A mission-centric view of the firm: Lessons from Social Entrepreneurship
AbstractSocial Entrepreneurship causes increasing debate in the literature and represents a growing enigma for theories of the firm. Beyond the divergences in its definitions, we show that its mission to create "social value" is an identifiable common feature that cannot be satisfactorily described within the main existing theories. Indeed, social entrepreneurship is, by definition, inconsistent with the shareholder primacy advocating for the too narrow only objective of shareholder profit maximization. But it departs also from stakeholder views that focus on the survival of the firm by aligning its interests with discrepant and "overbroad" crucial stakeholders. Outwardly oriented missions in fact necessitate forgetting the dominant "principal-agent"-like settings, even if principals might be carefully and rightfully chosen. We support our arguments with the study of two empirical cases that are successful long-lasting businesses related to social entrepreneurship: John Lewis Partnership and Equal Exchange. These companies have built pioneering custom-made governance systems - ensuring both performance and social fairness - that dispense with standard implicit hypotheses: their clearly explicit mission identifies "beneficiaries" that are distinct from crucial stakeholders, financial contributors, and principals. Instead, the mission becomes a pivotal attribute to explain and design these organisations' structure and mechanisms. Consequently, we delineate three main theoretical and managerial implications of revealing this mission: it lends a strong legitimacy to the directors and officers by clearly defining the boundaries of their discretion, it specifies and justifies the participants' engagement in the management authority, and it calls for new control mechanisms that are fundamentally different from the monitoring systems of principal-agent relationships. Thus our model clarifies the firms' boundaries and escapes the traditional stakeholders' conflicts of interest. We postulate that this model opens an interesting field for future research, both on social and conventional entrepreneurship, and may entail a deep change in managerial and governance techniques that may have reached a dead-end in the recent economic crisis.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by HAL in its series Post-Print with number hal-00733413.
Date of creation: 23 May 2012
Date of revision:
Publication status: Published - Presented, R&D Management, 2012, France
Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00733413
Contact details of provider:
Web page: http://hal.archives-ouvertes.fr/
Social Entrepreneurship; Social purpose; Corporate Governance; Management Discretion;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-30 (All new papers)
- NEP-BEC-2012-09-30 (Business Economics)
- NEP-ENT-2012-09-30 (Entrepreneurship)
- NEP-PKE-2012-09-30 (Post Keynesian Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Michael Jensen, 2001.
"Value Maximisation, Stakeholder Theory, and the Corporate Objective Function,"
European Financial Management,
European Financial Management Association, vol. 7(3), pages 297-317.
- Michael C. Jensen, 2001. "Value Maximization, Stakeholder Theory, And The Corporate Objective Function," Journal of Applied Corporate Finance, Morgan Stanley, vol. 14(3), pages 8-21.
- Michael C. Jensen, 2010. "Value Maximization, Stakeholder Theory, and the Corporate Objective Function," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(1), pages 32-42.
- Loizos Heracleous & Luh Luh Lan, 2012. "Agency Theory, Institutional Sensitivity, and Inductive Reasoning: Towards a Legal Perspective," Journal of Management Studies, Wiley Blackwell, vol. 49(1), pages 223-239, 01.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
- R. Freeman & Kirsten Martin & Bidhan Parmar, 2007. "Stakeholder Capitalism," Journal of Business Ethics, Springer, vol. 74(4), pages 303-314, September.
- Michael Carney & Eric Gedajlovic & Sujit Sur, 2011. "Corporate governance and stakeholder conflict," Journal of Management and Governance, Springer, vol. 15(3), pages 483-507, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).
If references are entirely missing, you can add them using this form.