Can Purpose Foster Stakeholder Trust in Corporations?

Ranjay Gulati · Franz Wohlgezogen

50 citations0/0 files storedStrategy Science

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Organizational Strategy and Culture Corporate Social Responsibility Reporting Corporate Identity and Reputation

Abstract

As part of institutional changes toward more responsible capitalism, firms increasingly articulate a purpose beyond simply profit as a central tenet of their governance. Management scholarship has noted the potential advantages of such purpose-focus for stakeholder trust. However, some consumers, employees, and shareholders have expressed skepticism about the veracity of firms’ purpose claims and raised concerns about purpose-washing. We propose two distinct influence pathways—one cognitive, one affect-based—by which corporate purpose can influence stakeholder trust. First, purpose constitutes a signal of firm intent and quality that expresses a firm’s public, enduring commitments. It fosters cognitive trust by providing clarity and assurance regarding the firm’s future conduct, allowing stakeholders to better calculate relational and reputational risk and the instrumental value of exchange—even when they do not share the firm’s prosocial mission, principles for stakeholder relations, or its conception of virtues. Second, purpose presents a moral appeal to stakeholders. This appeal can stimulate positive affective responses, activate stakeholders’ hedonic and eudaemonic motives tied to their moral identity, and thus provide intuitive cues to trust the firm. By sharply delineating the pathways by which purpose can shape interorganizational trust, we not only illuminate how purpose can yield trust benefits but also when it is ineffectual and causes stakeholder backlash. This clarifies the role of purpose in shaping relational governance and multistakeholder cooperation and contributes to research on strategic and moral commitments as foundations of interorganizational trust. History: This paper has been accepted for the Strategy Science Special Issue on Corporate Purpose.

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2023Green corporate image: Assessing the effects of climate change management practices on corporate reputation 2023Systemic Symbolic Management, Corporate Social Responsibility, and Corporate Purpose: A Cautionary Tale 2024Purpose in Management Research: Navigating a Complex and Fragmented Area of Study 2023Inside-out and Outside-in Perspectives on Corporate Purpose 2023The Contingent Relationship Between Purpose and Profits

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