Social License and Nonmarket Strategies Based on Social Contract Theory

Social license (SL) refers to the approval by a corporation’s stakeholder community. While corporate social responsibility (CSR) and SL are linked by a social contract between corporation and society, they are distinguished from one another. It is often assumed that CSR guarantees SL, but evidence shows that, when members possess unequal socio-political power within a community approving SL, CSR can be counterproductive to SL. In a deliberatively democratic society, corporate political activity (CPA), as a nonmarket strategy other than CSR, can also harm SL, as it manifests corporate power that contradicts political egalitarianism.