Shifting Mandates and Mindsets: A Study of B Corps in Catalyzing Institutional Change under Shareholder Capitalism

• In Event: 20866 - Organizational Activism and Change

Abstract

We argue that activist corporations can drive institutional change by shifting mandates (formal institutions such as regulators) and/or mindsets (informal institutions such as assumptions of individuals). The existing literature on institutional change has not fully differentiated formal versus informal institutions or examined which may be more receptive to change efforts. Instead of positing a definitive prediction, we present competing hypotheses, suggesting that formal institutions, as codified rules, are tangible and direct targets for change but are often challenging to deal with, whereas informal institutions, rooted in individual beliefs, offer avenues for persuasion, yet deeply entrenched assumptions can stand in the way of such tactics. Importantly, we argue that the presence of infrastructure of formal versus informal institutions can facilitate changes to the respective dimensions of institutions by activist corporations. We show that certified B Corps drive institutional change that broadens corporate responsibilities in different U.S. states under the dominant institution of stakeholder capitalism through political lobbying and community advocacy. We further find that B Corps are faster in initiating changes to informal institutions—diffusing sustainability norms—than formal institutions—the passage of Benefit Corporation laws. We also show that the existing infrastructure of formal (i.e., sustainability-oriented laws) and informal institutions (i.e., sustainability-oriented social norms) accelerates B Corps’ efforts in transforming the respective institutional dimensions. Our results are robust to the potential endogenous location choice by B Corps and different model specifications. Our work contributes to institutional theory by addressing the strategic challenge of prioritizing dimensions of change and the social movement literature on how firms can catalyze societal change.

Authors

• Kunyuan Qiao, Northeastern University

• Christopher Marquis, University of Cambridge