We compare the strategic behavior of cooperatives to alternative organizational forms (for-profit and state-owned organizations) in the pursuit of community-based benefits beyond profits. Specifically, we examine credit cooperatives, where clients (borrowers) are owner-members, and analyze their responses to the increased digitalization of the banking sector. We hypothesize that client ownership amplifies the importance of in-person relational channels, prompting cooperatives to retain more physical branches as digitalization accelerates. We also posit that the propensity of cooperatives to keep those branches increases in vulnerable markets and when cooperatives are organized as single vs federated organizations. To test our hypotheses, we track 46,143 Brazilian bank branches between 2012 and 2021 and their reactions to a regulatory change that accelerated digitalization in the financial sector. Consistent with our predictions, credit cooperatives keep a stronger physical presence than other organizational forms following the regulatory change, particularly in vulnerable areas. However, contrary to our expectations, cooperative federations expand more than single ones, benefiting from their improved scale and governance structures designed to support new entries. Overall, this study sheds light on the role of cooperatives as a relevant organizational form in which clients exert pronounced strategic influence, yielding critical implications for organizational strategy and value allocation.

Socially responsible investment (SRI) funds claim to invest in firms with high social performance and engage with them to push them to improve their social performance. However, based on existing empirical evidence, it remains unclear whether they actually do so. Therefore, to assess whether SRI funds attempt to deliver on their promises, we examine how they respond when firms are targeted by activist hedge funds. As activist hedge funds often get firms to redirect their resources and managerial attention toward their priorities (which are often related to short-term financial performance), there is an impending risk that firms' social performance declines. Given this risk, it is important to ask whether SRI funds fight to push firms to prioritize social performance or they avoid investing in such firms to ensure that they have firms with high social performance in their portfolio. Using the difference-in-differences methodology, we analyze panel data on 462 firms from 2010 to 2022 and find evidence suggesting that SRI funds flee rather than fight. This finding illustrates that SRIs prioritize delivering on their promise of investing in socially responsible firms over their promise of engaging in activism to make firms socially responsible.

This study explores the configuration of multi-partner collaborations (MPCs). While the pooling of resources and sharing of risks among multiple partners offer substantial benefits, they also introduce governance complexity and collaboration costs associated. Previous research suggests proposed dominant-partner governance as a solution, where powerful partners act as peacekeepers and coordinators to mitigate collaboration challenges. This solution, however, assumes that the dominant partner possesses both the expertise and objectives aligned with the collective entity. We examine the effects of dominant-partner governance within the context of project-financed infrastructure projects. We investigate the role of government as a dominant partner and find that while such involvement tends to reduce the size and diversity of expertise within the group, these negative impacts are moderated by the government’s collaborative capabilities and its reliance on resources from private partners. Based on an original dataset of more than 1,200 projects across 68 countries and five sectors from 1997 to 2020, our findings contribute to a nuanced understanding of MPC dynamics and configuration.

We develop a conjectural variation model of strategic Corporate Social Responsibility (CSR) orchestration in business groups, drawing on characteristics of fungibility and scale-free deployment to derive generalizable insights on the mechanisms of intangible resource allocation. The model shows how structural position and resource characteristics jointly determine optimal distribution patterns, emphasizing how groups balance cooperative value creation against competitive rent extraction when coordinating partially non-rival resources like brands, knowledge, and reputation. Using disaggregated CSR data from Indian firms from 2000-2013, we document two distinct channels of influence. First, through strategic coordination, where core firms lead value-enhancing resource creation with 42.5% higher sensitivity to industry CSR propensity compared to standalone firms. Second, through pyramidal ownership structures that enable tunneling via asymmetric cost allocation, particularly pronounced for high-fungibility activities. These effects are more than twice as large for reputation-enhancing CSR compared to localized community investments, consistent with differential resource transferability. Our findings extend internal markets theory beyond tangible capital allocation by developing micro-foundations for how rational economic agents navigate the tension between value creation and private benefits in coordinating strategic investments in less contractible resources.

This study examines how stakeholder orientation influences a firm’s likelihood of becoming an acquisition target. Firms with high stakeholder orientation foster complex, trust-based relationships with stakeholders, creating resources that are socially embedded and causally ambiguous. This complexity poses two challenges for prospective acquirers. First, the information mechanism highlights difficulties in evaluating stakeholder-oriented firms’ resource configurations due to their intangible and opaque nature, increasing perceived risks of adverse selection. Second, the combination mechanism addresses concerns about integrating relational resources, which are often deeply tied to firm-specific routines and difficult to transfer post-acquisition. Analyzing 3,684 U.S.-listed firms (1991–2012), the study finds a negative association between stakeholder orientation and acquisition likelihood, driven primarily by information asymmetry. These findings provide a nuanced understanding of stakeholder resources in acquisition dynamics.

We investigate why distributors struggle to scale last-mile distribution of durable goods in Base of the Pyramid (BoP) markets, introducing the concept of supply chain relationship resilience—the ability to recover from disruptions, measured as the ratio of post-disruption to pre-disruption revenue. We build a model to demonstrate how supply chain relationship resilience shapes a distributor’s allocation of retailers to sales executives. If resilience levels are uniform across informal and formal retailers, the distributor’s optimal assignment to sales executives is fully unbalanced (i.e., most sales executives handle only one etailer type). We then show how accounting for differences in supply chain relationship resilience can dramatically change the firm’s optimal sales executive assignment strategy.

Using data from 319 formal and 505 informal retailers in India, we employ quasi-experimental methods to examine how supply chain relationship disruptions affect subsequent retailer performance. While formal retailers show no significant effects, informal retailers experience a 43.5% decrease in order value relative to the control group, with no sustained recovery within four 60-day periods post-disruption. These findings highlight the importance of relationship resilience in BoP operations, suggesting that managers should consider informal retailers' lower resilience when allocating resources and designing distribution strategies to improve last-mile delivery performance.

Urban riots, as nascent social movements, create significant challenges for firms by disrupting local communities and impacting firm performance and survival. In this paper, we investigate how community embeddedness—defined as the socio-demographic and cultural alignment between a firm and its local community—moderates the relationship between riot intensity and firm outcomes. Using data from firms in riot-impacted and non-impacted cities following the 2005 urban riots in the Paris area, we find that community embeddedness positively moderates the negative effect of riot intensity on short-term performance. However, in the long term, greater community embeddedness is associated with a higher risk of firm failure in high-intensity riot contexts. Our results, therefore, provide evidence of a paradox of embeddedness for firms deeply impacted by the riots—where deeper integration with the local community provides short-term benefits but leads to long-term vulnerabilities— which highlights the complexities firms face when balancing local ties and adaptability in volatile environments.

The diffusion of technological innovations in low and middle-income countries has been facilitated by the use of Rent-To-Own (RTO) business models, which give flexibility to consumers by allowing them to make incremental payments over time. Motivated by an application of RTO to the distribution of solar lamps in low and middle-income countries, we examine the drivers and impact of payment flexibility on repayment performance and consumer behavior in RTO contracts. We formulate a stochastic dynamic programming model that characterizes an important dimension of payment flexibility, i.e., the ability of consumers to make bundled payments (multiple installments paid at once, in advance). We characterize when and why bundled payments are more likely to occur. We examine different flexibility levers that the firm can adjust as part of its contract design (repayment frequency/installment amount, grace period), accounting for the impact of bundled payments. Our results show that an intermediate level of flexibility could benefit both the firm and consumers under some conditions. Our findings indicate that a moderate level of flexibility can go a long way in helping firms and consumers in these environments. Hence, RTO firms may not need to offer extreme degrees of flexibility in order to achieve desirable outcomes.

This paper explores how regulatory ambiguity—a distinct yet related concept to uncertainty—plays a crucial and understudied role in shaping entrepreneurial entry into regulated markets. Unlike uncertainty, which can be reduced by acquiring more information, ambiguity arises from the presence of multiple, conflicting interpretations of existing information and may persist or even increase with additional data. Our study proposes that regulatory ambiguity increases with imprecise regulatory language, creating cracks in the rigid regulatory environment that allow entrepreneurs to actively experiment. To explore this, we leverage regulatory ambiguity in state policies regarding geothermal energy definitions between 1960 and 1990. Using a synthetic control method, our results show that ambiguity increases market entry, with effects largely driven by de novo entrants. Further analyses suggest that increased ambiguity leads to greater use of advanced technologies among market entrants. This study stresses the importance of accounting for ambiguity when examining how organizations respond to complex institutional environments.

This study examines how U.S. power sector firms respond to environmental regulation violations, focusing on facilities flagged by the EPA for non-compliance. In response, these plants implement various strategies to reduce air pollution and prevent future violations, including cutting electricity generation, improving fuel quality, reducing coal use, installing scrubbers, enhancing pollution controls, and investing in energy-efficient generators. Organizational efficiencies and government subsidies further strengthen these efforts. While these actions aid environmental recovery, the costs of compliance are often passed on to local communities through higher electricity prices, raising concerns about social equity. Following a violation, firms generally experience increases in assets, capital expenditures, debt, revenues, and electricity prices, yet operating income remains unaffected. Our findings highlight that while market competition and government subsidies can help alleviate some of the financial burden on consumers, these subsidies often fall short of promoting the long-term investments in advanced technologies necessary for sustained environmental progress.

This paper argues that business ethics as a field requires a normative reconstruction of its foundations. Over the course of several centuries, social misdevelopments have occurred in the economic sphere of business firms and markets. Successive approaches in business ethics such as those flying under the banners of corporate social responsibility, stakeholder theory, ESG (environmental, social, and governance), and business purpose have so far proven inadequate to the task of addressing these misdevelopments because they do not go deep enough to explore the normative foundations of the division of labor in society. The social philosopher Axel Honneth, following Friedrich Hegel, Adam Smith, and others, has argued for a method of “normative reconstruction.” This paper reviews Honneth’s approach in the context of business ethics. It argues for a normative reconstruction of business that recommends institutional change from both the bottom up (business participants) and the top down (governance and law).

How significant are pay gaps in the U.S.? Utilizing the release of Type 2 EEO-1 forms by the Department of Labor, which covers over 11,000 public and private U.S. contractors, we estimate gender and race/ethnicity pay disparities. Our analysis reveals that these government contractor firms save, on average, over $49 million annually for public firms and $6 million for private firms by employing women and minorities. Notably, private firms exhibit larger pay gaps per worker than public firms, and pay disparities increase with firm size within both public and private sectors. We also analyze market reactions to the disclosure of these EEO-1 forms and identify a positive association between market responses and the size of the firm's pay gap, indicating that investors perceive pay gaps as net value-enhancing. Our results remain consistent across various control variables, including firm productivity, workplace diversity, the job functional structure, and state and industry influences. These insights should enlighten stakeholders regarding the magnitude, drivers, and market valuation of pay gaps. Moreover, they imply that capital markets alone may not effectively resolve systemic pay inequities in the U.S.

Industry awards convey status and visibility to their winners, but evaluation biases can limit how equitably these benefits are distributed. Indeed, award-giving organizations are often criticized for not recognizing the achievements of women and racial minority workers. Interventions to close these gender and racial gaps have focused on diversifying award committees to reduce evaluation biases, with mixed direct effects on awards decisions. This paper investigates the indirect effects of these interventions, specifically how diversifying award committees influences hiring decisions within the evaluated industry. Using archival data on 193,394 hiring decisions on 6,999 films released in the U.S. from January 2010 to April 2021, I examine an intervention by the Academy of Motion Picture Arts and Sciences to increase the number of women and racial minority Oscar voters. The results show a positive association between the Academy’s intervention and the likelihood of award-seeking film productions hiring women or racial minority workers. Moreover, these hiring effects are concentrated in visible occupations and primarily benefit workers who are Academy members, suggesting a strong strategic component in organizations’ response to the evaluator’s diversity intervention. These findings provide insights into the role that awards and third-party evaluators can play in reducing inequality within an industry.

Focusing on a firm’s imbalance between internal and external stakeholder orientations, we propose that the impact of this stakeholder disparity on the firm’s market value depends on country-level trust. Integrating sociology research on societal trust with strategy research on corporate social responsibility (CSR), we argue that firms in countries with higher outgroup trust experience more negative effects from gaps between internal and external CSR actions. In contrast, in countries with greater ingroup trust compared to outgroup trust, the negative impact of the CSR gap on firm value is mitigated. Our empirical analysis of firms across 46 countries supports our predictions. Our study is the first to theoretically and empirically demonstrate the multilevel social capital framework on firm value throughout the cross-national investigation of the interactive influence of firm-level stakeholder orientations and country-level trust radius.

This study explores the impact of local opioid exposure on the performance of U.S. public firms and examines whether these effects propagate through supply chain networks to their downstream customers. Methodology/results: Analyzing a sample of 2,617 public suppliers and 1,473 public customers from 2003 to 2020, the study finds that firms headquartered in areas with high opioid exposure see a reduction in sales. We establish causality by using the introduction of staggered state-level prescription drug monitoring programs (PDMPs) as exogenous shocks to opioid exposure and running a difference-in-differences (DID) test to analyze the impact. PDMPs could mitigate the negative impact of opioid exposure, resulting in a 5.7% increase in sales. Furthermore, we document that this negative impact propagates to downstream customers: a one-standard-deviation increase in supplier opioid exposure, measured by the average opioid-related death rate across the headquarters counties of its suppliers, reduces customer sales by 2.92%. This relationship is causal and holds when controlling for customers’ opioid exposure. We rule out the alternative explanations of common shocks. The spillover effect is more pronounced when suppliers are in labor-intensive industries and when customers face higher costs for switching suppliers. Finally, customers make strategic adjustments to manage supplier opioid risks.

This study examines the distributional consequences of broadening stakeholder governance; i.e. expanding firm governance rights to non-equity, or contracted, stakeholders. We theorize that broadening stakeholder governance initially reduces the residual value left to equity providers, due to increased coordination costs and heightened claims on firm resources by contracted stakeholders. However, these effects diminish as firms with broadened stakeholder governance mature. Over time, diminishing coordination costs and increasing returns from firm-specific investments generate enough value to increase the residual value left to equity providers. Additionally, we propose that contracted stakeholders with governance rights are willing to compromise their claims when the focal firm faces economic difficulties. As a result of these dynamics, we argue that broadening stakeholder governance is likely to increase firm survival. To test these arguments, we analyze longitudinal French tax and archival data on firm with varying governance structures. Taken together, our findings highlight the temporal trade-offs of stakeholder governance, which bear implications for value creation and value capture dynamics in firms with broadened stakeholder governance.

When multinational corporations engage in tax avoidance while committing significant human rights abuses, they epitomize the worst excesses of globalization: imposing severe social costs on workers, communities, and the environment while depriving states of the fiscal resources necessary to address these harms. This dual failure—economic and ethical—poses serious risks to democratic governance. Analysing data from 83 of Europe’s largest corporations (2000–2020), this paper explores the link between tax avoidance and human rights violations, highlighting the moderating influence of institutional investors. Our findings reveal that firms investing in tax havens jurisdictions are also more likely to directly abuse human rights, with institutional ownership reducing this tendency. Notably, the connection between tax avoidance and rights violations is strongest when abuses occur outside Europe.

This study examines how social connectivity, particularly face-to-face interactions, enhances user engagement and collective action within social mission platforms (SMPs), using recycling behavior as a focal point. While digital platforms typically expand through network effects and online interactions, we argue that integrating face-to-face communication can significantly increase participation and group cohesion and improve platform effectiveness. Through a case study of the recycling SMP Yoyo and two experimental studies, we find that face-to-face interactions increase first-time participants’ recycling contributions but can also trigger collective flight, where disengagement by some participants prompts broader declines in participation. Furthermore, we find that simply invoking social connectivity through communication frames, embedded in a targeted messaging campaign, can encourage “idle” participants to follow through and start contributing to the SMP’s objectives. These findings underscore the value of interpersonal connections in SMP design while highlighting potential risks related to group dynamics. We discuss the implications for SMP design strategies and suggest future research directions to deepen our understanding of digital-physical engagement for social impact.

This paper adopts a question-driven approach to compare the strategies of for-profit firms and non-profits when entering markets for social services and their connection to long-term firm outcomes. It examines the period following legislation that, for the first time, allowed for-profit firms to operate in Brazil’s higher education market. Using quantitative analysis and qualitative interviews, we show that, compared to non-profits, for-profit firms started operations with broader service portfolios, offered more market-oriented degrees and adopted more flexible human resource management. These strategies were positively associated with firm survival and growth, accounting for a significant share of the performance differences between for-profits and non-profits. Differences in the social orientation of non-profits partially explained these disparities. This research underscores the role of for-profit firms in the provision of social services.

CEOs engaging in activism have an opportunity to shape how individuals perceive their views on the specific issue they are addressing. Moreover, such activism can prompt individuals to update their perceptions of the CEO’s stance on other social or political issues, as well as their views on the company’s work environment. In a pre-registered experiment, we examine how individuals update their beliefs about CEOs and their companies when exposed to CEO activism. Our findings indicate that individuals adjust their beliefs about the CEO’s views on the focal issue in alignment with the CEO’s stance. Additionally, they revise their perceptions of the CEO’s positions on other social or political issues and the company’s work environment when informed about the CEO’s stance on an individual issue. These results underscore the nuanced and constrained ways individuals update their beliefs about CEOs and firms, with the CEO’s inferred political ideology emerging as a key mechanism influencing these updates.

We examine how social movement organizations (SMOs), particularly third-party rating agencies, can catalyze rapid shifts in social norms among an organizational population. We propose that rating agencies can instigate new social norms by defining appropriate and acceptable standards of performance that prompt organizations to realign their behaviors to mirror these new standards, thereby accelerating changes in shared understandings regarding appropriate firm behavior. We tested our theory by analyzing how members of the S&P 500 index adapted to a new gender diversity rating by KLD Research & Analytics, focusing on the acceptance and implementation of gender diversity standards on corporate boards during the early 1990s. Our results suggest that firms rated for their gender diversity were more likely to increase female board representation, particularly those firms initially not meeting the standard set by the rating agency. This public rating not only shifted behavior, but also shifted the underlying norm for gender diversity among S&P 500 companies. These findings challenge the traditional view that social change is gradual and highlight the potential of ratings as an alternative governance tool for practitioners and policy makers interested in changing corporate behavior.

We examine the effectiveness of both implicit and explicit contracting in linking executive compensation to environmental and social targets ("ES Pay"). Consistent with predictions from contract theory, firms with explicit ES Pay schemes demonstrate better ES performance for targets that can be precisely measured, such as emissions. By contrast, implicit ES Pay schemes are ineffective for targets that are easily measurable. However, they are effective and can even outperform explicit schemes for targets with less precise performance measures, such as community engagement. While our results show that the use of effective ES Pay is uncommon so far, they indicate that firms could improve their ES performance by utilizing explicit contracts for measurable targets and implicit contracts for hard-to-measure targets.

Firms increasingly need to attend to diverse stakeholder groups with different demands and integrate a variety of sometimes-competing societal priorities within their business activities. Yet corporate sustainability research provides limited insight into how different sustainability dimensions may potentially interact, often implicitly assuming independence across diverse sustainability dimensions. We illustrate this issue by documenting how efforts to accelerate growth of green jobs to mitigate climate change appears to be associated with a negative impact in terms of slowing down progress towards meeting workforce diversity goals. Our empirical analysis relies on detailed online job profile data on over 16 million individual job positions in 713 Fortune 1000 firms in the US between 2011 and 2022. We further explore micro-level mechanisms behind this trade-off, specifically those related to the locational features typical of green jobs, as potentially driving this effect. We argue that making progress on one dimension of sustainability sometimes have undesirable effects on another dimension, thus highlighting potential trade-offs among different dimensions within sustainability, challenging that these can be pursued independently. In doing so, we contribute to the emerging literature on the multiplicity of dimensions within sustainability and the potential trade-offs encountered in managing across multiple dimensions.

Green patents are especially suitable for firms to gain distinctive market positions because of their high novelty. However, the high uncertainty and pressure by regulation and society incentivize firms to gain legitimacy by following competitors. Applying a strategic balance lens, we explain how green patenting distinctiveness contributes to firm value. Firms also struggle to maintain green patenting persistence and supplement green patents with green CVC investments. As ideal distinctiveness needs to be balanced across several strategic dimensions in the green context, green patenting persistence and green CVC portfolio distinctiveness are important moderators to consider. We find that green patenting persistence does not significantly affect the association between green patenting distinctiveness and firm value. However, green CVC portfolio distinctiveness negatively moderates this association because its saliency undermines legitimacy. We build our empirical tests on a multi-source dataset of S&P 500 firms from 2008 to 2023.

We examine the comparative role of public versus private actors in addressing grand challenges through adoption of desalination technologies that vary in sustainability dimensions. While prior research has explored how governments promote new technologies via supply-side (e.g., via subsidies), we explore public (versus private) actors’ role on demand-side (as clients). Using data on historical droughts and all desalination investments worldwide (1950s-2015), we find that, while private clients respond with more plants launched, public clients are associated with more energy-efficient technology choices. Crucially, this effect is contingent upon the institutional development of the countries. We further demonstrate how both sector investments are associated with negative externalities through environmental pollution. By highlighting sustainability trade-offs, we foster a better understanding of economic organizing for pressing societal issues.