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Profit with Purpose? A Theory of Social Enterprise with Experimental Evidence

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  • Timothy Besley
  • Maitreesh Ghatak

Abstract

When social benefits cannot be measured, a hybrid organization which selects managers based on motivation can be used to balance profi…ts with a social purpose. This paper develops a model of social enterprise based on selection of citizen-managers with this goal in mind. It develops the implications of matching between founders and managers based on their preferences for the mission. The main trade-offs suggested by the theory are tested experimentally and these are used to calibrate a matching outcome. This makes precise the parameter range in which social enterprises based on selection will be observed in a market setting; we show that they achieve gains in proficiency of around 10% over non-pro…fit enterprise.

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  • Timothy Besley & Maitreesh Ghatak, 2013. "Profit with Purpose? A Theory of Social Enterprise with Experimental Evidence," STICERD - Economic Organisation and Public Policy Discussion Papers Series 047, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    • Handle: RePEc:cep:stieop:047
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    Cited by:

    1. Koppel, Hannes & Regner, Tobias, 2019. "What drives motivated agents: The ‘right’ mission or sharing it with the principal?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 83(C).
    2. Huber, Laura Rosendahl & Sloof, Randolph & Van Praag, Mirjam, 2017. "The effect of incentives on sustainable behavior: evidence from a field experiment," Labour Economics, Elsevier, vol. 45(C), pages 92-106.
    3. Felipe Augusto de Araujo & Erin Carbone & Lynn Conell-Price & Marli W. Dunietz & Ania Jaroszewicz & Rachel Landsman & Diego Lamé & Lise Vesterlund & Stephanie Wang & Alistair J. Wilson, 2015. "The Effect of Incentives on Real Effort: Evidence from the Slider Task," CESifo Working Paper Series 5372, CESifo.
    4. Jonathan DE QUIDT & Maitreesh GHATAK, 2018. "Is The Credit Worth It? For-Profit Lenders In Microfinance With Rational And Behavioral Borrowers," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 89(1), pages 175-199, March.
    5. Lea Cassar, 2014. "Job mission as a substitute for monetary incentives: experimental evidence," ECON - Working Papers 177, Department of Economics - University of Zurich.
    6. Ola Andersson & Marieke Huysentruyt & Topi Miettinen & Ute Stephan, 2017. "Person–Organization Fit and Incentives: A Causal Test," Management Science, INFORMS, vol. 63(1), pages 73-96, January.
    7. Le Grand, Julian & Roberts, Jonathan, 2018. "The public service mutual: theories of motivational advantage," LSE Research Online Documents on Economics 84380, London School of Economics and Political Science, LSE Library.

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    More about this item

    Keywords

    Social enterprise; motivated agents; non-profits;
    All these keywords.

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

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