responsible Supply Chain Partnership Based-On CSR Equity Model 189
so as to improve the own positive and trustworthy cor-
porate reputation. Thus it can be seen, as the Stackelberg
leader, the socially responsible manufacturer must make
the investment of CSR efforts and share rate r of coor-
dination strategy with cost sharing contract first and then
the partner-supplier observes this strategy and makes his
own investment strategy choice.
Consider the above Stackelberg equilibrium policy,
letting the socially responsible manufacturer first make
investment level e
m
on its own CSR efforts and share
rate r of the investment of partner-suppliers CSR ef-
forts.
In virtue of backwards induction, firstly, find the part-
ner-suppliers optimal CSR efforts policy as a response
to any strategies made by the Stackelberg leader:
( ) ( )
( )
0
1
1

1 0
s m s s
s
s s
s m s
MR D e e r e
e e
MR e e r
o |
o |


(
c
c

=
c c
= =
(10)
As a result, the investment of partner-suppliers CSR
efforts generated is expressed as following
( )
1
1
**
1
s
s
m
MR
e
r e
|
o
|
+
| |

\ .
|
|
s
(11)
As o > 0, | > 0, 0 s r s 1, then the following proposi-
tions may be given from the express (11),
[Proposition 2] The optimal CSR efforts strategy e
s
**
for partner-supplier is positive relevant with the share
rate r, besides his marginal revenue (i.e. MR
s
) and his
leverage rate of CSR efforts (i.e. |);
[Proposition 3] The optimal CSR efforts strategy e
s
**
is negative relevant with his downstream partner exerting
the total investment on CSR efforts e
m
and leverage rate
of CSR efforts (i.e. o).
Given the results of these two propositions, it can be
able to observe that, in addition to the marginal revenue
MR
s
and leverage rate of CSR efforts |, the part-
ner-supplier only has incentive to increase his investment
on CSR efforts as the socially responsible manufacturer
increases the share rate r. Even if the socially respon-
sible manufacturer solely increases investment level e
m

and the leverage rate o on his own CSR efforts, the part-
ner-supplier prefer to be a free-rider of partners cor-
porate reputation effect so as to have incentive to reduce
the investment on CSR efforts instead.
Secondly, find the optimal CSR policy for the socially
responsible manufacturer anticipating the response by the
upstream partner-supplier.
( )
0
, ,
max max
. .0 1, 0
s s
m m m s m
r e r e
s
MR D e e e re
s t r e
o |
(
=

s s >
(12)
Intuitively, the socially responsible manufacturer chooses
the best possible point on the followers best response
function.
( ) ( )
{ }
**
**
,
** **
0
,
**
max
max
. .0 1, 0
s
s
m
r e
m
m s m
r e
s
s
MR D e e e r e
s t r e
|
o

(
=
(

s s >
(13)
Differentiating this expression with respect to and
r yields,

m
( ) ( )
{ }
** **
0

0
m
m s m
m
m
MR D e e e r e
r e
|
o

(
c
( c

=
c c
=
s
(14)
Thus,
1 ,
1
1
* *
+ >

= |
|
s
m
s
m
MR
MR
MR
MR
r
(15)
Considering 0 s r s 1, only as 1
m
s
MR
MR
| > + , the so-
cially responsible manufacturer shall provide the share
rate r (0 s r s 1) for the upstream partner-suppliers
CSR efforts. And propositions is given below.
[Proposition 4] The share rate r is positive relevant
with firms marginal revenue (i.e. MR
m
);
[Proposition 5] The share rate r is negative relevant
with the partner-suppliers marginal revenue (i.e. MR
s
)
and his leverage rate of CSR efforts |.
Finally, in the same way from differentiation,
( ) ( )
{ }
** **
0

0
m m s m s
m
m m
MR D e e e r e
e e
|
o

(
c
( c

= =
c c
(16)
Consequently, we have the following Stackelberg
equilibrium policies,
( )
1
1
** 1
1
,
1
m m
m
s
e MR MR
MR
MR
|
o |
|
o |
|
|
+ +
+

(
| |
= (
|

( \ .

> +

s
(17)
( )
1
1
** 1
1
,
1
s m
m
s
e MR MR
MR
MR
o
o |
o
| |
o
|
+ +
+

(
| |
=
(
|

\ .
(

> +

s
(18)
As o > 0, | > 0 and 1
m
s
MR
MR
| > + , then the following
Copyright 2012 SciRes. AJIBM
Socially Responsible Supply Chain Partnership Based-On CSR Equity Model 190
propositions may be given,
[Proposition 6] The firms optimal strategy is
positive relevant with his marginal revenue (i.e. MR
m
)
and leverage rate of CSR efforts o, whereas negative
relevant with the partners marginal revenue (i.e. MR
s
)
and the leverage rate of CSR efforts |.
**
m
e
[Proposition 7] The firms optimal strategy
**
s
e is
positive relevant with his marginal revenue (i.e. MR
m
)
and leverage rate of CSR efforts |, whereas negative
relevant with the partners marginal revenue (i.e. MR
s
)
and the leverage rate of CSR efforts o.
5. Comparisons and Managerial Insights
Aggregating the results from Proposition 1 to Proposition
7, it can be reached that the share rate r of the total
investment of upstream partner-suppliers CSR efforts
shall be the critical contract clause to coordinate the so-
cially responsible supply chain partnership to implement
Pareto optimal policy with cost sharing contract. More-
over, since ( )
**
1 1
m s
r MR MR | = , this implies that
the share rate r has the strong positive relativity with
the ratio of marginal revenues between supply chain
members (i.e.
m s
MR MR ), whereas negative relativity
with the partner-suppliers leverage rate of CSR efforts
(i.e. |) under the condition of 1
m s
MR MR | > + .
In order to compare the above policies in non-coop-
erative static games and cost sharing contract coordina-
tion strategy, consider the following groups of parameter
values:
1) Letting , o | > while MR
s
is constant and
m s
MR MR is variable and then considering the case of
0.6, 0.4 .5 , 0
s
MR o | = = = ;
2) Letting , o | < while MR
s
is constant and
m s
MR MR is variable and then considering the case of
0.4, 0.6 0.5 ,
s
MR o | = = = .
Then the respective numerical results, including the
optimal investment strategies on CSR efforts of the two
members and the total system revenue in the socially
responsible supply chain, are illustrated in Figures 2 and
3.
When comparing these figures, it should be noted that
the socially responsible supply chain shall gain the more
system revenue via the cost sharing contract coordination
strategy, even if this implies that both of the two partners
shall invest the more on CSR efforts e
m
and e
s
, respec-
tively.
However, as the Stackelberg leader, the socially re-
sponsible manufacturer shall make the effective contract
clause share rate r to promote the upstream partner-
supplier to increase CSR efforts even with increasing
manufacturers marginal revenue (i.e. MR
m
). In this way,
the socially responsible supply chain shall gain the more
system revenue than the non-cooperative static games
MR
m
/MR
s
0
0.2
0.4
0.6
0.8
1
1.2
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
em*
em**

(a)
MR
m
/MR
s
0
0.1
0.2
0.3
0.4
0.5
0.6
0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
es*
es**

(b)
MR
m
/MR
s
2
2.5
3
3.5
4
0.6 0.7 0.8 0.9 1
System
Profit*
System
Profit**

(c)
Figure 2. The numerical results in non-cooperative static
games vs. cost sharing contract coordination strategy as =
0.6, = 0.4, MR
s
= 0.5. (a) Firms investment strategies on
CSR efforts with MR
m
/MR
s
; (b) Suppliers investment
strategies on CSR efforts with MR
m
/MR
s
; (c) System profit
with MR
m
/MR
s
.

whereas taking advantage of the less investment on CSR
efforts e
m
.
The key managerial insight derived from this study is
that the share rate r shall be the critical contract clause
Copyright 2012 SciRes. AJIBM
Socially Responsible Supply Chain Partnership Based-On CSR Equity Model 191
MR
m
/MR
s
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
em*
em**

(a)
MR
m
/MR
s
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
es*
es**

(b)
MR
m
/MR
s
2
2.5
3
3.5
4
0.6 0.7 0.8 0.9 1
System
Profit*
System
Profit**

(c)
Figure 3. The numerical results in non-cooperative static
games vs. cost sharing contract coordination strategy as =
0.4, = 0.6, MR
s
= 0.5. (a) Firms investment strategies on
CSR efforts with MR
m
/MR
s
; (b) Suppliers investment
strategies on CSR efforts with MR
m
/MR
s
; (c) System profit
with MR
m
/MR
s
.

to coordinate the socially responsible supply chain part-
nership to implement Pareto optimal policy with cost
sharing contract. Moreover, the share rate r has a
strong positive relativity with the ratio of marginal reve-
nues between supply chain members, whereas negative
relativity with the partner-suppliers leverage rate of CSR
efforts.
6. Concluding Remarks
The purpose of this paper is to develop a five-step CSR
Equity framework based-on socially responsible cus-
tomer perspective for modeling and analysis of socially
responsible supply chain partnership and show relevant
optimal coordination strategies to the economic, social
and environmental performance of all partners in the
socially responsible supply chain system.
Five critical components of the five-step CSR Equity
framework based-on socially responsible customer per-
spective are presented as follows:
To put in voluntary and sustainable CSR efforts;
To build and enhance the positive and trustworthy
corporate reputation in virtue of voluntary and sustain-
able CSR efforts to reconcile economic, social and envi-
ronmental benefits;
To create the strong and favorable CSR associations
through corporate reputation transmission;
To elicit and spread intense and desirable customer
reactions to CSR initiatives;
To forging and foster socially responsible customer
loyalty, which can be broken down into two key dimen-
sions: behavioral loyalty (as well as purchase loyalty)
and attitudinal loyalty.
Both attitudinal loyalty and behavioral loyalty link to
better socially responsible consumer intentions and con-
sumer behavior. As a result, the socially responsible
consumer would avoid buying products from companies
that harm society and actively seek out products from
companies that help society.
From all propositions in the socially responsible sup-
ply chain coordination strategy with cost sharing contract,
it notes that the share rate r shall be the critical contract
clause to coordinate the socially responsible supply chain
partnership to implement Pareto optimal policy with cost
sharing contract. Moreover, the share rate r has a
strong positive relativity with the ratio of marginal reve-
nues between supply chain members, whereas negative
relativity with the partner-suppliers leverage rate of CSR
efforts.
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