Abstract
Social enterprises (SEs) have an increasingly important role in developing more equitable societies worldwide. The capabilities of SEs are an important driver of their performance, but research in this area is still emerging, and the link between capabilities and performance has yet to be examined. By drawing on the dynamic capabilities perspective, it is suggested in this study that absorptive capacity—an organization’s ability to absorb, assimilate, and apply knowledge—affects a SE’s performance indirectly via its marketing capabilities. Using data from Hong Kong and Taiwanese social enterprises (n = 109), a set of hypotheses related to the capabilities–performance linkage were tested. The results show that the marketing capabilities of SEs mediated the relationship between absorptive capacity and financial performance. However, absorptive capacity was not associated with improved social performance via marketing capabilities. The paper concludes with a discussion of the implications of the findings and directions for future research.
Similar content being viewed by others
Notes
RBV theory suggests that the sustainable competitive advantage of organizations requires the possession of resources that are valuable, rare, inimitable, and non-substitutable (VRIN) (Teece et al. 1997).
We tested the hypotheses using samples of SEs that have been established for three or more years, so we can include SEs with sufficient absorptive capacity and marketing capabilities, because the knowledge and skills of an organization accumulate over time (Cohen and Levinthal 1990) and therefore become more observable from 3 years onwards.
The items used to measure each construct of the framework all demonstrate a high level of reliability and validity (factor loadings > 0.6; Cronbach’s α > 0.7). Thus, the remaining scale is acceptable.
These include five measures for “marketing communication” and five for “selling.”
References
Agle, B. R., Mitchell, R. K., & Sonnenfeld, J. A. (1999). Who matters to CEOs? An investigation of stakeholder attributes and salience, corporate performance, and CEO values. Academy of Management Journal,42(5), 507–525.
Allan, B. (2005). Social enterprise: Through the eyes of the consumer (prepared for the National Consumer Council). Social Enterprise Journal,1(1), 57–77.
Alter, S. K. (2004). Social enterprise typology. Virtue Ventures LLC. Retrieved from June 2017, http://www.virtueventures.com.
Aupperle, K. E., Carroll, A. B., & Hatfield, J. D. (1985). An empirical examination of the relationship between corporate social responsibility and profitability. Academy of Management Journal,28(2), 446–463.
Austin, J., Stevenson, H., & Wei-Skillern, J. (2006). Social and commercial entrepreneurship: Same, different, or both? Entrepreneurship: Theory and Practice,30(1), 1–22.
Bagozzi, R. P., & Yi, Y. (1988). On the evaluation of structural equation models. Journal of the Academy of Marketing Science,16(1), 74–94.
Baron, R., & Kenny, D. (1996). The moderator-mediator variable distinction in social psychological research: Conceptual, strategic and statistical considerations. Journal of Personality and Social Psychology,51(6), 1173–1182.
Battilana, J., & Dorado, S. (2010). Building sustainable hybrid organizations: The case of commercial microfinance organizations. Academy of Management Journal,53(6), 1419–1440.
Bauhinia Foundation Research Centre. (2013). Social enterprises in Hong Kong. Hong Kong: Bauhinia Foundation.
Bentler, P., & Chou, C. (1987). Practical issues in structural modeling. Sociological Methods and Research,16(1), 78–117.
Cano, C., Carrillat, F., & Jaramillo, F. (2004). A meta-analysis of the relationship between market orientation and business performance: Evidence from five continents. International Journal of Research in Marketing,21(2), 179–200.
Capron, L., & Hulland, J. (1999). Redeployment of brands, sales forces, and general marketing management expertise following horizontal acquisitions: A resource-based view. Journal of Marketing,63(2), 41–54.
Carroll, A. (1979). A three-dimensional conceptual model of corporate social performance. Academy of Management Review,4(4), 497–505.
Carroll, A. B. (2000). A commentary and an overview of key questions on corporate social performance measurement. Business and Society, 39(4), 466–478.
Chan, K., Kuan, Y., & Wang, S. (2011). Similarities and divergences: Comparison of social enterprises in Hong Kong and Taiwan. Social Enterprise Journal,7(1), 33–49.
Chandra, Y. (2016). Social entrepreneurship as institutional-change work: A corpus linguistics analysis. Journal of Social Entrepreneurship,8(1), 14–46.
Chandra, Y. (2017). Developing a theory of the management practices of Chinese social enterprises. In International society for third sector (ISTR) 10th Asia Pacific regional conference, Jakarta, Indonesia.
Chandra, Y., & Wong, L. (2016). Social entrepreneurship in the greater China Region: Policy and cases. Abingdon: Routledge.
Cohen, W. M., & Levinthal, D. (1990). Absorptive capacity: A new perspective on learning and innovation. Administrative Science Quarterly,35(1), 128–152.
Dai, H., Lau, Y., & Lee, K. H. (2017). The paradox of integration: Work-integration social enterprises (WISE) and productivist welfare regime in Hong Kong. VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations,28(6), 2614–2632.
Danna, D., & Porche, D. (2008). Establishing a nonprofit organization: A venture of social entrepreneurship. The Journal for Nurse Practitioners,4(10), 751–752.
Dart, R. (2004). Being “business-like” in a nonprofit organization: A grounded and inductive typology. Nonprofit and Voluntary Sector Quarterly,33(2), 290–310.
Day, G. S. (1994). The capabilities of market-driven organizations. Journal of Marketing,58(4), 37–52.
Dees, J. G. (2001). The meaning of “Social Entrepreneurship”. Stanford, CA: Stanford University.
Dees, J. G., & Anderson, B. (2002). For-profit social ventures. International Journal of Entrepreneurship Education,2(1), 1–13.
Dees, J. G., Emerson, J., & Economy, P. (2001). Enterprising nonprofits: A toolkit for social entrepreneurs. New York: Wiley.
Desa, G. (2012). Resource mobilization in international social entrepreneurship: Bricolage as a mechanism of institutional transformation. Entrepreneurship Theory and Practice,36(4), 727–751.
DeSarbo, W. S., Di Benedetto, C., Song, M., & Sinha, I. (2005). Revisiting the miles and snow strategic framework: Uncovering interrelationships between strategic types, capabilities, environmental uncertainty, and firm performance. Strategic Management Journal,26(1), 47–74.
Doherty, B., Haugh, H., & Lyon, F. (2014). Social enterprises as hybrid organizations: A review and research agenda. International Journal of Management Reviews,16(4), 417–436.
Domenico, M. D., Haugh, H., & Tracey, P. (2010). Social bricolage: Theorizing social value creation in social enterprises. Entrepreneurship Theory and Practice,34(4), 681–703.
Drnevich, P., & Kriauciunas, A. (2011). Clarifying the conditions and limits of the contributions of ordinary and dynamic capabilities to relative firm performance. Strategic Management Journal,32(3), 254–279.
Dutta, S., Narasimhan, O., & Rajiv, S. (1999). Success in high-technology markets: Is marketing capability critical? Marketing Science,18(4), 547–568.
Eisenhardt, K., & Martin, J. (2000). Dynamic capability: What are they? Strategic Management Journal,21(10/11), 1105–1121.
Fornell, C., & Larcker, D. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of Marketing Research,18(1), 39–50.
Gefen, D., Straub, D., & Boudreau, M. (2000). Structural equation modeling and regression: Guidelines for research practice. Communications of the Association for Information Systems,4(7), 1–7.
Guclu, A., Dees, J. G., & Anderson, B. B. (2002). The process of social entrepreneurship: Creating opportunities worthy of serious pursuit. Center for the Advancement of Social Entrepreneurship: Duke—The Fuqua School of Business.
Hair, J. F., Black, W. C., Babin, B. J., Anderson, R. E., & Tatham, R. (2010). Multivariate data analysis. NJ: Pearson.
Haugh, H. (2005). The role of social enterprise in regional development. International Journal of Entrepreneurship and Small Business,2(4), 346–357.
Helfat, C., Finkelstein, S., Mitchell, W., Peteraf, M., Singh, H., Teece, D., et al. (2007). Dynamic capabilities: Understanding strategic change in organizations. Malden: Blackwell Publishing.
Herman, R. D., & Renz, D. O. (1997). Multiple constituencies and the social construction of nonprofit. Nonprofit and Voluntary Sector Quarterly,26, 185–206.
Ho, A., & Chan, T. (2010). The social impact of work-integration social enterprise in Hong Kong. International Social Work,53(1), 33–45.
Hunt, S. D., & Morgan, R. (1995). The competitive advantage theory of competition. Journal of Marketing,59(2), 1–15.
Ibrahim, N. A., Howard, D. P., & Angelidis, J. P. (2008). The relationship between religiousness and corporate social responsibility orientation: Are there differences between business managers and students? Journal of Business Ethics,78(1), 165–174.
Ip, E., Lai, V., Li, K., & Yu, K. (2017). How social enterprises are facing up to challenges in Hong Kong. Hong Kong Free Press. Retrieved from January 8, 2017, https://www.hongkongfp.com/2017/01/08/tender-systems-sustainable-operations-challenges-social-enterprises-hong-kong/.
Jansen, J. J. P., Van den Bosch, F. A. J., & Volberda, H. W. (2005). Managing potential and realized absorptive capacity: How do organizational antecedents matter? Academy of Management Journal,48, 999–1015.
Kee, C. H. (2015). Developing social workers to run social enterprises. Unpublished Doctor of Education dissertation, University of Nottingham.
Kerlin, J. A. (2006). Social enterprise in the United States and Europe: Understanding and learning from the differences. VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations,17, 247–263.
Kohli, A. K., & Jaworski, B. (1993). MARKOR: A measure of market orientation. Journal of Marketing Research,30(4), 467–478.
Lane, P. J., Koka, B., & Pathak, S. (2006). The reification of absorptive capacity: A critical review and rejuvenation of the construct. Academy of Management Review,31(4), 833–863.
Lee, J. (2017). Fashioning new values in Hong Kong. Stanford Social Innovation Review, Supplement for Leping Social Entrepreneur Foundation, pp. 12–13.
Leung, S., Mo, P., Ling, H., Chandra, Y., & Ho, S. S. (2019). Enhancing the competitiveness and sustainability of social enterprises in Hong Kong: A three-dimensional analysis. China Journal of Accounting Research. https://doi.org/10.1016/j.cjar.2019.03.002.
Lichtenthaler, U. (2009). Absorptive capacity, environmental turbulence and the complementarity of organizational learning processes. Academy of Management Journal,52(4), 822–846.
Liu, G., Eng, T., & Takeda, S. (2013). An investigation of marketing capabilities and social enterprise performance in the UK and Japan. Entrepreneurship Theory and Practice,39(2), 267–298.
Liu, G., & Ko, W. (2012). Organizational learning and marketing capability development: A study of the charity retailing operations of British social enterprise. Nonprofit and Voluntary Sector Quarterly,4(4), 580–608.
Luke, B. G., Barraket, J., & Eversole, R. (2013). Measurement as legitimacy versus legitimacy of measures: Performance evaluation of social enterprise. Qualitative Research in Accounting and Management,10(3/4), 234–258.
Mair, J., & Marti, I. (2006). Social entrepreneurship research a source of explanation, prediction, and delight. Journal of World Business,41(1), 36–44.
Makadok, R. (2001). Toward a synthesis of the resource-based and dynamic-capability views of rent creation. Strategic Management Journal,22(5), 387–401.
Man, C. K., & Terence, Y. Y. K. (2011). An overview of social enterprise development in China and Hong Kong. Journal of Ritsumeikan Social Sciences,5, 165–178.
Marsh, S. J., & Stock, G. N. (2006). Creating dynamic capability: The role of intertemporal integration, knowledge retention, and interpretation. Journal of Product Innovation Management,23, 422–436.
Meyskens, M. C., Robb-Post, C., Stamp, J., Carsrud, A., & Reynolds, P. (2010). Social ventures from a resource-based perspective: An exploratory study assessing global Ashoka Fellows. Entrepreneurship Theory and Practice,34(4), 661–680.
Morgan, N., Vorhies, D., & Mason, C. (2009). Market orientation, marketing capabilities, and firm performance. Strategic Management Journal,30(8), 909–920.
Murray, J., Gao, G., & Kotabe, M. (2011). Market orientation and performance of export ventures: The process through marketing capabilities and competitive advantages. Journal of the Academy of Marketing Science,39(2), 252–269.
Ngo, L., & O’Cass, A. (2012). In search of innovation and customer-related performance superiority: The role of market orientation, marketing capability, and innovation capability interactions. Journal of Product Innovation Management,29(5), 861–877.
Nicholls, A. (2004). Social entrepreneurship: The emerging landscape. In S. Crainer & D. Dearlove (Eds.), The financial times handbook of management (3rd ed., pp. 636–643). Harlow: FT Prentice Hall.
Nicholls, J. (2006). Social entrepreneurship: New paradigms of sustainable social change. Oxford: Oxford University Press.
Nicholls, A. (2009). We do good things, don’t we? Bended value accounting in social entrepreneurship. Accounting, Organizations and Society,34(6–7), 755–769.
Nunnally, J. C. (1978). Psychometric theory. New York: McGraw-Hill.
Pearce, J. (2003). Social enterprise in anytown. London: Calouste Gulbenkian Foundation.
Peredo, A. M., & McLean, M. (2006). Social entrepreneurship: A critical review of the concept. Journal of World Business,41(1), 56–65.
Podsakoff, P., MacKenzie, S., Lee, J., & Podsakoff, N. (2003). Common method biases in behavioral research: A critical review of the literature and recommended remedies. Journal of Applied Psychology,88(5), 879–903.
Podsakoff, P., & Organ, D. (1986). Self-reports in organization research: Problems and prospects. Journal of Management,12(4), 532–544.
Powell, M., & Osborne, S. P. (2015). Can marketing contribute to sustainable social enterprise? Social Enterprise Journal,11(1), 24–46.
Preacher, K. J., & Hayes, A. (2008). Asymptotic and resampling strategies for assessing and comparing indirect effects in multiple mediator models. Behavior Research Methods,40(3), 879–891.
Reis, T. K., & Clohesy, S. J. (2003). Unleashing new resources and entrepreneurship for the common good: A philanthropic renaissance. New Directions for Philanthropic Fundraising,2001(32), 109–144.
Schreyoegg, G., & Kliesch-Eberl, M. (2007). How dynamic can organizational capabilities be? Towards a dual-process model of capability dynamization. Strategic Management Journal,28(13), 913–933.
Shin, S., & Aiken, K. D. (2012). The mediating role of marketing capability: Evidence from Korean companies. Asia Pacific Journal of Marketing and Logistics,23(4), 658–677.
Stevens, R., Moray, N., & Bruneel, J. (2014). The social and economic mission of social enterprises: Dimensions, measurement, validation and relation. Entrepreneurship Theory and Practice,4, 1–32.
Teece, D. (2014). The foundations of enterprise performance: Dynamic and ordinary capabilities in an (economic) theory of firms. The Academy of Management Perspectives,28(4), 328–352.
Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal,18(7), 509–533.
Tracey, P., Phillips, N., & Owen, J. (2011). Bridging institutional entrepreneurship and the creation of new organizational forms: A multilevel model. Organization Science,22(1), 60–80.
Vorhies, D. W., Harker, M., & Rao, C. (1999). The capabilities and performance advantages of market-driven firms. European Journal of Marketing,33(11–12), 1171–1202.
Vorhies, D., & Morgan, N. (2005). Benchmarking marketing capabilities for sustainable competitive advantage. Journal of Marketing,69(1), 80–94.
Wang, Y., & Li, Y. (2019). The SEE way. In Stanford social innovation review, a supplement sponsored by Leping social entrepreneur foundation (pp. 9–10).
Weerawardena, J., & Mort, G. (2012). Competitive strategy in socially entrepreneurial nonprofit organizations: Innovation and differentiation. Journal of Public Policy and Marketing,31(1), 91–101.
Wong, L., & Tang, J. (2006). Dilemmas confronting social entrepreneurs: Care homes for elderly people in Chinese cities. Pacific Affairs,79(4), 623–640.
Wood, V. R., Bhuian, S., & Kiecker, P. (2000). Market orientation and organizational performance in not-for-profit hospitals. Journal of Business Research,48(3), 213–226.
Yu, X. (2011). Social enterprise in China: driving forces, development patterns and legal framework. Social Enterprise Journal,7(1), 9–32.
Zahra, S. A., Gedajlovic, E., Neubaum, D., & Shulman, J. (2009). A typology of social entrepreneurs: Motives, search processes and ethical challenges. Journal of Business Venturing,24(5), 519–532.
Zahra, S. A., & George, G. (2002). Absorptive capacity: A review, reconceptualization, and extension. Academy of Management Review,27(2), 185–203.
Zahra, S. A., Sapienza, H., & Davidsson, P. (2006). Entrepreneurship and dynamic capabilities: A review, model and research agenda. Journal of Management Studies,43(4), 917–955.
Zhao, M., & Han, J. (2019). Tensions and risks of social enterprises’ scaling strategies: The case of microfinance institutions in China. Journal of Social Entrepreneurship. https://doi.org/10.1080/19420676.2019.1604404.
Zott, C. (2003). Dynamic capabilities and the emergence of intra-industry differential firm performance: Insights from a simulation study. Strategic Management Journal,24(2), 97–125.
Acknowledgments
We thanked all social enterprise founders and managers who participated in this research. Special thanks go to Ms. Shu-Hui SHIH and Ms. Jasmine LEUNG for their assistance with data collection. We also thanked the directors of Fullness Social Enterprises Society for their various support in this research.
Author information
Authors and Affiliations
Corresponding author
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
About this article
Cite this article
Lee, E.K.M., Chandra, Y. Dynamic and Marketing Capabilities as Predictors of Social Enterprises’ Performance. Voluntas 31, 587–600 (2020). https://doi.org/10.1007/s11266-019-00155-y
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11266-019-00155-y