The Role of the B Corp Certification in Early-Stage Investors' Decision Process

Abstract

The B Corp certification is adopted by an increasing number of early-stage ventures to present themselves favourably to investors and increase their funding chances. The current understanding of the processes underlying this relationship is however lacking. This research provides further insights by analysing the role of the B Corp certification in early-stage investors’ decision process. Based on an exploratory abductive approach, 22 interviews with impact and traditional investors were conducted and analysed using process frameworks by Gompers et al. (2020) and Huang (2018). The B Corp certification is found to have minor effects on the decision process based on both ideologic and economic perceptions. Its role is much larger when cognitively evaluated within itself in terms of costs and benefits than as a source of quality signalling. The certification only significantly impacts the final selection decision if investors expect it to create a competitive advantage which outweighs the high cost of undergoing the certification process as an early-stage venture. These findings call into question the predominant assumption of a positive effect of the B Corp certification on funding chances due to quality signalling and highlight the need for further research into the relationship between voluntary sustainability certification and early-stage investors’ sensemaking.