Published in: Journal of Business Research
Cited as: Tykkyläinen, S. and P. Ritala (2020). “Business model innovation in social enterprises: An activity system perspective.” Journal of Business Research.
Social enterprises aim to create both social and financial value, requiring the creation of business models that allow both objectives to be pursued simultaneously. However, the tensions between these objectives can make this a challenging task in terms of issues such as mission drift and commercial failure. Our multiple case study of seven social enterprises operating in Finland examines business model innovation in social enterprises from an activity system perspective to identify different patterns of activity through which social and financial goals are developed, discarded, and reconfigured. We find that the process involves variety of hybrid logics, with both sequential and parallel combinations of social and financial value, as well as gradual and discontinuous progressions. The findings also provide evidence of how social and financial goals guide the strategic framing of the business model in social enterprises by setting mutually constraining boundary conditions, restricting or guiding opportunities for business model innovation.
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Recommendations from this resource
1. More research is needed to elucidate the temporal dynamics of business models in variety of social enterprise settings. For instance, there could be comparative studies examining how social enterprises are able to develop and grow their business models under different institutional settings.
2. This study did not distinguish between the value creation, delivery, and capture elements of business models. Future studies could usefully combine these perspectives by focusing, for example, on activities that affect financial and social value creation, as well as activities that facilitate value capture in these domains.
3. Further studies could examine how abilities such as adaptive culture or paradoxical mindset, for instance, improve social enterprises’ abilities in business model innovation.
1. The public sector can take actions to lessen the complexity of social enterprise business models, as they play various roles even in market-oriented social enterprises, and their involvement appears to be associated with complexity of business models. Complexity, in turn, increases the risk of mission drift and/or financial failure. Predictability and coherence of public policies and practices is vital to minimize the need for sudden actions and complex business models from social enterprises’ part.
2. Public sector actors should follow common guidelines whether they interact with social enterprises as buyers, funders, partners or legislators.
1. Social enterprises should be especially aware of the relevant boundary conditions for growth. This means clearly understanding the social enterprise’s mission and whether business growth is to be led by internal or external drivers (or both).
2. It is important to ask what financial risks the company can afford to take and to what extent growth should be steered by social or business opportunities. In other words, social enterprises benefit from a clearly defined growth strategy.
3. Social enterprises benefit from clear goal-setting for business model innovation to address the inevitable question of whether the new business model should prioritize financial or social value or try to balance these.