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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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Bibliographic Info

Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Economic Organisation and Public Policy Discussion Papers Series with number 47.

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Date of creation: Nov 2013
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Handle: RePEc:cep:stieop:47

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Web page: http://sticerd.lse.ac.uk/_new/publications/default.asp

Related research

Keywords: Social enterprise; motivated agents; non-profits;

This paper has been announced in the following NEP Reports:

References

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  7. Ashraf, Nava & Bandiera, Oriana & Jack, Kelsey, 2012. "No margin, no mission? A Field Experiment on Incentives for Pro-Social Tasks," CEPR Discussion Papers 8834, C.E.P.R. Discussion Papers.
  8. Mark Bagnoli & Susan G. Watts, 2003. "Selling to Socially Responsible Consumers: Competition and The Private Provision of Public Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(3), pages 419-445, 09.
  9. Tobin, James, 1970. "On Limiting the Domain of Inequality," Journal of Law and Economics, University of Chicago Press, vol. 13(2), pages 263-77, October.
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Cited by:
  1. Andersson, Ola & Huysentruyt, Marieke & Miettinen, Topi & Stephan, Ute, 2014. "Person-Organization Fit and Incentives: A Causal Test," Working Paper Series 1010, Research Institute of Industrial Economics.

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