This article develops a theory in which a firm's adoption of a prosocial purpose can increase profitability by strengthening employees' reputation and identity—leading to higher effort and lower wages—as long as implementing purpose is costly with respect to direct monetary payoffs. Employees who value prosocial action will select into firms with a social purpose, which then become a visible carrier for these employees' identity and reputation.

Does the “soft side” of management matter? Many managers assert that “firm culture” is strongly correlated with productivity, but there are few robust tests of this assertion. In a set of field experiments, we study driver productivity within a large US logistics company that is arguably transitioning from one relational contract to another, while leaving formal practices and incentives unchanged. We find that sites under the new contract are associated with 1/8 percent higher productivity. Our findings suggest that relational contracts have a first-order effect on productivity and that they can be altered over time.