Theoretical perspectives relevant to the key research findings are discussed in Chapter two, highlighting gaps in the literature related to the main contributions of the research findings.
Chapter three provides an overview of the research design, clarifying the methods used to develop understanding of how social enterprises can develop effective business models to achieve their dual mission. The key concepts of grounded theory are explained, and the context, sampling strategy and data collection are justified. Data underpinning the analysis were collected based on five prominent social enterprises in the UK, and five further case studies operating in The Netherlands, Ivory Coast, Ghana, India, Ecuador and the US, meeting calls to study the phenomenon in a global perspective (Kerlin, 2010, Doherty et al., 2014, Bosma et al., 2016).
Having clarified the methodological choices, the thesis continues by discussing the findings in the following three chapters. Chapter four explores key drivers as part of the social enterprise business model to effectively achieve profits and purpose. The findings are based on analysis of all 93 interviews and a comparison of the financial and social outcomes and key business model drivers across the case studies. Chapter five proceeds by discussing a cross-case comparison highlighting the main factors driving social impact. The concept of
‘justice versus charity’ is emphasised, proposing key differentiating criteria between charitable support and social entrepreneurship. Building on Chapter four and five, Chapter six proposes how to effectively combine ‘profits and purpose’ as part of the mainstream
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economy. Finally, Chapter seven concludes by summarising the main contributions and limitations of this study, and suggested avenues for future research.
The thesis structure is summarised in Figure 2.
Figure 2: Thesis structure
Conclusions Chapter 7. Conclusions Findings and discussion Chapter 4.
Balancing 'purpose and profits'
Chapter 5.
Key drivers social outcomes
Chapter 6.
Profits for purpose Methodology
Chapter 3. Research design and methods Literature review
Chapter 2. Theoretical perspectives on 'purpose and profits' Context and overview
Chapter 1. Introduction
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C
HAPTER TWO:
THEORETICAL PERSPECTIVES ON‘
PURPOSE AND PROFITS’
“On the face of it, shareholder value is the dumbest idea in the world. Shareholder value is a result, not a strategy. The main constituencies are your employees, your customers, and your products.
Managers and investors should not set share price increases as their overarching goal. Short-term profits should be allied with an increase in the long-term value of a company”
Jack Welch, CEO General Electrics (Guerrera, 2009)
2.1 Introduction
Early literature on social entrepreneurship predominantly focused on heroic tales and positive outcomes (Bornstein and Davis, 2010, Elkington and Hartigan, 2008, Yunus, 2007, Bornstein, 2004). Famous success stories such as the Grameen Bank attracted attention to social entrepreneurship as a promising vehicle to address major issues in society (Smith et al., 2013, Wilson and Post, 2013, Bloom, 2012). However, the rather one sided initial focus on successful examples did not reveal the difficulties faced by many other social enterprises.
More recent studies have highlighted the challenges arising from combining both a commercial and social mission, often referred to as the ‘dual mission’ (Doherty et al., 2014, Banerjee and Duflo, 2011, Dacin et al., 2011, Ridley-Duff and Bull, 2011, Teasdale, 2010, Peattie and Morley, 2008, Mair and Marti, 2006, Peredo and McLean, 2006).
The combination of conflicting social and commercial logics is seen as the main cause of ineffective strategies leading to deficient performance or organisational failure (Santos et al., 2015, Besharov and Smith, 2014, Doherty et al., 2014, Wilson and Post, 2013, Battilana and Dorado, 2010, Moizer and Tracey, 2010, Teasdale, 2010, Zahra et al., 2009, Austin et al., 2006, Harjula, 2006). There is a lack of understanding of whether and how such challenges can be overcome, especially in the field of strategic management (Wilson and Post, 2013, Hamby et al., 2010). Managers have no blueprint to follow of how to make strategic decisions effectively in favour of social or commercial logics to achieve ‘profits’ as well as
‘purpose’. For example, when faced with a decision to recruit more skilled and experienced people, or whether to take on homeless people or refugees as apprentices what should be prioritised? Can and should the social enterprise incur higher training and management costs to achieve a social purpose? And what if that means that these additional costs put the financial sustainability of the social enterprise at risk? Or, when faced with a decision to locate the enterprise in a deprived area with much social need, but limited market potential, or somewhere with more promising commercial opportunities, what matters more?
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Recent studies have begun to explore how prioritising commercial or social logics impacts on the tensions experienced by social enterprises (Woodside, 2017) and the success of the organisation (Battilana et al., 2015, Jay, 2013, Smith and Lewis, 2011). Whilst these studies provide valuable insights into possible ways to maintain a certain balance around the dual mission and prevent certain tensions they do not clarify as to how strategic decisions can be made as part of the business model to effectively achieve ‘profits’ as well as ‘purpose’. This study aims to contribute to this gap in our understanding by exploring key factors as part of the social enterprise business model that enable better financial and social outcomes.
This chapter sets out theoretical perspectives that relate to the findings from the study. In grounded theory methodology, the literature review is mainly conducted as part of a comparison with the key findings. Theoretical concepts and framework are developed following data collection and analysis, rather than derived from a literature review at the start of the research. However, the literature and existing theories related to the proposed concepts are presented here first ahead of the findings and discussion chapters, for advance clarity and to follow the same order as most academic publications.
First, perspectives on competing social and commercial logics are explored as part of recent studies in the context of social entrepreneurship in section 2.2. The combination of social and commercial aims is not unique to the phenomenon social enterprise. Businesses pursuing commercial targets increasingly adopt social initiatives, albeit in different ways and to a different extent. Section 2.3 explores why ‘profits and purpose’ should be combined as part of the mainstream economy. By clarifying why corporations should pursue creating value for society, instead of a sole purpose to maximise shareholder return, important insights are gained into how to combine the profit motive with a social mission. Section 2.4 draws on theoretical perspectives on combining ‘profit with purpose’ as part of mainstream business, namely CSR, stakeholder theory, and shared value. The three strands provide valuable insights into combining social aims with commercial aims, but are criticised for lack of clarity of how to overcome challenges related to combining ‘profit and purpose’, and for issues around the legitimacy of these theories. Section 2.5 introduces the concept that social entrepreneurship is not a separate phenomenon but a trajectory as part of the mainstream economy. Risks and opportunities of mainstreaming social entrepreneurship are explored drawing on comparisons with the mainstreaming of fair trade. Finally, the chapter concludes with a summary of the main shortfalls in extant theory of how to overcome challenges arising from combining profits and purpose in section 2.6.
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