Corporate purpose, regulation, innovation and
performance: An empirical examination of French
purpose-driven bylaws companies

Hollandts Xavier, Baudoux Marie, Bourjade Sylvain, Girard-Guerraud Carine

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Hollandts Xavier, Baudoux Marie, Bourjade Sylvain, Girard-Guerraud Carine. Corporate purpose, regulation, innovation and performance: An empirical examination of French purpose-driven bylaws companies. Journal of Cleaner Production, 2026, 538, pp.147383. 10.1016/j.jclepro.2025.147383. hal-05459754

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# Corporate purpose, regulation, innovation and performance: An empirical examination of French purpose-driven bylaws companies

Hollandts Xavier<sup>a, *</sup>, Baudoux Marie<sup>b</sup>, Bourjade Sylvain<sup>c</sup>, Girard-Guerraud Carine<sup>d</sup>

## HIGHLIGHTS

* Purpose-driven bylaws companies outperform peers on financial performance.

* Purpose bylaws with continuous innovation boost firm's profitability and accountability.

* Innovation drop after adopting purpose bylaws harms financial outcomes.

* Managers should favor innovation continuity when adopting purpose bylaws.

## GRAPHICAL ABSTRACT

<figure><img src="image_3.png" /></figure>

## ARTICLE INFO

JEL classification:

JEL: D22

G32

M14

O30

Keywords:

Purpose

Innovation

Performance

Regulation

Strategy

## ABSTRACT

In the contemporary volatile economic environment, companies are increasingly prioritizing societal objectives, focusing on the concept of purpose, which has attracted growing academic interest. Simultaneously, firms are encouraged to innovate across multiple dimensions to achieve greater financial performance. This paper investigates French purpose-driven bylaws companies (PBCs) as leading candidates for observing the effect of the dual approach—combining innovation efforts with commitment to purpose—on financial performance. Using a unique dataset of French PBCs and comparable industry peers from 2015 to 2021, we explore the relationship between innovation, purpose bylaws and financial performance. Our results indicate that French PBCs outperform their industry counterparts, particularly when firms maintain a continuous commitment to innovation both before and after the adoption of purpose-driven bylaws. However, companies that fail to renew their commitment to innovation following their transition to PBC status experience a decline in this performance advantage.

<footnote><sup>a</sup> Xavier Hollandts, KEDGE Business School, 680 Cours de la Libération Cedex, 33405, Talence, France</footnote>

<footnote><sup>b</sup> Marie Baudoux, KEDGE Business School, 680 Cours de la Libération Cedex, 33405, Talence, France</footnote>

<footnote><sup>c</sup> Sylvain Bourjade, TBS Business School, 1 Place Alfonse Jourdain, 31000, Toulouse, France</footnote>

<footnote><sup>d</sup> Carine Girard-Guerraud, Audencia Business School (Finance Department), 8 Route de la Jonelière, F-44300, Nantes, France</footnote>

<footnote>* Corresponding author.</footnote>

<footnote>E-mail addresses: xavier.hollandts@kedgebs.com (H. Xavier), marie.baudoux@kedgebs.com (B. Marie), s.bourjade@tbs-education.fr (B. Sylvain), cgirard@audencia.com (G.-G. Carine).</footnote>
# 1. Introduction

In recent years, companies have increasingly recognised the imperative of committing to societal and environmental goals and embedding these objectives into their core business strategies. This shift reflects a growing global awareness of the crucial role companies play in addressing pressing societal challenges, as emphasised by the Sixth Assessment Report<fnref n="1" /> of the Intergovernmental Panel on Climate Change (IPCC). Additionally, emerging regulatory incentives, such as the Corporate Sustainability Reporting Directive (CSRD), adopted in November 2022, and the Sustainable Finance Disclosure Regulation (SFDR), introduced in 2021 for investment firms, further incentivise this transformation. These evolving expectations raise critical questions regarding how firms can genuinely integrate such commitments into their purpose and operations, moving beyond gut feel towards a more meaningful impact. More broadly, ongoing discussions on corporate purpose are multiplying, including, for instance, reflections on the creation of a dedicated European legal status to provide a clearer framework for mission-driven companies (Deffains et al., 2023). In fact, the proliferation of statuses and label tied to societal inclination or social innovation risks blurring the distinctions between organisations that are dedicated to promote social innovation and address grand challenges and those that are less committed or even try to make green or purpose washing (Lee and Raschke, 2020; Mion et al. 2021; Le, 2022; Le et al. 2022).

The concept of purpose<fnref n="2" /> is increasingly recognised as a pivotal driver of both sustainable and financial performance, gaining attention in both academic literature and business practice (Gartenberg et al., 2019; Jones-Khosla and Gomes, 2023). In this context, results from the literature indicate that purpose-driven companies are often better positioned to align with societal expectations and stakeholder interests, leading to enhanced performance and the creation of sustainable value (Edmans, 2021; Gartenberg, 2023). Furthermore, a firm's commitment to such a purpose may serve as a catalyst towards transformative and disruptive efforts, enabling companies to integrate their purpose into their innovation efforts—whether technological or strategic—not only to generate profit but also to create positive social and environmental impact (De Oliveira et al., 2023). Several papers suggest that employees in firms with clear innovation and social-oriented mission-based purpose are more inclined to support innovation and to enhance their efforts (Andrassy et al. 2025). Nevertheless, important challenges remain. For instance, the literature highlights the challenge raised by the implementation of the mission or purpose (Kilson and Tavares, 2024), and the “actionability” for employees for their daily work or objectives (Holmes et al. 2025). Studies focusing on clarity and implementation show that employees do not necessarily recognise the (organisational) purpose which raise question about the gap between corporate communication and actionability (Holmes et al. 2025). Besides issues of lack of clarity, mission and purpose is still on the way to being comprehended within companies. Consequently, implementation and actionability are still a puzzle at micro-level and the link between mission, innovation and performance remains ambiguous. If each firm develops its own approach to making mission and innovation actionable, will this translate into observable and objectively measurable performance?

In this context, innovation within purpose-driven firms is particularly vital amid today's rapidly evolving market dynamics, where the demand for continuous innovation has reached unprecedented levels. To this extent, the 2019 Ernst and Young report, drawing from the

Economist Intelligence Unit report,<fnref n="3" /> posits that a company's potential for substantial impact and long-term performance is amplified when purpose serves as the guiding principle behind innovation. This report underscores that the current disruptive environment has elevated innovation to an unprecedented imperative for business, asserting that firms must “innovate and disrupt, or suffer disruption.” Whether manifested in products, services or governance structures, innovation is crucial for firms to navigate disruptive environments and achieve long-term sustainable success.

De Oliveira et al. (2023) underscore the “synergistic potential” of innovation in driving the transition towards sustainable models, particularly through the enablement of organisational social practices (Sindhwani et al., 2022; Nara et al., 2021), such as setting up an innovative corporate governance body dedicated to assessing the company’s response to its purpose (Levillain et al., 2024). Despite the growing interest in how purpose and innovation interact, several research gaps remain. First, there is limited empirical understanding of the relationship between purpose and innovation, particularly regarding their combined effect on profitability within a regulated context. Notably, only one empirical study (Gartenberg, 2023) has examined how the interplay between purpose and profit varies across different industries and firms. Gartenberg (2023) found that companies with higher levels of innovation intensity, intangible capital or long-term investors are more likely to pursue both purpose and profits simultaneously, while those with lower levels of these factors tend to prioritise one over the other. Second, there is an insufficient understanding of how regulation influences the relationship between corporate purpose, profit, and innovation, despite the potential for well-designed regulation to foster sustainable change. Lastly, the phenomenon of “purpose washing”—where firms superficially commit to societal goals without genuine integration—has not been fully addressed (Crane et al., 2014; Findlay and Moran, 2019), particularly in the context of purpose bylaws frameworks. Therefore, a clear perspective on the link between innovation, the degree of commitment of the firm and the potential translation in the mission and purpose-based policy and strategy still does not exist. If we consider that at micro-level, there are several ways to make the mission actionable, the transformative effect of the mission-based framework remains unclear. In the French context, the existence of a specific legal status—with enforceable legal consequences—can steer firms toward transformative practices and help make innovation more effectively performance-enhancing. As showed by Worren and Pope (2025), there are two streams to make the mission (and the innovation-orientation within) effective: via communication or metrics. We precisely focus on the second option, and we aimed to examine the relationship between mission, innovation (commitment), and the most common metric, performance (Farza et al. 2021).

This paper seeks to address these gaps by examining to what extent innovation propensity influences the profitability of purpose bylaws companies (PBC), with a particular focus on the unique French legal framework of the Société à Mission. Established by the 2019 PACTE law (Action Plan for Business Growth and Transformation), it enables French companies to formalise their commitment to social and environmental responsibility by embedding this mission directly into their bylaws, in turn becoming PBCs. To declare their PBC status and amend their previous legal framework, companies must register with the Commercial Court, where this commitment is documented and made publicly available. As mentioned by Mion et al. (2021, 2024) or Levillain et al. (2024) the French status can be seen as the most advanced in terms of enforceability. This process involves clearly defining the company's purpose (commonly translated as *raison d'être* in French) and officially

<footnote n="1">¹ https://www.ipcc.ch/assessment-report/ar6/.</footnote>

<footnote n="2">² We understand purpose here in Edmans's sense as the reason for a company's existence beyond profit, aimed at creating value for society. From this perspective, profit is not an end in itself but a consequence of a genuine commitment to stakeholders.</footnote>

<footnote n="3">³ How a higher purpose drives better innovation | EY - Global.</footnote>
declaring its PBC status, thereby signalling a strong dedication to soci-
etal and environmental goals as well as fostering innovation<fnref n="4" /> through
initiatives such as supporting startups, encouraging research and
development and facilitating the creation of innovative enterprises.<fnref n="5" />
Overall, French PBC status not only represents an innovative legal model
but also serves as a mechanism for aligning innovation with social re-
sponsibility, making it an ideal context for exploring the complex rela-
tionship between purpose bylaws, innovation and financial
performance. Thus, the central question that arises is whether this ideal
framework genuinely leads to the anticipated profitable alignment—
specifically, whether the combination of purpose and innovation
translates into enhanced profitability. We suggest that PBCs are an ideal
type of companies that (due to the specificity of the status) value and
make their innovation more effective, and by combining innovation and
social responsibility, meet the expectations of both consumers and
stakeholders. This combination may allow firms to enhance perfor-
mance. Our paper's objective is to evaluate the impact of innovation, the
alignment of critical stakeholders and the performance may be
improved (LEE and RASCHKE, 2020; Worren and Pope, 2025; Andrassy
et al., 2025).

Building on signalling theory and using a unique database of French PBCs, our paper presents the first empirical evidence indicating that purpose bylaws enhance firm profitability, particularly when coupled with long-term commitment to innovation. Our study highlights the critical role of innovation in both preceding and complementing corporate purpose bylaws to bolster firm performance. Using data from France, where purpose is legally recognised by the Commercial Court Registry, we are the first, to the best of our knowledge, to provide empirical insights to help companies leverage innovation as a pathway to achieving both sustainable and financial success.

The subsequent sections of this paper include a comprehensive literature review on innovation propensity and its relationship with purpose bylaws (Section 2), followed by a detailed explanation of our methodology and data in Section 3. Section 4 presents and analyses our results, while Section 5 outlines some robustness tests. Finally, Section 6 discusses our findings and limitations, with Section 7 concluding the paper.

## 2. Literature review and research hypothesis

### 2.1. *Purpose and profit: the added value of a regulated context*

The literature mostly supports the hypothesis that purpose exerts a positive impact on firm performance and acts as an accelerator of profit, particularly in contexts where market conditions and internal alignment are favourable.

For instance, drawing from market competition theory, Roe (2021) highlighted that firms in monopolistic or mature industries have more flexibility to integrate purpose into their profit strategies, as a low degree of competition allows them to redirect profits from shareholders to stakeholders more easily. This perspective is in line with the concept of shared value developed by Porter and Kramer (2006, 2011) and later

synthesised by Mengwar and Daood (2021). These authors suggested that companies can simultaneously generate economic value while addressing societal needs, with committed employees and stakeholders. The literature on purpose and mission-based companies highlights that purpose and mission can led to a strong alignment between a large scope of stakeholders (LEE and RASCHKE, 2020; Le, 2022; Worren and Pope, 2025). For instance, the core of the process leading to build up the mission and the other steps leading to the adoption of a status (PBCs in our case) is an efficient tool to align both external and internal stakeholders' objectives (Kim and Schifeling, 2022; Zasa et al., 2022). The required deliberative process aims to strongly align crucial stakeholders with the core values, but also the strategic orientations and the core metrics (Worren and Pope, 2025). Employees of mission-based companies are more committed, exhibit higher level of productivity and are less reluctant to turnover and absenteeism (Andrassy et al., 2025). Thus, it suggests that the emergence of a shared vision and the alignment of the main stakeholders is likely to strongly support the performance at micro and macro level - the performance of the firm (Lee and raschke, 2020; MION et al., 2023).

While the literature supports the idea that the adoption of a corporate purpose can drive a firm's performance, there is growing evidence that profit with purpose is further enhanced when embedded within a regulatory framework (Segrestin and Levillain, 2023). Accordingly, Berrone et al. (2013) showed that regulatory frameworks exert institutional pressure that encourages firms to enhance their CSR initiatives, serving as a signal of their commitment to stakeholders (Pollmeier et al., 2025). Similarly, Demirel et al. (2018) found that environmental regulations can support self-regulatory measures, thereby improving a firm's environmental management systems. Collectively, these studies indicate that regulation plays a crucial role in reinforcing a firm's commitment to its societal goals. Regulation thus provides a formal structure that is in line with long-term strategic objectives and enhances credibility with stakeholders.

In this context, the integration of purpose into a firm's bylaws (as a French PBC) serves as a strong signal of the company's engagement with social and environmental objectives. Furthermore, the regulatory framework ensures clearer objectives, materiality, and greater accountability i.e., ability to provide material proof of the achievement of its objectives and of the resources deployed (Mayer, 2021a, 2021b). This is in line with Gartenberg et al. (2019), who suggested that companies with a well-defined and clearly articulated purpose are more likely to foster employee engagement and customer loyalty (Kim and Schifeling, 2022; Zasa & al. 2022; Andrassy & al. 2025), which are crucial drivers of financial performance (Farza & al. 2021; Le, 2022; Le & al. 2022). Indeed, by embedding purpose into a regulated framework, firms signal their commitment more effectively, reducing ambiguity and enhancing transparency, thereby building trust with stakeholders, and improving overall performance (Lee and Raschke, 2020; Farza & al. 2021; MION et al., 2024). Consequently, we propose the following first hypothesis:

**Hypothesis 1.** Adopting purpose bylaws increases a firm's performance.

The corporate purpose literature also underscores that innovating firms are better positioned to transform their social engagements into tangible business outcomes (Marin et al., 2017; Wong et al., 2017). Therefore, in the next section, we examine how combining purpose and innovation may contribute to a firm's ability to achieve sustained profitability and competitive advantage.

### 2.2. *The intricated relationship between purpose bylaws, innovation and long-term horizon*

#### 2.2.1. *Corporate Purpose and innovation*

Research suggests that purpose-driven firms, that is, those companies that embed a clearly defined social, environmental or ethical mission at

<footnote n="4">⁴ Specifically, the *Communauté des entreprises à missions* (CEM)’s self-evaluation grid provides recommendations to firms on how to effectively design their ambitions. Innovation is clearly highlighted as a priority, given that these purpose-driven companies are encouraged to translate their mission into long-term innovative objectives. https://www.entreprisesamission.org/le-sesame-vers-la-mission/.</footnote>

<footnote n="5">⁵ The *Société à Mission* framework is not merely symbolic; it comes with specific obligations. Companies with this status are required to form a mission committee (mandatory for companies with over 50 employees), which must include at least one employee, and they must undergo an annual external audit, conducted by an accredited independent organisation to verify the company’s adherence to its mission. Failure to meet these requirements could result in the loss of the PBC status.</footnote>
the core of their strategy, decision-making and operations, tend to derive greater benefits from innovation compared to profit-driven firms (Bacq and Aguilera, 2022). This purpose-related advantage stems primarily from the culture of trust and autonomy it creates (LEE and RASCHKE, 2020; Bhattacharya et al., 2023), both of which are crucial for promoting creativity and innovation within organisations and, ultimately, firm performance (De Clercq et al., 2011; Edmans, 2020).

The enhanced ability of purpose-led firms to harness innovation is further supported by Henderson (2021), who argued that a clear and effective purpose accelerates the adoption of high-performance management practices, fostering relational contracts within the organisation. According to Henderson (2021), this environment promotes architectural innovation, allowing firms to leverage their purpose more efficiently for growth. Chemmanur and Tian (2018) and He et al. (2009) also stated that when firms allow greater managerial discretion, it nurtures strategic decision-making and employee creativity, which are critical components to foster innovation. Conversely, overmonitoring can stifle creativity, as highlighted by Azoulay et al. (2011). Finally, Gartenberg (2023) provided evidence that companies with higher levels of innovation intensity, intangible capital or long-term investors perform better in pursuing both purpose and profit, highlighting the crucial role of innovation in enabling purpose-driven firms to balance social missions with profitability. This perspective aligns with Kaplan (2023),<fnref n="6" /> who suggested that innovation serves as a primary tool for overcoming trade-offs between profit and purpose, offering opportunities for growth when tensions arise.

However, innovation is not only facilitated by internal factors but is also influenced by the regulatory environment. The Porter-Linde hypothesis suggests that well-designed regulations can stimulate innovation by promoting resource efficiency and waste reduction (Lim and Prakash, 2014). Chang (2013) supported this perspective, suggesting that stringent environmental regulations drive firms to develop new technologies and processes, thereby enhancing profitability. In line with this argument, Rennings and Rammer (2011) found that regulation-driven environmental innovation can achieve similar success in sales and cost savings to other forms of innovation. Finally, Kimsey et al. (2023) demonstrated that embedding purpose within an organisation culturally fosters co-creation and stakeholder collaboration, leading to more innovative insights (Henisz, 2023; Rindova and Martins, 2023). Overall, these studies indicate that purpose-driven firms, guided by regulatory frameworks, are more likely to pursue innovative solutions aligned with both their mission and regulatory requirements, thereby enhancing their competitiveness (Mion et al., 2023; 2024).

Furthermore, Bacq and Aguilera (2022) emphasised the crucial role of aligned governance mechanisms that allow organisations to allocate the value created by sustainable innovation among their various stakeholders. In this regard, PBCs with aligned and regulated governance structures, such as French PBCs, are particularly well suited to leverage innovation for profitability.

In summary, innovation emerges as a critical component in the relationship between regulation, purpose, and firm performance, acting as both a catalyst and a mechanism for transforming purpose into tangible value.

### 2.2.2. Long-term innovation and purpose-driven firms' performance

While innovation is widely acknowledged as a critical driver of sustainable and financial performance, long-term orientation also emerges as a key strategic factor influencing the relationship between purpose and profitability. In this section, we present evidence from the

literature explaining why this relationship holds, both in terms of reduced costs, increased benefits, and synergetic effects.

First, several authors, including Findik and Beyhan (2017), emphasise that both product and process innovations have the greatest impact when aligned with a firm's long-term strategic objectives. This alignment is particularly crucial for purpose-driven firms, as their stakeholders—ranging from customers to investors—expect not only immediate results but also sustainable practices that contribute to broader societal goals. One crucial aspect for stakeholders is to consider that the commitment to innovation and the overall goals (both economic and social) is not opportunistic (Zasa et al., 2022) and may constitute a solid pillar for the long-term orientation of the firm (MION et al., 2023; Kilson and Tavares, 2024). This is a strong driver for employees to support the mission and the innovation perspective via their work and commitment (Kim and Schifeling, 2022; Andrassy & al. 2025).

The importance of embedding innovation with a firm's long-term vision is further underscored by Kalay and Lynn (2015), who found that strategic innovation management practices significantly improve firm innovation performance, especially when these practices are aligned within the firm's long-term objectives. In contrast, a focus on short-term innovations may yield immediate gains but often fails to create lasting value or align with the firm's purpose, potentially undermining stakeholder trust, and loyalty. As a result, innovation with a long-term orientation is more likely to resonate with these stakeholders, thereby enhancing firm performance.

Resources also play a significant role in fostering long-term innovation. Demirkan (2018) argued that while financial resources contribute to innovation, the integration of network-level resources is essential for achieving substantial breakthroughs. Likewise, Seclen-Luna et al. (2024) highlighted the critical impact of cooperative efforts, showing that co-innovation with suppliers and customers significantly enhances eco-efficiency through various forms of technological innovation. This is particularly relevant for purpose-driven firms, which frequently rely on collaborative networks and ecosystems to drive innovation aligned with their missions (Zasa et al., 2022; MION et al., 2023). Indeed, purpose-driven firms can be thought of as complex and innovative organisations (Crespin-Mazet et al., 2019) uniquely positioned to engage in long-term innovation strategies. Building on this, it is reasonable to assume that firms already or historically committed to innovation should find it easier and less costly to mobilise, activate and align their pre-existing innovation-related network-level resources when adopting PBC status.

Building once again on signal theory, the cost for a signal to be efficient according to Spence (1973), should be analysed from two perspectives: the cost of committing to innovation and the cost of committing to purpose. However, firms that have already invested in innovation have likely incurred part of this cost. As a result, the commitment of PBCs to innovation is relatively less costly while remaining equally observable (Stiglitz, 2000), particularly for historically innovative firms that reaffirm their dual commitment to innovation and purpose in their corporate mission. In addition, the long-term orientation and commitment around innovation enhance confidence for a broad range of stakeholders and make easier the effectiveness of the mission and the purpose (Andrassy & al. 2025). It signals that the innovation vision embedded in the mission is not opportunistic and the whole process of setting up the mission (and the subsequent implementation) gives strong support to enhance the alignment of employees and stakeholders around corporate and societal objectives (Mion et al., 2023; Pollmeier et al., 2025).

Finally, the literature emphasises the synergies created around the connection between innovation and purpose, which Rayna (2024) described as impact innovation and thereafter called purpose-led innovation. As Gartenberg states, "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." Here, Gartenberg (2023) also recalled the importance of a long-term investment perspective, pointing out that

<footnote n="6">⁶ Accordingly, XU et al. (2022) highlighted the mediating role of innovation in enhancing corporate social responsibility (CSR) and firm performance. Their findings indicate that green technology innovation mediates the relationship between CSR and firm performance, demonstrating that sustainable innovation practices can significantly enhance both financial and environmental outcomes.</footnote>
<figure><img src="image_4.png" /><figcaption>Fig. 1. – Hypotheses framework.</figcaption></figure>

companies with higher levels of innovation intensity, intangible capital or long-term investors are better equipped to pursue both purpose and profits. This perspective aligns with Wang and Bansal (2012) and Birkinshaw et al. (2014), who asserted that long-term thinking helps sustain a firm’s authentic commitment to purpose while ensuring profitability.

In summary, these insights indicate that a long-term-oriented connection to innovation should not only enhance firm performance but also strengthen the alignment between a company's strategic objectives and its social purpose. This generates a sustainable competitive advantage in an increasingly socially conscious market. This alignment can, in turn, initiate a virtuous cycle in which innovation, purpose and profitability mutually reinforce one another, driving both financial success and positive societal impact.

Accordingly, we propose the second hypothesis:

**Hypothesis 2.** The positive effect of purpose-led innovation on financial performance is strengthened when innovation is long-term oriented.

Our literature review underscores that while a corporate purpose bylaw is expected to bolster corporate profitability (Hypothesis 1), the impact of innovation propensity on a long-term basis (Hypothesis 2) is likely to further amplify the profitability of a PBC. Fig. 1 illustrates our two hypotheses.

## 3. Data and empirical model

Before turning to the empirical exploration of our two hypotheses, we first present our data and methodology in Section 3.1. We begin with a presentation and statistical description of our main variables and next describe (Section 3.2) the empirical methodology used to test our two hypotheses.

### 3.1. *Sampling approach*

Our main panel includes 206 French PBCs referenced in the *Observatoire des sociétés à mission* (OSAM)<fnref n="7" /> as of June 2023 with an available mission statement (i.e. those firms that correctly answered the OSAM survey as to be referenced on the website). Most of our panel was collected from data shared by the OSAM. We also collected financial data from Cap Financials and Orbis (Bureau Van Dijk) on these 206 French PBCs from 2015 to 2021. This longitudinal approach enabled us to capture historical trends regarding the relationship between purpose bylaws, profit, and innovation propensity. Due to the predominantly small and mid-sized structure of the French PBC ecosystem, collecting comprehensive financial data was challenging. We have only included firms in our dataset, for which we were able to collect data about both mission statements and financial information, resulting in a dataset that

includes 969 firm-year observations (on these PBCs).<fnref n="8" />

To further assert the robustness of our findings, we built a second panel (like Pollmeier et al., 2025, using a similar theoretical framework for Bcorps). This allowed us to determine whether innovation propensity has a greater impact in purpose-driven firms than in nonpurpose firms. This panel includes comparable firms selected from Cap Financials, all operating within similar industries (based on APE codes) and exhibiting innovation-focused corporate purposes. Additionally, these firms have available financial statements for the same seven-year period under study. Our rationale for defining a panel that focuses on innovative and comparable firms was to avoid arbitrarily reducing the sample size by selecting cutoff variables. Moreover, our supplementary statistical analysis revealed that the firms in our comparison group shared similar characteristics in terms of size and age, further validating the comparability of our sample. Finally, we ended up with 132 comparable firms with available financial information (779 firm-year observations).

### 3.2. *Data and methodology*

In this section, we present how we built our innovation measure, the various firm-level variables, and the methodology used to test our different hypotheses.

#### 3.2.1. *Innovation measurement*

We first explain the rationale for associating innovation content in firm's statements with firms' innovation commitment. We relied on several papers using content analysis as a key methodology to examine and somehow classify the innovation content and commitment of the companies about this key pillar (Duriau et al., 2007). For instance, Baek et al. (2023) underline and use content analysis of 100 mission statement to evaluate the link between mission and organisational performance. Other papers from Mion et al. (2023, 2023, 2024) also use content analysis and additional and complementary qualitative methodologies (text mining & fsQCA) to assess the content, the value supporting the mission and the commitment needed for main stakeholders. Kilson and Tavares (2024) apply content analysis to examine the clarity of the mission, both from internal sources and companies' websites. Kim and Schifeling (2022) also highlight the usefulness of content analysis to evaluate the quality and of the mission of Bcorps and this give us the opportunity to assess the variability of missions and the different levels of commitment from the firms. Content analysis is thus widely recognised as a reliable method for examining various dimensions of corporate strategies.

Additionally, the literature demonstrates that corporate statements, including innovation content, effectively capture a firm's innovation

<footnote n="7">⁷ The OSAM is the official institution tasked with facilitating the identification of companies that have adopted the *Société à Mission* status, tracking in real-time the adoption of this legal framework introduced by the PACTE law, and making these efforts visible to support research and potential regulatory developments.</footnote>

<footnote n="8">⁸ We are aware that, even though our sample has a reasonable level of representativeness, it faces some limitations. Indeed, as we cannot access to the overall sample, this may constitute a potential bias. The missing data mainly consist in very small SMEs or young companies, as in many papers about innovation and mission (Le & al. 2022; Kim and Schifeling, 2022). Our identification strategy of comparable companies helps us to build a more reliable sample, even if the representativeness of our sample in comparison with the French economy is not perfect.</footnote>
performance. For instance, Zhang et al. (2015) showed that innovation-oriented mission statements may positively influence both innovation performance and nonfinancial business outcomes. Similarly, Stallworth (2008) recognised that innovation content in mission statements reflects a core value of a firm. Moreover, Varis and Littunen (2010) suggested that innovation orientation may be a more comprehensive measure of innovation potential than traditional indicators, such as internal R&D intensity, emphasising the broader scope of innovation propensity in driving firm performance. Doloreux and Kraft (2019) used content analysis to develop a taxonomy of eco-innovation types in SMEs, indicating the potential for textual analysis to capture different patterns of innovation. Lastly, Wongsinhirun et al. (2023) used earnings conference calls to explore the relationship between corporate culture, innovation, and board size, indicating the potential for textual analysis to capture innovation-related information from corporate communications.

Overall, these studies collectively suggest that textual coding, particularly of mission or corporate statements, can provide valuable insights into a firm's innovation propensity and its potential impact on innovation performance. Therefore, we should expect the innovation content included in corporate statements to precisely capture a firm's innovation propensity.

Accordingly, we created different innovation dummy variables using a content analysis method based on both the company's purpose (equivalent to *raison d'être* in French<fnref n="9" />) and the mission statement bylaws obtained from the OSAM's survey. For this purpose, we created two dummy variables: Innovation_CP and Innovation_MS. Innovation_CP (Innovation_MS) is coded as one if the firm includes innovation content in its corporate purpose (mission statement) and as zero otherwise.

### 3.2.2. Firm-level variables

We measured a firm's performance following Gartenberg (2023), using the firm's return on assets (net profit over total assets). As stated by Gartenberg (2023), “ROA focus is driven the active policy discussion on the compatibility of purpose and profits, as well as the broad acceptance of long-term profits as a fundamental yardstick of firm performance”.<fnref n="10" />

Following Gartenberg (2023), we controlled for several determinants of firms' profitability (return on assets) beginning with the firm's age (in months) and size (natural logarithm of the firm's sales). The empirical evidence shows that a firm's age should negatively impact its profitability. While younger companies might bear high initial costs, they also often exhibit more agility and innovation (Huergo and Jaumandreu, 2004), potentially leading to long-term profitability. Older firms might also be more prone to self-satisfaction or rigid operational processes. The literature also acknowledges the positive influence of a firm's size on profitability (Rahman and Yilun, 2021, among others). Specifically, the literature indicates that larger companies are typically associated with enhanced profitability due to potential economies of scale, better negotiation power with suppliers and heightened brand. Finally, we also added an additional control, namely firm leverage (which corresponds to the ratio of total liabilities and equity/total equity). Indeed, leverage has been shown to have a negative effect on a firm's profitability (Frank

and goyal, 2009). Table 1 presents the different groups included in our dataset and their characteristics. Table 2 provides the general statistics on firm-level variables differentiating between PBCs and non-PBCs.

### 3.2.3. Methodology

We first proposed an OLS regression to assess the influence of both purpose and innovation propensity on a firm's profitability. Indeed, we created several dummy variables as follows: PBC is equal to one if the firm is a PBC as of June 2023 and zero (one) otherwise. Furthermore, we created seven additional dummy variables along with the different typologies presented in Table 1. For instance, the GroupI dummy is equal to one if the firm is a PBC with innovation-related content in its original corporate purpose. GroupI A dummy takes the value of one if the firm is a PBC with innovation-related content in its original corporate purpose and mission statement, and so on.

Then, to address our first hypothesis, we used the following specifications:

$$ROA_{i,t} = \beta_0 + \beta_1.PBC + \beta_2.Age_{it} + \beta_3 Size_{it} + \beta_4.Leverage_{it} + \epsilon_{jt}, \quad (1)$$

where i denotes a firm, t denotes a year and j denotes the industry. Our dependent variable ROA corresponds to the ratio of net profit to total assets. We included the three firm-level control variables (Age, Size and Leverage). To assess our second hypothesis, we employed a leave-one-out approach with the previously defined group identification dummies, allowing us to compare their relative effects on ROA.

Our empirical specification also includes industry and year fixed effects<fnref n="11" /> to absorb potential time and industry characteristics (e.g. investment opportunities) that would be correlated with our explanatory variables. All continuous variables were winsorised at 1 % to mitigate the impact of extreme values. We also clustered robust standard errors at the firm level.

## 4. Results

Our main results are presented in Table 3. In Panel A, we consider all 338 firms (PBCs and non-PBCs), while Panel B presents the results, accounting only for PBCs.

First, we observe that the coefficient of PBC in Column 1 of Panel A is significant (at a 1 % level) and positive, suggesting that PBCs tend to outperform innovative non-PBCs. From an economic perspective, this coefficient suggests that, everything else being equal, firms (innovative or not) with purpose bylaws exhibit, on average, an ROA of 1.275 percentage points higher compared to innovative firms without such bylaws.

In Column 2, we include GroupI and GroupII dummies (i.e. two out of the three groups represented in Panel A). Including these two interaction terms allows us to compare innovative (Group I) and noninnovative PBCs (Group II) with nonpurpose but innovative firms (Group III) (i.e. the 'missing' firm type). We find that both dummies' coefficients are positive and significant at the 1 % level. This suggests that PBCs, whether innovative or not, tend to outperform innovative non-PBCs. Additionally, the greater magnitude of the GroupI dummy variable's coefficient over GroupII (1.312 > 1.269) suggests that purpose is more profitable when coupled with innovation in the original corporate purpose. Overall, these initial results provide further support for our first hypothesis that purpose bylaws enhance a firm's profitability.

In Column 3, we conduct a similar OLS regression to Column 2, using

<footnote n="9">⁹ The corporate purpose of a company, particularly in the French context where it is highly regulated, is the legal description of its main activity or activities it intends to undertake, as defined in its bylaws. It establishes the company's scope of action, objectives and the nature of its operations. In France, it is a strict legal requirement during the company's creation, and it must be clearly stated, as it precisely determines the company's field of activity and the boundaries of its operations, providing a comprehensive legal framework for all business activities. This level of formalisation is more specific compared to other countries, where the definition might be more flexible.</footnote>

<footnote n="10">¹⁰ See for example, https://corpgov.law.harvard.edu/2021/07/20/furth er-on-the-purpose-of-the-corporation/#:~:text = We%20have%20described% 20corporate%20purpose, value%20over%20the%20long%20term.</footnote>

<footnote n="11">¹¹ We conducted a Hausman test to determine the suitability of a fixed-effects versus a random-effects model. The test yielded a chi-square statistic with a p-value below 1 %, indicating a statistically significant difference between the coefficients of the two models. This result suggests that the assumptions of the random-effects model were violated, making the fixed-effects model more appropriate for our analysis. We thus used a fixed-effect model to ensure consistent and unbiased estimates.</footnote>
<table><caption>**Table 1**
- Group typologies and subtypologies</caption><thead><tr><th></th><th>Innovation_CP</th><th>Non-Innovation_CP</th></tr></thead><tbody><tr><td>PBCs</td><td>[Group I]<br>PBCs with innovation-related content in their original corporate purpose<br>[GroupI_A]<br>PBCs with innovation-related content in their original corporate purpose AND<br>mission statement<br>[GroupI_B]<br>PBCs with innovation-related content in their original corporate purpose BUT<br>NOT in their mission statement</td><td>[Group II]<br>PBCs without innovation-related content in their original corporate purpose<br>[GroupII_A]<br>PBCs with innovation-related content in their mission statement BUT NOT in their<br>original corporate purpose<br>[GroupII_B]<br>PBCs NEITHER with innovation-related content in their original corporate purpose<br>NOR in their mission statement</td></tr><tr><td>Non-PBCs</td><td>[Group III]<br>Non-PBCs with innovation-related content in their original corporate purpose</td><td>[Group IV]<br>Non-PBCs without innovation-related content in their original corporate purpose</td></tr></tbody></table>

<table><caption>**Table 2**
- Descriptive statistics (Groups I, II and III).</caption><thead><tr><th></th><th>Obs.</th><th>Min</th><th>Mean</th><th>Median</th><th>Max</th><th>Sd</th></tr></thead><tbody><tr><td><strong>Total Panel (N = 338)</strong></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>ROA</td><td>1748</td><td>-0,65</td><td>0,28</td><td>0,89</td><td>5,31</td><td>1,19</td></tr><tr><td>Age</td><td>1748</td><td>32,00</td><td>179,00</td><td>300,94</td><td>1463,00</td><td>348,02</td></tr><tr><td>Size</td><td>1748</td><td>9,56</td><td>14,88</td><td>15,00</td><td>20,22</td><td>2,09</td></tr><tr><td>Leverage</td><td>1748</td><td>-29,72</td><td>0,78</td><td>2,10</td><td>73,99</td><td>9,79</td></tr><tr><td><strong>PBCs (N = 206)</strong></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>ROA</td><td>969</td><td>0,00</td><td>1,53</td><td>1,68</td><td>5,31</td><td>1,16</td></tr><tr><td>Age</td><td>969</td><td>32,00</td><td>193,00</td><td>263,20</td><td>1463,00</td><td>210,04</td></tr><tr><td>Size</td><td>969</td><td>9,56</td><td>15,54</td><td>15,49</td><td>20,22</td><td>2,04</td></tr><tr><td>Leverage</td><td>969</td><td>0,00</td><td>0,56</td><td>0,58</td><td>5,75</td><td>0,34</td></tr><tr><td><strong>Non-PBCs (N = 132)</strong></td><td></td><td></td><td></td><td></td><td></td><td></td></tr><tr><td>ROA</td><td>779</td><td>-0,65</td><td>0,02</td><td>0,02</td><td>0,60</td><td>0,17</td></tr><tr><td>Age</td><td>779</td><td>48,00</td><td>168,00</td><td>336,99</td><td>1463,00</td><td>438,31</td></tr><tr><td>Size</td><td>779</td><td>9,56</td><td>14,37</td><td>14,53</td><td>20,22</td><td>2,03</td></tr><tr><td>Leverage</td><td>779</td><td>-29,72</td><td>2,03</td><td>3,87</td><td>73,99</td><td>14,19</td></tr></tbody></table>

This table reports summary statistics for firm-level variables each winsorised at the 1 % level. The full sample consisted of 338 French firms, 206 being PBC and 132 non-PBC. It covers the period 2015–2021. All variables are defined in Appendix A.

the *Group II dummy* as the missing category. Interestingly, the results show that innovative PBCs (Group I) do not outperform noninnovative PBCs (Group II), as the coefficient for the *GroupI dummy* is not significant. Overall, these results suggest that PBC status serves as the first key driver of outperformance, independent of the company’s initial innovative nature. In contrast, innovation alone does not necessarily translate into superior performance without the adoption of PBC status.

This result prompted us to further investigate the role of innovation commitment statements within the context of purpose bylaws, differentiating this commitment along with its continuity (short-vs long-term innovation commitment) and combination with purpose (embeddedness of innovation into PBC mission statement).

In Panel B, we replicate the regressions from Panel A, but now focus exclusively on PBCs, distinguishing between those with innovation content in their original corporate purpose only (GroupI_B), those with innovation content in their mission statement only (GroupII_A), firms featuring innovation content in both (GroupI_A) and those without any innovation content (GroupII_B). In Columns 1 to 4, we observe the effect of each individual group on ROA, while in Columns 5 to 8, we again use the leave-one-out approach.

First, we observe that the coefficient of the *GroupI_A dummy* is statistically significant at the 1 % level and positive in Columns 5 to 7, indicating that a long-term commitment to innovation—that is, from the original corporate purpose to purpose adoption—is the most beneficial mix for PBCs in terms of ROA. Accordingly, the coefficient of the *GroupI_A dummy* is also significant and positive in Column 1, confirming that adopting a purpose while maintaining a long-term innovation commitment positively influences a firm’s profitability.

Additionally, the significant and negative coefficient of the *GroupI_B dummy* in Column 5 (when compared to other group typologies) and

Column 2 (when considered independently of other group typologies) indicates that PBCs incorporating innovation into their original corporate purpose but not in their mission statement tend to experience a decline in ROA. Moreover, this renouncement of innovation appears to be even more detrimental than having never engaged in innovation from the outset. Economically, the Column 5 coefficient suggests that PBCs with innovation mentioned only in the original corporate purpose have an ROA that is 0.379 percentage points lower compared to PBCs with no innovation content in either the original corporate purpose or the mission statement. This finding suggests that abandoning the original innovation orientation when adopting the PBC status can be highly detrimental to performance.

In contrast, the coefficient in Column 3 suggests that firms experiencing reverse discontinuity in innovation commitment—that is, those that embrace innovation concurrently with becoming a PBC—do not undergo any negative adjustment in ROA. However, this shift does not confer any performance advantage, as the *GroupII_A dummy* coefficient is not significant.

In summary, these findings alleviate concerns about potential opportunism in innovation propensity when transitioning to a PBC while also rewarding firms that have maintained a historical alignment with innovative objectives without penalising those that genuinely embrace innovation as part of their responsible transformation.<fnref n="12" />

Overall, these results support our second hypothesis, confirming that a historical (long-term) commitment to innovation—from the original corporate purpose through the transition into a PBC—plays a crucial role in driving the superior performance of French PBCs.

## 5. Robustness tests

To ensure the reliability of our findings, we conducted a series of robustness tests. In addition to addressing concerns related to potential unobserved firm characteristics, such as the sincerity or depth of purpose-driven and innovative initiatives, we also tested the robustness of our results using an alternative difference-in-differences (DID) specification. Specifically, we leveraged the previously defined Innovation_CP and Innovation_MS measures, along with their interaction terms, to assess the impact of purpose and innovation adoption on firm performance from a different methodological perspective.

### 5.1. Purpose and Innovation's depth of commitment

In this section, we address potential concerns that performance outcomes may be influenced by unobserved firm characteristics, such as the sincerity or depth of their purpose-driven and innovative initiatives.

To mitigate this issue, we introduce three additional variables that capture the PBCs’ historical engagement in purpose-driven and innovation initiatives: *ESS*, *PositiveWorkplace* and *InnovScore*. The *ESS*

<footnote n="12">¹² Thus, in line with transformation and signalling costs (Spence, 1973), the positive effect on performance may materialise once these costs are absorbed.</footnote>
<table><caption>**Table 3**
- Purpose and innovation propensity effect on a firm's profitability (OLS results).</caption><caption>PANEL A: ALL FIRMS (Groups I, II, III)</caption><thead><tr><th>Dependent variable</th><th>[1]<br>ROA</th><th>[2]<br>ROA</th><th>[3]<br>ROA</th></tr></thead><tbody><tr><td>PBC</td><td>1.275***<br>[0.039]</td><td></td><td></td></tr><tr><td>GroupI dummy</td><td></td><td>1.312***<br>[0.120]</td><td>0.044<br>[0.123]</td></tr><tr><td>GroupII dummy</td><td></td><td>1.269***<br>[0.040]</td><td></td></tr><tr><td>GroupIII dummy</td><td></td><td></td><td>-1.269***<br>[0.040]</td></tr><tr><td>Firm-level controls</td><td>Y</td><td>Y</td><td>Y</td></tr><tr><td>Year FE</td><td>Y</td><td>Y</td><td>Y</td></tr><tr><td>Industry FE</td><td>Y</td><td>Y</td><td>Y</td></tr><tr><td>Observations</td><td>1748</td><td>1748</td><td>1748</td></tr><tr><td>R-squared</td><td>0.79</td><td>0.79</td><td>0.79</td></tr></tbody></table>

<table><caption>**PANEL B: PBCs ONLY (Group1_1 I_B, II_A and II_B)**</caption><thead><tr><th>Dependent variable</th><th>[1]<br>ROA</th><th>[2]<br>ROA</th><th>[3]<br>ROA</th><th>[4]<br>ROA</th></tr></thead><tbody><tr><td>GroupI_A dummy</td><td>0.719***<br>[0.197]</td><td></td><td></td><td></td></tr><tr><td>GroupI_B dummy</td><td></td><td>-0.433**<br>[0.219]</td><td></td><td></td></tr><tr><td>GroupII_A dummy</td><td></td><td></td><td>-0.104<br>[0.168]</td><td></td></tr><tr><td>GroupII_B dummy</td><td></td><td></td><td></td><td>-0.106<br>[0.156]</td></tr><tr><td></td><td>[5]</td><td>[6]</td><td>[7]</td><td>[8]</td></tr><tr><td>GroupI_A dummy</td><td>0.694***<br>[0.214]</td><td>0.744***<br>[0.199]</td><td>1.073***<br>[0.286]</td><td></td></tr><tr><td>GroupI_B dummy</td><td>-0.379*<br>[0.225]</td><td>-0.0329<br>[0.266]</td><td></td><td>-1.073***<br>[0.286]</td></tr><tr><td>GroupII_A dummy</td><td>-0.050<br>[0.178]</td><td></td><td>0.329<br>[0.266]</td><td>-0.744***<br>[0.199]</td></tr><tr><td>GroupII_B dummy</td><td></td><td>0.050<br>[0.178]</td><td>0.379*<br>[0.225]</td><td>-0.694***<br>[0.214]</td></tr><tr><td>Firm-level controls</td><td>Y</td><td>Y</td><td>Y</td><td>Y</td></tr><tr><td>Year FE</td><td>Y</td><td>Y</td><td>Y</td><td>Y</td></tr><tr><td>Industry FE</td><td>Y</td><td>Y</td><td>Y</td><td>Y</td></tr><tr><td>Firm-level controls</td><td>Y</td><td>Y</td><td>Y</td><td>Y</td></tr><tr><td>Observations</td><td>969</td><td>969</td><td>969</td><td>969</td></tr><tr><td>R-squared</td><td>0.50</td><td>0.50</td><td>0.50</td><td>0.50</td></tr></tbody></table>

This table presents the results of the OLS regressions based on Specification 1. ROA represents the ratio of net profit to total assets. Dummy variables are defined according to the group typologies presented in Table 1. Each regression includes three firm-level controls—size, age, and leverage—along with firm- and year-industry fixed effects. Robust standard errors are reported in brackets. Significance levels are denoted by *, ** and *** at the 10%, 5% and 1% levels, respectively. All firm-level controls were winsorised at the 1% tails to manage outliers. We also checked for multicollinearity by examining the variance inflation factor (VIF) values, with all mean VIFs below 4, well within the acceptable threshold of 10, confirming that multicollinearity is not a concern in our models. Our sample consisted of 206 French PBCs and 132 French non-PBCs, covering the period from 2015 to 2021. The definitions of all variables are provided in Appendix A.

variable is a dummy that equals one if the firm operates within the ‘social economy’ sector of the French economy and zero otherwise. The *PositiveWorkplace* variable takes a value of one if the firm has obtained relevant certifications, indicating a commitment to positive workplace practices, and zero otherwise. Lastly, *InnovScore* is an index ranging from 1 to 4, reflecting the degree to which innovation has been a core driver in the decision to adopt PBC status. This score, extracted from the CEM database, was collected through questionnaires at the time of referencing. Specifically, a score of 4 indicates that innovation was a key factor in the decision to become a PBC, while a score of 1 suggests that it

was not considered particularly important. Table 4 presents the results.

In Column 1, we present the results from the alternative DID strategy previously introduced.<fnref n="13" /> The coefficients confirm that the combination of PBC and innovation is even more profitable when innovation is sustained in the long run. Conversely, and in line with previous findings, the coefficient of *Innovation_CP* is significant and negative, indicating that abandoning innovation when transitioning into a PBC can be detrimental to firm performance.

Then, comparing Columns 2 to 4 with Column 1, we first noted that our previous observations remain stable: historical commitment to innovation, from the original corporate purpose through the transition to PBC status, still plays a crucial role in driving the superior performance of PBCs.

Additionally, we observed that only one of the three new control variables, ESS, exhibited a statistically significant and negative influence on ROA (−0.339). This suggests that, in contrast to the adoption of French PBC status, being part of the ESS economy does not confer a performance advantage for PBCs and is, in fact, even more detrimental to their profitability. An alternative explanation could be that most social firms operate in industries that are more subject to market failures or in certain specific sectors where profitability is lower (and less attractive for conventional counterparts). This last result may seem surprising in light of previous studies, such as those by Moric et al. (2020) and Rizos et al. (2016). This is particularly true if we consider that circular economy practices and the ESS framework share common principles that have been shown to positively impact firm performance.

Overall, these results confirm the robustness of our findings, stating that long-term innovation thinking plays a significantly positive role in enhancing the return on assets of purpose-driven firms. Moreover, they help mitigate previous concerns regarding the potential influence of unobserved firm characteristics.

## 5.2. Industry characteristics

Furthermore, we considered potential industry-specific characteristics that could influence a firm’s inclination towards innovation.

Preliminary descriptive statistics indicate that innovative firms are mainly represented in two main sectors: technology-IT and consulting. Consistent with previous findings, these sectors, particularly the technology-IT industry, have a greater propensity to foster innovation within firms. Moreover, they often attract and retain a highly skilled workforce, which can enhance innovation and profitability. To account for these sector-specific effects and ensure that our results are subject to sample selection and impacted by the characteristics of a limited number of sectors, we introduced two additional dummy variables: *Technology* and *Consulting*. These variables were set to one if the firm operates within the technology-IT or consulting industry, respectively and zero otherwise. We then included these variables in our regression model to assess their impact. Table 5 presents the results.

In the first column of Table 5, we present the previous results of Table 4 (Column 1) as a baseline for comparison with our new findings. In Columns 2 and 3, we progressively introduce the *Technology* and *Consulting* variables into the specification. The results in both columns indicate that our previous findings remain robust, regardless of whether we control for *Technology* or *Consulting*. Furthermore, Column 3 reveals

<footnote n="13">¹³ We use the adoption of purpose-driven bylaws companies, which was explicitly linked to the PACTE’s law in France, as an “external shock” to build our diff in diff approach. The adoption of this specific status was perfectly identifiable by the date of the adoption of the law, and we had the opportunity to estimate the impact of the adoption of the specific law on our focal relationship. Our approach was guided by the willingness to disentangle opportunistic behaviors around the adoption of the law (and the creation of this status) vis a vis-more committed firms that were already engaged in an innovative strategy.</footnote>
<table><caption>**Table 4**
Purpose and innovation controls.</caption><thead><tr><th rowspan="2">Dependent variable</th><th>[1]</th><th>[2]</th><th>[3]</th><th>[4]</th></tr><tr><th>ROA</th><th>ROA</th><th>ROA</th><th>ROA</th></tr></thead><tbody><tr><td>Innovation_CP</td><td><strong>-0.343**</strong><br>[0.158]</td><td><strong>-0.327**</strong><br>[0.163]</td><td><strong>-0.348**</strong><br>[0.158]</td><td><strong>-3.334**</strong><br>[0.159]</td></tr><tr><td>Innovation_MS</td><td>-0.049<br>[0.073]</td><td>-0.031<br>[0.073]</td><td>-0.049<br>[0.072]</td><td>-0.044<br>[0.073]</td></tr><tr><td>Innovation_CP*Innovation_MS</td><td><strong>0.556**</strong><br>[0.225]</td><td><strong>0.630***</strong><br>[0.228]</td><td><strong>0.631***</strong><br>[0.252]</td><td><strong>0.546***</strong><br>[0.226]</td></tr><tr><td>ESS</td><td></td><td><strong>-0.339**</strong><br>[0.121]</td><td></td><td></td></tr><tr><td>PositiveWorkplace</td><td></td><td></td><td>-0.290<br>[0.291]</td><td></td></tr><tr><td>InnovScore</td><td></td><td></td><td></td><td>0.014<br>[0.018]</td></tr><tr><td>Year FE</td><td>Y</td><td>Y</td><td>Y</td><td>Y</td></tr><tr><td>Industry FE</td><td>Y</td><td>Y</td><td>Y</td><td>Y</td></tr><tr><td>Firm-level controls</td><td>Y</td><td>Y</td><td>Y</td><td>Y</td></tr><tr><td>Observations</td><td>969</td><td>969</td><td>969</td><td>969</td></tr><tr><td>R-squared</td><td>0.58</td><td>0.58</td><td>0.58</td><td>0.58</td></tr></tbody></table>

This table presents the results of the OLS regressions based on Specification 1. ROA represents the ratio of net profit to total assets. Innovation_CP and Innovation_MS are dummy variables set to one if the firm incorporates innovation content into its corporate purpose or mission statement, respectively and zero otherwise. The ESS variable is a dummy set to one if the firm is part of the French ESS ecosystem and zero otherwise. PositiveWorkplace is a dummy variable that takes the value of one if the firm has obtained relevant certifications, indicating a commitment to positive workplace practices, and zero otherwise. Lastly, InnovScore is an index ranging from 1 to 4, indicating the extent to which innovation is a key driver in the decision to adopt SàM status. Each regression includes three firm-level controls—size, age, and leverage—along with firm- and year-industry fixed effects. Robust standard errors are reported in brackets. Significance levels are denoted by *, ** and *** at the 10%, 5% and 1% levels, respectively. All firm-level controls were winsorised at the 1% tails to manage outliers. We also checked for multicollinearity by examining the VIF values, confirming that multicollinearity is not a concern in our models. Our sample consisted of 206 French PBCs and 132 French non-PBCs, covering the period from 2015 to 2021. The definitions of all variables are provided in Appendix A.

that technology PBCs tend to outperform their counterparts in other industries, while consulting firms, despite being highly innovation oriented, tend to underperform in terms of ROA. This outcome corresponds to the previously discussed alignment hypothesis, which suggests that innovation should be deeply integrated and historically embedded within a firm's core business, which is a specific characteristic of technology firms.

## 6. Discussion and limitations

The literature on innovation, purpose and performance is flourishing, with the objective to help to better understand the core concept such as mission and purpose. Mission is not a new concept per se, but it was rejuvenated by the notion of purpose. The rise of mission-based labels and statuses has also put the spotlight on the impact and consequences of both mission and purpose. Most of the literature has focused on the implementation of the mission since it seems to be a clear puzzle. Thus, the micro level (at people and employee level) is dominant, even though some papers have also used a corporate perspective. For instance, the strategy literature has examined the potential for differentiation or positioning of companies with (strong) mission commitment and powerful purpose.

From our knowledge, few papers have tried to examine the link between mission-based companies and performance (since the data for that are quite recent) and even less have focused on the potential relationship between mission, innovation and performance. We believe that mission-based companies have a clear inclination to innovation, and broader than a simple social innovation, and that is likely to enhance performance. As highlighted by MION et al. (2024, 2024), most of papers have only examined the organisational dimension of performance, in line with the micro-level perspective.

We opted for a different angle and contributed to a recent and emerging stream of literature. As suggested by Worren and Pope (2025), there are two main options to examine the impact of innovation in mission-based companies: via communication or metrics. We followed the second option and examined the relationship link between mission-based companies and performance in the French context, since

<table><caption>**Table 5**
- Industry controls.</caption><thead><tr><th rowspan="2">Dependent variable</th><th>[1]</th><th>[2]</th><th>[3]</th></tr><tr><th>ROA</th><th>ROA</th><th>ROA</th></tr></thead><tbody><tr><td>Innovation_CP</td><td><strong>-0.343**</strong><br>[0.158]</td><td><strong>-0.343**</strong><br>[0.157]</td><td><strong>-3.342**</strong><br>[0.158]</td></tr><tr><td>Innovation_MS</td><td>-0.049<br>[0.073]</td><td>-0.049<br>[0.073]</td><td>-0.049<br>[0.073]</td></tr><tr><td>Innovation_CP*Innovation_MS</td><td><strong>0.556**</strong><br>[0.225]</td><td><strong>0.556**</strong><br>[0.224]</td><td><strong>0.556**</strong><br>[0.226]</td></tr><tr><td>Technology</td><td></td><td><strong>0.568**</strong><br>[0.137]</td><td><strong>0.876***</strong><br>[0.108]</td></tr><tr><td>Consulting</td><td></td><td></td><td><strong>-0.307***</strong><br>[0.104]</td></tr><tr><td>Year FE</td><td>Y</td><td>Y</td><td>Y</td></tr><tr><td>Industry FE</td><td>Y</td><td>Y</td><td>Y</td></tr><tr><td>Firm-level controls</td><td>Y</td><td>Y</td><td>Y</td></tr><tr><td>Observations</td><td>969</td><td>969</td><td>969</td></tr><tr><td>R-squared</td><td>0.58</td><td>0.58</td><td>0.58</td></tr></tbody></table>

This table presents the results of the OLS regressions based on Specification 1. ROA represents the ratio of net profit to total assets. Innovation_CP and Innovation_MS are dummy variables set to one if the firm incorporates innovation content into its corporate purpose or mission statement, respectively and zero otherwise. The Technology (Consulting) variable is a dummy set to one if the firm operates within the technology-IT (consulting) industry and zero otherwise. Each regression includes three firm-level controls—size, age, and leverage—along with firm- and year-industry fixed effects. Robust standard errors are reported in brackets. Significance levels are denoted by *, ** and *** at the 10%, 5% and 1% levels, respectively. All firm-level controls were winsorised at the 1% tails to manage outliers. We also checked for multicollinearity by examining the VIF values, confirming that multicollinearity is not a concern in our models. Our sample consisted of 206 French PBCs and 132 French non-PBCs, covering the period from 2015 to 2021. The definitions of all variables are provided in Appendix A.

the status ensure stakeholders and employees that companies must make effective their mission and the content. To our knowledge, our paper is one the very first, to examine the relationship link between mission-based companies and performance in the European context and
with regard for specific status and not only with labels such as Bcorps. Our main findings explore a critical dimension of innovation, the long-term orientation and commitment and adopt a broader perspective than solely the social one.

While our findings shed light on the relationship between purpose adoption, innovation strategies and firm performance, some limitations and broader considerations must be addressed. In this section, we first discuss challenges related to purpose measurement and content clarity (6.1) before exploring the nuanced relationship between purpose and different innovation typologies (6.2). Finally, we examine the external factors—such as regulation, institutional quality, and industry dynamics—that shape firms’ ability to sustain their innovation commitments (6.3). These discussions helped refine the interpretation of our results and outline key areas for future research and managerial action.

## 6.1. Addressing purpose measurement issues: enhancing clarity and content

Measuring a firm’s purpose presents significant challenges, both for academic, practitioners and evaluators, particularly when it comes to ensuring a standardised and codified approach. One key issue is the reliance on employee perceptions, which can introduce interpretative biases and hinder comparability between firms (Kilson and Tavares, 2024; Baek et al., 2023). Additionally, there is often a tendency to focus solely on the strength of a firm’s purpose, neglecting its actual content and its consequences. As mentioned by Worren and Pope (2025) and Gartenberg (2023), purpose and mission are not just word or a will or a global objective. It has some declination, and a mission needs to be implemented and needs effectiveness (Mion et al., 2024, 2025; Holmes & al. 2025). Meanwhile, the risk of mission-washing or words without concrete actions will rise. Mission exhibits clear links with strategic orientation and positioning (Roe, 2021; Bacq & al. 2022; George & al. 2023). A mission has also an internal dimension, which is mainly examined in the literature. In our paper, we wanted to address a question related to a more firm’s and industry perspective. We contribute by examining the innovative dimension which is more needed for companies that are willing to get a status for their mission and their contribution for the society. We do not delve into the internal dimensions of the firm, and we focused on the content of innovation, how it is translated into the mission and the subsequent consequences in terms of performance.

Our paper also has managerial implication regarding the innovation-mission relationship. Since PBCs are evaluated both by third-party evaluators and some specific stakeholders (as external shareholders and/or impact fund managers), our results may also help practitioners to set up a category of analysis and evaluation based on the length, duration and intensity of commitment of innovation for purpose-based companies. Our results also suggest taking into account and precisely evaluate (via interviews or the analysis of the mission for many years) the degree of innovation of such organisations. The evaluation process can rely on a content analysis and also be based on a comparative approach from the best-in class. The process toward PBCs (and the follow up) gives an opportunity for practitioners and evaluators to get data (even qualitative) that can be reliable for these tasks and jobs. Practitioners as evaluators can integrate this important dimension or add this issue to their assessment. In doing so, our results may help to

clarify and disentangle companies with continuous innovation and commitment via and by the status (the best case in our matrix presented in the next section) and those who can be considered as more opportunistic.

In the end, our paper partially addresses these concerns by using the French PBC framework, which offers a standardised and codified approach to measuring purpose. This framework reduces the level of individual interpretation and enhances comparability across firms, thus aligning with Gartenberg’s call for a more consistent measure (and that could be useful also for practitioners). Moreover, by combining the legal commitment to purpose (through official mission statements) with a detailed analysis of its content, we were able to capture both the strength and substance of the firms’ objectives, addressing the second issue raised by Gartenberg (2023).

However, we recognise that even with these improvements, there is still room for further research. Specifically, our model could be enhanced by incorporating an assessment of the sincerity or trustworthiness of a firm’s purpose. This would provide a more comprehensive understanding of the genuine commitment behind purpose-driven initiatives, thereby moving closer to an ideal measure of embedded purpose.

## 6.2. Exploring the relationship between Purpose and innovation typologies

A natural extension of our work lies in examining the depth and nature of innovation embedded within a firm’s purpose. While we primarily focus on the continuity of innovation from the corporate purpose (CP) to the mission statement (MS), the true alignment between innovation and purpose may be more nuanced. Our paper took another perspective to examine the economic and corporate performance of innovation and mission (Farza & al. 2021; Le & al. 2022; Lee and Raschke, 2022). In contrast with papers focusing on organisational performance, we examined more precisely the impacts of a long-term commitment in terms of innovation and performance. An historic stream of literature in economics, strategy or organisation has exhibited that innovation may enhance performance (e.g. Gartenberg, 2023). But we need to delve into the relationship and examine precisely the intensity and impact of innovation and not only in terms of implementation and organisational performance.

Specifically, it could be argued that the authenticity of a firm’s purpose should be closely tied to the nature of the innovation it pursues (this is a direct driver for implementation and actionability, Holmes & al. 2025; Kilson and Tavares, 2024). As Henderson (2021) suggested, an authentic purpose, particularly one that aligns with architectural innovation, can significantly enhance a firm’s ability to engage in more complex and systemic innovations. In our current analysis, we do not differentiate between types of innovation or assess whether they genuinely serve the firm’s purpose. Future research should investigate whether the nature of innovation (social, green, incremental, radical, systemic, or architectural) affects alignment with a firm’s purpose and, subsequently, its performance. For instance, does a PBC with architectural innovation, which changes the underlying structure of its products or processes, derive more performance benefits than one engaged in incremental innovation? Such an enquiry could provide valuable insights into how different innovation typologies contribute to a firm’s authentic purpose and long-term profitability. This could be an
<figure><img src="image_5.png" /><figcaption>Fig. 2. – Strategy matrix of PBC’s positioning along innovation continuity and purpose alignment.</figcaption></figure>

extension of our work and may help to better identify what kind of
innovation are more likely to be translated in tangible performance (and
could initiate a virtuous circle – Mion et al., 2023).

6.3. *The role of regulation, institutional quality, and industry dynamics in supporting innovation commitment*

Finally, we should also discuss the potential need for regulatory intervention to promote a more structured commitment to innovation within purpose-driven firms. The relationship between purpose and profit can differ significantly depending on whether it is externally imposed or voluntarily adopted, raising the question of whether similar governance measures should also be considered for innovation-related practices. This perspective aligns with recent discussions, such as those by Gartenberg (2023), which highlight the importance of regulatory frameworks in shaping the balance between purpose and profit.

Like many issues in governance, finance and strategy, this debate raises a fundamental question: when tackling societal or grand challenges, is a compulsory and legal framework necessary or are incentive-based approaches that encourage proactive behaviours and policies more effective? In contrast with labels or incentivized framework, our paper highlights and documents the impact of a legal framework designed to recognise and valuate the mission-based companies. Such a legal framework may not only help companies to signal their commitment to mission-oriented objectives but also help them to be supported by their whole ecosystem and stakeholders (Gartenberg, 2023; MION et al., 2023).

Our findings suggest that firms with an *ex-ante* and sustained commitment to innovation tend to outperform those that adopt innovation opportunistically without it being an inherent part of their

strategy. Considering the alignment between purpose and innovation as a contractual relationship between the firm and its stakeholders—essential for achieving both profitable and sustainable performance—raises the question of whether regulatory frameworks should incentivise or even mandate a stronger integration of purpose and innovation. In the context of the French PBC, our results give support to the innovative dimension of this specific status. The key point around the mission and innovation is rooted, in our opinion, around the enforceability and the legal weight. It contrasts with voluntary (and private) “labels” such as Bcorp since it requires a better level of transparency and commitment. Regarding the growing interest for purpose based companies, our result that mission-based companies may demonstrate their will to innovate, in the best interest of the society, but we need to consider a broad range of innovation orientation and note solely the social one.

In addition to regulatory considerations, the role of institutional quality and industry dynamics cannot be neglected when evaluating the performance of firms within the purpose ecosystem. Research has shown that firms operating in environments with robust institutional frameworks tend to perform better, as these frameworks provide essential support for innovation and strategic growth (KAFOUROS et al., 2024). This suggests that the effectiveness of innovative incentives and purpose-driven strategies may be heavily contingent on the broader institutional context in which firms operate.

Therefore, any consideration of governance reforms or regulatory intervention must also consider the institutional quality and industry-specific dynamics that influence a firm's ability to innovate and achieve profitable outcomes. By addressing both regulatory frameworks and the institutional environment, policymakers and firm leaders can better ensure that purpose-driven innovation strategies are effective and
capable of driving sustainable growth within the purpose ecosystem.

## 7. Concluding remarks

Our paper delves into the intricate relationship between purpose bylaws and innovation and questions whether the combination of these different elements could have a positive influence on performance.

On the one hand, our results confirm our initial hypothesis, demonstrating that companies with purpose bylaws outperform their counterparts without such bylaws. Furthermore, our findings reveal that purpose also significantly amplifies it when combined with a historical commitment to innovation. In contrast, firms that abandon their commitment to innovation when adopting a purpose experience detrimental effects on performance. These findings contribute to the broader literature on strategic management, innovation integration, the role of legislation and purpose-driven corporate governance. They align with recent research recognising the importance of embedding innovation within a company's mission to ensure long-term strategic coherence and accountability (Mayer, 2021a, 2021b; Gartenberg, 2023; George et al., 2023).

On the other hand, these findings also offer valuable managerial insights and strategic considerations for firms navigating purpose adoption and innovation alignment. Altogether, our findings highlight several key drivers of firm performance, whose various combinations can lead to different outcomes. Fig. 2¹⁴ summarises these strategic combinations and their expected effects. As previously demonstrated, while purpose adoption is the most significant driver of corporate performance, additional factors—such as innovation continuity and a genuine innovation strategy—also play a crucial role.

Executive managers should also approach purpose adoption strategically: If innovation continuity is uncertain, it may be preferable to reconsider or postpone purpose adoption to avoid misalignment and potential performance drawbacks (such as in the Value Destroying Strategy in Fig. 2). However, firms capable of maintaining long-term innovation engagement when becoming PBCs will maximise their performance and sustainability (the Best-Case Strategy). Furthermore, firms that do not plan to sustain their past innovation commitments have little to gain from adopting a corporate purpose, as misalignment can lead to value destruction (such as in the Value Destroying Strategy in Fig. 2).

In contrast, companies that have not previously engaged in innovation can still adopt a purpose to enhance their positioning, particularly if their goal is short-term profitability (Neutral Strategy). However, for those willing to commit to innovation as part of their responsible transformation, a carefully managed shift towards innovation can be rewarding, provided they have the capacity to absorb the transition costs—aligning with the Transformational Strategy (see Fig. 2 below).

Our results contribute to the broader literature on social innovation, hybrid organisations, and purpose-driven business models. In particular, they emphasise how firms integrating innovation within their purpose can enhance both financial performance and social impact (Bacq and Aguilera, 2022; Henderson, 2021; Battilana and Dorado, 2010; Ferreras et al., 2022). In the long term, innovative companies with purpose bylaws may represent a novel alternative for combining financial and social performance.

Our study, while acknowledging its limitations due to unobservable or missing data, paves the way for future research in this field. Of course, our article also calls for complementary studies of a comparative nature, since similar or even quasi-similar statuses exist in many countries, such as the Società Benefit in Italy, the Benefit Corporation in the United States or Sociétés à finalité sociale in Belgium. Complementary comparative studies across different countries would deepen our understanding of this phenomenon. We leave these avenues for future research.

### CRediT authorship contribution statement

**Hollandts Xavier:** Writing – review & editing, Writing – original draft, Validation, Conceptualization. **Baudoux Marie:** Writing – review & editing, Writing – original draft, Methodology, Data curation. **Bourjade Sylvain:** Writing – review & editing, Writing – original draft, Methodology, Conceptualization. **Girard-Guerraud Carine:** Writing – review & editing, Writing – original draft, Conceptualization.

### Declaration of competing interest

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

## Appendix A. Definitions of Variables

- Return on Asset (ROA) represents the ratio of net profit to total assets (Source: Cap Financials).

- **Innovation_CP** is a dummy variable set to one if the firm incorporates innovation content into its corporate purpose and zero otherwise (Source: Cap Financials).

- **NONInnovation_CP** is a dummy variable set to one if the firm does not incorporate innovation content into its corporate purpose and zero otherwise (Source: Cap Financials).

- **Innovation_MS** is a dummy variable set to one if the firm incorporates innovation content into its mission statement and zero otherwise (Source: OSAM Database).

- **Size** is computed as the natural logarithm of the firm's sales (Source: Cap Financials).

- **Age** represents the number of months the firm has been active since its inception (Source: Cap Financials).

- **Leverage** corresponds to the ratio of total liabilities and equity/total equity (Source: Cap Financials).

- **ESS** is a dummy that equals one if the firm operates within the 'social and supportive' sector of the French economy and zero otherwise (Source: OSAM Database).

- **PositiveWorkplace** variable takes a value of one if the firm has obtained relevant certifications, indicating a commitment to positive workplace practices and zero otherwise (Source: OSAM Database).

- **InnovScore** is an index ranging from 1 to 4, reflecting the degree to which innovation has been a core driver in the decision to adopt French PBC status. This score was collected through questionnaires at the time of referencing. Specifically, a score of 4 indicates that innovation was a key factor in the decision to become a PBC, while a score of 1 suggests that it was not considered particularly important (Source: OSAM Database).

- **Technology** is a dummy set to one if the firm operates within the technology-IT (based on APE codes) industry and zero otherwise (Source: Cap Financials).

- **Consulting** is a dummy set to one if the firm operates within the consulting (based on APE codes) industry and zero otherwise (Source: Cap Financials).

<footnote n="14">¹⁴ See also Appendix B for detailed information on the global mapping of PBC profiles according to innovation continuity.</footnote>
<figure><img src="image_6.png" /><figcaption>Appendix B. PBCs Profiles in Terms of Innovation Continuity.</figcaption></figure>

## Data availability

The authors do not have permission to share data.

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