Taxation and Strategic Corporate Social Responsibility in a Mixed Duopoly With Foreign Ownership

ABSTRACT This paper investigates the relationship between foreign ownership, Corporate Social Responsibility (CSR), and optimal taxation policy in a mixed duopoly framework. The findings reveal that foreign ownership can negatively impact CSR activities, especially when foreign‐owned firms compete with public firms. The analysis further suggests that taxation policies should be tailored to both the level of foreign ownership and the firm's CSR engagement. Specifically, subsidies are recommended for low levels of foreign ownership, while taxes become more appropriate as foreign ownership increases. Extensions of the analysis consider the effects of public firm privatization, efficiency gaps, and changes in the timing of strategic decisions.