Panel Paper: Complements Or Substitutes? B-Corporations, the Nonprofit Sector, and the Blurring Line Between the Market and Philanthropy

Friday, November 8, 2013 : 10:25 AM
Washington (Ritz Carlton)

*Names in bold indicate Presenter

Adam Eckerd, Virginia Tech and Stephanie Moulton, The Ohio State University
More than 600 organizations nationwide are now certified as “B-Corporations”, legally integrating public purposes, accountability and transparency into their founding documents and stated corporate missions. As stated in their “Declaration of Independence,” B Corporations envision themselves as “a new sector of the economy which harnesses the power of private enterprise to create public benefit”. Twelve states currently recognize the legal status of Benefit Corporations.

Going further than legal status, B-Corporations are certified by B-Lab, a nonprofit organization with a defined set of requirements assessing a firm's commitment to its community, environmentally sound business practices, accountability and transparency. Some of these requirements focus on roles that have traditionally been the focus of the philanthropic sector. On the one hand this could provide nonprofits with an additional source of revenue without having to enter the fray of the market on their own. On the other hand, nonprofits may find themselves competing for resources from firms who can market “social-friendly” goods to consumers. For this study, we employ a unique panel data set collected as part of the initial and ongoing certification process, which has been made available to the researchers under contract with Duke University and B-Lab, and provides a first look at the characteristics and performance (including public benefit) of certified B-Corporations.

Drawing from organizational sociology, institutional theory, and the literature on CSR (Bies et al. 2007; Galaskiewicz 1991; Marquis, Glynn, and Davis 2007; Scott 2001, 2003; Terlaak 2007), we investigate the extent to which B-Corporations tend to focus on addressing community needs indirectly through cooperation with local nonprofits, or directly through such activities as hiring local residents, community-building efforts, or altering business practices in environmentally friendly ways. Using a combination of perceptual data and indicators of organizational structure, we model the propensity of B-Corporations to work indirectly on social impact via nonprofits versus direct action by the corporation itself.  We then elaborate on the scope of the B-Corporation movement and discuss the social impact of these organizations to this point. Finally, we discuss some of the potential implications for the 20 states currently considering legally recognizing Benefit Corporations.