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

Final version published in: 11 Review of Law & Economics 2015, pp. 79-110 (doi 10.1515/rle-2014-0036)

MPI Collective Goods Preprint, No. 2013/04

36 Pages Posted: 2 Mar 2013 Last revised: 2 Feb 2016

See all articles by Sven Fischer

Sven Fischer

University of Newcastle - Economics

Sebastian J. Goerg

Florida State University - Department of Economics; Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods

Hanjo Hamann

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods

Date Written: February 1, 2013

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 that have no institutionalized means of enforcing them. By relying primarily on managers' other-regarding concerns whilst leaving corporate incentive structures unaltered, how effective can such legislation be? This question is vital for the ongoing debate about social enterprise forms, as recently introduced in several US states and in British Columbia, Canada. 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 the US, cannot overcome material incentives. However, even absent incentives the stakeholder norm does not foster other regarding behavior but slightly inhibits it instead. Our experiment thus 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.

Keywords: experiment, stakeholder value, social enterprise, benefit corporation, corporate law

JEL Classification: D01, A12, M52, D03, L21, M14

Suggested Citation

Fischer, Sven and Goerg, Sebastian J. and Hamann, Hanjo, Cui Bono, Benefit Corporation? An Experiment Inspired by Social Enterprise Legislation in Germany and the US (Preprint Version) (February 1, 2013). Final version published in: 11 Review of Law & Economics 2015, pp. 79-110 (doi 10.1515/rle-2014-0036); MPI Collective Goods Preprint, No. 2013/04. Available at SSRN: https://ssrn.com/abstract=2226382 or http://dx.doi.org/10.2139/ssrn.2226382

Sven Fischer

University of Newcastle - Economics ( email )

Newcastle-upon-Tyne NE1 7RU
United Kingdom

Sebastian J. Goerg

Florida State University - Department of Economics ( email )

Tallahassee, FL 30306-2180
United States
+1 (850) 644-7083 (Phone)

HOME PAGE: http://www.s-goerg.de

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

HOME PAGE: http://www.coll.mpg.de

Hanjo Hamann (Contact Author)

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

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