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Metaphor as the Purpose of the Firm

Periodic Reporting for period 1 - METAPoF (Metaphor as the Purpose of the Firm)

Reporting period: 2019-04-01 to 2020-09-30

How does language reflect, and even shape, sense-making about the purpose of the firm? In the last decade, the purpose of the firm has become a pressing concern, with many corporations making explicit commitments to social purpose in mission statements, policies, and communications. There is growing debate over whether business has responsibilities that extend beyond profit-making. Growing corporate power has triggered calls for firms to tackle “grand challenges”—including economic inequality, climate change, and resource scarcity. Firms’ efforts to tackle such challenges bring into sharp relief the perceived tension between their financial and social objectives. Thus far, most explanations why executives identify the firm’s purpose as extending beyond creating economic value focus on the external environment. Thus, executives in Anglo-Saxon countries, such as the United States and United Kingdom, tend to prioritize their duties to shareholders. Managers in German-speaking Europe and in Japan are more likely to acknowledge duties towards non-shareholding stakeholders even if fulfilling these duties does not pay off financially. However, these explanations ignore substantial variance across firms within the same country: after all, not all firms in the United States (or, for that matter, the United Kingdom, Germany, or Japan), are alike and approach questions of purpose in the same way.

A linguistic lens complements the dominant focus on external forces to explain how executives and their stakeholders conceive of the purpose of the firm. Language offers a particularly promising lens. Language—not only content, but also latent features such as grammar and figures of speech—sheds light on how actors construe the world. Moreover, discourse can shape which policies and practices become accepted. By using discourse strategically, executives can project their actions as legitimate, potentially shaping the reactions of stakeholders, including investors. Intriguingly, the ways in which complex ideas—such as purpose—are constructed in language are not always explicit. Rather, language can reflect and reinforce deep-rooted social norms of which actors may be unaware. I build on research at the interface of linguistics and cognitive science to argue that even highly subtle ways of speaking about the future and agency shape understandings of the kinds of societal challenges that firms are responsible for tackling. Metaphor, a figure of speech whereby an abstract or elusive concept is described in terms of something more concrete or readily understood, is of particular focus in the project because it reveals underlying attitudes and subtly influences audience opinions.

The overarching aim is to investigate two dimensions of language that matter for sense-making and sense-giving about purpose: how the future is conceptualized, and how agency is conceptualized. These two dimensions matter in concert for the kinds of societal challenges that executives recognize as salient and ultimately choose to tackle. Addressing societal challenges implies that decision makers sufficiently value the future so that they are prepared to make efforts today that will only pay off after many years. It also implies that they recognize their responsibility and their capacity to effect change so that they believe their efforts will be worthwhile. Both of these dimensions come to the fore in metaphors that express time and agency in terms of space and motion. The project uses archival analysis and experiments to address three concrete objectives, namely to understand 1) why executives use the metaphors they do to describe the future and their agency to act, 2) how distinct metaphors influence the reactions of investors, as well as 3) how the dominant ways of constructing purpose in language vary across nations. Taken together, these objectives will advance an understanding of the linguistic basis of corporate purpose.
I have conducted a literature review of metaphors used to depict time and agency as well as of their influence on audience reactions. This has produced a working paper which will be submitted for publication towards the end of 2020/early 2021.

I have conducted experiments using managers and investors as participants. These experiments test hypotheses about two particular types of metaphors (journey-related metaphors; war-related metaphors) on the willingness to invest. As a whole, the experiments show that war-related language evokes perceptions of risk and is less effective in convincing audiences than is journey-related language. Journey-related language often has a positive effect, but the specific form of the journey metaphor matters.

I have assessed the influence of journey- and war-related language in explaining investor reactions to firms’ corporate strategy announcements. The analysis shows a generally negative influence of war-related language. Specifically, a 1% increase in war-related language produces on average a decline of 0.57% in cumulative abnormal returns.
I have compiled a data set of social enterprises, which includes pitches of social enterprises as well as indicators of funding success. Initial analysis shows that how entrepreneurs speak about time is a critical driver of funding success. Successful social entrepreneurs speak about the past (to convey credibility) as well as the future (to convey optimism).

I have also compiled a data set of reports from Japanese companies in the automobile and energy sectors, hand coding how purpose is articulated. This data set will be complemented by reports from U.S. and German companies to allow a cross-country/cross-language comparison of the dominant ways in which how purpose is understood and explained.
The research goes beyond the state of the art in two key ways.

First, hitherto research in management and economics has largely focused on forces in the external environment in explaining understandings of corporate purpose and investor reactions to such understandings. The focus on figurative language is novel. Whilst there is some research in management that examines metaphor, researchers almost always treat metaphor as a single category of language. However, already the experimental results show that different metaphors have differential effects on investors. Whereas, for example, war-related metaphors are generally disadvantageous for market reactions, journey-related metaphors have altogether more positive effects. These results are found both in archival data and in experimental data.

Second, the research using corporate reports and social enterprise pitches underscores the different forms of discourse used to make sense of the future and agency. It surfaces new ideas about how metaphors of the future and agency. Whereas metaphors are usually understood as forms of linguistic embellishment, the results show that metaphors are effective in evoking emotion and perceptions of morality. Much of the remaining research effort will focus on how the nature of corporate discourse varies by geography.