Beyond Profits: The Rise of Dual-Purpose Organizations and Its Consequences for Disclosure

Abstract

Organizations with a mission that extends “beyond profit” to achieve broader objectives are becoming increasingly common. This paper studies such hybrid entities—firms that value the profits they generate, as well as the utility they provide to customers—and details their implications for industry disclosure practices. The findings demonstrate that disclosure incentives are perturbed not just from being a hybrid entity, but also from competing with such entities. Accounting for both competitive and disclosure effects, the paper then assesses the circumstances under which a hybrid firm is economically viable and derives the ensuing equilibrium industry composition. As such, we show that the presence of firms with objectives beyond profit can be an endogenous characteristic of many industries.

What level do disadvantaged firms weight rivals' profits in relative performance evaluations under quantity competition?

“…Expanding the mixed oligopoly model, Matsumura and Ogawa (2014) introduce corporate social responsibility, including social welfare in a manager's objective function. Arya, Mittendorf, and Ramanan (2019) and Hino and Zennyo (2017) consider the manager's objective function, which is composed of their firm's profit and the consumer surplus.…”

Horizontal partial shareholding, dual purpose concern, and mixed duopoly competition

“…Let Π i represent the profit of firm i and β represent firm 1's responsible concern for customers or social responsibility preference. Similar to Arya et al (2018) and Wang and Li (2021), the utility functions of each firm can be defined as U 1 ¼ Π 1 þ βCS and U 2 ¼ Π 2 , respectively. Moreover, there exists partial shareholding between firm 1 and firm 2.…”

“…Dual purpose firms (social responsible firms) refer to firms that consider not only profit but also social outcomes or mission, such as consumer welfare and social interests (Arya et al, 2018;Wang & Li, 2021). The previous papers have indicated that the firm's responsible concern may intensify the competition in product market because of higher output and lower selling price.…”

“…This paper is related to the literature stream that examines the economic effect of responsible concern. Arya et al (2018) examine the effect of dual purpose concern on disclosure incentives. Wang and Li (2021) study the effect of downstream firm's responsible concern on upstream firm's entry decision.…”

Supplier Encroachment in the Supply Chain in the E-Commerce Age: A Systematic Literature Review

“…Third, it is general in the selected encroachment literature that scholars assume supply chain members are rational and pursue their own profit-maximizing, which can be viewed as for-profit firms. Nevertheless, the topic of dual-purpose corporations with "beyond profit"motivations is intriguing and would be valuable for practitioners and academic researchers to elaborate in the future [66]. The impact of pursuing the "beyond profit" goal on a firm's profits and the consumer surplus in face of the supplier's encroachment behavior has been investigated by the authors of [50].…”