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1 Introduction Economic activity is affected by interest and activist groups through two mechanisms One is through public politics in which groups attempt to in uence public of142ceholders to the bene142t of the groups themselves or those whom they support The other is through private politics in which interest and activist groups attempt to in uence economic activity directly without reliance on public institutions or of142ceholders This paper provides a theory of private politics in which an activist seeks to change the production practices of a 142rm for the purpose of redistribution to those whose interests it supports The source of the activists in uence is the possibility of support for its cause by the public One objective of the paper is to explore the positive implications of interest and activist groups in affecting economic activity through private politics The subject of redistribution by 142rms has a long history in the normative literature on corporate social responsibility CSR1 CSR This research has been sponsored by NSF Grant No SBR-9809177 I would like to thank Peter Coughlan and Dennis Yao for their comments and David Ahn for his assistance 1 See Carroll 1979 Freeman 1984 Preston and Post 1975 and Wood 1991 2001 Massachusetts Institute of Technology Journal of Economics Management Strategy Volume 10 Number 1 Spring 2001 7-45 8 Journal of Economics Management Strategy advocates argue both that normative principles demand redistribution by 142rms and that if 142rms do not meet the expectations of society with regard to their social performance they will be faced with government action The 142rst argument pertains to a moral motivation whereas the second argument pertains to a response to or anticipation of a threat A third argument is that 142rms that voluntarily take actions in the name of CSR will be rewarded in the marketplace for example by increased demand for their products Firms thus can adopt policies labeled as CSR for a variety of reasons
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