Mission
accomplished? An empirical research on the link between Social Co-operative
Enterprises’ strategic orientation and performance
Dr. Niki Glaveli1 and Dr. Konstantinos Geormas2
1 Academic Staff, Division of Business
Administration, Department of Economics, Aristotle University of Thessaloniki, nglaveli@auth.gr
The Social Co-operative
Enterprise (SCE) is a relative new type institution of the third sector which
despite its nonprofit character, is treated as a fully entrepreneurial entity.
SCEs are called to integrate business principles into their functioning and
adopt entrepreneurial behaviors in the provision of social goods and/or
services. However, only a handful of researchers have so far investigated this
type of behavior in social enterprises. This paper seeks to contribute to a further
understanding of the strategic aspect of SCEs’ entrepreneurial behavior and
expand the current knowledge on the link between SCEs’ strategic orientation,
vision and performance. Using data from Greek SCEs, called KOINSEPs, we
examined the mediating roles of commercial and social effectiveness (as well as
direct associations) with regard to strategic orientation (SO) effects
on profitability. More precisely, based on an extensive literature review, SO is
conceptualized as a three dimensional construct consisting of the product,
customer and market/competitor aspects. The findings designate that the
customer orientation dimension, defined as an organization’s commitment to
understand and satisfy customer/users preferences, plays the most vital role in
enhancing SCEs effectiveness and subsequently profitability. Further, the
development of a clear and shared (among the SCE members) vision has positive
direct associations with SCEs performance (social effectiveness and
profitability). We conclude with a discussion of directions for future research
and implications for theory and practice.
1. Introduction
Social Co-operative Enterprises (SCEs) are a
relative new (in Greece it was established by the 4019/2011 Law) hybrid in
nature and social mission-driven institutions of the third sector (or rather
the fourth), which despite their nonprofit character are in fact located
between profit and nonprofit organizations. Their contribution, particularly in
a “neo-poor” country, related to: social innovation, the provision of social
services and jobs to marginalized members of the society, the improvement of
the quality of life of citizens and the strengthening of social cohesion and
development, designate them as a major player in the economy and civil society
and a valuable ally for the public sector.
Despite their social and not-for-profit nature,
SCEs are treated as fully entrepreneurial organizations. They are called to
integrate business principles into their functioning and adopt entrepreneurial
behaviors in the provision of social goods and/or services in order to compete
and survive in the demanding and sophisticating contemporary market place
(Krlev, 2012; Borzaka et al, 2014). Strategic orientation (SO), which refers to
the generation of organizational behaviors targeted to satisfy some need or
desire in the marketplace, is considered as an essential construct for healthy
organizations that seek to maintain fiscal viability and financial independence
(Dacin, et al., 2010; as in the case of SCEs).
Indeed, installing and improving SO in SCEs is expecting to help them
anticipate and react to market like constituencies more accurately and
consequently achieve higher performance to accomplish their social mission (Shoham
et al; Schmidt et al., 2015).
In an attempt to address various gaps in the
current literature, in this article, we investigate three of the most
fundamental and widely discussed SO behaviors that SCEs could adopt - in
particular, customer, competitor and technology/product orientations - in order
to improve effectiveness and (economic) performance.
The contributions of this paper are fivefold. First, it lays the theoretical
rationality for bringing SO behavior into the SCEs context, where SO is a
relative new, under-researched concept (Ma et al., 2012; Liu et al., 2012;
Schmidt et al., 2015). Second, it seeks
to deepen understanding of the associations between SO behaviors (emphasizing
the market orientation aspect of strategic orientation) and SCEs performance by
examining potential mediators. Previous research has mainly focused on the
direct effects of SO on performance (Morris et al., 2011) although some
scientists (predominately in the profit context, rarely in the non-profit
sector and hardly in the social entrepreneurship context) have tried to shed
light on the contingencies through which this relationship may be formed (i.e.
Voss and Voss, 2000; Liu et al, 2012). Third, vision, as an indicator of
strategic behavior, is also entered in the equation. Fourth, as already stated
previously, we investigate strategic behaviors in the SCEs context where
research is even more restricted. Fifth, practical implications are provided as
well as studies related to SO and performance in a Social Co-operative
Enterprise context are invigorated.
2.
Background and hypotheses
2.1.Social (Co-operative) Enterprises in
the marketplace arena
Social
enterprises (SE) have recently appeared as a new significant phenomenon not
only throughout Europe but also in other continents. Despite the lack of a
universal definition of the term, in Europe the concept of social enterprise is
increasingly used to identify a “different way” of doing business, which occurs
when enterprises are created specifically to pursue social goals (Defourny and
Nyssens, 2008). Under the European approach a SE is viewed as “an operator in
the social economy whose main objective is to have a social impact rather than
make a profit for their owners or shareholders. It operates by providing goods
and services for the market in an entrepreneurial and innovative fashion and
uses its profits primarily to achieve social objectives. It is managed in an
open and responsible manner and, in particular, involve employees, consumers
and stakeholders affected by its commercial activities” (EC Communication on
the Social Business Initiative, SEC 2011/1278).
Although
the concept of SE overlaps with the traditional social economy organizations
and cuts across many legal forms (association, co-operative or any other type
set up in recent years under national legislation, Galera and Borzaga, 2009) in
fact it differs substantially by traditional not-for profit organizations
because it involves “enterprise”. This
implies that they are income-generating ventures which aim at earning a
considerable part of their revenues through trading (both with private and
public sector), rather than rely on grants or donations. Moreover, they pursue both economic and
social returns on investment; bending however not on profit but on social
benefit. As Dees (1998, p. 3) states
“Wealth is just a mean to an end” for social enterprises. In this sense, a
social enterprise despite its entrepreneurial nature, also differentiates from conventional
enterprises in that they have a primary social purpose which they try to
achieve in a stable, continuous and
economically viable way. Any generated profits are (in their vast proportion)
reinvested or otherwise used to achieve the social mission of the enterprise
(Bacchiega and Borzaga, 2001).
Based
on the discussion above, it could be supported that SEs are a unique hybrid
business model, compelled by legal and political forces to seek financial
independence to pursue its social mission, which is to provide general interest
services and solutions to social issues (Dancin et al., 2011). This element in
their functioning provides legitimacy to social enterprises to be commercially
involved and competitive. In fact, due to their bottom-up (participative and
multi-stakeholder) nature, SEs often prove to be more efficient in identifying
emerging needs and in developing innovative responses to meet social needs than
the public entities.
2.2.The Greek context
In the European context, Greece represents a
latecomer in introducing social entrepreneurship. It was law 4019 of 2011 on
“Social Economy and Social Entrepreneurship” which identified “Social Economy”
as “the sum of economic, entrepreneurial, productive and social activities,
undertaken by juridical entities or associations whose statutory aim is the pursue
of collective benefit and the service of wider social interests” (Art 1), and
the Social Co-operative Enterprise (SCE/ KOINSEP in Greek) as an entity of
Social Economy. As the law stipulates, the Social Co-operative Enterprise is a
civil co-operative with social purpose possessing entrepreneurial capacity
(Balourdos and Geormas, 2012)
Law 4019/2011 distinguishes between three (3)
forms of SCEs/KOINSEPs: i) Inclusion
SCEs, targeting at the integration of vulnerable social groups into the
economic and social life, ii) Social
Care SCEs which produce products and provide social
and welfare services targeted at vulnerable social groups, such as: the
elderly, babies, children, people with disabilities and chronic illness and
iii) Collective and Productive SCEs, with the purpose to serve local and collective interests
and promote employment, social cohesion and local or regional development. Today, 1056 KOINSEPs are registered
to the Social Economy Registry (36 Inclusion SCEs, 116 Social Care SCEs and 904
Collective
and Productive SCEs; Data
from the General Social Economy Registry as of 13.04.2016 data processing), however a much smaller number
is in fact active.
In 2013 a Steering Committee was set up to develop a national strategy
plan for social entrepreneurship in Greece[1].
The committee was an initiative of the Greek Ministry of Labour, Social
Security and Welfare and the DG Employment, Social Affairs and Inclusion of the
European Commission. The committee was comprised both from Greek and European
experts on social economy. The report identified four axis of interventions:
1.
An enabling ecosystem for the Social Economy
2.
Direct financial support for starting and developing a
social enterprise
3.
Access to finance to consolidate and scale social
enterprises
4.
Good governance and public sector capacity building
In addition the report proposed certain steps
for the development of the ecosystem. First, a central mechanism was to evolve
to produce the necessary tools for the set-up and running of a social
enterprise. The second major step had to do with the formation of one-stop
shops in the 13 Greek prefectures. The responsibilities of these shops had to
do with couching, mentoring, providing information for means of financing, tax
issues, legal issues, needs for training. Their role resembles that of an
incubator or a chamber. Finally, the third step had to do with the development
of financial tools, such as subsidies, loans, microcredit, equities and so on.
For the time being only the first step has been implemented.
In overall, the ecosystem to support SCEs is
almost non-existing in Greece. Besides basic consultation from the Social
Economy Registry, there are but a few bodies that SCEs can rely on for
consulting and mentoring (European Commission, 2014, pg. 5-6). Additionally, the lack of expertise and
experience of professionals such as: lawyers or accountants in social economy
issues and of the broad public administration contribute further to the
inability of the ecosystem to support SCEs. Consequently, they are excluded
from programs that subsidize SMEs’ start-ups and development. Moreover, banks, also, are hesitant (even
unable due to capital controls) in providing the required capital to set up and
run a social enterprise (European Commission, 2014, pg. 1).
Last but not least, there are a number of
cultural characteristics that affect the development of social
entrepreneurship. Civil society in Greece is not well articulated, especially
regarding the formation of institutions that could sustain SCEs effort. A recent
study by CICOPA (2013) calls this “a fragmentation of bottom-up
initiatives”.
Additionally, evidence has shown that SEs have
weaknesses related to the motives of the social entrepreneurs. In their
majority they are “necessity entrepreneur” forced to set up their enterprise
because they don’t have a better or any choice at all related to them being
absorbed in the labor market. As a
result, the strategic orientation of such enterprises, as well as their social impact are weak.
Further, they don’t have expectations that their firms will grow, they don’t
hire employees, and they are small in size (Poschke, 2010).
Summing up, given the characteristics of the
contemporary Greek economic and social context, such as: budget deficits and
“uncontrollable” public debt, negative growth rate, high levels of poverty and
unemployment rates (and subsequent emigration of the youth), aging population,
suggest that SCEs could be an important ally of the public sector in
identifying emerging needs (due to their bottom-up nature), integrating people
into society, facing the difficulties encountered by social policy and even
take over in some areas. To happen so, not only SCEs’ ecosystem needs to be
improved but next to that the adoption of managerial techniques and instruments
could help them advance the quality of their management, develop comparative
advantages, compete in equal terms with private for-profit organizations and
grow. Thus, a study of mechanisms/behaviors such as strategic orientation in
the light of current empirical research is required with the expectations that
this knowledge could be transferred to SCEs.
2.3.Strategic orientation
Strategic
orientation (SO) is a widely used concept in the research field of strategic
management and marketing. In the strategic
management literature stream SO has been described as strategic choice, strategic thrust, strategic fit, and strategic
predisposition (Chaffee, 1985; Lau and Bruton, 2010) emphasizing a
cognitive understanding, interpretation and alignment between the external
environment and firm’s resources. In the marketing
literature, academicians and practitioners draw attention to customer value
creation, emphasizing the market orientation (MO) component of SO (i.e.
Shapiro, 1988; Narver and Slater 1990; Kohli and Jaworski 1990; Kohli et al.,
1993; Slater and Narver 1994; Gatignon and Xuereb, 1997). Under this
perspective some authors view strategic orientation of a market-driven firm as organizational competitive culture that
efficiently and effectively generate the appropriate behaviors - i.e: customer,
competitor and product orientations and interfunctional coordination - to
create and maintain superior value for buyers/users to help the
organisationachieve superior performance (Narver and Slater, 1990; Gatignon and
Huereb, 1997). Whilst others adopt a market
intelligence perspective (Kohli and Jaworski 1990, Kohli et al., 1993) and
SO/MO is also conceptualized as a three dimensional construct: intelligence
generation, intelligence dissemination (cross-functional) and responsiveness to
disseminated information. However, these two
approaches seem to overlap (i.e. Cadogan and Diamantopoulos, 1995) rather
than be in contrast. In fact, they share several similarities in the sense that
both regard customers as a core and stress the importance of responding to
customer needs. Further, the proposed by the two streams dimensions of SO/MO
present significant conceptual clash (i.e. Stoham et al., 2006).
Nevertheless,
other types of strategic orientations have also been studied such as: brand
(i.e. Baumgarth, 2010; Wong and Merrilees, 2008), entrepreneurial (i.e. Matsuno
et al., 2002; Zhou et al., 2005), learning (i.e. Baker and Sinkula, 1999) and
production and cost (Noble et al., 2002; Olson et al., 2005) orientation.
The mainstream of quantitative empirical
research, in alliance with the marketing behavioral perspective, adopts (as in
the present study) the Gatignon and Xuereb (1997) proposal of SO
dimensionality, specifically: customer
orientation; the sufficient understanding of one’s target buyers to be able
to create superior value for them continuously,
competitor orientation; the
ability and the will to identify, analyze, and respond to competitors’ actions
and technology/product orientation;
which means that the firm is strongly R&D oriented, proactive in acquiring
new technologies and uses sophisticated technologies in the development of its
new products. However, various inconsistencies do exist since researchers may
have different interest on the strategic orientations of an organization (Atuahene-Gima,
2001; Im and Workman, 2004; Zhou et al., 2005; Baker and Sinkula, 2005; Kaya
and Seyrek, 2005; Salavou, 2005; Lau and Bruton, 2010). Variations are also
apparent in the limited non-profit sector SO studies where some academics
suggest that due to its uniqueness (i.e. dependence in donors and volunteers,
free provision of services) some dimensions of SO might be irrelevant, whilst
others like: donor and volunteer orientations should be added (Bennett, 1998;
Shoham et al., 2006; Morris et al., 2007; Carmen and Jose, 2008; Schmidt, et
al., 2015).
Focusing
on social enterprises (SEs); only two
empirical studies have extended the investigation of SOs in the social
enterprise environment, and none in the SCE, context. More precisely, Ma et al.
(2012) studies the market aspect of strategic orientation, whilst Liu et al.
(2012) the market and entrepreneurial orientations of SEs.
2.4. Strategic/market
orientation and performance: Development of hypotheses
The marketing strategy literature has presented
evidence that strategic orientation (emphasis is placed mainly on the MO aspect
of the SO construct) of a market-driven organisation is a significant indicator
of its performance (Aaker, 1991; Narver and Slater, 1990; Porter, 1991). The
theoretical reasoning behind this assumption is that for an organisation to
continuously achieve above normal market performance it needs to create
sustainable competitive advantage; that is superior value (benefits received vs
acquisition and use costs) for its customers/users. The ability to create
superior value is founded on the quality of understanding of its environment
and customers and the creation and maintenance of a value-driven culture.
Earlier studies, both in the for-profit and
not-for-profit context provided evidence of a direct relationship between strategic/market orientation and
objective and/or subjective /perceived organisational level performance,
measured as: overall performance (Jaworski and Kohli, 1993), financial
performance (Slater and Narver, 1994; Pelham and Wilson, 1996), sales growth
(Slater and Narver, 1994), new product performance (Slater and Narver, 1994;
Atuahene-Gima, 1996; Pelham and Wilson, 1996), quality, revenue increase and
improvement in user/customer satisfaction and loyalty (Wood et al., 2000);
relative income generation (Pearce II et al., 2010). However, some studies failed to support a direct positive relationship between objective performance measures and strategic/market orientation (Shiham et al., 2006), suggesting that
the type of performance measures used (i.e. subjective vs objective or
financial versus non financial) affects the existence or the strength of the
relationship (i.e. Kohli and Jaworski, 1993; Voss and Voss, 2000; Langerak,
2001).
More recent publications view the relationship
as more complex and attempt to explore
routes/linkages and potential mediation (for example: customer loyalty and
satisfaction, quality, innovatiness, for a meta-analytic review see i.e: Kirka
et al. 2005; Shoham, et al., 2006) and moderation (for example: industry i.e. demand; competition i.e. intensity of; supply i.e. supplier power; product i.e. relative product quality; level of country development) effects of
variables.
In the case of SEs, the two empirical studies and
the one conceptual paper that were located by the authors follow a mix approach
to the relationship between SO and performance. More precisely, Ma et al.
(2012) explore antecedents (innovation, progressiveness and risk-taking as
dimensions of entrepreneurship variable) and outcomes (social performance
public performance/stabilization of local community and job creation) of MO
(approach to SO) and supports a positive direct relationship between the two
variables. Whilst, Liu et al. (2012) examined the mediating roles of market
effectiveness and customer satisfaction in both the commercial and social
domains with regard to market and entrepreneurial orientation effect on (social
and commercial) performance and found positive associations and that success in
one aspect of business (i.e. social or commercial) may enhance success of
another. Lastly, Schmidt et al. (2015) proposes a conceptual framework that
integrates three SOs (market, brand and entrepreneurial) arguing that they
consist of two layers: a cultural and a behavior one with the cultural driving
the behavioral. Further, the authors suggest that the behavioral layer will
have a direct positive effect (moderating by enterprise, founder and market
characteristics) on SEs’ performance which is viewed as a three part variable
that consists of: economic performance, social effectiveness and institutional
legitimacy.
2.5.The Theoretical Framework
In the light of the literature review -
performed in the current paper - on the empirical research and theory examining
SO and its relationship to organizational performance, the widely used (both in
the for-profit and nonprofit settings) multi-dimensional conceptual approach to
SO proposed by Gatignon and Xuereb (1997), that emphasizes the marketing
behavioral perspective to SO, is adopted. As in the case of Liu et al (2012)
and embracing the social and economic nature of SEs, we examine the effect of
two mediators, commercial and social effectiveness, on the performance
(profitability/objective measure) of SCEs (see Figure 1). Indeed, strategic
orientation is central to organizational effectiveness (Evered, 1983), a
dimension also of a business’s performance, in that it represents the strategy
implemented by the organization to foster continuing performance improvements
(Gatignon and Xuereb, 1997). Particularly, in the case of SEs (SCEs in our
study) both commercial/economic (mean) and social effectiveness (end) are
important (Dees, 1998). Next, to SO we add, and investigate, the relationships
among a clearly articulated vision (social) and the study variables.
More precisely:
As stated earlier in the literature review
section of the current paper, a strategic/market
orientation provides SCEs with a better understanding of their environment
(i.e. competitors) and customers’ needs, value chain and dynamics. This
knowledge enables them to channel their resources appropriately and design
(innovative) products and services (product/ technology orientation) that
better satisfy customers’ needs, leading thus to enhanced customer
satisfaction, attainment of market-based goals (commercial effectiveness) and
ultimately to higher profits (i.e. Bennett, 1998; Carmen and Jose, 2008;
Camarero and Carribo, 2008). Therefore, we suggest that there is a positive
relationship between the three SO/MO
orientations studied (customer, competitor and product/technology) and SCEs
financial performance which is mediated by their commercial
effectiveness (H1a, H1b, H1c and H9).
Moreover, commercial effectiveness
will be positively related to profitability (H6).
Figure 1: The proposed theoretical framework on the
link between strategic orientation and performance in the SCEs context
Notes: The dotted
lines represent direct effects that may be fully mediated; The bold letters
highlight the hypotheses that were accepted.
Insofar, a strategic/market
orientation implies that a SCE will achieve its market-based goals but it could
also help it meet the social purpose for which it was established. Social
effectiveness refers to the achievement of social goals in terms of (Kendall
and Knapp, 2000): inputs (i.e.
composition of workforce – particularly in the case of inclusion SCEs), outputs (i.e. characteristics of
products), outcomes (positive effects
to intended beneficiaries such as: employment outcomes, user satisfaction) and impacts (long term impacts on the wider
community such as: pollution reduction, integration, quality of peoples’
lives). Under this definition strategic/market
orientation (three dimensions) is anticipated to improve (positively
affect) social aspects of effectiveness such as: quality of
products, integration, quality of peoples’ lives and workforce composition (H2a,H2b,
H2c).
Furthermore, we also expect
that a linkage exists between SCEs’
commercial effectiveness and social effectiveness. Since, as literature
suggests the primary focus of SCEs is to meet their social vision/mission and
produce social value (Dees, 1998; Brooks, 2008) it is logical to expect that
high levels of commercial effectiveness
and profitability will enhance SCEs achievement of social goals (social
effectiveness; H4 and H10). Particularly, in the case of
Greece SCEs are obliged to re-invest 60% of their profits in the business in
order to create more jobs and develop.
Similarly, social value creation
can also support their commercial practice. SCEs with a social brand value
attract more customers with regard to their commercial activities by creating
psychological effects such as “concern for the community” (Napoli, 2006; Liston–Heyes
and Liu, 2010), and thus can generate high market /commercial effectiveness and
profitability though their commercial practices (H5 and H7)
.
Finally, as the strategic management literature
puts forward a coherent vision/purpose shared by all SCE members can operate as
the “compass” that will unify employees to co-operate for the achievement of
the organization social and market-based/commercial goals, increasing thus its
effectiveness. Particularly in the case of SCEs a social value vision can
connect people to an inspiring purpose, to something larger than themselves and
increase the potential of positive attitudes towards the organization and their
engagement towards goal attainment (Phanuel and Darbi, 2012). This view is echoed
in the work of Bevan et al. (2005) and Buytendijk (2006), who both found that
effective and high-performing organizations have a strong sense of shared
purpose internally and this purpose is understood and shared with their
external stakeholders. So, we incorporate vision as a characteristic of a
strategic approach to the management of SCEs and test the hypotheses that a clearly stated cohesive vision will be positively related to SCEs effectiveness
in both the commercial and social domains of activities (H3a and
H3b) and to SCEs performance (profitability; H8).
3.
Methodology
To test the proposed theoretical framework, an
empirical study was carried out, the results of which we outline in this
section. First, we provide details on the study design and sampling.
Subsequently, we present the measurement scales of each examined variable.
3.1.Sampling and
data collection
Our empirical study focused on Greek SCEs
(KOINSEPs). Information was gathered through an electronic questionnaire that
was eventually sent by e-mail in April 2015 to the total population (676; total
population sampling) of SCEs which were registered in the National Social
Registry in February 2015. In some cases the e-mail was followed by telephone
contact.
Finally, 69 usable questionnaires (response
rate of 10.21 percent) were gathered. However, 9 were excluded from correlation
and regression analysis since they were founded in 2015 (and thus could not
have profits in 2014). The distribution of the sample in terms of the type of
KOINSEP (SCE) is representative of the population since 86.8% are Collective and Productive, 10.3% are Social Care and 2.9% are Inclusion KOINSEPs.
Seventy –one percent (71%) were funded in the period 2014-2015. Founders’
initiative was the force behind the decision to start a KOINSEP for almost 80%
of the respondents. Additionally, only 17.5% had profits.
Since the instrument was designed to be
self-completed emphasis was placed on the clarity of presentation meaning that
each section and statement was clearly numbered, balanced scales were utilized
and emphasis was given to its general attractiveness in order to increase the
response rate. The questionnaire consisted of two sections; the first included
questions on demographics (characteristics of the entrepreneurs and the SCE)
whilst the second aimed to collect information about the study variables.
To increase (content) validity, the
questionnaire was send to experts in social economy/entrepreneurship in Greece
and a pilot survey (to a sample of 5 entrepreneurs) was administered. Critics
of the instrument were received and incorporated. The items that were reported
to be difficult, ambiguous or inconsistent were revised.
2.2. Measurement
Strategic/market orientation
Based on Gatignon and Xuereb (1997)
conceptualisation and Voss and Voss (2000) operationalization (adapted for
SCEs), three variables assessed SO: customer orientation; competitor
orientation; and technology/product orientation (see section Strategic Orientation for an analysis of the terms).
Finally, after validity testing (exploratory and confirmatory factor
analysis) seven (out of the initial 8) items of the Voss and Voss (2000) scale
assessed SO (3 for the product, 2 for the competitor and 2 for the customer
dimensions). Sample items are: “We put emphasis on developing new high quality
products”, “We keep a close eye to our competitors tactics and products”, “Our
customers preferences/needs guide our business decisions”. Respondents
indicated the extent to which each item characterised their organisation using
a 7-point scale ranging from 1= Strongly
disagree and 7=Strongly agree.
The higher the mean score the higher the intensity of strategic orientation.
Shared vision
Three items from the proposed by Calontone et al.
(2002) relevant scale measured shared vision i.e. “There is a commonality of
(social) purpose in my organisation”.
Answer categories ranged from 1=Strongly
disagree and 5=Strongly agree.
Higher scores indicated a higher level of shared purpose and commitment to
commonly set goals.
Effectiveness
To measure commercial and social effectiveness we used
2 items. We asked respondents to specify the extent to which they believe that
they were effective in achieving their commercial and social objectives.
Response options were ranged from 1 = Not
at all effective to 7 = Totally
effective, with higher scores indicating higher levels of effectiveness.
Profitability
An objective measure of profitability, level of profits per se, was used. The
respondents were asked to indicate the level of profit generation in the last
economic year (2014). Based on experts’ views, four options were available: no
profits, 1-10,000 Euros, 10,001 – 30,000 Euros and 30,000+ Euros. We assigned
values from 1-4 respectively for the four available options when entering the
data in SPSS 20, so the higher the rating the higher the level of profits.
4.
Results and Discussion
4.1.Validity/reliability, descriptive
statistics and correlations
Besides experts opinion who added to the
content validity of the used measurement scales, we tested for discriminant
validity by applying exploratory factor analysis (Extraction method: Principal
Component Analysis, Rotation method: Varimax with Kaiser normalization) to all
items that measured strategic orientation and shared vision. The results
validate the expected factor structure of SO variable (three-dimensional
construct that explain 81.527% of the total variance) and of shared vision
(uni-dimensional construct that explains 88.429% of the total variance) with
factor loading well above the .4 cutting point (ranged between .652 - .970).
Further, as it can be observed in Table 1 Cronbach’s alpha were above .70
(ranged between .703 -. 932) suggesting that the construct measuring scales
used were reliable.
The correlation coefficients (see Table 1)
provide initial support for: i) the vital role of the customer orientation
dimension in enhancing SCEs commercial effectiveness and subsequently economic
performance and ii) the positive relationship between competitor orientation
and social effectiveness. Further, the development of a clear and shared (among
the social co-operative enterprise members) vision has positive direct
associations with social effectiveness and profitability levels. Additionally,
social effectiveness and commercial effectiveness are related. Last but not
least, effectiveness - in both aspects of practice - seems to boost
profitability.
Table 1: Construct
means, alphas and correlations
|
Study variables
|
Scale mean
|
SD
|
alphas
|
SO
|
PO
|
CO
|
CuO
|
SV
|
CE
|
SE
|
|
Strategic Orientation SO)
|
5.56
|
1.22
|
.851
|
|
||||||
|
Product Orientation PO)
|
5.43
|
1.56
|
.822
|
.884**
|
||||||
|
Competitor Orientation (CO)
|
4.97
|
1.61
|
.703
|
.804**
|
.496**
|
|||||
|
Customer Orientation CuO)
|
6.25
|
1.33
|
.888
|
.716**
|
.444**
|
.560**
|
||||
|
Shared Vision (SV)
|
5.65
|
1.60
|
.932
|
.365*
|
.334*
|
.233
|
.374**
|
|||
|
Commercial Effectiveness (CE)
|
3.00
|
1.63
|
N/A
|
.235
|
.152
|
.198
|
.284**
|
.258
|
||
|
Social Effectiveness (SE)
|
3.94
|
1.94
|
N/A
|
.309*
|
.199
|
.317*
|
.259
|
.364**
|
.636**
|
|
|
Profitability
(Pr)
|
N/A
|
N/A
|
N/A
|
.193
|
.179
|
.142
|
.111
|
.313*
|
.336*
|
.309*
|
Notes:
SD:
Standard deviation; * p<0.05 , ** p< 0.01 (two-tailed t-test)
4.2.Hypotheses testing
To further test our hypotheses we conducted a
series of stepwise regression analyses, in total five (5) models were tested (see Table 2). To minimize the threat of
multicollinearity the commercial and social effectiveness variables were mean-centered. To explore the mediating effects we
followed Baron and Kenny’s (1986) procedure. Further, simple (linear)
regressions were run to test the linkages between commercial and social effectiveness
and between profitability and social effectiveness.
The analysis suggests that a direct relationship exists between shared vision and profitability (Model 1, H8 is accepted). Further, a strong cohesive vision also affects social
effectiveness (Model 3, H3b gained support). These outcomes
strengthen the stream of research which supports the view that a high level of
shared purpose across the organization motivates people to set and deliver
common goals, providing thus a sense of strategic direction (Springett, 2004)
by diffusing the what and why (the end to
which the strategy is directed) of the organization amongst its members
(Ellsworth 2002, p4). Particularly, when this vision, as in our case, unifies
employees towards a higher purpose, greater than just profit, this has a
positive impact on profit levels and on the achievement of social goals. Relevant
research evidence do suggests that a sense of (social) purpose is
related to positive employee and customer attitudes (e.g. satisfaction),
resulting thus to higher profits (Ellsworth, 2002).
Table 2: Regression analysis
|
Dependent
variable
Independent
variables
|
Model 1
Profitability
|
Model 2
Commercial Effectiveness
|
Model 3
Social Effectiveness
|
Model 4
Profitability
|
Model 5
Profitability
|
|
Product Orientation
|
|
|
|
||
|
Competitor Orientation
|
|
|
|
||
|
Customer Orientation
|
|
.285**
|
|
||
|
Shared Vision
|
.321*
|
|
.373*
|
|
|
|
Commercial Effectiveness
|
|
|
.336*
|
.336*
|
|
|
Social Effectiveness
|
|
|
|
||
|
CE X SE
|
|
|
|
||
|
Adjusted R2
|
.084
|
.062
|
.121
|
.095
|
.095
|
|
F
|
5.388*
|
4.146**
|
7.583*
|
6.236*
|
6.236*
|
Notes: The colored cells indicate the variables entered
in each of the 5 Regression Models that were tested (stepwise method), only
predictor’s b are reported; * p<0.10 , ** p< 0.05
Moreover, in our study it was found that commercial effectiveness predicts profitability (Model 4, H6 is
supported) even when the interaction between commercial and social
effectiveness is entered into the equation (Model 5, interaction between
commercial and social effectiveness - SExCE). Thus, in line with other
researchers’ findings, we can support our proposition that strategic orientation’s positive effect on profitability is
mediated by commercial effectiveness (i.e. Bennett, 1998; Carmen and Jose,
2008; Camarero and Carribo, 2008, Model 2).
However, only customer’s
orientation role in attaining commercial
goals is revealed (H1a is
accepted), proposing that a better understanding of customers’ needs, value
chain and dynamics (enhances customer satisfaction) and can help SCEs reach
their market-based goals (commercial effectiveness) and subsequently achieve
higher profitability levels (mediation; Model 2 and Model 4).
It was also pinpointed that profitability directly affects social effectiveness (b= .309, p<0.10, F =
5.171, Adjusted R2 = 0.077)
and that a linkage do exists between commercial
and social effectiveness (commercial effectiveness social effectiveness: b= .636, p<0.01,
F = 33.292, Adjusted R2 = 0.397 and social effectiveness commercial effectiveness: b = .192,
p<0.01, F = 2.567, Adjusted R2 = 0.97) putting forward for
consideration the view (i.e. (Liu et al., 2012) that commercial practice can support social effectiveness. Additionally,
there are indications (linkage between social and commercial effectiveness)
that social value created (social goals achieved) can support commercial
effectiveness by adding to SCEs competitive stance (strong social
brand/differentiation).
4.3.Theoretical and managerial implications
This study has implications for both theory and
practice. First, a research in the SCEs context is conducting (filling a
research gap) providing: i) justification/the rationality for bringing
strategic/market orientation (SO/MO) into the SCEs sector and ii) highlighting
the importance (for a SCE) of being customer oriented and having a cohesive and
shared, amongst its members, vision in order to foster effectiveness in its
functioning in both areas of practice: commercial and social. This means that
SCEs need to understand their customers, and search continuously for ways to
upgrade their offering (product /service) and spot new ideas for commercial and
social opportunities, as well as for differentiating themselves from their
competitors.
Second, this research adds to the theory and
literature on SO/MO, in the social sector particularly, by proposing and
testing a framework which focuses on the route through which strategic/market
orientation affects profitability (performance). More precisely, it is
hypothesized that strategic/market orientation enhances profitability through
the mediating effect of commercial and social effectiveness. Our findings
demonstrate that the route between SO/MO and profitability (objective measure
of performance) is indeed complex and could be mediated by commercial
effectiveness. Particularly, customer orientation (dimension of SO/MO) plays
the vital role in reinforcing commercial effectiveness and profitability.
Further, it is suggested that customer orientation also supports social
effectiveness through the linkage found between social and commercial
effectiveness. The previous findings put forward for consideration the notion
that an organizational culture which creates and preserves superior value for
customers is the cornerstone for commercial and successively social results
(the end/the mission of a SCEs effort) rationalizing the argument that when
SCEs engage in both commercial and social goals, with the right management
strategy, success in one aspect may enhance success in the other.
Third, the results give ground for our decision
to include vision, as an indicator of strategic behavior, in the proposed
model. The data analysis underlines that a strong shared social vision has both
a direct and an indirect (through its impact on social effectiveness) effect on
profitability, since it gives a sense of purpose that facilitates particularly
social goals (social mission)
achievement. So, compiling an inspiring vision (statement) and diffusing it
amongst SCEs employees, has to be a priority for the management team of a SCE.
4.4.Limitations and directions for future
research
The major limitation of this study results from
the fact that the SCEs in the sample (due to the fact that the first
SCE/KOINSEP in Greece was founded in 2012 – after the Social Economy 2011 Law
was introduced) are in fact start ups. Considering that it takes a lot of time
to establish a market oriented culture – and the initial costs of establishing
an “enterprise” - the results may
underestimate or overestimate some of the hypothesized relationships. This
limitation is also related to the fact that we used one-time survey data.
Therefore, studies using longitudinal data could provide more accurate and
deepen understanding of the proposed/examined relationships between the study
variables.
Additionally, a large scale survey, the use of
control variables for i.e. age and size (in our case would not add to the
research due to similarities that exist among SCEs in our sample related again
to the fact that the first SCE/KOINSEP in Greece was founded in 2012) that
often appear in relevant research, as well as multilevel research to collect
data from different sources could further strengthen the
validity/generalizability of our results and deepen our comprehension of the
under study relationships.
Last but not least, as suggested in the
literature review section, the type of performance measures used (i.e.
subjective vs objective or/and financial vs non financial) affects the
existence or the strength of the relationship between SO and performance. So,
different types of performance measures could be incorporated in the proposed
model and tested.
5.
Conclusion
This research has attempted to contribute to
the ongoing quest to understand the strategic management aspect of social
enterprises. Our research findings demonstrate that pursuing a clear/shared
vision and customer orientation (dimension of SO/MO) can strengthen the
profitability levels of a SCE (KOINSEP). Moreover, we have expanded our
understanding between SO/MO and profitability relationships by exploring the
mediating effects of commercial and social effectiveness and incorporating
vision, as a variable, in the proposed framework.
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[1] http://ec.europa.eu/internal_market/social_business/docs/news/130708_social-economy-strategy-greece_en.pdf
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