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Abstract:

Development Discussion Paper
Profit with Purpose? A Theory of Social Enterprise with Experimental Evidence
Timothy Besley and Maitreesh Ghatak
November 2013
Paper No' EOPP 047:
Full Paper (pdf)

Tags: social enterprise; motivated agents; non-profits

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.