Abstract
We empirically test whether B Corp certification affects the short- and medium-term growth rates of sustainable enterprises. These businesses are growing in popularity and prevalence but, due to their hybrid nature, often suffer from external credibility issues and competing internal logics. Because of the rigorous and time-involving audit procedure, B Corp certification potentially sends a credible signal about the sustainable nature of the enterprise to its stakeholders. In addition, the B Corp label could help to straighten out internal tensions and align the company towards its dual purpose. Hence, B Corp certification could contribute to company success. We observe 129 firms that were certified between 2013 and 2018 over a period between six years prior and five years post-certification. Using propensity score matching, we identify 129 non-certified matching companies. On this sample, we conduct a difference-in-differences panel regression analysis to investigate the effect of certification. Our dataset allows us to study how the effects of B Corp certification evolve over time, which was previously untested. Our study documents a positive effect of B Corp certification on turnover growth and also that this effect increases with the time since certification, implying that certification requires some time for its full effect to become apparent.
Highlights
The research objective of this paper is to empirically assess the short- and mediumterm effects of B Corp certification on the financial success of European sustainable enterprises
The sample that was used for the matching procedure consisted of 2,995,223 observations of potential control firms and 147 observations of treated firms, both covering the years 2012 to 2017
Potential control firms were included for each year that they had sufficient data to estimate the propensity scores (PS).) After estimating the PS, 91,597 observations of potential control firms were discarded from the sample when performing the nearest-neighbor matching, as their PS did not fall within the area of common support
Summary
The research objective of this paper is to empirically assess the short- and mediumterm effects of B Corp certification on the financial success of European sustainable enterprises. Sustainable enterprises are hybrid enterprises that pursue sustainability (social and/or environmental) goals in addition to their financial goals [1]. A problem typical of hybrid enterprises is that they experience tensions from their dual nature [3]. These tensions arise because the dual targets are often internally competing and hinder the credibility towards internal and external stakeholders [4], which may impair hybrid companies’ financial growth [5]. The internal changes that are implemented due to the intensive non-financial audit procedure might result in the reinforcement of the commercial and social/environmental logics, which could in turn mitigate the internal tensions [4]
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