Talk given at the occasion of the opening symposium (11 april 2017) of the research project 'What Good Markets are Good for.'

1. MARKET INCENTIVES,
INTRINSIC MOTIVATIONS and CSR:
CROWDING IN or CROWDING OUT?
Johan Graafland
Tilburg University
Tilburg Sustainability Center

2. Intro
• Luigino Bruni: a negative side effect of incentives is that
nothing has intrinsic value anymore…the function is
controlling people, not freedom
(in: De ongekende kant van de economie. Gratuïteit en markt, p. 99)
• Crowding theory: Frey, Gneezy, Fehr, many others
– Crowding out: market incentives reduce intrinsic motivation and
replace it by extrinsic motivation
– Crowding in: market incentives enforce intrinsic motivation

3. Context of Templeton project “Where
good markets are good for”
Scheme 1
Scheme 2

4. Project 7: Free Market Institutions,
Corporate Social Responsibility and
Human Flourishing
4
4
Intrinsic
motivation
Responsibility for
common good
Market incentives
and pressure
Corporate social
responsibility
Human
flourishing
Social values
Environmental
values

5. Hypotheses
• H1: Market incentives for the CSR of a business organization crowd
in the intrinsic motivation of a director towards CSR
– Enlarges freedom to act
– Preference update by meeting intrinsically motivated people
– Signals trust of stakeholders
• H2:Compelling market pressure on the CSR of a business
organization crowds out intrinsic motivation of a director towards
CSR
– Intrudes directly into the director’s realm of self-determination
– Signals distrust; competence of director not acknowledged

6. N = 860 directors of small and medium sized enterprises
Regression analysis
with * p<.05; **p<.01; ***p<.001
6
Intrinsic
motivation
Corporate social
responsibility
Market incentives (H1) 0.27*** 0.18***
Market pressures (H2) -0.07* 0.02
Intrinsic motivation 0.19***

7. 7
Conclusions
• Business case is important
– Direct effect (extrinsic motivation)
– Indirect effect through crowding in intrinsic motivation towards CSR
• Policy implication
– Competition policy may benefit a broader concept of welfare that
includes sustainability
– Important role of NGOs and media and government regulation on CSR:
increase market incentives by fostering transparency in CSR
7

8. Talk given at:
From ‘Ratrace’ to ‘Relationships’
Markets in Service of People
Openings symposium research project
‘What Good Markets Are Good For’
Funded by the:
Templeton World Charity Foundation
11 april 2017
Partners symposium : CLUE+, VU-Centrum Ethos, Goldschmeding Foundation, Socires