Why Do Firms Strive for Non-Pecuniary Performance?

Abstract

The present paper develops an explanation of non-pecuniary performance of firms, which extends current ethical and financial rational and encompasses multiple levels of stakeholder analysis. Drawing from social identity theory and the literature on organizational reputation, we show that identity overlaps between managers and organizations create an incentive to protect and build corporate reputation, thereby motivating managers to produce non-pecuniary performance outcomes that satisfy reputation forming stakeholders. We suggest that the link between identity overlaps and the incentives to build and protect corporate reputation is moderated by the type of the manager's commitment and provide empirically testable propositions for our claims. We use the family business, a particularly high identity overlap organization, as a context to explore our arguments.

Keywords: family firms, stakeholder theory, non-pecuniary performance, social identity theory, organizational reputation

JEL Classification: M13