1 on Firm Investment in Innovation and Csr in the Presence of Activists

*The paper has benefited from comments obtained at presentations of an earlier version at the Technical University, Dresden and Jadavpur University, Calcutta. We would like to sincerely thank Jean-Pierre Ponssard for his useful remarks. The first author acknowledges support from FMSH, Paris. The second author acknowledges support from the program " Chair for Sustainable Finance and Responsible Investment " at the Ecole Polytechnique and the Agence Nationale de la Recherche, Paris, France under the project " The dynamics of Nanosciences and Nanotechnologies: Perspectives from Economics and Sociology ". The usual disclaimer applies. 2 Abstract Defining firm investment in reduction of damages generated in the process of innovation as a form of corporate social responsibility (CSR), the paper identifies the determinants of such CSR investment, the emergence of an activist group and welfare consequences. It demonstrates that the presence of an activist group motivates CSR. The higher the innovation profit, the lower the CSR. An activist group emerges only if the innovation profit is high but the social costs of innovation and the fixed costs of activist group formation are not too high. Finally, CSR investment may not always improve welfare in the innovation context.