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Profit with purpose? a theory of social enterprise with experimental evidence

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  • Besley, Timothy
  • Ghatak, Maitreesh

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.

Suggested Citation

  • Besley, Timothy & Ghatak, Maitreesh, 2013. "Profit with purpose? a theory of social enterprise with experimental evidence," LSE Research Online Documents on Economics 58181, London School of Economics and Political Science, LSE Library.
  • Handle: RePEc:ehl:lserod:58181
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    Cited by:

    1. Felipe Augusto de Araujo & Erin Carbone & Lynn Conell-Price & Marli W. Dunietz & Ania Jaroszewicz & Rachel Landsman & Diego Lamé & Lise Vesterlund & Stephanie Wang & Alistair J. Wilson, 2015. "The Effect of Incentives on Real Effort: Evidence from the Slider Task," CESifo Working Paper Series 5372, CESifo.
    2. Jonathan DE QUIDT & Maitreesh GHATAK, 2018. "Is The Credit Worth It? For-Profit Lenders In Microfinance With Rational And Behavioral Borrowers," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 89(1), pages 175-199, March.

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    More about this item

    Keywords

    social enterprise; motivated agents; non-profits;
    All these keywords.

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

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