The Contingent Relationship Between Purpose and Profits

Abstract

When do for-profit corporations pursue both purpose and profits and when do they prioritize one over the other? This study explores this question, measuring the strength of purpose based on the perceptions of nearly 1 million employees across 635 U.S. public companies within 14 industry categories. Two main findings emerge. First, the relationship between purpose and profits varies widely across companies and industries. Second, companies with higher levels of innovation intensity, intangible capital, or long-term investors tend to pursue both purpose and profits, whereas companies with lower levels of these factors tend to prioritize one over the other. This evidence suggests that purpose and profits are compatible in settings that rely on innovation and long temporal horizons for value creation and opposed in settings that do not. History: This paper has been accepted for the Strategy Science Special Issue on Corporate Purpose. Funding: C. Gartenberg acknowledges financial support from the Govil Family and the Wharton School.