A resource dependence perspective on crowdfunded social enterprises

Abstract

Succeeding as a social enterprise is challenging because its performance, legitimacy, and autonomy emerge from the social-economic tensions inherent in its operation. Social enterprises tend to shield themselves from external demands and pressures if they fail to fulfil their dual mission, creating challenges in resource acquisitions. Accordingly, such challenges fundamentally change the relationship between social enterprises and resource providers. Therefore, social enterprises often struggle to acquire resources; thus, they need innovative forms of resource acquisition. By adapting resource dependence theory and data collected from social enterprises, this study investigates the role of reward-based crowdfunding in social enterprises’ performance and how the legitimacy and autonomy of social enterprises mediate such a relationship.

The findings show that reward-based crowdfunding does not directly or indirectly shape the performance of social enterprises. Nevertheless, the findings indicate that crowdfunding increases the legitimacy of social enterprises. Moreover, although crowdfunding does not appear to be related to the autonomy of social enterprises, autonomy itself supports the social and innovation performance of social enterprises. Thus, this study challenges the expected positive role of crowdfunding in social enterprises’ performance but shows that crowdfunding continues to benefit social enterprises as it increases their legitimacy. Theoretically, this study suggests legitimacy can be an end in itself for social enterprises. These results support a characterisation of resource dependence theory as a sociological theory in which establishing social acceptability is important in its own right. However, the findings contradict the view of resource dependence theory as a theory of organisational performance. The missing link between resource acquisition, legitimacy, and performance suggests that resource dependence theory can explain organisational actions with societal acceptance rather than financial performance.

Moreover, the findings indicate that autonomy is an essential characteristic of social enterprises allowing organisations to pursue different goals, which can protect against potential mission drift. Correspondingly, the study contributes to practices by showing that reward-based crowdfunding is a practical utility that can solve managerial problems related to attaining legitimacy. This study shows that crowdfunding is still a fledgling field for enabling social entrepreneurship; therefore, this study contributes to the current societal and governmental discussions on the financial inclusion of social enterprises within social economy policies.