Why do firms choose to fight poverty?

Abstract

Why do firms adopt inclusive business practices that aim to alleviate poverty or address other social issues? We investigate how organizational motivations, which range from purely intrinsic to purely extrinsic/economic, lead to variations in strategies towards addressing social issues. Based on a conceptual model, we develop a set of hypotheses that relate motivation types to performance differences in inclusive business practices. We test these hypotheses using a survey dataset of small and medium enterprises that pursue inclusive business practices in sub-Saharan Africa. The results show that intrinsic rather than extrinsic motives are important drivers of inclusive business performance. While the overall effect of extrinsic motives is relatively limited, it is significantly greater among large firms in a few domains of inclusive business practice. Finally, we find that extrinsic and intrinsic motives do not reinforce each other, suggesting the limited incidence or efficacy of mixed motives among inclusive businesses in Africa. The results point to the need for greater understanding of the conditions that lead to the emergence of mixed motives for inclusive business.

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