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Cui Bono, Benefit Corporation? An Experiment Inspired by Social Enterprise Legislation in Germany and the US

Author

Listed:
  • Fischer Sven

    (Max-Planck-Institute for Research on Collective Goods, Kurt-Schumacher-Str. 10, 53113 Bonn, Germany)

  • Goerg Sebastian J.

    (Department of Economics, Florida State University, 113 Collegiate Loop, Tallahassee, FL 32306-2180, USA)

  • Hamann Hanjo

    (Max-Planck-Institute for Research on Collective Goods, Kurt-Schumacher-Str. 10, 53113 Bonn, Germany)

Abstract

How do barely incentivized norms impact incentive-rich environments? We take social enterprise legislation as a case in point. It establishes rules on behalf of constituencies without institutionalized means of enforcement. By relying primarily on managers’ other-regarding concerns while leaving corporate incentive structures unaltered, how effective can such legislation be? We ran a laboratory experiment with a framing likened to German corporate law which traditionally includes social standards. Our results show that a stakeholder provision, as found in both Germany and more recent US regulation, cannot overcome material incentives. Yet even in the absence of adverse incentives the stakeholder duty does not foster other-regarding behavior. Our experiment illustrates the paramount importance of taking into account both incentives and framing effects when designing institutions. We tentatively discuss potential policy implications for social enterprise legislation and the stakeholder debate.

Suggested Citation

  • Fischer Sven & Goerg Sebastian J. & Hamann Hanjo, 2015. "Cui Bono, Benefit Corporation? An Experiment Inspired by Social Enterprise Legislation in Germany and the US," Review of Law & Economics, De Gruyter, vol. 11(1), pages 79-110, March.
    • Handle: RePEc:bpj:rlecon:v:11:y:2015:i:1:p:79-110:n:2
    DOI: 10.1515/rle-2014-0036
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    Cited by:

    1. Kurland, Nancy B., 2017. "Accountability and the public benefit corporation," Business Horizons, Elsevier, vol. 60(4), pages 519-528.

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    Keywords

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    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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