The emergence of social enterprise in not-for-profits

Abstract

With restrictive or uncertain income available from government and the public, many not-forprofits seek to develop social enterprises with commercial revenue streams, as a means to increase their financial autonomy and sustainability. Much remains to be learned about how social enterprises might be successfully generated within this context, however, as the disruptive challenges of bringing innovative commercial processes into not-for-profits are often underestimated. This research explored how not-for-profit organisations develop social enterprises. More specifically, it asked how do not-for-profits introduce and accommodate a business model with commercial logics within a social organisation, what are the most significant changes they make to accommodate a commercial business model and how might the not-for-profits configure themselves when introducing a commercial business model? Complexity theory was used as the primary theoretical lens because of its appreciation that social enterprises developing within not-for-profits are often in a state of continual change and are at risk of instability. Complexity theory was supported by the field of institutional logics that acknowledges the potentially different co-existing logics, and a business model framework to track the development of core business operations. Using qualitative abductive research, interviews and document analysis were conducted in three large not-for-profits from different sectors over an eighteen-month period. This research contributes two ideal types of social (not-for-profit) and commercial (for-profit) organisations to the academic literature. In addition, a theoretically based model outlines the key emergent themes from the analysis, identifying the point of bifurcation that led to the establishment of the social enterprise and the adaptive tensions that required development. The model presents the business model as a structural attractor with some components that were challenging to implement in all cases and also required internal change. Organisational configuration is presented as a second structural attractor, with a discussion on the emerging structural and cultural configurations of each social enterprise, in relation to its not-for-profit parent. A typology of structural options for a social enterprise within a not-for-profit is provided to help manage the type and level of commercial logic diffusion. This model and its related constructs aim to usefully inform key decisions for not-for-profits when developing a social enterprise.