We begin our analysis of CSR by relating it to a theory of the firm, in which it is assumed that the management of publicly held firms attempts to maximize profits (Jensen, 1988). Based on this perspective, CSR can be viewed as a form of investment. One way to assess investment in CSR is as a mechanism for product differentiation. In this context there are CSR "resources" and "outputs." A firm can create a certain level of CSR by embodying its products with CSR attributes (such as pesticide-free fruit) or by using CSR-related resources in its production process (such as naturally occurring insect inhibitors and organic fertilizers).
As such, it seems natural to consider the nature of the markets for CSR attributes and CSR-related resources. Our analysis of these markets is based on a simple supply and demand framework, which we outline below.