Vivian Wan
The objective of this paper is to examine the role of the profit motive in encouraging pro-social economic behaviors and to compare outcomes between profit-driven and government-owned enterprises. A narrative literature review was conducted using peer-reviewed journals, economic theories, and case studies to compare performance on three criteria: innovation, efficiency, and customer satisfaction. The scope of this review spans multiple sectors and regions, including developed and developing economies. The hope for profit encourages pro-social behaviors such as innovation, efficiency, and customer-centricity. This paper compares a profit-driven enterprise with a government-run enterprise based on these points through various studies and economic theories. A profit-driven enterprise may cause various negative externalities, such as environmental degradation. However, it was found through studies that government-run enterprises do not solve these issues and instead create new ones, such as inefficiency, lack of innovation, and a risk of corruption. For example, it was found that government-run oil companies operated at only 61–65% efficiency compared with their profit-driven counterparts. In addition, surveys found that the satisfaction rate for government agencies was significantly lower than that for profit-driven companies. In the case of government-run companies in countries such as Vietnam and Nigeria, corruption risk was found to be higher than that of their profit-driven counterparts. This paper proposes the idea that an economy with many government-run companies would have worse outcomes than an economy driven by the hope for profit, and that the balance between profit-driven and government-run companies would be necessary for the welfare of society.