(2003), Kotchen (2006) or Arora and Gangopadhay (1995) among others investigated the economic motivation beneath CSR as well as related welfare implications. An important insight is the emergence of a sorting equilibrium along heterogeneous stakeholder preferences where firms supply different levels of the public good to different demand segments. However, market driven CSR can only achieve second best levels of public goods provision. Public provision in theory can achieve first best levels but may itself be subject to government failure<sup>10</sup> . Few authors such as Lyon and Maxwell (2004) or Maxwell, Lyon and Hackett (2000) have begun to investigate the interaction between public policy, CSR and other strategic considerations by firms, however, no explicit attention has been paid to the potential tradeoff between strategic CSR and firm location in the international context as well as the resulting implications for regulation or welfare.

The concept of international strategic CSR rests upon two main pillars, multinational enterprises (MNEs) and international public goods (of environmental or social character), which are linked via an information dependent demand channel. We will shortly discuss each pillar and intuitively characterize the role of information in determining the workings of this market. First, MNEs are usually large(r) corporations with big societal impact and prominent presence in public (stakeholder) discussion, awareness and scrutiny. These correlations are witnessed empirically by Edwards et al. (2007) among others. Second, environmental and social public goods and externalities today are inseparably linked to corporate conduct and affect large parts of society through a mix of extrinsic, physical impact and/or intrinsic, reputational perception. In short, demand for public goods was able to expand 1) quantitatively through stronger and wider spread preferences, and 2) qualitatively through empowered market mechanisms. The quantitative effect can be explained by concepts such as the above discussed Environmental Kuznets Curve<sup>11</sup> . Only when basic needs are fulfilled, do people start worrying about more indirect needs such as the environment, global warming, or ethical firm behavior. Then, in a development perspective, in the initial process of industrialization people only care about jobs and income while public environmental spending and regulations are weak and unpopular. As income rises, however, technology improves pollution levels, and preferences as well as regulation begin to favor environmental protection.

Besides regulation, markets constitute a relevant mechanism to match such demand with supply. Both regulation and markets, especially in today's international framework, are constrained by imperfect information. Here, technology has greatly improved the availability and flow of information over the last 20 years. In a recent (2005) US consumer survey conducted by Fleishman Hiller and the National Consumer League it is found and concluded that [t]echnology is changing the landscape in which consumers gather and communicate information about how well companies are being socially responsible. The majority of consumers seek out information about social issues (77 percent) or the social responsibility record of companies (52 percent) "some" or "all of the time." Furthermore, [t]he respondents' demographic characteristics appear to influence their level of interest in seeking out CSR information. For example, those who tend to seek out this information tend to have Internet access and/or have at least some college education. In sum, both purchasing power and information through education and

> 10 In the international context a candidate for such failure is coordination failure. 11

> Originally outlined by Grossman and Krueger (1993) and revisited later by Dasgupta et al. (2002)

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