Why Do Firms Have "Purpose"? The Firm's Role as a Carrier of Identity and Reputation

This article develops a theory in which a firm's adoption of a prosocial purpose can increase profitability by strengthening employees' reputation and identity--leading to higher effort and lower wages--as long as implementing purpose is costly with respect to direct monetary payoffs. Employees who value prosocial action will select into firms with a social purpose, which then become a visible carrier for these employees' identity and reputation.