Why Do Firms Have "Purpose"? The Firm's Role as a Carrier of Identity and Reputation
Rebecca Henderson, Eric Van den Steen
American Economic Review · 2015 · Volume 105 · Issue 5
Abstract
This article develops a theory in which a firm's adoption of a prosocial purpose can increase profitability by strengthening employees' reputation and identity—leading to higher effort and lower wages—as long as implementing purpose is costly with respect to direct monetary payoffs. Employees who value prosocial action will select into firms with a social purpose, which then become a visible carrier for these employees' identity and reputation.
Keywords
Firm Behavior: Theory, Wage Level and Structure, Wage Differentials, Firm Performance: Size, Diversification, and Scope, Corporate Culture, Diversity, Social Responsibility
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