To Profit or Not to Profit? The Role of Greed Perceptions in Consumer Support for Social Ventures SAEROM LEE LISA E. BOLTON KAREN PAGE WINTERICH An increasing number of social ventures are for-profit companies (i.e., for- profit social ventures) that seek to advance a social cause while making a profit. In a series of seven studies, this research investigates consumer sup- port for organizations as a function of their social mission and profit orienta- tion. The impact of profit orientation on consumer support depends on the prominence of the organization’s social mission. For organizations with a prominent social mission, profits are interpreted as a signal of greed; absent a prominent social mission, a for-profit orientation can instead imply greater competence. As a result, consumer support of for-profit social ventures suffers in comparison to both nonprofits and traditional for-profits—a downside to the organizational benefits of for-profit social ventures identified in prior research. In addition, this research investigates organizational factors—including exces- sive organizational spending, profit perceptions, and operational efficiency cues—that alter greed perceptions and consequently support for for-profit so- cial ventures. Together, this research sheds light on consumer reaction to organizations that support social causes, with implications for the social ven- ture marketplace, including the nonprofit versus for-profit quandary faced by social entrepreneurs. Keywords: for-profit social ventures, nonprofit, greed, social mission, profit orienta- tion, communal norms A social entrepreneur’s quandary: non-profit or for-profit? Saerom Lee ([email protected]) is assistant professor of marketing —New York Times, 10 July 2013 at the University of Texas at San Antonio, College of Business, One For love or lucre UTSA Circle, San Antonio, TX 78249. Lisa E. Bolton ([email protected]) —Stanford Social Innovation Review, spring 2011 is professor of marketing and Frank and Mary Jean Smeal Research Fellow at the Pennsylvania State University, 441 Business Building, Social ventures—organizations serving an explicit social University Park, PA 16802. Karen Page Winterich ([email protected]) is as- purpose through transactions in the marketplace—are on sociate professor of marketing and Frank and Mary Jean Smeal Research the rise (Austin, Stevenson, and Wei-Skillern 2006; Hall- Fellow at the Pennsylvania State University, 449 Business Building, University Park, PA 16802. This research was supported in part by re- Phillips et al. 2015; McKeever and Pettijohn 2014). search grants from the Smeal College of Business and the Smeal College Notably, an increasing number of social ventures are for- of Business Sustainability Research Initiative. Supplementary materials profit companies that seek to benefit social causes through are included in the web appendix accompanying the online version of this the efficiency and effectiveness associated with for-profit article. organizations (Dees and Anderson 2003; Easterly and Vicki Morwitz served as editor and Lauren Block served as associate Miesing 2007; Lumpkin et al. 2013). In comparison to non- editor for this article. profit organizations, for-profit social ventures (hereafter FPSVs) exist to address social issues but also have the abil- Advance Access publication May 31, 2017 ity to retain profit. Hence, social entrepreneurs face a VC The Author 2017. Published by Oxford University Press on behalf of Journal of Consumer Research, Inc. All rights reserved. For permissions, please e-mail: [email protected] Vol. 00 2017 DOI: 10.1093/jcr/ucx071 1 2 JOURNAL OF CONSUMER RESEARCH quandary—whether to seek for-profit or nonprofit orienta- attest, FPSVs vary in their social purpose (e.g., education, tion when pursuing a social mission. We address this ques- environment, labor), revenue generation (e.g., sales of tion, and the corresponding gap in the literature opened up goods and services, donations), as well as their correspond- by the recent rise in FPSVs, by exploring consumer support ing business practices. for social ventures as a function of their profit orientation Having said that, FPSVs all share two important and dis- and the prominence of their social mission. tinguishing characteristics. First, FPSVs exist, at least in Our research contributes to the literature in several part, to serve a social mission. This presence of a social ways. First, academic and public discourse has tended to mission is shared with their nonprofit counterparts, and focus on organizational benefits of FPSVs (Dees and some FPSVs even directly compete with nonprofit organi- Anderson 2003; Harrison 2006; Ransom 2008) without zations for consumer support (Cohen 2014; Knobel 2011; consideration of consumer perceptions (Battilana et al. Lumpkin et al. 2013). Second, FPSVs have a for-profit 2012; Leimsider 2014). Second, prior work on consumer orientation. This for-profit orientation is shared with trad- support for social causes has tended to focus on consumer itional for-profits and, indeed, many FPSVs in the United support of nonprofit organizations (Bekkers and Wiepking States are legally indistinguishable from for-profit compa- 2011; Lee, Winterich, and Ross 2014; Shang, Reed, and nies (Dees and Anderson 2003). Hence, FPSVs differenti- Croson 2008; Small and Verrochi 2009; White and Peloza ate themselves from both for-profit companies and 2009; Winterich, Mittal, and Aquino 2013). We address nonprofit organizations in the marketplace via their social these gaps by investigating how consumer support for a so- mission and profit orientation. The present research will in- cial venture is affected by the organization’s profit vestigate the impact of these factors on consumer support, orientation. which is important to understand because FPSVs rely on Third, prior research has examined consumer percep- consumer support via purchases and/or donations to ac- tions of nonprofit and for-profit organizations (Aaker, complish their social goals. We begin by considering how Vohs, and Mogilner 2010) and, more broadly, the inherent profit orientation affects consumer support for FPSVs. trade-off between doing good and doing well (Lin-Healy and Small 2012, 2013; Luchs et al. 2010; Newman, Gorlin, and Dhar 2014; Torelli, Monga, and Kaikati 2012). We ex- Profit Orientation and Competence pand this work by investigating how organizational percep- On the one hand, consumer support may favor FPSVs tions vary as a function of both profit orientation and the over their nonprofit counterparts. Certainly, academic dis- prominence of the organization’s social mission. Fourth, course points to various benefits of a for-profit orientation we build upon prior research on consumer perceptions of for social ventures. For example, Dees and Anderson organizational greed (Gre´goire, Laufer, and Tripp 2010), (2003) state, “The profit motive, if properly channeled, has which has received scant attention in prior literature (Lee the potential to encourage efficiency and innovation.” et al. 2014; Shang et al. 2008; Small and Verrochi 2009; Indeed, social entrepreneurs often point to the burden of Smith, Faro, and Burson 2013; White and Peloza 2009; donor dependency and the social and sustainability benefits Winterich et al. 2013). Specifically, we place greed percep- of operating as a for-profit (Berry 2013; Chhabra 2013a; tions within a nomological network that emphasizes the but see Leimsider 2014). However, claims about the bene- distinguishing characteristics of social ventures: profit fits of FPSVs (Harrison 2006; Ransom 2008) have tended orientation and social mission. Finally, our research has to focus on organizational issues such as legal structure implications for both consumers and marketing practice of and financing without consideration of consumer percep- nonprofits and for-profit social ventures—including the tions (Battilana et al. 2012; Leimsider 2014). aforementioned quandary in social entrepreneurship. Some consumer research also points to benefits of a for- profit orientation. For example, consumers perceive for-profits as more competent (though less warm) than CONSUMER SUPPORT FOR SOCIAL nonprofits (Aaker et al. 2010). Considering consumer pref- VENTURES erence, a for-profit orientation may seem beneficial inas- much as consumers emphasize competence in commercial For-profit social ventures are becoming more prominent, exchanges; indeed, competence can increase product pur- and there is considerable variation in such organizations chase likelihood for for-profits over nonprofits (Aaker (see web appendix study A). For example, Books4Cause et al. 2010). Moreover, research on corporate social re- solicits book, CD, and DVD donations, as well as financial sponsibility (CSR) suggests socially responsible behavior donations to support the African Library Project; Alter Eco can enhance consumer support of for-profit companies sells organic food to its customers and works with small- (Chernev and Blair 2015; Luo and Bhattacharya 2006; Sen scale farmers to help them institute Fair Trade and organic and Bhattacharya 2001) via positive effects on consumer practices; and TerraCarbon provides consulting services in identification and company image (Lichtenstein, support of environmental conservation. As these examples Drumwright, and Braig 2004; Sen and Bhattacharya 2001). LEE, BOLTON, AND WINTERICH 3 Indeed, CSR initiatives can enhance organizational warmth organization is making a profit at the expense of others, the and competence perceptions