The motives that companies have for sustainable business vary. Two types of motives are often distinguished: extrinsic and intrinsic motivation. In case of so-called extrinsic motivation, a company acts sustainable because it contributes to other company goals, such as a good reputation or profitability. In the case of intrinsic motivation, a company acts sustainable because of a sense of responsibility or because the owner or management wants to contribute to a better society. Intrinsically motivated companies will settle for slightly less profit if the company’s sustainability contribution can be much higher as a result.
It is known that intrinsic motivation may come under pressure if a reward is connected to the behaviour. This is the so-called ‘crowding out’ effect. Research has shown, for example, that when you are going to pay people who are voluntary donating their blood, their willingness decreases instead of increases. The reward is experienced as a kind of pressure to donate blood, which fails to acknowledge the intrinsic motivation and thereby reduces it.
In a recent study in the context of our research project on market forces, which will soon be published in the scientific journal Corporate Social Responsibility and Environmental Management, I analyze whether this effect also occurs with companies that do business in a sustainable way. For example, what happens if competition for a company increases: does this added pressure increase or decrease the intrinsic motivation for sustainable business?
The results of the research show that this depends on management’s perception of the effect that sustainable business has on the innovative power of the company. If this perception is positive, more competition means that doing business in a sustainable way will yield more financially. In contrast to research into blood donation, my research shows that in this case the monetary reward does not erode the intrinsic motivation of the company for doing business in a sustainable way, but rather reinforces it. If, on the other hand, companies expect that sustainable entrepreneurship does not contribute to the innovative power of the company, more competition leads to a weakening of intrinsic motivation.
What could be the reason companies differ from blood donors in this regard? A possible explanation is that owners or managers of a company think that they can only take responsibility for sustainability if it is financially viable. If they estimate that building a sustainable enterprise improves the innovation and competitiveness of the company, a competitive market offers more freedom to do business sustainably. Freedom is a condition for being able to take responsibility, which in turn is required for being intrinsically motivated.
For an individual who is considering giving blood, receiving a monetary reward is not necessary adding to the freedom of choice to donate blood. But for a company it is different; if sustainable business would be loss-making, the continuity of the company is at risk when the competition gets fiercer. And when a company goes bankrupt by doing more sustainable business, it can no longer take responsibility for society as a whole. So profit does give people in companies the freedom to act on their intrinsic motivation.
The lesson that I draw from these findings is that an increase in competition and an increase in the sustainability of business do not have to oppose each other. But that does depend on whether owners and managers of companies think that sustainable entrepreneurship also benefits the innovation and competitiveness of their company. In the companies that I have researched, 80 percent think it does. It is also known from other research that doing business in a sustainable way enhances innovation in a company. It would be good if more companies were aware of this. Because my research shows that this not only reinforces their extrinsic motivation, but also their intrinsic motivation for sustainability.