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Profit with Purpose? A Theory of Social Enterprise

Author

Listed:
  • Timothy Besley
  • Maitreesh Ghatak

Abstract

When social benefits cannot be measured, an organization that selects managers based on pro-social motivation can be used to balance profits with a social purpose. This paper develops a model of social enterprise based on selection of citizen-managers to run firms with flexible missions. We analyze organizational choice between social enterprise, for-profits, and nonprofits. The paper also develops the implications of matching between founders and managers based on their preferences for the mission.

Suggested Citation

  • Timothy Besley & Maitreesh Ghatak, 2017. "Profit with Purpose? A Theory of Social Enterprise," American Economic Journal: Economic Policy, American Economic Association, vol. 9(3), pages 19-58, August.
    • Handle: RePEc:aea:aejpol:v:9:y:2017:i:3:p:19-58
    Note: DOI: 10.1257/pol.20150495
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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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