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How Do Nascent Social Entrepreneurs Respond to Rewards? A Field Experiment on Motivations in a Grant Competition

Ina Ganguli (), Chloé Le Coq () and Marieke Huysentruyt ()
Additional contact information
Ina Ganguli: University of Massachusetts Amherst, Postal: Department of Economics, 412 N. Pleasant Street , Amherst, MA 01002, https://www.umass.edu/economics/ganguli
Chloé Le Coq: Stockholm Institute of Transition Economics, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden,, http://chloelecoq.org
Marieke Huysentruyt: HEC Paris, Postal: 1 rue de la Libération , 78351 Jouy-en-Josas Cedex , France, http://www.hec.edu/Faculty-Research/Faculty-Directory/HUYSENTRUYT-Marieke

No 46, SITE Working Paper Series from Stockholm School of Economics, Stockholm Institute of Transition Economics

Abstract: We conducted a field experiment to identify the causal effect of extrinsic reward cues on the sorting and performance of nascent social entrepreneurs. The experiment, carried out with one of the United Kingdom’s largest support agencies for social entrepreneurs, encouraged 431 nascent social entrepreneurs to submit a full application for a grant competition that provides cash and in-kind mentoring through a one-time mailing sent by the agency. The applicants were randomly assigned to one of three groups: one group received a standard mailing that emphasized the intrinsic incentives of the program, or the opportunity to do good (Social treatment), and the other two groups received a mailing that instead emphasized the extrinsic incentives - either the financial reward (Cash treatment) or the in-kind reward (Support treatment). Our results show that an emphasis on extrinsic incentives has a causal impact on sorting into the applicant pool: the extrinsic reward cues led fewer candidates to apply and “crowded out” the more prosocial candidates while “crowding in” the more money-oriented ones. The extrinsic reward cues also increased application effort, which led these candidates to be more successful in receiving the grant. Yet, the selection resulting from the extrinsic incentive cues led to worse performance at the end of the one-year grant period. Our results highlight the critical role of intrinsic motives in the selection and performance of social enterprises and suggest that using extrinsic incentives to promote the development of successful social enterprises may backfire in the longer run.

Keywords: social entrepreneurship; field experiment; incentive; intrinsic motivation; grants (search for similar items in EconPapers)
JEL-codes: C93 J24 L31 O35 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2018-12-01, Revised 2020-11-23
New Economics Papers: this item is included in nep-ent, nep-hrm and nep-lma
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