Social enterprises: an examination of the uncertainties on both sides of innovation adoption
Dorothy M Kirkman
Administrative Sciences Department, University of Houston - Clear Lake, Houston TX, USA
PP: 143 - 155
Abstract
The purpose of this paper is to examine constraints existing nonprofit organizations encounter when attempting to bring a social enterprise into their existing organization. Motivation to alleviate funding uncertainty constrains executives awareness of the complexity and the potential disruptive nature of the social enterprise innovation. Given this initial constraint, creating a social enterprise may lead to culture clashes, resistance, and highlight managers' inability to develop effective systems to manage and monitor the new venture, leading to uncertainty and the inability to use the social enterprise for its intended purpose. When adopting an innovation, problems and uncertainties arise not because of the adequacy of the innovation but due to factors that constrain: (1) executives' ability to assess the innovation and (2) internal stakeholders' willingness to use it.
Keywords
innovation, innovation adoption, change, non-profit organizations, social entrepreneurship, uncertainty
Article Text
Social enterprises possess the potential to have a transformative impact on society by utilizing a multi-faceted innovative approach to delivering social services (Dees & Anderson 2003). They involve creating novel solutions through a hands-on approach (Moss Kanter 1999), achieving financial flexibility, and developing effective operating, management, and governance systems (Dees 1998; Jones & Keogh 2006; Austin, Stevenson & Wei-Skillern 2006). Social enterprises (hereafter SEs), emerged as new organizational forms (Dart 2004) that are widely viewed as a possible solution to nonprofits' (NPOs) financial, governance, and accountability problems (Foster & Bradach 2005). Although SEs incorporate a systemic approach to social services, many NPO managers are limited in their ability to assess the innovation by the potential to earn revenue. They created SEs that failed to achieve the intended benefits and consumed scarce resources (Foster & Bradach 2005). Along this way, instead of solving problems, creating an SE can cause internal disruptions, lessen stakeholder commitment, and lead to uncertainties or failure.
The problem lies not with innovation but with factors that constrain evaluation and use. When an NPO creates an SE, it is adopting an innovation-an idea or behavior new to the organization (Damanpour 1991). SEs are NPOs that possess an entrepreneurial culture that embraces creative and innovative ways to address social problems, develops management skills to create organizational sustainability, and uses a strategic approach that is engenders long-term growth and scalable revenues stream (Mason, Kirkbride & Bryde 2007; Brozek 2009). This novel approach incorporates a new theory that involves assumptions that shape any organization's behavior, dictates its decisions about what to do, and defines what the organization considers meaningful (Drucker 1994).
From a Schumpeterian (1934) perspective, a new SE is started by social entrepreneurs who are free to employ new assumptions, approaches, and systems. Employees and volunteers who attach to the SE commit to its new approach to social services. However, this scenario is very different when an existing NPO seeks to adopt the SE innovation. Embedded in these organizations are routines, relationships, cultural values, and systems that act as stabilizing forces (Salipante & Golden-Biddle 1995; Christensen & Overdorf 2000) but have the potential to constrain innovation adoption.
An example of an SE is Rock and Wrap It Up, which collaborates with sports and entertainment venues, hotels, the National Hockey League, concert promoters, and entertainers. A network of NPOs acquires leftover food from events and distributes it to homeless shelters (Peet 2009). This SE uses business models, legal contracts, and alliance strategies to address poverty by creating and leveraging a network of social and professional contacts (Peet 2009). Adopting are radical new approach (Brozek 2009; Dees & Anderson, 2003) such as the one used by Rock and Wrap It Up may require existing NPOs to concurrently shift their structure, strategy, and control mechanisms (Tushman & Romanelli 1985) in order to dislodge existing patterns to create new ones. Whether changing strategy, systems, or relationships independently or concurrently, uncertainty may emerge from the adoption process that threatens existing systems, relationships, and values.
This article examines the problematic and uncertain process existing NPOs encounter when adopting the SE innovation. Research suggests that existing organizations may be unable to adopt a complex or disruptive innovation because of internal constraints such as resources, capabilities, or managerial assumptions and capabilities (Christensen & Overdorf 2000; Tripsas & Gavetti 2000). Furthermore, external constraints such as a firm's value network (Christensen 2003) that includes donors, employees, or volunteers may also hinder or promote innovation adoption based on their self-interest. Leveraging previous innovation adoption frameworks (Framback & Schillewaert 2002), the current discussion highlights how managerial and stakeholder perceptions influence the adoption process. Perceptions are critical to the adoption process because they influence executives' willingness to adopt the innovation and stakeholders' willingness to use it.
Innovation adoption is an interpretive process that occurs at the organizational and intra-organizational levels. At the organizational level, an NPO's top managers identify a need, scan the environment, evaluate, and determine whether to adopt the SE innovation (Frambach & Schillewaert 2002). Executives make sense of environmental cues that signify rapidly changing funding relationships (Dees 1998) and then turn to the environment to find a financial solution to reduce their organization's dependency on external funding (Froelich 1999).
The first constraint that occurs in the adoption process reflects managers' limited understanding of the SE innovation as a solely financial solution. Thus, information selected to evaluate the frame will more than likely support a manager's original anchor. A financial frame that ignores the new model employed within a SE may require new systems, resources, and capabilities. Additional factors at the organizational level, such as organizational characteristics or competitive and normative pressures from peer NPOs, constrain executives' ability to adequately assess the SE innovation beyond their financial frames.
At the intra-organizational level, managers attempt to fit the SE innovation within the context of the existing NPO's operations. The willingness to use or reject the innovation lies with internal stakeholders. The second constraint highlights internal stakeholders' willingness or ability to use the innovation. A review of the literature suggests that three factors may constrain an existing internal stakeholder's willingness to accept an innovation. First, bringing together for-profit and nonprofit activities under the same umbrella fosters an internal environment conducive to cultural conflicts (Miles & Covin 2002) and leads internal stakeholders to perceive the innovation as a source of mission drift. Second, the resource rigidity-specifically, the willingness of internal stakeholders to let go of existing knowledge and relationships to develop new skills and role behaviors-also influences their perception of the SE innovation. Third, NPO managers' ability to direct the activity of and monitor the SE venture (Penrose 1959) constrains the NPO's ability to use innovation for its intended purpose. Ultimately, these three factors restrict implementation and increase the likelihood that the SE will generate value for the NPO.
Figure 1 depicts a model of the SE adoption process. The framework used in this discussion distinguishes between those factors that influence key decision makers' adoption decisions and those that influence employees' willingness to adopt an innovation. Key decision makers play a central role in the adoption process but low-level managers, employees, and volunteers influence whether the innovation is used for its intended benefits (Leonard-Barton & Deschamps 1988).
This goal of this article is to examine the factors that constrain or impede an existing NPO from adopting the SE innovation. Organizational change and uncertainty are inextricably linked to innovation. Short, Moss, and Lumpkin (2009) propose that future SE research should address the effects of the change process in social ventures. This paper is a novel attempt to integrate SE research-such as resource accumulation (Di Domenico, Haugh & Tracey 2010), challenges (Foster & Bradach 2005; Dees 1998), and innovation in NPOs (McDonald, 2007)-to deepen our understanding of the complexity of SE innovation and the problems that arise when existing NPOs adopt it.
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