Single-objective versus multi-objective theories of the firm: using a constitutional perspective to resolve an old debate

Ingo Pies (), Philipp Schreck () and Karl Homann ()
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Ingo Pies: Martin-Luther-University Halle-Wittenberg
Philipp Schreck: Martin-Luther-University Halle-Wittenberg
Karl Homann: Ludwig-Maximilians-Universität München

Review of Managerial Science, 2021, vol. 15, issue 3, No 9, 779-811

Abstract: Abstract Our article contributes to the recurring debate on whether and how firms in competitive markets should pursue objectives other than purely financial ones. Two competing approaches dominate this debate: one favors profit maximization as a single objective; the other favors multiple, partly social objectives. This debate has been going on for decades without approaching consensus. Our article offers an explanation for this intellectual stalemate and proposes a constitutional perspective that reconciles and improves the two seemingly antagonistic approaches. At the core of our proposed solution lies the distinction between the sub-constitutional level of action (choices within constraints) and the constitutional level of rules (choices among constraints). Using this distinction, we argue that both single-objective and multi-objective theories of the firm play equally important, but categorically different roles.

Keywords: Business ethics; Constitutional economics; Corporate political responsibility; Corporate social responsibility; Stakeholders; Strategic management (search for similar items in EconPapers)
JEL-codes: A13 D23 L21 M14 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (13)

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DOI: 10.1007/s11846-019-00376-x

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