Double Bottom Line: The Use of Performance Incentives in Mission-Driven Firms.

Abstract

In this paper, we examine the effect of introducing an incentive plan based on social performance in a sample of 188 social mission-oriented firms in Korea. We find that social performance of social enterprises (SEs) significantly improves over time after the introduction of an incentive plan based on social performance. Moreover, we document that social bonuses do not harm SEs' financial performance, and that they have a positive spill-over effect on financial performance in SEs that have a higher level of task complementarity between social and financial goals. Finally, our results show that the positive association between social bonuses and social performance is less (more) pronounced in SEs whose managers have higher levels of prosocial motivation (perceived measurability of social performance).