The Impact of B Lab Certification on Firm Growth

We investigate the impact of B Lab certification—a rapidly growing type of third-party certification for organizations with social and/or environmental missions—on the short-term growth rates of certifying firms. To date, this kind of certification has generally been regarded as an unalloyed good for the organizations that adopt it; but prior research has overlooked the possibility that it may also entail attentional deficits and internal organizational disruption, leading to a short-term growth slowdown. Our study reports results based on a novel, hand-collected dataset of 249 mainly privately held North American certified B Corporations over 2011–2014. Our results, derived from a difference-in-difference framework, and augmented with insights from a set of in-depth interviews, identifies a short-term growth slowdown arising from certification, which is more pronounced for the smallest and youngest firms. These findings highlight the need for management theorists to pay greater attention to internal re-organization costs and external benefits flowing from B Lab certification; they also carry important practical implications for organizations contemplating certification.