We develop a new perspective on capital structure differences between for-profit social and commercial enterprises by combining imprinting and social entrepreneurship theory. Using a longitudinal ...matched sample, we find that for-profit social enterprises have 40% to 13% lower leverage and up to four times greater leverage stability over time than commercial enterprises. Our results suggest that these differences in capital structure derive from the process of prosocial organizing, which goes beyond the primary focus on financial preferences. Thus, for-profit social enterprises—and similar hybrid organizations, such as B corporations—may require theories adjusted to their context.
•We develop a new perspective on capital structure differences between for-profit social and commercial enterprises.•We use a longitudinal matched sample of for-profit social and commercial enterprises subject to the same accounting standards.•For-profit social enterprises have 40% to 13% lower leverage ratios than commercial enterprises.•For-profit social enterprises have up to 4 times greater leverage stability over time than commercial enterprises.•These differences in capital structure derive from prosocial organizing, which goes beyond financial preferences.•For-profit social enterprises—and similar hybrid organizations—may require theories adjusted to their context.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPUK, ZRSKP
Firms usually need to attract debt to form and grow, but increasing financial leverage also entails increased risks and costs for stakeholders, such as customers and employees. Accordingly, past ...research suggests that for common commercial firms (CCFs), which prioritize profits, higher leverage leads to lower sales growth and higher employment costs. However, Certified B Corporations (CBCs) distinguish themselves by having a credible prosocial mission and, therefore, might be better insulated against the adverse effects of higher leverage. Using a European multi-country matched sample of 136 CBCs and 136 CCFs, we find that the negative relationship between leverage and sales growth and the positive relationship between leverage and employment costs are weaker for CBCs than CCFs. Taken together, due to their certified prosocial mission, CBCs enjoy an advantage in debt financing compared to CCFs.
Examining how new forms of currencies diffuse is important to uncover their impact on the organization of communities, and thus motivates our study of community currencies. Community currencies ...provide a medium of exchange by using alternative banknotes or electronic money, which circulates only within particular communities, allowing members to trade goods, increase social cohesion, and achieve collective goals. In this study, we examine how community currencies help facilitate social commons by serving as a setting for building community relationships and a catalyst for other social activities beyond market relations. We analyze cases of community banks that provide microfinance and issue community currencies in Brazil. We find that microfinance entrepreneurs who involve a greater diversity of stakeholders from public, private, and nonprofit sectors in decision making even prior to startup, while also facilitating the formation of supportive social capital from diverse cross-sector stakeholders, increase opportunities for developing new community currencies. By exploring the implications of entrepreneurial actions that promote inclusive participation of diverse stakeholders for accomplishing collective goals, our findings are relevant for other activities that create a common pool of resources while also developing the vitality of the community, including initiatives that use cryptocurrencies and other emerging forms of currencies for building social commons.
Scholars have argued that informality is driven by the degree to which it is expensive or difficult to operate in the formal economy. In contrast, we argue that firms choose to be informal or formal ...partly driven by industry conditions. We examine informal firms that are not registered with a governmental authority. Based on a large data set of Brazilian businesses, we find that firm informality is positively associated with dynamism, yet negatively associated with munificence and concentration. Our findings suggest that informality is a decision driven by both cost of registering and risk reduction for entrepreneurs depending on industry conditions.
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Purpose
Ingenuity can be viewed as the use of creativity to develop innovation within constraints. The authors investigate how entrepreneurial ingenuity is enhanced by self-imposed ethical ...constraints, by using a case study of sustainability-driven technology enterprises in an emerging economy. The authors find that self-imposed ethical constraints can enhance entrepreneurial ingenuity because they encourage entrepreneurs to solve more complex problems as a result of considering the impact of the business on a more diverse set of stakeholders. The aim of this study is to show that while additional resources are normally considered an advantage, a dearth of resources can be a source of competitive advantage leading to ingenuity. By self-imposing ethical constraints, founders increase engagement of stakeholders who shape the firm’s industry toward greater sustainability knowledge.
Design/methodology/approach
The authors used semi-structured interviews which are typically the most important data source in the Gioia methodology because they provide both retrospective and present accounts by individuals experiencing the phenomenon of theoretical interest (Gioia et al., 2012). The authors focused on founders at each enterprise who had sufficient knowledge to speak comprehensively and authoritatively about their organizations. The goals of the semi-structured interview protocol were to focus on the research question, avoid the use of terminology that could lead interviewees in their answers and maintain flexibility to explore spontaneous themes during the interviews.
Findings
The authors examined the influence of entrepreneurial ingenuity on the creation of knowledge in an organization's environment. They defined entrepreneurial ingenuity as a type of organizational ingenuity (Lampel et al., 2014a, 2014b) and by focusing on the role of ethical constraints, examined the conditions under which it is influenced. They emphasized that ethical constraints warrant consideration in the knowledge management process (Rechberg and Syed, 2013) because they can stimulate entrepreneurial ingenuity. The authors also investigated the relevance of ethical constraints for founders of social enterprises in Brazil, an emerging economy of growing interest to knowledge management scholars.
Research limitations/implications
This study brings the following three main contributions. First, by incorporating the scope of social entrepreneurship, the research contributes to the perspective that both ethics and innovation can positively coexist within an organization while contributing to knowledge management creation and success (Borghini, 2005; Schumacher and Wasieleski, 2013). Second, the authors establish ethics as an important type of constraint that can spark ingenuity and help break through the constraints of bounded awareness for knowledge management (Kumar and Chakrabarti, 2012). Third, by highlighting the role of self-imposed ethical constraints, this study helps answer a recent call for research on “entrepreneurial actions that benefit others” (Shepherd, 2015, p. 490) addressing “What are the constraints that disable or obstruct an organization’s normal routines from alleviating human suffering?..It could be less about whether it is good or bad to ignore constraints and more about which constraints are ignored and which are abided by” (Shepherd, 2015, pp. 499, 501, emphasis added).
Practical implications
In this study, the authors show that entrepreneurs facing ethical dilemmas experience a unique cycle of equilibration, essentially throwing customary norms of equilibrium into disequilibrium. Treating ethics as both a lever and a constraint allows a more unique set of problems to be solved through knowledge management and entrepreneurship, so solutions to these problems can themselves become new sustainability-driven businesses.
Social implications
This study opens up several opportunities for future research. The authors conducted a study with five sustainability-driven enterprises from Brazil. New research may benefit from examining a larger number of organizations in other countries to investigate potential environmental differences that affect ingenuity and knowledge management. This study highlights the notion of ethical constraints as enabling mechanisms, and thus self-imposed ethical constraints merit a more systematic consideration as a key additional factor that may inspire disruptive innovation (Christensen, 2013), blue-ocean strategy (Kim and Mauborgne, 2004), as well as value-creation for stakeholders (Tantalo and Priem, 2016).
Originality/value
Resources are critical to both knowledge management and entrepreneurial activity and have been examined from numerous perspectives (Alvarez & Busenitz, 2001; Barney, Wright, & Ketchen, 2001; Moustaghfir and Schiuma, 2013). Entrepreneurs following a creation strategy depend less on accumulating existing knowledge and resources before beginning, and more on forming new knowledge or relationships that do not yet exist. They do this through a process of entrepreneurial trial and error (Alvarez & Barney, 2007, 2010). From a knowledge management perspective, individual knowledge sharing through both experimentation and learning by doing provide consistently high levels of knowledge sharing (Burns, Acar and Datta, 2011). This research emphasizes that constraints, such as limited resources and self-imposed ethical standards, can be a source of advantage leading to ingenuity and knowledge creation.
Demand-side perspectives represent a burgeoning research area in the fields of technology innovation, entrepreneurship and strategic management, yet are only at an early stage in the field of ...international business. Demand-side research looks outside the focal organization toward consumers and product markets to explain managers' strategic decisions — decisions that increase value created within a value system by emphasizing: consumer benefits experienced; thematic similarity (i.e., products and services that are used in performance of the same activity); value systems/ecosystems rather than a single focal organization only; and value creation for consumers rather than value capture for a firm. Demand-side research can be valuable for expanding the strategic actions available to multinational organizations and international social enterprises by integrating geographical expansion and business diversification in ways that can create the most value for heterogeneous end users both across and within national boundaries. This adds conceptual complexity to the international business field by raising international consumer issues to the strategic level – with, for example, investments in mergers and acquisitions and strategic alliances – rather than the more typical single-business or functional marketing levels. This added complexity has the potential to extend international business theories in new ways.
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High-technology entrepreneurship in emerging economies takes place in a context very different from that of developed economies. In large measure, this difference is due to greater resource ...constraints and higher levels of firm informality in emerging economies. In this study, we examine formal versus informal young high-technology ventures, assessing the extent to which firm informality moderates the relationship between technology investments and firm performance in an emerging economy. We find that technology investments are positively related to firm performance. Yet, firm informality positively moderates the relationship between resources and firm performance. The effect of resources tends to be contingent on the level of firm informality in an emerging economy. Greater resource constraints and higher levels of firm informality not only represent critical factors in emerging economies, but also are essential for contextualizing resource-based theory.
This research examines the evolving role of universities as agents of social and economic change, through academic social intrapreneurship implemented digitally. Utilizing an in-depth case study of ...an international virtual incubator that emerged from a large public research university's internal funding, we study a shift beyond economic motivations, highlighting the importance of universities' non-pecuniary contributions to society. We unveil a unique model of academic social intrapreneurship that integrates research, entrepreneurship, digitization, and social responsibility. The descriptive case study method examines the virtual incubator's emergence, processes and activities, exploring how digitally implemented academic social intrapreneurship can address global concerns. The findings highlight the significance of achieving legitimacy at multiple levels and adopting a decentralized approach to innovation, indicating effective means for engaging diverse stakeholders and addressing local and global issues. The findings suggest that academic social intrapreneurship is a potential avenue for universities to enhance societal contributions. We present theoretical insights and actionable advice for universities, academic intrapreneurs, and virtual incubators, emphasizing the importance of promoting academic social intrapreneurship for a positive societal impact. We conclude by advocating for universities' role in fostering transformative cross-disciplinary collaborations and expanding their societal engagement in the digital era.
•We explore how universities can make local and global impact through digitally implemented academic social intrapreneurship.•We explore a virtual incubator, developed by internal funding, that empowers marginalized entrepreneurs internationally.•We present an academic social intrapreneurship model, highlighting the role of digitalization in addressing wicked problems.•We explore the importance of multi-level legitimacy when engaging diverse stakeholders in social intrapreneurial initiatives.•We demonstrate how a decentralized approach to innovation can engage diverse stakeholders in addressing wicked problems.
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How information technology (IT) may complement other key firm resources such as human capital is a question that has drawn increasing attention from scholars and practitioners. Answers to this ...question are crucial for small businesses in today's environment. These businesses face a growing demand for IT usage at the same time that they typically can count only on limited resources. This has become a common situation that is particularly critical for small businesses operating in developing countries with emerging economies. We develop propositions and test them with a dataset of service small businesses in an emerging economy. We find that the use of IT services is positively related to firm productivity and that this relationship is positively moderated by entrepreneurs' management education. Our findings indicate that firm productivity is associated with a combination of human and technology resources.
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Considering a social enterprise's relationships with complementors, suppliers, and customers within the broader context of an innovation ecosystem can help advance theory in the field of social ...entrepreneurship. Our qualitative study examines microfinance organizations in bottom-of-the-pyramid communities in Brazil. Our findings indicate that interactive relationships with complementors, suppliers, and customers can improve the microfinance organization's ability to support commercial transactions, manage financial capital, and educate customers, thereby improving its ability to facilitate economic development. These findings extend the literature on innovation ecosystems, microfinance, and social entrepreneurship.
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