Claudine Gartenberg

Claudine Gartenberg (2023), The Contingent Relationship Between Purpose and Profits, Strategy Science, in press ().

Abstract: When do for-profit corporations pursue both purpose and profits and when do they prioritize one over the other? This study explores this question, measuring the strength of purpose based on the perceptions of nearly 1 million employees across 635 U.S. public companies within 14 industry categories. Two main findings emerge. First, the relationship between purpose and profits varies widely across companies and industries. Second, companies with higher levels of innovation intensity, intangible capital, or long-term investors tend to pursue both purpose and profits, whereas companies with lower levels of these factors tend to prioritize one over the other. This evidence suggests that purpose and profits are compatible in settings that rely on innovation and long temporal horizons for value creation and opposed in settings that do not.

Claudine Gartenberg and Shun Yiu (2023), Acquisitions and Corporate Purpose, Strategy Science, in press ().

Abstract: Purpose is undergoing a resurgence of interest across research and practice. Yet, we know little about how it relates to strategy and specifically, how strategic actions reinforce or undermine purpose in organizations. This study explores this question in the context of acquisitions. We examine 831 transactions using data from approximately 1.7 million employees to construct our measure of purpose. We find that, on average, employees’ sense of purpose drops after acquisitions. This drop is particularly pronounced among firms that undertake unique acquisitions: those involving unusual industry combinations. This relationship suggests a possible tension between strategic and motivational consequences of boundary changes. Firms may benefit strategically from these changes, particularly those that enable expansion into unique areas. These same actions, however, may also erode the purpose of the organization, with consequences for downstream performance.

Claudine Gartenberg and Anita M McGahan (2023), Authoritarianism, Populism, and the Global Retreat of Democracy: A Curated Discussion, Journal of Management Inquiry, 32 (1), pp. 3-20.

Abstract: To the surprise of many in the West, the fall of the USSR in 1991 did not lead to the adoption of liberal democratic government around the world and the much anticipated “end of history.” In fact, authoritarianism has made a comeback, and liberal democracy has been on the retreat for at least the last 15 years culminating in the unthinkable: the invasion of a democratic European country by an authoritarian regime. But why does authoritarianism continue to spread, not only as an alternative to liberal democracy, but also within many liberal democracies where authoritarian leaders continue to gain strength and popularity? In this curated piece, contributors discuss some of the potential contributions of management scholarship to understanding authoritarianism, as well as highlight a number of directions for management research in this area.

Claudine Gartenberg and George Serafeim (2023), Corporate Purpose in Public and Private Firms, Management Science.

Claudine Gartenberg and Elaine Pak (Under Review), Corporate Ownership and Employee Compensation.

Abstract: This study documents that firms with active corporate owners compensate their employees less than their peers. We analyze over 20 million employee records from 897 US firms and calculate pay differentials for employees in comparable positions across firms. The analysis yields three main insights. First, firms with external active owners (i.e., hedge funds and private equity firms) pay 3 to 5% less than other firms for comparable work. Second, these pay differentials correspond to differences in rent-sharing practices across these firms: firms with external active owners provide flatter incentives (i.e., lower bonus to base pay) and are less likely to grant equity to employees. Lastly, lower pay for comparable work does not correspond to higher profits for firms, even within industries that depend relatively more on cost management than on innovation. All together, these results are consistent with corporate owners having different orientations toward human capital, which in turn may reflect differing strategic approaches toward value creation and appropriation.

Claudine Gartenberg and Todd Zenger (2023), The Firm as a Subsociety: Purpose, Justice, and the Theory of the Firm, Organization Science, in press ().

Abstract: Research in the “theory of the firm” tradition has often characterized firms as subeconomies, in which economic exchange is shaped by a central authority. We propose an expanded view of firms as subsocieties, in which authority is also responsible for establishing principles that shape cooperation among members. We draw on insights from political theory, sociology, and, to a lesser degree, legal theory to discuss how employees become members of subsocieties by exchanging rights, such as formal control over their work, for the benefits of membership. With this rights exchange, subsociety members develop expectations that those in positions of authority will use their control to define and sustain principles of justice and common purpose consistent with members’ moral sentiments. This view suggests expanded roles for authority and firm boundaries from what are incorporated into standard theories of the firm. These expanded roles have implications both for internal governance and for the boundary itself: When considering boundary changes, leaders must weigh both the economic and the social consequences of their decision.

Colin Mayer, Luigi Zingales, Patrick Bolton, Sophie L'Helias, Bengt Holmstrom, Paul Polman, Claudine Gartenberg, Caroline Flammer, Rebecca Henderson, Jordi Gual, Baroness Kingsmill, Jose Vinals, Jordi Canals, Marco Becht (2022), Can Purpose Deliver Better Corporate Governance?, , 33 (2).

Claudine Gartenberg (2022), Purpose-driven firms and sustainability, Handbook on the Business of Sustainability.

Abstract: Corporate purpose and business sustainability appear to be intrinsically related ideas, and yet there is little research on the nature of this relationship. The chapter begins with a discussion of purpose and two parallel treatments of the topic. The “corporate purpose” treatment, rooted in early 20th century institutionalism, views purpose as a (or, possibly, the) primary differentiator of firms over markets. The “purpose of the corporation” treatment, rooted in a near century-long debate in law and finance on the role of corporations in society, considers purpose as the appropriate objective for corporations. At the confluence of these two treatments lies important implications for the firm: how purpose is determined, how it influences behavior at both the organizational and employee level, and the associated role of leadership. The chapter then considers how these implications intersect with business sustainability. I suggest mechanisms by which purpose and sustainability might be mutually reinforcing, and the conditions under which this might occur. Each of the sections of this chapter concludes with topics for future research.

Claudine Gartenberg (Working), Corporate Purpose and Firm Strategy.

Claudine Gartenberg and Julie Wulf (2020), Competition and Pay Inequality Within and Between Firms, Management Science.