Journal of Social Entrepreneurship

ISSN: 1942-0676 (Print) 1942-0684 (Online) Journal homepage: https://www.tandfonline.com/loi/rjse20

Forging Ahead or Grasping at Straws? The Affects

and Outcomes of Social Enterprise Legal Structure
Change

Elena Dowin Kennedy & Nardia Haigh

To cite this article: Elena Dowin Kennedy & Nardia Haigh (2019) Forging Ahead or Grasping at
Straws? The Affects and Outcomes of Social Enterprise Legal Structure Change, Journal of Social
Entrepreneurship, 10:1, 30-54, DOI: 10.1080/19420676.2018.1541002

To link to this article: https://doi.org/10.1080/19420676.2018.1541002

Published online: 22 Nov 2018.

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JOURNAL OF SOCIAL ENTREPRENEURSHIP
2019, VOL. 10, NO. 1, 30–54
https://doi.org/10.1080/19420676.2018.1541002

RESEARCH ARTICLE

Forging Ahead or Grasping at Straws? The Affects and

Outcomes of Social Enterprise Legal Structure Change
Elena Dowin Kennedya and Nardia Haighb
a
Martha and Spencer Love School of Business, Elon University, Elon, NC USA; bCollege of
Management, University of Massachusetts-Boston, Boston, MA, USA. This work was supported by a
University of Massachusetts-Boston Joseph P. Healey Research Grant.

ABSTRACT KEYWORDS
Cases of legal structure change within social enterprises were Social enterprise; business
examined using case study and qualitative comparative analyses model; social value
to understand how legal structure change altered core business creation; legal
model components and subsequent outcomes for survival. The structure change
article identifies motivations for legal structure change (opportun-
ity, weakness and threat), tracks changes made to business model
components (value proposition, value creation and value capture),
and examines post-change survival. Findings indicate that the
business model component altered depends on the motivation
for legal structure change and that survival favours enterprises
that build value creation and value capture components first,
while others enter a downward spiral from which it is difficult
to recover.

Introduction
The balancing act of generating social value while capturing economic value is what
many argue makes social enterprises unique (Battilana and Dorado 2010; Dohrmann,
Raith, and Siebold 2015; Thompson and MacMillan 2010). In their effort to balance
generating social value while capturing sufficient economic value to sustain them-
selves, social enterprises often alter their legal structure (Battilana et al. 2012; Haigh,
Kennedy, and Walker 2015).
Legal structure refers to the legal registration of an enterprise and regulations by
which its registration category is governed. Social enterprises can use for-profit, non-
profit or hybrid legal structures (Pache and Santos 2013; Rawhouser, Cummings, and
Newbert forthcoming). Within the for-profit category, some social enterprises utilize
traditional entities such as CCorps or LLCs, while others are utilizing new structures
promoting social value creation, such as Benefit Corporations, Low-Profit Limited
Liability Corporations (L3C) and Benefit Limited Liability Corporations (BLLC) in the
U.S., or Community Interest Corporations (CIC) in the UK.1 As non-profits, some social
enterprises register as a 501(c)(3) in the U.S. or similar corollary in other countries.

CONTACT Elena Dowin Kennedy EKennedy9@Elon.edu

Color versions of one or more figures in the article can be found online at http://www.tandfonline.com/rjse.
ß 2018 Informa UK Limited, trading as Taylor & Francis Group
 JOURNAL OF SOCIAL ENTREPRENEURSHIP 31

Finally, social enterprises have begun to register multiple legal entities, with for-profit
and non-profit entities working together under one organizational brand; prompting
the label ‘hybrid’ (Battilana et al. 2012; Haigh, Kennedy, and Walker 2015). Established
social enterprises adopting a hybrid structure must change their legal structure to do
so (Battilana et al. 2012; Haigh, Kennedy and Walker 2015).
Changes to legal structure necessitate making changes to the business model. This
is especially the case when an enterprise traverses non-profit and for-profit categories.
Legal structure influences all aspects of a business model by affecting how external
stakeholders perceive an organization (Teece 2010) and dictating how the organization
is governed (Low 2006) and transactions are conducted (Casadesus-Masanell and
Ricart 2010). Although researchers differ on terms used (Bocken et al. 2014; Massa,
Tucci, and Afuah 2017), three core components comprise a business model: value
proposition, value creation and value capture (Bocken et al. 2014; Schaltegger,
Ludeke-Freund, and Hansen 2016; Schneider and Spieth 2014).
One aim of this study is to address a gap in social enterprise literature by under-
standing how legal structure change translates into business model change; beginning
with what motivates the legal structure change (beyond the broad desire to balance
social value creation with economic value creation), and which business model com-
ponents are altered. Further, given the importance of the legal structure and business
model to how enterprises propose, create and capture value, changing them may also
have implications for enterprise survival; however, these implications are not presently
known. The second aim of this study is to understand the implications of legal struc-
ture and business model change on enterprise survival.
This multi-method study uses case study analysis and qualitative comparative ana-
lysis (QCA) to identify what motivated 24 social enterprises to change their legal struc-
ture, track specific changes they made to business model components and examine
their post-change survival four years after changing. The study is guided by two
research questions: 1) What drives legal structure change in established social enterprises
and what changes are made to the business model as a result?; and 2) What post-
change survival outcomes do established social enterprise experience?
This study makes two main contributions to the current knowledge of social enter-
prises. First, by orthogonally comparing three identified drivers of legal structure
change with business model components altered, four dominant business model
change patterns were identified. These patterns indicate that the motivation for
change influences, which business model component is altered. Opportunity-driven
changes predominately altered value proposition and value creation components,
weakness-driven changes focused more on value creation and value capture, and
threat-driven changes focused exclusively on value capture. Second, this study offers
some of the first insights into post-legal structure change outcomes for social enter-
prise survival, as two opportunity-driven change patterns were associated with social
enterprise survival, while one weakness-driven change pattern was associated with
enterprises closing their doors. These results indicate that survival favours social entre-
preneurs who prioritize building value creation and value capture components first,
while those that do not get caught in a downward spiral from which it is difficult
to recover.
32 E. DOWIN KENNEDY AND N. HAIGH

Legal structure and social enterprise business models

Decisions about social enterprise legal structure are somewhat complicated because
the differences between for-profit and non-profit legal structures are significant. They
include differences in how organizations can legally raise and use funds (Bromberger
2011), how stakeholders perceive organizations (Battilana et al. 2015; Pache and
Santos 2013), and how they might partner with other organizations (Meyskens and
Carsrud 2011). New for-profit entities that allow the sale of equity and accumulation
of profit, while prioritizing a social mission over shareholder value further complicate
these decisions (Bromberger 2011; Rawhouser, Cummings, and Crane 2015), all of
these intricacies affect business model efficacy.
Business models are defined as the ‘content, structure and governance of transac-
tions designed so as to create value through the exploitation of business oppor-
tunities’ (Amit and Zott 2001, 511). This literature has historically looked at traditional
for-profit business models, but recently, there has been an increased focus on social
and sustainable business models. The goal of any business model is to sustain the
enterprise (Demil and Lecocq 2010) and this involves balancing value creation and
value capture (Amit and Zott 2012; Schneider and Spieth 2014), but achieving this bal-
ance creates tension, ambiguity and challenges for enterprises (Teece 2010), particu-
larly in social enterprises because of their deeply embedded social missions (Pache
and Santos 2010; Santos 2012). Understanding the influence of legal structure change
on social enterprise business models will contribute to an understanding of how social
enterprises generate social value and sustain their missions over time, which is a key
question raised by social enterprise scholars (Dahan et al. 2010; Florin and Schmidt
2011; Inigo, Albareda, and Ritala 2017).

Legal structure change, business model components, and business

model innovation
Legal structure plays a role in how the value proposition, value creation and value
capture business model components are expressed. Value proposition components
refer to products and services offered to customers, relationships with customers, and
positioning within the market (Demil and Lecocq 2010; Johnson 2010; Kindstro €m
2010; Moingeon and Lehmann-Ortega 2010; Osterwalder and Pigneur 2010). In order
for a business model to be successful, customers must perceive that the value they
receive from products and services to be higher than the cost they are asked to pay.
For social enterprises, the value proposition also needs to “provide measurable eco-
logical and/or social value in concert with economic value” (Bocken et al. 2014, 43).
Value creation refers to the firm’s core activities and processes (Johnson 2010;
Osterwalder and Pigneur 2010), competencies (Demil and Lecocq 2010; Morris,
Schindehutte, and Allen 2005), resources (Demil and Lecocq 2010), interactions with
stakeholders (Bocken et al. 2014) and governance (Casadesus-Masanell and Ricart
2010). This includes the ‘value chain’ (Chesbrough and Rosenbloom 2002; Kindstro €m
and Kowalkowski 2014), ‘supply chain’ (Boons and Freund 2013) and ‘infrastructure
management’ (Dubosson-Torbay, Osterwalder, and Pigneur 2002) that extend beyond
the organization.
 JOURNAL OF SOCIAL ENTREPRENEURSHIP 33

Value capture among traditional (Moingeon and Lehmann-Ortega 2010;

Osterwalder and Pigneur 2010; Teece 2010) and social business literature (Boons and
Freund 2013) refer to earned revenue, as enterprises entice payments from customers,
convert them to profits, and account for and reduce costs (Osterwalder and Pigneur
2010; Teece 2010). Value capture mechanisms are highly individualized in social enter-
prises (Battilana et al. 2012) and rely on inventive funding solutions (Walker 2012)
beyond earned revenue (Lyons and Kickul 2013) because of beneficiaries’ limited abil-
ity to pay (Sharir and Lerner 2006).
Enterprises that make significant changes to these business model components are
engaging in Business Model Innovation (BMI). BMI is the act of rethinking (Bock et al.
2012), an enterprise’s business model, so that its ‘content, structure, and governance
of transactions’ (Amit and Zott 2001, 511) align with changes in its circumstances and
operating environment (Bock et al. 2012; Bocken et al. 2014; Chesbrough 2010;
McGrath 2010; Sosna, Trevinyo-Rodriguez, and Velamuri 2010). Legal structure change
prompted BMI in each of the cases examined within this study and was evident in the
business model components described above.

Drivers of legal structure change and BMI

Extant literature on legal structure change among social enterprises indicates that top
drivers of legal structure change include a desire to better facilitate the mission, the
need to raise capital, be better understood by stakeholders and diversify income
streams (Haigh, Kennedy, and Walker 2015). Similarly, Battilana et al. (2012) found that
social entrepreneurs pursued a hybrid structure to be less reliant on donations and
subsidies and create sustainable financial models.
Although not focused on social enterprises, BMI literature also indicates that BMI is
motivated by a range of internal and external factors (Amit and Zott 2012; Teece 2010)
including technological innovation (Lambert and Davidson 2013; Schneider, Spieth, and
Claus 2013; Teece 2010), changes in accepted modes of operating (Mezger 2014), the
emergence of new markets and competition (Amit and Zott 2012; George and Bock
2011; Schneider and Spieth 2013; Sosna, Trevinyo-Rodriguez, and Velamuri 2010), pres-
sure to be more environmentally sustainable (Bocken et al. 2013), and new regulatory
requirements (de Reuver, Bouwman, and MacInnes 2009; Lambert and Davidson 2013).
Many of the granular stimuli identified above in social enterprise or BMI literature
may cause either opportunity-driven or necessity-driven changes depending on the
capabilities of the firm (de Reuver, Bouwman, and MacInnes 2009; Lambert and
Davidson 2013) and mindset of the entrepreneur (Sinfield et al. 2012). When studying
entrepreneurship, the Global Entrepreneurship Model (GEM 2014) categorizes entre-
preneurial decisions as driven by opportunity or necessity (Fuentelsaz et al. 2015).
Opportunity-driven entrepreneurship occurs when an entrepreneur recognizes an
opportunity and pursues it, while necessity-driven entrepreneurship occurs when they
have limited options and determines that they must create an opportunity to facilitate
their own survival (GEM 2014). Thus, following the GEM (2014), and in an effort to
develop a theory that is clear and impactful, this study explores these granular drivers
within their broad opportunity or necessity category.
34 E. DOWIN KENNEDY AND N. HAIGH

Outcomes of legal structure change and BMI in social enterprises

Scholars have argued that BMI supports successful market entry and builds organiza-
tional resilience among market incumbents (Osterwalder and Pigneur 2010; Teece
2010) and that organizations need to continuously undertake BMI to remain competi-
tive and survive (Johnson, Christensen, and Kagermann 2008; Teece 2010). Empirical
examinations have focused predominately on individual cases of BMI with successful
outcomes (Arend 2013; Demil et al. 2015; Gebauer, Haldimann, and Saul 2017) and
BMI undertaken to find the best business model for a given situation (Lubik and
Garnsey 2016; Richter 2013). Thus far, BMI literature has paid less attention to possible
relationships between BMI and unsuccessful outcomes. The present study extends
existing research examining positive outcomes by examining the relationship between
BMI and both positive and negative outcomes for organizational survival.

Data and methods

This study examined 24 social enterprises that undertook legal structure change using
an exploratory multi-case method approach (Stake 2006) encompassing data collected
from interviews, internal documentation, websites and news stories. This analysis was
complemented with confirmatory and exploratory QCA of survival data gathered four
years after the initial data collection period.

Sample
Initially, the researchers developed a sample of 48 social enterprise cases whose
founders had struggled with initial business design decisions. Cases were recruited
through snowball sampling (Noy 2008), starting with the researchers’ networks using
professional and social media outlets, to overcome the lack of single register or data-
set of social enterprises in any given country or region at the time data were col-
lected. Participants referred to other social enterprises, so snowball sampling located
social enterprises that otherwise would not have been found (Atkinson and Flint 2001)
and allowed the researchers to build a diverse sample that included a range of for-
profit and non-profit entities.
Social enterprise business models can evolve rapidly as solutions and structures are
conceived, then reconceived (Battilana and Lee 2014; Zahra et al. 2009) and half of
the original 48 cases had changed or were changing their legal structure at the time
of interview. This study examines the 24 cases that had undergone legal structure
change and the resulting BMI.

Case studies
The researchers developed case studies as the foundation of analysis because the
exploratory nature of the research questions necessitated collection and analysis of
both the details and context of each case. The methods used here follow an inductive
coding process (Stake 2006; Yin 2003) that entailed reading and re-reading the data
for each case and applying it to the research questions, comparing case data to
 JOURNAL OF SOCIAL ENTREPRENEURSHIP 35

literature, and comparing multiple cases to each other, until adequate conceptual cat-
egories were developed to understand their BMI.
Of the 24 case sample, 16 initially registered as for-profit and 8 as a non-profit. The
enterprises ranged in the age from 2 to 40 years, with 50% found between 2008 and
2010. The enterprises addressed issues ranging from maternal and infant health to
waste management, to employment of disadvantaged populations and operated in
areas throughout the globe including North America, Europe, Africa and the Middle
East. Four years after initial data collection, six of these enterprises were no longer
operational. Table 1 provides a summary of the cases including information on the
changes to the legal structure and business model in each case.

Case study data collection

Each case was compiled of an extended semi-structured interview with the founder/s
(or in three cases a senior leader with extensive knowledge about the founder/s and
founding), news articles about each enterprise and publicly available data including
articles of incorporation, annual reports and website content. In some cases, social
entrepreneurs shared internal documentation that further explained their business
model and legal structure. Interviews were conducted over skype between April and
December 2012.
Semi-structured interviews lasted 40–60 minutes and allowed the researchers to
gain an in-depth understanding of each legal structure and business model. Interview
questions like ‘Please describe your business model, including whether it is for-profit,
non-profit or hybrid?’, ‘Would you describe, chronologically, how your business model
has changed?’, ‘Why was it changed?’, ‘What changed, specifically?’ and others probed
decision-making around the legal structure, products and services, customers and ben-
eficiaries, how the social value was generated and how the enterprise sustained itself
financially. Website and news data supplemented interviews, which allowed for a
deeper understanding of how each enterprise positioned itself in the market and
offered useful insights into value offerings, revenue streams and partnerships.
Publicly available data were gathered twice—once shortly after each interview and
again four years later—and consisted of websites, newspaper articles, LinkedIn accounts
of founders, and legal registration filings where available. The second round of data col-
lection confirmed legal structure change and BMI in cases where it had recently
occurred or was imminent at the time of the interview. When collecting the second
round of public data, the researchers identified six enterprises that had not survived.
Following previous case study researchers, such as Stake (2006) and Yin (2003), identify-
ing these six enterprises became a theme that led to the second research question.

Case study analysis

Cross-case thematic analysis was undertaken to identify themes across the cases fol-
lowing the method set out by Braun and Clarke (2006). Interviews were transcribed
and uploaded to QSR NVIVO Version 11 software (QSR 2015) along with publicly avail-
able data and shared internal documentation.
36 E. DOWIN KENNEDY AND N. HAIGH

Table 1. Sample Summary.

Beneficiary Yr. Issue Area and Change to the Business Model
Case Head-quarters Location Est. Changes to Business Model
1 USA USA 2010 Tackles low income unemployment through SMS job posting
platform. Initially NP, converted to ME to increase value for
both beneficiaries and customers (VProposition)
2 USA Developing world 2009 Supports small business investment by offering credit to
entrepreneurs in developing countries. Initially NP, con-
verted to a ME to increase value for both beneficiaries and
customers (VProposition)
3 USA Mali 2010 Supports food security by milling, fortifying and selling rice
grown by small-scale farmers in West Africa. Initially US
based FP, converted to Mali based FP to reduce complex-
ity (VCreation)
4 Palestine Africa, Middle 2006 Offers digital solutions for aid and development projects as
East, and Asia well as tackles unemployment through offering an SMS job
platform in the middle east. Initially FP, converted to ME to
increase value for beneficiaries (VProposition)
5 USA India 2008 Enhances maternal and child health through development of
medical technology, including an infant warmer that
doesn’t require electricity and educational programs.
Initially NP, converted to ME to improve ability to attract
equity investment (VCapture)
6
USA USA 1971 Employs individuals with disabilities through staffing, security
and food packaging outsourcing. Initially NP, converted to
ME to: increase value for beneficiaries (VProposition)
7 USA USA 2008 Supports female entrepreneurship through an online platform
through which they can sell their goods. Initially FP, con-
verted to ME to alter governance structure to better
achieve goals (VCreation)
8
USA USA 1993 Creates employment opportunities for veterans through a
greenhouse, golf course and restaurant. Initially NP, con-
verted to ME to increase value for both beneficiaries and
customers (VProposition)
9 Kenya Kenya 2007 Sells agricultural support and training program for small-scale
farmers in Africa. Initially FP, converted to ME to improve
ability to seek donations and grants (VCapture)
10 UK UK 2012 Offers artisan support and opportunities to sell artwork.
Initially sole trader (FP) and converted to a cooperative
model (FP) to alter governance structure to better achieve
goals (VCreation)
11 USA USA 2011 Offers software solutions to engage stakeholders in non-prof-
its. Initially CCorp (FP), converted to BCorp (FP) to facilitate
partnerships through better signaling (VCreation)
12 USA Ghana 2011 Tackles global health issues through developing medical tech-
nology for emerging markets. Initially L3C (FP), converted
to CCorp (FP) to improve ability to attract equity invest-
ment (VCapture)
13 USA Africa, India, and 2009 Sells mobile technology and alternative energy solutions in
Latin America developing markets. Initially LLC (FP), added and subtracted
additional LLCs (FP) to protect assets as organisation
expanded (VCreation)
14 USA Global 2009 Supports NP missions by offering pro-bono design services to
NP clients. Initially sole proprietorship (FP), converted to
general partnership (FP) to altered governance structure to
better meet goals (VCreation)
15 USA Ecuador and Peru 2009 Supports Amazonian farmers through technical assistance,
purchase, processing, and marketing of indigenous crops to
American customers. Initially NP, converted to ME to navi-
gate international law (VCreation)
16 USA USA 2009 Offers mentoring and etiquette classes to low-income girls.
Initially NP, converted to ME to improve revenue
lines (VCapture)
(continued)
 JOURNAL OF SOCIAL ENTREPRENEURSHIP 37

Table 1. Continued.
Beneficiary Yr. Issue Area and Change to the Business Model
Case Head-quarters Location Est. Changes to Business Model
17 USA Global 2010 Offers an online platform to supply volunteers to non-profit
organisations. Initially FP, converted to ME to facilitate part-
nerships through better signaling (VCreation)
18
Canada Canada 1970 Offers employment to individuals with mental illness through
a junk processing business. Initially NP, added additional
NP entities to increase value for both beneficiaries and cus-
tomers (VProposition)
19 Ireland Ireland 2010 Supports Irish entrepreneurship through offering classes and
networking opportunities.
Initially FP, converted to NP to improve ability to seek don-
ations and grants (VCapture)
20 USA USA 2009 Offers emergency financial support to families in need. Initially
FP, converted to NP to improve ability to seek donations
and grants (VCapture)
21
USA USA 1987 Employs individuals with mental health barriers through mov-
ing, records management, and warehousing services.
Initially NP, was sold to larger NP to establish succession
plan (VCreation)
22 USA USA 2005 Sells branding consulting to NP organisations. Initially LLC (FP)
and converted to BLLC (FP) to facilitated partnerships
through better signaling (VCreation)
23 South Africa South Africa 2012 Supporting artisans and education through paying artisans to
create bikes to be sold in the US. Initially FP, converted to
ME to: Increase value for beneficiaries (VCreation)
24 USA USA 2005 Pet store that supports animal welfare and localisation.
Initially CCorp (FP), converted to BCorp (FP) and franchised
to altered governance structure to better achieve
goals (VCreation)
Cases with an  are no longer operational.
Cases with an
are excluded from the survival analysis.
FP ¼ for profit; NP ¼ non-profit; ME ¼ mixed-entity.

Each researcher independently performed a content analysis of all data, starting

with codes relating to the reasons for legal structure change, what was changed and
the business model component/s altered, the benefits and challenges experienced,
founding year, country of headquarters, customers and beneficiaries, and social value
and mission. To further interpret the data, the researchers also recorded the codes for
each case on a spreadsheet and used the data filter to group cases in different ways
to perform cross-case analysis. Grouping the cases enabled the researchers to label
and define themes among the codes (Braun and Clarke 2006), uncover ambiguities
and contradictions in coding, and to identify further similarities and dissimilarities
between cases. Differences in interpretation of data, codes or themes were discussed
to arrive at an agreed understanding. Three dominant themes related to the research
question are described in more detail:

Legal structure
Legal structures were coded before and after changes were made. Codes were for-
profit (FP), non-profit (NP) and mixed-entity hybrid (ME). While there are differences in
international law related to specific legal structures, the major categories, FP, NP and
ME remain consistent globally.
38 E. DOWIN KENNEDY AND N. HAIGH

Table 2. Changes to Business Model Components.

Component Altered Change Made to Business Model Component Related Cases
Value Proposition Increased value for both beneficiaries and customers 1, 2, 8,18
Increased value for beneficiaries 4, 6,23
Value Creation Altered governance structure to better achieve goals 7, 10, 14, 24
Facilitated partnerships through better signaling 11, 17, 22
Navigated international law 3,15
Protect assets as organisation expanded 13
Establish succession plan 21
Value Capture Improved revenue lines 16
Improved ability to seek donations and grants 9, 19, 20
Improved ability to attract equity investment 5, 12

Business model components altered

The researchers coded for the component/s of each business model altered: value
proposition, value creation and/or value capture based on whether BMI emphasized
product and service offerings (value proposition), organizational processes, stakeholder
perceptions or governance (value creation), or revenue models and costs (value cap-
ture). Specific changes undertaken within each component were also recorded. Table 2
shows the specific changes made to components.

Change motivation
The language of interviewees indicated clearly that the change in each case was
driven by either opportunity or necessity. The differences in language were stark;
with necessity-driven change described as something the entrepreneur felt pushed
into—‘the reason why we [were] forced to change … ’ (Case 19)—as opposed to
opportunity-driven change, which was highlighted as something worth pursuing—
‘we saw this as a way to accelerate our mission’ (Case 1). Further, inductive coding
of the necessity category led to it being split into weakness and threat, resulting in
three motivation themes: opportunity, weakness and threat. Utilizing the two sub-
categories of necessity offered a clearer understanding of BMI patterns among social
enterprises.
Opportunity-driven change sought to increase impact through increasing serv-
ices offered to beneficiaries, increasing the number of beneficiaries reached, pro-
moting social innovation and increasing control. Weakness-driven change
responded to poor initial assumptions about the market or a flaw in organizational
design by restructuring the enterprise. Threat-driven change responded to
unanticipated changes in the external environment. Under these categories, each
change was undertaken to achieve specific-intended outcomes ranging from
broadening products and services offered to beneficiaries to increasing revenue.
Table 3 lists the specific and broader intended outcomes of change within the
over-arching drivers to which they relate.
To identify distinct BMI patterns, the researchers categorized each case according
to the business model component altered and the motivation for change. This created
nine possible change patterns, of which six were represented within the sample. The
patterns are addressed within the findings.
 JOURNAL OF SOCIAL ENTREPRENEURSHIP 39

Table 3. Motivations of BMI.

Broad
Over-arching Driver Specific Intended Outcome Intended Outcome Cases
Opportunity Broadening service offerings to beneficiaries Expand functions 1, 2, 18, 23
Expanding geographic market and beneficia- Expand coverage 13, 14, 24
ries reached
Expanding market accessibility to hire more 6, 8
beneficiaries
Offering free services to beneficiaries that were sold 4
to customers
Accessing capital to scale innovation 5
Supporting new social enterprise legislation Encourage 22
related activities
Increasing control over how donations are used Increase control 7
Necessity Weakness Responding to legal restrictions in foreign countries Align with external 3, 15
Aligning with market expectations environment 17
Ensuring commitment to mission Plan for succession 10, 11
Replacing leadership without succession plan 21
Increasing lines of revenue and accessing capital Raise funds 9, 16, 19
Threat Be able to raise capital after L3C legal structure was 12
not able to solicit tax-deductible donations
Be able to remain open after primary fiscal sponsor 20
stopped supporting the program

Qualitative comparative analysis

The researchers conducted confirmatory and exploratory QCA to further investigate
the research questions. QCA is a set-theoretic method that uses Boolean algebra to
identify the configurations of conditions associated with a focal outcome ( Ragin 2008,
2014 ). It is an intermediate approach between quantitative and qualitative methods
that complements the complexities of qualitative analyses with the generalizability of
quantitative analyses (Crilly 2011; Crilly, Zollo, and Hansen 2012) and is gaining trac-
tion in the study of business and society issues (Delmas and Pekovic 2018; Maggetti
2014). QCA was justified in this study because it would add rigor to the qualitative
case analysis and it is also appropriate for small samples and the sample of 24 cases is
consistent with other studies (e.g. Crilly 2011; Crilly, Zollo, and Hansen 2012; Fiss 2011;
Maggetti 2014; Pajunen 2008).
Confirmatory QCA confirmed which combination of drivers and business model
components were associated with BMI emerging from legal structure change were
empirically important. Exploratory QCA examined which combinations of conditions
were associated with social enterprises surviving or not after four years. Specifically,
crisp set QCA using fsQCA V3.0 software (Ragin and Davey 2014) was undertaken. Set
membership was binary (coded 1 for membership and 0 for non-membership). The
analysis followed Ragin (2008) by analyzing 3–8 ‘macrovariable’ conditions, represent-
ing the three drivers (Opportunity, Threat and Weakness) and three primary business
model components altered (value proposition, value creation and value capture).
An important concept in QCA is consistency, which ranges from 0 to 1, and ‘gauges
the degree to which the cases sharing a given combination of conditions … agree in
displaying the outcome in question’ (Ragin 2008, 44). Crilly, Zollo and Hansen’s (2012)
guideline of specifying a consistency threshold of 0.80 or more was adopted to ensure
that combinations of macrovariables were reliably associated with the outcomes in
question before completing the analysis. Another important QCA concept is coverage.
40 E. DOWIN KENNEDY AND N. HAIGH

Coverage indicates ‘the empirical importance of a causal combination’, and trade-offs

can occur between coverage and consistency (Ragin 2008, 55). Altogether, consistency
and coverage indicate how reliably a combination of conditions are associated with
the given outcome (Maggetti 2014). Following Ragin (2008), the researchers undertook
standard crisp set QCA and drew the results from the intermediate solution to maxi-
mize interpretability.

QCA analysis 1
Analysis 1 examined combinations of conditions to confirm the inductive identification
of BMI patterns and to discern which were more empirically important. This analysis
indicated that all combinations had a consistency of 0.80 or more. Results are reported
with the findings.

QCA analysis 2
Analysis 2 examined combinations of drivers and business model components associ-
ated with social enterprise survival four years later. Four cases aged over seven years
at the time of first interview (cases, 6, 8, 18 and 21) were removed from this analysis
because research continues to show that older enterprises are correlated with higher
survival rates (Esteve-Perez, Pieri, and Rodriguez 2018). This analysis indicated that 4 of
the 6 configurations represented had a consistency of 0.80 or more. Similarly, the
results are reported with the findings.

QCA analysis 3
In the third analysis, a counter-factual approach was taken by negating the set of sur-
viving enterprises to examine the combinations of conditions associated with social
enterprises not surviving. The same four cases excluded from Analysis 2 were also
excluded from Analysis 3. Analysis 3 showed that 1 of the 6 configurations repre-
sented in the data had a consistency of 0.80 or more and this is discussed in
the findings.

Findings
This article advances knowledge of how social enterprises attempt to balance social
and economic priorities through legal structure change, by examining legal structure
change and patterns of BMI associated with it, and by providing first insights into its
outcome for social enterprise survival.

Change motivations
Seizing opportunity motivated 13 cases, while the response to business model weak-
ness motivated 9 cases and response to threat motivated 2. Opportunity-driven legal
structure change and BMI capitalized on changes in the external environment that
were viewed as positive. Data indicated a sense of control and purpose in the BMI
 JOURNAL OF SOCIAL ENTREPRENEURSHIP 41

required and entrepreneurs framed the change in language expressing a desire to

grow their mission or market. They also described the changes in terms of seizing
opportunities and their role as an active driver of the change. As can be seen in Table 3,
the intended outcomes of opportunity-driven BMI focused on expanding mission func-
tions expanding beneficiary coverage as well as encouraging related activities and having
more control.
Case 4 is an example of opportunity-driven legal structure change and BMI, where the
founder highlighted an opportunity to expand their mission-related activities as a driver:
‘Setting up a non-profit enables us to meet that community level need that was there.
And through a mechanism that really wouldn’t have made sense if we had tried to
respond to that need under the framework of the company. We’re talking about small,
local community organizations: farmers, cooperatives, women’s associations and none of
them would be able to pay full price … If we had stayed solely with the corporate
model, we would likely not have been able to serve those stakeholders at all’ (Case 4).

The organization began developing software for humanitarian aid organizations as

a new service under their non-profit entity, which increased their partnerships and
access to beneficiaries.
In contrast, necessity-driven legal structure and BMI (weakness or threat) was
described in reactionary terms surrounding a desire to prevent loss of or harm to the
venture’s social and economic value. Here, changes responding to the external envir-
onment or poor initial planning were viewed negatively. Nine cases were weakness-
driven and two were threat-driven. Weakness-driven enterprises shared stories of poor
initial assumptions about their enterprise and its environment and being misunder-
stood by key stakeholders when trying to raise capital. For example, Case 17 initially
built a for-profit organization to match volunteers with international volunteering
opportunties for a subscription fee. However, they had trouble securing non-profit
partners with its for-profit label. Shifting to a non-profit structure made partnering eas-
ier and gave it the ability to seek donations and grants instead of individual fees.
Table 3 shows the intended outcomes of weakness-driven change focused on broad-
ening revenue and sources of capital, aligning with external environment and plan-
ning for succession.
Both threat-driven cases focused on raising funds after an unexpected change in
the external environment affected their ability to do so. For instance, Case 12 initially
formed as an L3C, which allowed it to both sell equity shares and accept tax-deduct-
ible donations. However, the IRS decided not to allow LC3s to accept tax-deductible
donations, which fundamentally changed the value of the legal entity and the found-
ers had trouble explaining the new model to equity investors; ultimately changing to
a traditional for-profit model to improve their value capture mechanisms by appealing
to a wider set of equity investors.

Business model components targeted

In addition to their motivations, the business model components primarily and sec-
ondarily altered provided further insight. These alterations are recorded in Table 1 and
reported below.
42 E. DOWIN KENNEDY AND N. HAIGH

Social enterprise and the value proposition

In 7 of the 24 cases, legal structure change led to BMI primarily targeting value prop-
osition. As illustrated in Table 2, these cases were motivated by opportunities to
increase their social impact by expanding services offered to beneficiaries or increasing
market accessibility to hire more beneficiaries. For example, Case 2 improved services
for both beneficiaries and customers. Case 2 developed an SMS-based platform that
for a fee allows micro-enterprises in the developing world to track their inventory and
build a financial profile that would give them access to credit. Over time, Case 2 saw
an opportunity to broaden its impact (and potentially increase its customer base) by
offering financial literacy classes through a new non-profit. In the words of the
entrepreneur:
‘we realized the really important thing is building a foundation for them to understand
how to manage money … before we do anything, even on the for-profit side, we have to
lay that foundation. And that is what really what we think … our non-profit side really is’
(Case 2).

Social enterprise and value creation

Nearly half (11) of the cases engaged primarily in value creation BMI to achieve a
number of goals outlined in Table 2, including facilitating partnerships through clearer
signaling, altering governance structures to better achieve goals, reducing and navi-
gating international labor and ownership laws. Case 7, for instance, altered its govern-
ance structure to better achieve its goal of developing an online platform through
which consumers can purchase goods from women-owned US based companies. The
founder explained that she wanted:
‘to provide scholarships and to provide resources so that other women who maybe
weren’t as lucky and blessed as I … to provide them with some form of help for their
start-ups or at least some additional resources’ (Case 7).

Under the solely FP model, the founder donated money to non-profits that distrib-
uted the funds, but as a mixed-entity, she had more control over the donations and
allow customers to participate in donation dispersal through a change in govern-
ance structure.

Social enterprise and value capture

Six cases targeted value capture for (predominantly necessity-driven) BMI. The founder
of Case 19 summed up this succinctly when he shared: ‘The reason also why we
[were] forced to change; like an awful lot of people, we find it comes down to capital’
(Case 19). Many social entrepreneurs in this study highlighted ways they competed for
grants and donations and pursued inventive ways to reduce costs such as negotiating
subsidized rent as a donation. Case 5 (a medical device enterprise) undertook legal
structure change and BMI to simultaneously earn income and attract research and/or
philanthropic funds. After three years of developing new products with research and
philanthropic funds as a non-profit, the organization added a for-profit corporation to
 JOURNAL OF SOCIAL ENTREPRENEURSHIP 43

‘enable us to more rapidly access the capital needed to achieve our overall core
objective: saving the lives of babies … by securing new sources of investment funding
from private investors and socially minded venture capital firms, [we] will be able to more
quickly and effectively accomplish these activities, and bring our lifesaving healthcare
technologies to those who most need them’ (Case 5).

Since social enterprises often serve beneficiaries who cannot pay market value for
goods and services, their business models rely on some external funding support
beyond earned revenue, as well as creative ways to keep costs down.

Patterns of BMI to balance social and economic value

Case study analysis identified six patterns of BMI (outlined in Table 4) undertaken to
balance generating social value and capture economic value. These patterns were
inductively labelled Broaden Mission, Broaden Scale and Control, Attract Investors,
Correct Poor Planning, Stabilise Revenue and Respond to Exogenous Shock.
The results of confirmatory QCA (Analysis 1) displayed in Table 5 showed that four
of the identified BMI patterns appear empirically important relative to the others, as
determined by them collectively providing 87.5% coverage of all consistent combina-
tions and three of the four having individual coverage over 0.20. Each of these four
patterns is described below with examples.

Broaden mission
Seven social enterprises undertook opportunity-driven change in relation to their value
proposition. These enterprises recognized an opportunity to deepen their impact by
expanding their range of goods and services—either by selling a wider range of prod-
ucts to customers or giving away services to support existing products offered to ben-
eficiaries. Case 2, provides an example of giving away services to support existing
products. By establishing a non-profit to help people understand and manage money,
Case 2 added value for its beneficiaries and expanded its potential customer base.

Broaden scale and control

Five enterprises undertook opportunity-driven BMI in relation to their value creation
component. These enterprises identified opportunities to broaden their beneficiary
groups, either through geographic expansion (e.g. Case 24) or through expanding the
definition of their beneficiaries (e.g. Case 6). Case 6, for instance, expanded its impact
by broadening its definition of disabled employees beyond that determined by its cur-
rent restrictive grant funding requirement. In the words of Case 6’s executive director:
‘We wanted to do our staffing in the private sector in a bigger way and as a result,
did not want some of the burdens that came with some [grant] requirements’. Case 6
shifted from non-profit to mixed-entity hybrid to facilitate the change without losing
its grant funding. This shift did not change its services or revenue streams and allowed
the enterprise to hire a greater number and broader range of disabled individuals.
44 E. DOWIN KENNEDY AND N. HAIGH

Table 4. BMI Patterns.

Opportunity (13)
Value Broaden Mission
Proposition (7) Number of cases: 7
Innovations categorized by a
desire to broaden the scope of
the mission by offering a wider
array of products and services
to customers and beneficiaries.
Resulting legal structures:
6 ME (Cases 1, 2, 4, 6, 8, and
23)
1 NP (Case 18)
Example:
FP adding to an NP that offers
education to stakeholders
beyond customers (Case 2)
Value Broaden scale and control
Creation (11) Number of cases: 5
Innovations categorized by a
desire to enhance the number
of people reached, while adding
flexibility as the enterprise
grows.
Resulting Legal Structures:
1 ME (Case 7)
4 FP (Case 13, 14, 22 and 24)
Example:
FP Franchising to make the
products and services available
in more markets (Case 24)
Value Attract investors
Capture (6) Number of cases: 1
Innovations categorized by a
desire to attract investors to
allow the enterprise to scale
more quickly
Resulting legal structures:
1 ME (Case 5)
Example:
NP adding FP that pays licens-
ing fee to utilize intellectual
property and allows for outside
investment to scale production
(Case 5)
Grey shading indicates empirical significance utilizing confirmatory QCA.
Weakness (9) Threat (2)
Correct poor planning
Number of cases: 6
Innovations categorized by a
need to correct poor assump-
tions
Resulting legal structures:
2 ME (Case 15 and 17)
3 FP (Case 3, 10, and 11)
1 NP (Case 21)
Example:
FP adding NP after learning
they could not sell products as
NP in Ecuador (Case 15)
Stabilise revenue Adapt to exogenous shock
Number of cases: 3 Number of cases: 2
Innovations categorized by a Innovations categorized by a
need to increase revenue or need to stabilize revenue or
attract capital for survival attract capital for survival
because initial business model is because of an unanticipated
unsustainable external change.
Resulting legal structures: Resulting legal structures:
2 ME (Case 9 and 16) 1 FP (Case 12)
1 NP (Case 19) 1 NP (Case 20)
Example: Example:
FP switching to NP so that the FP converting to NP to accept
organization can accept tax tax deductible donations after
deductible donations to support the loss of their initial fiscal
activities (Case 19) sponsor (Case 20)

Correct poor planning

Six social enterprises undertook necessity-driven change to rectify a weakness created
by poor initial planning. These enterprises initially designed business models that
were atypical for their industries; however, over time, they needed to change to meet
expectations and streamline internal processes. Three cases sought change to align
the organization with external expectations, either partner organizations better under-
stood them or to respond to legal restrictions in foreign countries. Three further cases
changed to better plan for succession and embed their mission into govern-
ance practices.
 JOURNAL OF SOCIAL ENTREPRENEURSHIP 45

Table 5. BMI Paths Confirmatory QCA Results.

BMI Paths: Confirmatory QCA Results
Adapt to
Broaden Scale Correct Stabilise Exogenous
Broaden Mission & Control Attract Investors Poor Planning Revenue Shock
Value O
Proposition
Value Creation O O
Value Capture O O O
Opportunity O O O
Weakness O O
Threat O
Raw Coverage 0.291667 0.208333 0.041667 0.250000 0.125000 0.083333
Unique 0.291667 0.208333 0.041667 0.250000 0.125000 0.083333
Coverage
Consistency 1.000000 1.000000 1.000000 1.000000 1.000000 1.000000
Consistency 1.000000
Cut-off
Solution 1.000000
Consistency
Solution 1.000000
Coverage
Key: “O” indicates the core causal condition is present; blank cells signify causal conditions that were not present.
Grey shading indicates sufficient coverage for path to be empirically important.

Case 3, an organization that sought to improve food security in Mali through the
creation of milling stations for small-scale rice farmers, learned the lesson of poor
planning after initially founding an LLC in the US:
‘We just learned this a hard way a few months ago when we were doing our taxes … We
didn’t really think of it and we probably should have asked for advice. We went for an
LLC because we were starting to get traction and the chance of us wining prizes was
increasing and so we decided to just create an entity that where we would put all the
winnings and prizes into that entity and separate it from our personal stuff’ (Case 3)

This misunderstanding cost the founders’ time and money that could have been
used to improve their overall business model, which was still in the testing phases
four years later. Of cases following the Correct Poor Planning pattern, three secondarily
altered their value capture component to pursue donations and grants or to improve
their tax position. Three of the six cases are no longer operational.

Stabilize revenue
Three cases needed to rectify financial instability inherent in the organization’s initial
design. These enterprises sought to generate new revenue streams through earned
income, donations or investors. None of these organizations survived. For instance,
Case 9 was unable to raise the capital necessary for its agricultural support and train-
ing business in Kenya, so the founder helped her parents opened a 501(c)3 in the US
to solicit donations, but quickly learned that the donations could not cover operat-
ing expenses:
‘ … at this stage you can’t just swap over because our audited financials —our existence
has been as a limited company. So we do have a new mechanism. We’ve had them for
more than a year and a half. We have a non-profit entity, a 501(c)3 – the challenge is that
46 E. DOWIN KENNEDY AND N. HAIGH

Table 6. Paths to Survival.

Paths to Survival: Confirmatory QCA Results
Broaden Mission Broaden Scale & Control Attract Investors Adapt to Exogenous Shock
Value Proposition O
Value Creation O
Value Capture O O
Opportunity O O O
Weakness
Threat O
Raw Coverage 0.285714 0.357143 0.0714286 0.142857
Unique Coverage 0.285714 0.357143 0.0714286 0.142857
Consistency 1.000000 1.000000 1.000000 1.000000
Consistency Cut-off 1.000000
Solution Consistency 1.000000
Solution Coverage 1.000000
Key: “O” indicates the core causal condition is present; blank cells signify causal conditions that were not present.
Grey shading indicates sufficient coverage for path to be empirically important.

Table 7. Paths to Failure.

Paths to Failure: QCA Results Stabilise Revenue
Value Proposition
Value Creation
Value Capture O
Opportunity
Weakness O
Threat
Raw Coverage 0.500000
Unique Coverage 0.500000
Consistency 1.000000
Consistency Cut-off 1.000000
Solution Consistency 1.000000
Solution Coverage 0.500000
Key: “O” indicates the core causal condition is present; blank cells signify causal conditions that were not present.

entity can’t be used to raise money for operating capital. So we’re sort of caught now in
a really nasty catch 22, which is even if I can repurpose the 501(c)3 it can’t be repurposed
to raise money that I need to operate’ (Case 9).

Ultimately, this course of action did not work and Case 9 closed.

Outcomes of BMI
To answer the second research question about post-BMI survival of social enterprises,
the researchers first examined which combinations of drivers and components were
associated with social enterprise survival. The results in Table 6 indicate that all config-
urations had consistency of 1 and that two BMI patterns – Broaden Mission and
Broaden Scale and Control – appear empirically important to survival, with 0.286 and
0.357 coverage, respectively (collectively covering 64% of the consistent
combinations).
To answer the research question, two from a counter-factual perspective, Analysis 3
identified combinations of conditions associated with social enterprises not surviving
after four years. Table 7 shows that one consistent BMI pattern – Stabilise Revenue -
 JOURNAL OF SOCIAL ENTREPRENEURSHIP 47

Figure 1. Summary of Findings.

appears empirically associated with enterprise failure, with 0.50 coverage and high
consistency.
To summarize, case analysis was utilized to address research question one and
found that the motivation for legal change strongly influenced the business model
component altered. Opportunity-driven change led to alteration of the value propos-
ition or value creation process while necessity-driven change led to alteration of the
value creation process or value capture mechanisms. Six patterns of BMI resulting
from legal structure change were identified, four of which QCA analysis found to be
empirically significant—Broaden Mission, Broaden Scale and Control, Correct Poor
Planning, and Stabilize Revenue. QCA was utilized to address the second research ques-
tion related to the outcomes of BMI. Analysis 2 found the two opportunity driven pat-
terns Broaden Mission and Broaden Scale and Control to be associated with enterprise
survival while QCA analysis 3 found one of the necessity-driven patterns, Stabilize
Revenue to be associated with enterprise failure after four years. These results are visu-
ally displayed in Figure 1 and their implications are discussed below.

Discussion
This multimethod study responds to questions related to social enterprise innovation
and survival. The results make two contributions to business model and social enter-
prise literature. The first is identifying four patterns of business model innovation
within social enterprises changing their legal structure. Social enterprises are only uti-
lizing six of the nine possible BMI patterns—showing a distinct preference to focus on
value proposition in times of opportunity and value capture in times of necessity.
Second, this research offers insight into the outcomes of such changes for survival.
Opportunity-driven BMI patterns were associated with social enterprise survival, while
weakness-driven BMI was associated with enterprises having closed four years later.
48 E. DOWIN KENNEDY AND N. HAIGH

In total, the results imply that if social enterprises are able to take advantage of oppor-
tunities to broaden their mission or broaden their scale and control, these courses of
action may have a relatively higher likelihood of survival, while social enterprises real-
izing they have significant weaknesses and changing to correct them by shoring up
revenue may be less likely to survive, particularly when that innovation focuses solely
on value capture. Each contribution is discussed below.

Patterns of BMI in social enterprises

Santos (2012) asserted that prioritizing social value creation over value capture is what
distinguishes social enterprises from traditional enterprises, and Haigh and Hoffman
(2012, 229) proposed that social enterprises were more likely to ‘subordinate profit’
than companies practicing corporate sustainability. Present results challenge these
arguments and confirm that social enterprises are striving to balance social value cre-
ation with value capture and are using legal structure change and BMI to do so, but
when necessity calls, they will prioritize value capture. Table 4 and Table 5 showed
that opportunity-driven BMI leaned towards value proposition and creation BMI. For
instance, the aim of Broaden Mission was to strengthen social value through new pro-
gramming, philanthropic elements, or expanding the availability of services as we saw
in the examples of Case 2 and Case 4. On the other hand, social enterprises undertak-
ing necessity-driven BMI leaned towards altering value capture components, confirm-
ing that revenue becomes a priority when there is not enough of it to carry the
mission, regardless of how worthy the mission may be.
Without the ability to capture economic value, social enterprises are unable to gen-
erate social value; however, over-emphasizing value capture can result in lost opportu-
nities for social value creation—either by pricing the neediest customer beneficiaries
out of the market or by only focusing on opportunities to expand offerings that are
low-cost interventions. This has been described as a paradox that must be managed if
social enterprises are to reach their potential (Smith, Gonin, and Besharov 2013; Smith
et al. 2012). The results (and that half the original sample of 48 cases undertook legal
structure change) indicate that legal structure change and its subsequent BMI is a
dominant tool to manage this paradox.

Social enterprise survival

This article offers insight into the implications of BMI for enterprise survival—a phe-
nomenon that has been overlooked, as BMI literature has focussed on positive BMI
outcomes (e.g. Arend 2013; Demil et al. 2015; Gebauer, Haldimann, and Saul 2017).
Specifically, the findings suggest that opportunity-driven change appears more
strongly associated with survival, while weakness-driven change appears more strongly
associated with enterprises failing. This article extends studies such as that by
Gebauer, Haldimann, and Saul (2017), which identified BMI patterns leading to positive
outcomes (overcoming barriers), by providing an understanding of BMI patterns and
their potential positive or negative outcomes for firm survival. Within the social enter-
prise arena, many enterprises generate significant social value but are unable to
 JOURNAL OF SOCIAL ENTREPRENEURSHIP 49

survive because they lack the necessary operating funds. Understanding post-BMI sur-
vival is of value to both the BMI literature and the social enterprise literature. In par-
ticular, survival appears to favour those that have prioritized building their value
creation processes and value capture mechanisms first.
Success of a business model depends on both the value proposition and the value
capture and the two work in tandem (Amit and Zott 2012)—if stakeholders perceive
low or no value proposition, it is challenging for the enterprise to capture value and if
the enterprise is unable to capture sufficient value, it is unable to offer a value propos-
ition. Enterprises need to balance them, suggesting that opportunity-driven BMI cases
survived because they had reached a minimum threshold for both categories prior to
undergoing BMI that strengthened their value proposition and value creation for
added impact and efficiency (resulting in more value capture as well). This does not
seem to be clearly understood by social entrepreneurs seeking to stabilize their rev-
enue in response to business model weaknesses.
The fact that social enterprises are failing to utilize value proposition to overcome
necessity is surprising. The language of these entrepreneurs suggested they went into
a pattern of self-protection looking to find new sources of money or reduce expenses
as opposed to looking for new opportunities to improve the value proposed. In the
words of one entrepreneur faced with revenue instability: ‘the delivery of services
model has not changed. We have just continued to look at ways in which to increase
the revenue stream’ (Case 16)—ultimately, this strategy of increasing the margins on
their existing services did not work and the enterprise is no longer operational. The
only way a social enterprise business model works is if the value proposition to cus-
tomers and beneficiaries outweighs the cost of the goods and services. Finding ways
to increase the value proposition may increase an organization’s ability to capture
value. A likely outcome of the Broaden Mission approach that Cases 2 and 4 took was
that they expanded their potential customer base by working to make beneficiaries
ready to become successful future customers in Case 2 and developed tools for non-
profit beneficiaries that could become products for later for-profit customers in Case
4. Investing in value proposition works to create a virtuous cycle in which opportunity
driven organizations continue to improve their conditions for survival. However, as
was seen in Case 16 quoted above, the thinking of social entrepreneurs faced with
necessity seemed constrained and survival became less likely. By only looking at the
value creation and value capture components, entrepreneurs engaging in necessity-
driven entrepreneurs are effectively doubling down on a value proposition that may
be failing to create sufficient use value, limiting their ability to capture value and per-
petuating a downward spiral.

Future directions and limitations

The findings suggest several topics that merit future study. For instance, legal struc-
ture change and BMI among social enterprises are a complex process that unfolds
over time, and the longitudinal data is binary so could not elucidate other reasons
that firms may have survived or not. Future longitudinal research would provide a
50 E. DOWIN KENNEDY AND N. HAIGH

greater understanding of the impact that patterns of BMI have on a social enterprise’s
survival and to enhance (or detract from) its ability to generate social value.
This study is not without limitations. First, interviews are socially complex situations
that have their own limitations due to linguistic complexities that affect the interpret-
ation of the questions (Alvesson 2003) and individual agendas. The researchers sought
to develop a holistic view of each case by supplementing interviews with website and
news articles. However, the researchers categorized the driver of BMI mainly according
to the language utilized by interviewees as a best approximation of their perception
of opportunity and necessity. Further exploration of entrepreneurial perceptions of
opportunity and necessity within the context of legal structure change and BMI is
merited. Second, BMI is a process and while the researchers sought to understand
how BMI evolved, they categorized cases by the first legal structure change and BMI.
Some enterprises had undergone multiple changes and this repetitive change merits
future research to understand the role of continuous changing to balance creating
social and economic value. Third, the combinations of conditions representing the
Stabilize Revenue pattern has lower relative coverage than the other three identified
patterns (see Table 5), indicating that it is less empirically important. This pattern was
included in the results because its coverage was just below the median coverage for
the entire set of results and this was coupled with high consistency.
In conclusion, this article offers an initial look into how legal structure change and
BMI are being utilized by social enterprises as they strive to simultaneously generate
social and economic value. It identifies four patterns of change showing that being
driven by opportunity or necessity influences, which component is the target of BMI.
Specifically, opportunity-driven change innovate value proposition and value creation
components and ignores value creation, while value creation and value capture were
targeted by necessity-driven change. Of the four patterns found, opportunity-driven
BMI appears to be more likely associated with enterprise survival, while necessity-
driven BMI appears more likely to be associated with enterprises not surviving.

Disclosure statement
No potential conflict of interest was reported by the authors.

Notes
1. Individual legal structure options vary by nation. However to learn more about the new
legal structures listed here we recommend informational materials created by The Law
Project (2016) and Social Enterprises UK (2017).

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