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Attributes
Little is known about social entrepreneurship in nonprofits, especially the factors that
influence social entrepreneurship intentions of these organizations. This study explores the direct
effect of the organizational attributes (commercial experiences of CEO, organizational level of
entrepreneurial orientation and collective efficacy, resource availability and social cause) on the
nonprofit organizations intention to start a social enterprise. We find that nonprofits led by
CEOs with commercial experience, with high collective efficacy and organization innovativeness
are more likely to evince intentions to start a social enterprise. Whilst it might have been thought
that the nonprofits social causes may have a negative effect on social entrepreneurship, it was
found to have a positive influence. Contrary to expectations, resource availability was not
significant to intentions; neither was risk-taking. Hence, nonprofit organizations keen to foster
social entrepreneurship are advised to seek to align any social entrepreneurship activities to
their social causes and develop internal capability for social entrepreneurship and collective
efficacy.
Keywords: Nonprofit Organizations, Social Enterprise, Entrepreneurship Intentions, Social
Cause, Resource Availability, Collective Efficacy, Entrepreneurial Orientation, and Role of
CEO.
Introduction
Nonprofit organizations are valued when they provide services or products that address unmet
needs in society. Social entrepreneurship by nonprofit organizations augments their contributions
through the new services, programs, enterprises and revenue generated. It is not surprising,
therefore, that policy makers encourage social entrepreneurship, social innovations and social
enterprises in the nonprofit sector. Yet, little is known about social entrepreneurship in
nonprofits and what drives entrepreneurship on the part of nonprofits and the much-desired
social innovations. Policy-makers have introduced measures presupposing that nonprofits will
respond in the same way as their for-profit cousins do.
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towards entrepreneurial acts (Krueger 2000; Krueger, OReilly and Carsrud 2000). The
antecedents in the form of attitudes towards social entrepreneurship within the nonprofits would
influence the nonprofit organizations intention towards social entrepreneurship (Krueger,
Schulte and Stamp 2008). These antecedents can act as either barriers or triggers to the
entrepreneurial action. Nonprofits having been steeped in meeting needs in social sectors may be
inhibited in starting social ventures. The prospect of having social enterprises that could augment
their revenue streams might not be perceived to be as desirable. Instead, the social cause that
they serve may act as an inhibitor. On the other hand, having top leadership supportive of social
entrepreneurship would facilitate social entrepreneurship in the nonprofit as the corporate
entrepreneurship literature suggests. Hence, the question is what conditions are necessary for
nonprofits to initiate new social ventures.
This paper reports a study that explores the role of organizational factors on the social
entrepreneurship intentions of nonprofits: the intentions to start new ventures that have both an
economic and social objectives. In particular, the study examines the role played by the social
mission of the nonprofit, collective efficacy and entrepreneurial orientation on the social
entrepreneurship intentions of the nonprofits. There has been increasing interest in social
entrepreneurship and this research is an attempt to add to the field with this empirical study of
the organizational factors that facilitate social entrepreneurship.
Tan 2001). Nonprofit organizations that manifest positive intentions towards social
entrepreneurship are more likely to launch social enterprises. Prior research has shown that
environmental factors such as social and cultural norms as well as economic factors influence
entrepreneurship intentions (Begley, Tan and Schoch 2005). However, these constructs have not
been examined in the case of nonprofit organizations. Krueger (2000) argues that perceptions of
organization members channeled through intentions can inhibit or enhance the identification and
pursuit of new opportunities, and those elements of a cognitive infrastructure need to be present.
According to Ajzens theory of planned behavior (1991), the antecedents of intentions and
attitudes serve to precipitate the intentions into behavior (Krueger and Brazeal 1994; Krueger,
Reilly and Carsrud 2000). Hence, nonprofit organizations are more likely to act if they have
positive social entrepreneurship intentions.
Social entrepreneurship can take various forms. The nonprofit organizations can offer a new
service or product as part of their existing operations. They can encourage their volunteers to
venture into open source innovation and develop new ideas for processes, products, or improve
service. For the purposes of this paper, we measure the intentions of the nonprofit organizations
to start a new venture called social enterprise. It is a new venture initiated with multiple purposes
coupling the social with the economic. It also takes the form of business generating revenue,
which can be rechanneled toward the social cause of the nonprofit organizations. Alternatively, it
can be a business employing socially responsible processes or the disadvantaged as part of the
business as in the case of the Greyston Bakery in New York, which hires ex-convicts in their
bakery.
Entrepreneurship Orientation
Corporate entrepreneurship refers to the process of new business creation within existing
organizations to improve organizational profitability and enhance its competitive position or the
strategic renewal of existing business (Zahra 1991). Research into corporate entrepreneurship
posits that certain organizational factors explain the incidence of corporate entrepreneurship.
These organizational traits or propensities - innovativeness, risk taking and proactiveness - are
components of entrepreneurial orientation (EO) of organizations (Miller and Friesen 1982; Covin
and Slevin 1989). Among the three components of EO, innovativeness is associated with a strong
organizational commitment to engage in and support new ideas, novelty, experimentation, and
creative processes that may result in new products, services or technological processes
(Lumpkin and Dess 1996 p.142). Risk taking refers to the degree to which managers are willing
to make large and risky resource commitments - that is, those which have a reasonable chance of
costly failure (Miller and Friesen 1978. p.923). Proactiveness involves an opportunity-seeking,
forward-looking perspective involving introduction of new products or services ahead of the
competition and acting in anticipation of future demand to create change and shape the
environment (Lumpkin and Dess 2001. p.431).
These three components of EO are believed to lend positive effects to organization
profitability and growth (Covin and Slevin 1991; Lumpkin and Dess 1996; Miller and Friesen
1983; Wiklund and Shepherd 2005). As such, components of EO (innovativeness, risk-taking
and proactiveness) may also help nonprofit organizations in creating new businesses (social
enterprises) by initiating and developing new innovative business opportunities while taking
proactive stance and risks on them. Davis, Marino, Aaron and Tolbert (2011) employed
entrepreneurial orientation (EO) to examine the external scanning behavior of home nursing
administrators by profit and nonprofit start-ups. They found no significant difference in the EO
between the nonprofit organizations and the for-profits in that sector. Surprisingly, the nonprofits
were more likely to engage in environmental scanning activities than their for-profit
counterparts. This leads to the following hypothesis.
H2: Non-profit organizations entrepreneurial orientation propensity will be positively related to
its intent to start a social enterprise.
Collective efficacy
Stakeholders possessing positive perceptions of social entrepreneurship in a nonprofit are part
of the intentionality equation. At organization level, there has to be collective efficacy towards
social entrepreneurship: (un) less people believe that they can produce desired effects and
forestall undesired ones by their actions, they have little incentive to act. People do not live their
lives in individual autonomy (Bandura 2000). Nonprofits activities are able to address social
problems in so far as they involve the interdependent efforts of other (staff, volunteers, donors
and government agencies). Community projects in the area of education, for instance, depend on
the pooling of resources, time and efforts of community people including community leaders
working together to secure what they cant accomplish on their own. This community project
could involve a corporate sponsor funding a library, the local village chiefs sanction of the
project, the local government provision of space, and the positive response of the community
school. Such a collective exercise took place recently in the far-flung region of western region of
China. The collective efficacy of the stakeholders in the library project sponsored by the Swire
group from Hong Kong in respect of future projects would incline their initiation of future
community projects. As defined in social cognitive theory, all efficacy belief constructs are
future-oriented judgments about capabilities to organize and execute the courses of action
required to produce given attainments in specific situations or contexts. (Goddard, R.D., Hoy,
W.K., and Hoy, A. W. 2004). Bohn (2002) defines collective efficacy in organizations as a
generative capacity within an organization to cope effectively with the demands, challenges,
stresses, and opportunities it encounters within the business environment. Hence, nonprofit
organizations with a positive collective efficacy towards social entrepreneurship may have high
degree of social entrepreneurship intentions. This leads to the following hypothesis.
H3: Non-profit organizations collective efficacy will be positively related to its intent to start a
social enterprise.
Resource Availability
In the realm of corporate entrepreneurship it is suggested that time and resource availability
influence employees perceptions of corporate entrepreneurship activities (Pinchot 1985; Covin
and Slevin 1991; Kreiser, P. Marino, L. and Weaver, L.M. 2002; Hornsby et al. 2002).
Entrepreneurship activities depend on resources being available. Entrepreneurship literature
supports the important role of the availability of financing. Nonprofits like all other organizations
depend on resources. Researchers on non-profit organizations have variously pointed to the
integral role of resources to the capability of non-profit organizations to flourish, innovate and
deliver their services (Anheier 2005). The resource-based view suggests that entrepreneurship in
nonprofits would require resources. Nonprofits, however, are unique - they require resources to a
much greater degree. Nonprofits, in particular, charities, depend on externally generated
resources from their donor base. For these organizations, there is often a dependence upon
donors and philanthropists. Nonprofits face resource scarcity (see for example, Anheier 2005)
and are provided for specific purposes. The dedication of resources to specific activities is in
many countries, more often than not, a subject of the tax laws as the donors are often able to
deduct against their taxable income the amounts contributed towards charitable causes. With
their focus on the social agenda, it is not surprising that new activities such as social
entrepreneurship would require resources to be available. Corporate entrepreneurship research
also suggests the same. That stream of research suggests if corporations wish to encourage
innovation and corporate entrepreneurship, they should provide resources for these to occur
because entrepreneurial pursuits generally require considerable resources (for example, Hornsby
et al. 2002; Wiklund and Shepherd 2005). This suggests that similarly in nonprofits, if the
incumbents are provided with resources for social entrepreneurship, then they are more likely to
get involved in social entrepreneurship activities. Hence, this leads to the following hypothesis.
H4: Non-profit organizations resource availability will be positively related to its intent to start
a social enterprise.
Social Cause
Prior studies have demonstrated that perceived desirability and feasibility are two key
precipitating factors when individuals and teams start new ventures (Krueger et al. 2000; Begley
and Tan 2001; Begley et al. 2005). Within organizations, the role of organization level
perceptions is extremely pertinent. Social entrepreneurship intentions are shaped by perceived
desirability and feasibility of organizations. The incumbents in an organization are more likely to
hold intentions towards entrepreneurial activities when the perceptions within the organization
are that such activities are desirable and that they are capable of engaging in them. It is in a sense
not different from situations in organizations like schools where attitudes within schools towards
scholastic or sporting achievements shape the behaviors.
The social element is important as it distinguishes this type of entrepreneurship. Yet it is the
social element that gives researchers some difficulty as the field moves from the pure business
arena to address social problems, that of definition (see for example, Tan et al. 2005). Setting
aside the definitional issue as the field has gravitated to accepting social entrepreneurship as
encompassing entrepreneurial activities that create value, economic and social value, across
nonprofit, government and business (Tan et al. 2005; Austin et al. 2006; Zahra, et al. 2009). The
interesting aspect of this research on non-profits and social entrepreneurship is that the nonprofits may prefer their non-profit activities to economic ones. While social entrepreneurship
marries enterprise principles and practices to the social, there may be a preference for the social
cause on the part of the organization. Obviously, the organization is a summation of the
individuals it comprises. In short, the perceptions incumbents in the non-profits have of starting
enterprises or engaging in entrepreneurial activities, may reflect a position akin to the Bible
passage admonishing the believers who place mammon in priority to God. They may place
priority on the social rather than the new venture with a business slant. A key reason for this lies
in the difference between a new social enterprise and one being initiated by an existing nonprofit. Unlike corporate entrepreneurship where there is some alignment as the new corporate
entrepreneurship venture has the same profit motive, the non-profits begin with the non-profit
mission. Hence, nonprofit organizations steeped in their social causes are more likely to have
negative perceptions of the desirability of social enterprises as they appear to be deviations from
their purposes.
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Conversely, social entrepreneurship may offer an opportunity for the nonprofit organization
an alternative to fundraising or to achieving its social agenda through business activities reducing
the reliance on volunteers or grants. Hence, it is unclear whether the nonprofit organizations
focus on the social mission would influence social entrepreneurship intention positively or
negatively. As such, the study did not specify a direction and seeks to explore this relationship.
This leads to the following hypothesis.
H5: Non-profit organizations social cause will be positively (or negatively) related to its intent
to start a social enterprise.
Method
A mail survey was employed in this study. The questionnaires were mailed to a list of 390
nonprofit organizations from MCYS database and additions to the list from other sources such
as the database from the National Volunteer and Philanthropy Centre. The executive directors
and senior management of the nonprofit organizations were asked to complete the
questionnaires. In total, 600 nonprofit organizations were approached, and follow-up phone calls
were made on the incomplete responses. A total of 147 surveys, or 24.5% response rate was
achieved. Of these responses, only 101 of the respondents had not started a social enterprise and
these formed the sample for this study.
The research instrument was developed with scale items to measure the constructs of interest.
Social entrepreneurship intention was measured on a five-point scale in the form of the question
whether the nonprofit would start a social enterprise within the next five years. Prior commercial
experience of the chief executive is operationalized as a dichotomous variable (Yes or No). The
influence of social cause which is our measure of negative perceived desirability of social
entrepreneurship as explained earlier was measuring using three items, illustrated by the
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following statement: Our organizations priority is to run programs that directly tie to our social
mission.
Drawing from prior research items was developed to measure collective efficacy (six items).
The scales for the perceived collective efficacy (organization feasibility) were developed for this
study, as the construct has not been previously operationalized in studies of entrepreneurship.
We employed one of the three suggested means of developing the measures. One possibility is to
include measures of individual self-efficacy and aggregating the scores. Alternatively, although
not possible in the case of this study, one could seek a group consensus of collective efficacy at
each nonprofit through discussion with the incumbents. Instead we employed measures of groupreferent capability with the measures referring to the object of the efficacy perception as we
instead of I. An example of a group-referent collective efficacy belief item is Our
organization has the management know-how and skill to start and run a social enterprise. This
approach has been applied in other contexts such as in schools (Goddard, Hoy and Hoy 2004).
New items were developed to measure resource availability. The items for resource
availability were borrowing ideas from the Kuratko et al (1990) Corporate Entrepreneurship
Assessment Instrument. Three items were developed and the incumbents in nonprofits were
asked to rate statements: Our organization can raise enough funds to start a social enterprise,
We can staff a new social enterprise using existing manpower resources, and Our
organization can start a social enterprise without any form of assistance (such as subsidies,
funding) from the government. This variable was conceptually justified as the nonprofit sector
in Singapore was usually less well resourced in funding and staffing. Most of the people
employed in this sector in Singapore were mostly from the social work sector and might not be
suited for social entrepreneurship ventures. The organization attributes of innovativeness and
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risk-taking were examined employing items adapted from the Covin and Slevins (1989)
entrepreneurial orientation scale. Innovativeness was explored employing statements on the
organizations emphasis on innovations; whether it sought new ways to address social needs; and
whether the organization was often in the lead as the first to introduce new products/services.
Risk-taking employed three items on the organizations preference for high-risk projects; if the
organization believed that bold and wide-ranging acts were necessary to attain its goals; if the
organizations response to uncertainty was a bold and aggressive posture. We employed
organization age and size as control variables in this study.
All constructs in the study have face and content validities derived from the extant literature
(Covin and Slevin 1989; Kuratko et al 1990; Goddard et al 2004). Discriminant validities for the
constructs are examined by exploratory factor analysis, using principal component factor method
with varimax rotation. After excluding three proactiveness items, twenty-one items loaded on the
six separate factors (social enterprise intent, social cause, innovativeness, risk-taking, collective
efficacy, resource availability) as anticipated, supporting their discriminant validities.
A coefficient alpha test is performed to examine the internal reliability, and all of the
independent variables (social enterprise intent, 0.84; social cause, 0.74; innovativeness, 0.75;
risk-taking, 0.72; collective efficacy, 0.88, and resource availability, 0.70) are above the cut-off
of 0.70 suggested by Nunnally (1978).
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organizations at times served more than one group of beneficiaries, the totals did not add up
100.0%. They relied on donations (47.5%) and grants (37.6%) as their top two main sources of
revenue. Surprisingly approximately 10.0% of respondents indicated earned income as their
primary source of income. 62% of top managers in nonprofit organizations had previous work
experiences in commercial sectors whereas 35% had no commercial experience in their previous
workplace. Table 1 provides the means, standard deviations and correlations among the
variables.
This study explored the direct effect of the independent variables (commercial experiences of
CEO, organizational level of entrepreneurial orientation and collective efficacy, resource
availability and social cause) on the nonprofit organizations intention to start a social enterprise.
Hypotheses are tested by hierarchical regression analysis. Control variables (organization age
and size) are first entered into the regression and then independent variables are added into the
base model to create the full model.
H1 predicts that top managers commercial experience in previous workplace may have a
positive effect on a nonprofit organizations intent to start a social enterprise. As shown in Table
2 the coefficients are significant and positive (0.17 p<0.05), supporting H1. Nonprofit
organizations entrepreneurial orientation propensity is predicted to have a positive effect on its
intent to start a social enterprise. Since items measuring proactiveness failed to load, only
innovativeness and risk-taking factors were employed in testing the hypothesis analysis. While
organizations innovativeness has a significant and positive effect (0.23, p<0.05) whereas risktaking has no significant effect. Therefore, H2 is partially supported. H3 predicts that nonprofit
organizations collective efficacy may have a positive effect on its intent to start a social
enterprise. The coefficients are significant and positive (0.27, p<0.05) as expected, supporting
14
H3. H4 predicts that resource availability may have a positive effect on the nonprofit
organizations intent to start a social enterprise. The coefficients are insignificant, and thus H4 is
rejected. H5 predicts that social cause of nonprofit organization may have a positive effect on its
intent to start a social enterprise. The coefficients are significant and positive (0.30, p<0.05),
supporting H5.
15
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cause. This is needful as the social entrepreneurship activities often require involvement of other
staff as team members or innovators and units in the organization who contribute resources. It
can be argued from the findings of this exploratory study that nonprofit organizations seeking to
engage in social entrepreneurship should embark on developing their organizations in building
the capabilities for enterprise activities. Being pro-enterprise in outlook and the introduction of
applicable business practices into nonprofit organizations will contribute to the efficacy of the
organization. Emphasizing the need for innovation and innovativeness would be helpful. All
these comments are prefaced on the theory of intentionality.
References
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Comparison Between East Asian and Anglo Countries, Journal of International Business
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Begley, T. M., Tan, W.L and Schoch, H.P. (2005). Politico-Economic Factors Associated with
Interest in Starting a Business: A Multi- Country Study, Entrepreneurship Theory and Practice,
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Bohn, J., (2002). The Relationship of Perceived Leadership Behaviors to Organizational
Efficacy, Journal of Leadership & Organizational Studies, 9: 65-79.
Covin, J.G. and Slevin, D.P. (1989). Strategic management of small firms in hostile and benign
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Covin, J.G. and Slevin, D.P. (1991). A conceptual model of entrepreneurship as firm behavior,
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17
18
Wee-Liang Tan is Associate Professor at the Lee Kong Chian School of Business, Singapore
Management University.
So-Jin Yoo is responsible for entrepreneurship education at the Global Academy, University
of Wales.
Address correspondence to: Wee-Liang Tan, Lee Kong Chian School of Business, Singapore
Management University, 50 Stamford Road, Singapore 178899. E-mail: wltan@smu.edu.sg.
19
Mean
S.D
1. Intent
2. Organization Age
3. Organization
Size
4. Commercial
Experience
5. Social Cause
6. Collective
Efficacy
7. Resource
Availability
8. Innovativeness
9. Risk-taking
5.31
24.5
64.6
2.06
23.4
155.1
-0.18
0.11
0.19*
1.64
0.48
0.27**
-0.07
0.03
8.11
20.1
2.41
4.93
0.40**
0.48**
-0.13
-0.16*
0.14
0.10
-0.01
0.24**
0.29**
7.38
2.55
0.25*
-0.02
0.24**
0.15
0.17*
0.59**
10.9
11.5
2.03
2.53
0.54**
0.30**
-0.06
-0.18*
0.21**
0.02
0.27**
0.09
0.24**
0.22**
0.54**
0.49**
0.39**
0.28**
*P<0.05, **p<0.01
-0.19**
0.13
0.05
2.45*
20
Full Model
-0.11
0.08
0.17**
0.23**
-0.01
0.27**
-0.02
0.30**
0.42
0.37
7.98***
0.43**
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