Purpose, Profit and Social Pressure

Purpose, Profit and Social Pressure

Fenghua Song, Anjan Thakor, Robert Quinn

Series number :

Serial Number: 
881/2023

Date posted :

February 12 2023

Last revised :

February 12 2023
SSRN Share

Keywords

  • Higher purpose • 
  • Incentives • 
  • Labor market matching • 
  • Organizational performance

We develop a model in which there are firms and employees who care about profit-sacrificing higher purpose (HP) and those who do not. Firms and employees search for each other in the labor market. Each firm chooses its HP investment.

When there is no social pressure on firms to adopt a purpose, HP dissipates agency frictions, lowers wage costs, yet elicits higher employee effort in firms that intrinsically value the purpose. However, social pressure to invest in HP can distort the HP investments of all firms and reduce welfare by making all agents worse off.

Authors

Real name:
Robert Quinn
Real name:
Fenghua Song
Real name:
Research Member
John M. Olin School of Business, Washington University, St. Louis