Research suggests that firms often address a wide range of societal issues with their prosocial initiatives (i.e., breadth strategy) at the expense of achieving meaningful impact on select issues (i.e., depth strategy). This trade-off arises from a distortion in the market for social impact, driven by a misalignment between market stakeholders (e.g., customers, employees), who are not directly affected by firms' efforts in addressing societal grand challenges and are constrained in evaluating their impact, and nonmarket stakeholders (e.g., regulators, NGOs), who operate outside the market and are more informed about and focused on societal impact. We argue and show that nonmarket stakeholders play a disciplinary role in the market for social impact. Using data on 2,711 firms’ operational and product alignment with the 17 United Nations Sustainable Development Goals, we demonstrate that nonmarket stakeholders are more likely to criticize firms for superficial breadth strategies, particularly in environments with high information reliability. We also find that nonmarket stakeholders are more favorable toward depth strategies, especially those involving operational efforts rather than product-related initiatives, as operational efforts are perceived as more holistic, less symbolic, and better at mitigating risks.
