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INSEAD Working Paper 2014/40/STR/EFE
Firms are increasingly launching initiatives with an explicit social mandate. A common strategic justification for encouraging employee participation in such “social impact projects” is the expectation of improved retention. Although existing research suggests that participation in these projects improves the motivation and organizational identification of employees, there is limited evidence regarding the extent to which this ultimately translates into retention benefits for the firm. Drawing on insights from the institutional logics literature and identity theory, we argue that although social impact projects improve retention on average, the effect is partially offset by the conflict between the social logic and profit logic different employees experience when reintegrating into the firm’s commercial activities. We combine theoretical arguments with in-depth interview data to develop hypotheses on how the retention effect varies with the length of employee exposure to social impact projects, the employee's prior business experience within or outside the firm, and the novelty of such projects in the employee’s work environment. Empirical analysis of a sample of 912 social impact project participants and carefully matched non-participants from a global consulting firm provide evidence in line with our predictions. Furthermore, improved retention is due to a drop in voluntary departures of participants with performance ratings similar to those of non-participants, suggesting that the associated decrease in attrition is indeed a desirable strategic outcome.