Internationalization of Dutch social enterprises
The applicability of adaptation, aggregation, and/or
arbitrage global strategies
Master Thesis Student: Eveline Westerhuis Student ID: 11138416 MSc. Business Studies: International Management
First supervisor: dr. Johan Lindeque Second reader: mw. dr. Francesca Ciulli Date: Friday 24th of March
Abstract
This research analyses the internationalization of Dutch social enterprises. It investigates the applicability of the AAA framework (Ghemawat; 2007, 2008) by determining how the adaptation, aggregation and arbitrage dimensions relate to the internationalization of social enterprises. As the selected social enterprises have a global social mission, their international behaviour is influenced from a very early stage. Besides, their internationalization process is two folded, by increasing international operations (sales, production and logistics) as well as increasing international social impact. An in-depth multiple case study is used for the study, in which qualitative data is gathered through semi-structured interviews with CEOs, founders and those responsible for the international strategy within the social enterprise. The results imply that the aggregation strategy plays a determinant role in the internationalization of social enterprises, often in combination with arbitrage strategies. Nevertheless, overall, pragmatic opportunity seeking choices were made based on international networks, instead of a clear defined and formal international strategy.
Keywords: Social enterprise, social entrepreneurship, international new ventures, internationalization, international strategy, location choice, AAA framework.
Statement of Originality
This document is written by Student Eveline Westerhuis who declares to take full responsibility for the contents of this document.
I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.
The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.
Acknowledgements
First of all, I would like to extend gratitude to my supervisor, Dr. Johan Lindeque. His input and guidance throughout the thesis was highly valuable. His expertise and highly motivational supervision during the whole process made the work of this thesis possible. Additionally, he left room for my own vision, preferences and time schedule.
Second, this thesis would not have been possible without the participants who provided insights into the topic and research question. Their willingness to provide me with material, while being extremely busy, is truly appreciated. To shed light on the work of all the social enterprises: I hope readers to get just as enthusiastic and inspired about their work as I happened to be.
Finally, and specially, I want to thank my family and parents for supporting me the past six and a half years during my studies. Moreover, thanks for always being open-minded to whatever choices I have made.
Table of Content
1. INTRODUCTION ... 8 2. CONCEPTUAL FRAMEWORK ... 11 2.1. SOCIAL ENTREPRENEURSHIP ... 112.1.1. SOCIAL ENTERPRISES ... 12
2.1.2. THE SOCIAL ENTREPRENEUR ... 13
2.1.3. SOCIAL OPPORTUNITIES AND GEOGRAPHICAL SCOPES ... 14
2.2. GROWING INTERNATIONALIZATION OF SOCIAL ENTERPRISES ... 16
2.2.1. International new ventures ... 16
2.2.2. International entrepreneurship ... 17
2.3. SEMIGLOBALIZATION ... 18
2.3.1. The CAGE framework ... 19
2.4. INTERNATIONAL STRATEGY ... 20
2.4.1. AAA framework ... 20
2.4.2. Adaptation: adjusting to differences ... 22
2.4.3. Aggregation: overcoming differences ... 24
2.4.4. Arbitrage: exploitation of differences ... 25
3. RESEARCH DESIGN ... 28 3.1. RESEARCHER AND REALITY ... 28
3.2. QUALITATIVE MULTIPLE CASE STUDY DESIGN ... 29
3.2.1 Quality criteria ... 30
3.2.2. Case selection ... 31
3.2.3. Data collection and interview sampling ... 35
3.3. DATA ANALYSIS ... 37
4. FINDINGS ... 39 4.1. WITHIN-CASE ANALYSE ... 39
4.1.1. WakaWaka – ‘Premium portable solar products, for all markets’ ... 39
4.1.2. Dopper – ‘The bottle is the message’ ... 44
4.1.3. O My Bag – ‘These bags not only make you happy, but also the world around you’ ... 49
4.1.4. Lendahand – ‘Social impacts and financial returns’ ... 54
4.2. CROSS-CASE ANALYSE AND DISCUSSION OF THE FINDINGS ... 59
4.2.1. Internationalization ... 59
4.2.2. International new ventures (INVs) and International entrepreneurship (IE) ... 60
4.2.3. Social mission ... 63
4.2.4. Adaptation ... 63
4.2.5. Aggregation ... 64
4.2.6. Arbitrage ... 66
5. CONCLUSION ... 68 5.1. MANAGERIAL IMPLICATIONS ... 69
5.2. LIMITATIONS AND SUGGESTIONS FOR FUTURE RESEARCH ... 69
REFERENCES ... 71
Index of tables Table 1. Differences across the AAA strategies derived from Ghemawat (2008)………22 Table 2. The levers and sublevers of the adaptation strategy (Ghemawat, 2007)…. ………..23 Table 3. Overview of the selected cases…..………34 Table 4. Selected interview questions about internationalization……….………36 Table 5. Nvivo codes….……….…38 Table 6. Results case 1…….……….…42 Table 7. Results case 2………..………47 Table 8. Results case 3………..…52 Table 9. Results case 4………..………57 Table 10. Results cross-case analysis………..………61 Table 11: Working proposition results…..………67
1. Introduction
Social entrepreneurship is an innovative approach for dealing with complex social needs around the world (Johnson, 2000). Scientific publications on social entrepreneurship have valued the social enterprise as an increasingly common organizational form of the business landscape in many countries (Austin et al., 2007; Chell, 2007; Chen, 2012; Leadbeater, 1997; Zahra et al., 2014). The main reason for social entrepreneurship is to create social value instead of primarily focusing on profit generation (Zadek & Thake, 1997). Hence, social entrepreneurs’ address the pursuit of opportunities for profit realization and simultaneously deliver social or environmental benefits, which they integrate into the core of the enterprise’s plans, products and processes (Aidis et al., 2007). Other than this focus on social value, the definitions of traditional and social entrepreneurship are quite similar. These similarities underlie Dees’ (1998, p. 2) declaration that ‘‘social entrepreneurs are one species in the genus entrepreneur’’. The majority of social enterprises are being recognized as small-medium enterprises (SMEs), as they are similar in size, resource-constrained and the entrepreneur is the key figure in the organisation (Bridgstock et al., 2010; Spear, 2006). Entrepreneurs are expected to make the most valuable impacts relating to the creation of social value, as they are able to leverage their entrepreneurial potential and resolve social problems through opportunity recognition and innovative solutions (Cohen & Winn, 2007).
Since most social opportunities are global in nature, entrepreneurs have become skilled in creating innovative solutions and organizational forms to address these global needs. Consequently, a rising number of social entrepreneurs engage in social value creation activities not only in their home country, but also abroad (Marshall, 2011). Some social enterprises might find it advantageous to focus on a few countries, or a specific region, to increase their impact, while other enterprises might pursue social opportunities on a broader global scope. An advantage for social enterprises is that they are able to operate abroad, even though they might have just set up their business. Oviatt and McDougall (1994) were the first to really highlight the importance of small and young firms and their distinctive characteristics that provide opportunities for them to internationalize quickly. Hence, the investigation
of the literature of international entrepreneurs is perceived as a promising way in order to examine the actions of social entrepreneurs at an international level (Zahra et al., 2014).
However, although these enterprises are becoming increasingly global, current international business (IB) literature on social enterprises overlooks how they operate on an international level (Kalinic & Pater, 2013). Consequently, documenting the variety of strategies used by social enterprises internationally is an important field for future research (Zahra et al., 2008). This study aims to review the role of social enterprises in the global market and deep dive into the strategies they follow. A study based on empirical data has the potential to provide plenty of new insights, as well as to contribute to the future research and theoretic framework in the international field. Different international strategies can have various effects on the social enterprise’s internationalization and require extensive analysis, since operating abroad entails consequences such as overcoming the liability of foreignness or newness (Zaheer, 1995).
An important aspect in literature on international strategy is the trade-off between global integration and local responsiveness (Bartlett & Ghoshal, 1989; Ghemawat, 2008). Currently, the world is in a state of semi-globalization where levels of cross-border integration are generally increasing, but fall short of complete integration (Ghemawat, 2007). In a semiglobalized world, both the differences and similarities between countries must be taken into account, as they could arguably be essential for enabling social enterprises to exist and operate across borders. Ghemawat (2007) established a framework for thinking about differences across countries, which he calls ‘’the AAA framework’’. The triple A’s refer to; adaptation, aggregation and arbitrage strategies. He emphasized that any firm that engages in international business must select the most suitable strategy.
Since it is hard to adapt multiple international strategies at the same time, enterprises are expected to have their focus on one particular international strategy. The AAA framework (Ghemawat, 2007; 2008) is used to explain the internationalization of social enterprises and to illustrate how they decide on scale and scope of their international operations. Conceptualizing and exploring social enterprises’ international strategies with the use of the AAA framework is the primary objective of this research. Subsequently, this study tested which of the three A’s, or a combination, is
applicable for social enterprises. By integrating the AAA framework of international strategy into the IB literature of social enterprises, this paper seeks to answer the following research question:
How well is the AAA framework applicable to the internationalization process of social enterprises?
This study attempts to explain the implications of the AAA framework within the internationalization strategies of social enterprises, by focusing on four Dutch social enterprises. These social enterprises have been selected on the basis of their HQ located in the Netherlands, their globally oriented social mission, their international activities, their years of existence and their product offerings.
In attempt to answer this question, this paper starts with an overview of the relevant IB literature on social enterprises, international entrepreneurship and internationalization strategies. This way a research gap in existent literature can be identified, as well as to the detection of possible overlaps and common features of the concepts. This overview results in the formulation of a number of working propositions that reflect the AAA framework. Following the theoretical foundation, the methodology of this study will be discussed. This includes the research philosophy, the selection of cases, the collection of data and the method used to analyse the data. This study is conducted using a qualitative multiple case study, while data is collected through semi-structured interviews with social entrepreneurs. The following chapter addresses a within-case analysis and a cross-case analysis combined with a discussion on the working propositions. The conclusion contains the key findings, as well as the limitations of the study, managerial implications and suggestions for future research. The findings imply that the aggregation strategy plays a determinant role in the internationalization of social enterprises, often in combination with arbitrage strategies. Nevertheless, there was no clearly defined international strategy, whereas all the AAA strategies were applied to a certain extent in different manners.
2. Conceptual framework
The conceptual framework bridges the social enterprise phenomena and their growing internationalization with recent IB literature on international new ventures (Oviatt & McDougall, 1994; 2005) and international entrepreneurship (Oviatt & McDougall, 2000; 2005). Zahra et al., (2014) note that the field of social entrepreneurship enriches the field of international entrepreneurship. Subsequently, this chapter discusses related concepts, central to the internationalization of social enterprises, including differences between locations (Ghemawat, 2001; Hutzschenreuter et al., 2014) and semiglobalization (Ghemawat, 2003; Rugman & Verbeke, 2004). The focus will then shift to a strategic vision of internationalization: the AAA framework of Ghemawat (2007; 2008) which covers three strategies; adaptation, aggregation and arbitrage.
2.1. Social entrepreneurship
Social entrepreneurship is a novel field, which is currently gaining more and more attention everyday (Zahra et al., 2014). The concept first appeared around 1990 primarily in response to social needs that had been inadequately met by public services (Borzaga & Santuari, 2001). Contemporary scientific publications on social entrepreneurship have highlighted the social enterprise as an increasingly common organizational form of the business landscape in many countries (Chen, 2012; Zahra et al., 2014). Due to this increased interest, the literature of the social entrepreneurship topic has gained relevance in the last years (Perrini, 2006; Chell, 2007; Dacin et al., 2010; Zahra et al., 2009; 2014). This interest partially derives from various researchers who emphasize their emerging role as innovative social change agents who deal with complex social needs around the world (Leadbeater, 1997; Johnson, 2000; Steyaert & Katz, 2004; Austin et al., 2006; Chell, 2007), while at the same time possessing sufficient business-like characteristics which ensures their survival (Yunus et al., 2010). Social entrepreneurs set themselves apart from traditional entrepreneurs primarily by following a social mission and by focusing on social needs. The social objectives are considered equal to economic ones (Corner & Ho, 2010). Other than this focus on social values as opposed to private wealth, the definitions of traditional and social entrepreneurship are quite similar. Due to its merger of economic and non-economic aims, defining opportunities is complicated for social entrepreneurs
(Baker et al., 2005). Moreover, with the dual mission and hence the possible conflicts between the goals of social value and those of economic value creation, social enterprises face tensions and possible conflicts of interests (Battilana et al., 2015). Reflecting these tensions, a stream of research has labelled the organizational form of social entrepreneurship as a hybrid form, a mixture between purely economic and purely social oriented organizational structures (Doherty et al., 2014). In a sense, then, these social enterprises pursue two bottom lines, one of which deals with profits while the other deals with social value. People engaging in these activities and processes are social entrepreneurs, and organizations practicing social entrepreneurship are social enterprises (Brouard et al., 2010). As social enterprises emerge out of social entrepreneurship, this organizational form will be explained subsequently.
2.1.1. Social enterprises
There is no singular, widely-accepted, definition of the social enterprise concept. The multiple definitions and conceptualizations reveal the variability of the concept (Austin et al., 2006). The OECD (1998, p. 12) employs a broad definition that applies to the entire range of entities identified as social enterprises which are sensitive to the divergent legal statuses and frameworks applied: “any
private activity conducted in the public interest, organized with an entrepreneurial strategy but whose main purpose is not the maximization of profit but the attainment of certain economic and social goals, and which has a capacity for bringing innovative solutions to the problems of social exclusion and unemployment”.
Social enterprises are considered self-sustaining with a high degree of self-financing as a core characteristic of their strategy (Thompson & Doherty, 2006). This enables a greater freedom and further helps the enterprise to sustain their social mission without any undesirable influences by third parties (Doherty et al., 2014). Consequently, most social enterprises generally do not want to be dependent on donations and financial partnerships (Doherty et al., 2014). Though, as social enterprises can include both profit and non-profit (Austin et al., 2006; Zahra et al., 2009), they have the ability to tap into the resources of the private and/or public sector in pursuit of sustainable growth. The areas between the public and the private sector are areas in which social enterprises flourishes (Spear, 2006).
Nevertheless, Arthur et al. (2006) suggest that the dominant discourse within the literature amplifies the ‘business model’ above all other perspectives.
Furthermore, the European Commission is attempting to spur the creation of social enterprises as part of its efforts to develop the SME sector as a whole when looking at the European Agenda for Entrepreneurship (Council of the European Commission, 2015). As stated in the introduction, the majority of social enterprises are recognized as SMEs, since they are similar in size, resource-constrained and the entrepreneur is the key figure in the organisation (Bridgstock et al., 2010; Spear, 2006). Moreover, they need to be classified as non-subsidiary, independent, and of limited size within the EU. Why researchers talked about social entrepreneurship and not simply of an evolution of the non-profit sector is due to the theories about entrepreneurship (Borzaga & Defourny, 2001) explained in the next section.
2.1.2. The social entrepreneur
Extant literature mostly refers to the social entrepreneur as the engine of the social enterprise, responsible for social value and social change creation, hence accountable for the success or failure of it (Sharir & Lerner, 2006). Dacin et al., (2010) list characteristics of social entrepreneurs mentioned in publications and define the social entrepreneur (in line with social entrepreneurship) as: “an actor who
applies business principles to solving social problems” (Dacin et al., 2010, p. 44). According to
Schumpeter (1934), entrepreneurs are not necessarily the owners of a company, yet they are responsible for introducing changes in at least one of the following ways: the introduction of a new product or a new quality of product; the introduction of a new production method; the opening of a new market; the acquisition of a new source of raw materials; or, the reorganisation of a sector of activity. Expanding on Schumpeter's notion, Drucker (2007) emphasizes the idea of opportunity. For him, the entrepreneur searches for change, responds to it, and exploits it as an opportunity (Drucker, 2007). This is in line with the view of Guclu et al., (2002) who state that all acts of entrepreneurship start with the vision of an attractive opportunity. Dees (1998) defines social entrepreneur’s attributes as the recognition and persistent pursuit of new opportunities to further the mission of creating social value, continuous engagement in innovation and not accepting existing resource limitations. Innovation is a concept linked to the acts of individual social entrepreneurs and the practice of social
entrepreneurship, emphasizing the inventive use and combination of resources to address social needs, effect social change and create social value (Martin & Osberg, 2007). In the case of the process of social entrepreneurship, the social entrepreneur is needed in order to start the change (Doherty et al., 2014), similarly, the social entrepreneur occupies the role of a leader, inspires as well as convinces others to support the idea or project and creates a community around him (Sharir & Lerner, 2006).
Without any business related knowledge on how to conduct a business successfully, the social entrepreneur is not able to achieve economic profits, which are necessary in order to create social value (Dacin et al., 2010). Moreover, like commercial enterprises, social enterprises are concerned about customers, suppliers, entry barriers, substitutes, rivalry and the economics of the venture when considering an opportunity, but maybe to different extents due to the differences in market dynamics (Austin et al., 2006). Subsequently, entrepreneurs welcome and leverage the unexpected as a source for new opportunities, resources and or collaboration (Eckhardt & Shane, 2003). For the social entrepreneur an attractive opportunity is one that has sufficient potential for positive social impact and social change to justify the investment of time, energy, and money required to pursue it seriously (Guclu et al., 2002). Overall, those entrepreneurs hold a primary purpose which is formulated as the social value proposition or in other words, the social mission (Austin et al., 2006). The importance of the social mission, innovativeness and the perception of opportunities with a long-term focus, are perceived as key aspects to create social value and provide solutions to social problems by social entrepreneurs (Austin et al., 2006; Dacin et al., 2010). In addition, to create social change, social entrepreneurship implies the utilization of networks, building of connections between individuals, and the interactions in communities (Domenico, Haugh, Tracey, 2010). Moreover, social entrepreneurs heavily rely on a robust network of contacts that will provide them with access to funding, board members, and management and staff, among other resources (Austin et al., 2006).
2.1.3. Social opportunities and geographical scopes
It is essential to recognize that within the social enterprise sector there are differences in social objectives and the degree of local embeddedness, varying from a local enterprise to a cross-border enterprise with global activities and/or a global social mission (Zahra et al., 2008). Social enterprises do vary in form and function, depending upon local levels of economic and social development;
context specific characteristics of welfare systems, the third sector and the climate of the institutional legal system (Chell et al., 2010). Typical social objectives include reducing poverty, inequality, homelessness and unemployment (Doherty et al., 2014) in areas such as education, welfare, the environment, and healthcare (Austin et al., 2006).
Overall, the definitions of social value are about the improvement of the quality of human existence and the global sustainable well-being (Zahra et al., 2014). With poverty being so rampant around the globe, it is not surprising that a majority of social enterprises is engaged in global economic development activities (Schwab Foundation for Social Entrepreneurship, 2005; Zahra et al., 2000). Since resources are concentrated in developed economies and social problems in developing countries, globalization has increased awareness of opportunities for social improvement in the developing countries (Zahra et al., 2000). This takes social enterprises closer to where their services are most needed (Zahra et al., 2008) and creates opportunities. To illustrate, social enterprises often target problems that have a global relevance, e.g. access to water, promoting small-business creation, re-integration of individuals into the work-force, waste management or poverty (Santos, 2012).
Comprehensively, as the world experienced an internationalization of global economies and markets, this leads to increasing social involvement (Zahra et al., 2008). The internet, blogs, television, and international travel have facilitated transformative interactions between those in the developed world and those in developing countries (Zahra et al., 2008). These sometimes intense exposures have encouraged the founding of many social enterprises (Barendsen & Gardner, 2004). Internationalization facilitates a rising number of social enterprises engaging in activities not only in their home country but also abroad (Zahra et al., 2014). According to Zahra et al., (2014) plentiful social enterprises are entrepreneurial and, from their inception, perceive the world as one market, facing a global social issue (Zahra et al., 2014).
Now that social enterprises are defined, their distinctive features are discussed and criteria are set regarding international social opportunities, the next sections will dive deeper into their growing internationalization, using the dynamics of born globals, international new ventures and international entrepreneurship in view of their internationalization process.
2.2. Growing internationalization of social enterprises
Internationalization is divided into three main dimensions; scale, scope and pace of firm internationalization (Taylor & Jack, 2012). The pace of internationalization refers to the time taken between the inception of the firm and its entry into international markets (Taylor & Jack, 2012). The scale and the scope of firm internationalization concern the degree to which the firm involves itself in international operations – also referred to as the degree of internationalization (Hilmersson, 2013; Taylor & Jack, 2012).
From the late 1980s, increasing numbers of enterprises are international from inception and are increasingly prevalent in international business (Rialp et al., 2005). These enterprises often raise capital, manufacture, and sell products on several continents (Freeman et al., 2006). The period from domestic market to foreign market entry is often three years or less and the domestic market is not as important in this approach as it is in the traditional approach. (Autio et al., 2000; McDougall & Oviatt, 2000). Recent studies explaining SMEs internationalization have opened research streams that have become relevant in the literature of internationalization (Rialp et al., 2005), focusing on born globals (Knight & Cavusgil, 2004), international new ventures (Oviatt & McDougall, 1994), and international entrepreneurship (McDougall & Oviatt, 2000). Noted is that the field of social entrepreneurship enriches the field of international new ventures (INVs) and international entrepreneurship (IE) (Zahra & George, 2002), as their conceptualizations fit and complement each other. Although, not a social enterprises internationalize rapid. Zahra et al. (2008) suggest that some social enterprises gradually expand internationally while other social enterprises may start by focusing on a world region and begin international operations right from inception (Zahra et al. 2008)
2.2.1. International new ventures
Oviatt and McDougall (1994) define an international new venture as ‘’a business organization that,
from inception, seeks to derive significant competitive advantage from the use of resources and sale of outputs in multiple countries’’ (p. 48). Additionally, they describe different types of international new
ventures by the number of value chain activities that are coordinated and by the number of countries entered (Oviatt & McDougall, 2005). They differ from traditional SMEs insofar as their origins are
international and they start with an international strategy. Studies identifying international new ventures emphasize their early and rapid internationalization (Autio et al., 2000) and the use of networks in SME internationalization (Lu & Beamish, 2001). These enterprises do not need to own resources to internationalize their operations and do not have extensive experiential knowledge of foreign markets (Oviatt & McDougall, 2005). Instead, they build network through structures such as strategic alliances or collaborative relationships to facilitate rapid internationalization (Oviatt & McDougall, 2005; Freeman et al., 2006). International new ventures largely rely on social networks with for example, financiers, suppliers and customers. This is a valuable key component for them to overcome entry barriers as well as the liability of foreignness and newness in the host country (Chen, 2012; Mair & Marti, 2004; Mudambi & Zahra, 2007). Similarly, Sharir and Lerner (2006) stated that this network is especially helpful for social enterprises to achieve acceptance abroad.
Comparing international new ventures with social enterprises, the notion of social actions needs to be added, as the social mission is fundamental to social enterprises (Chen, 2012). While conventional international new ventures go abroad to exploit new market opportunities and to capitalize on them, social enterprises internationalize to provide and develop social benefits more effectively than the traditional market solution in the host countries (Chen, 2012; Zahra et al., 2014). There are no reliable statistics on the extent to which social enterprises internationalize from inception or incremental (Zahra et all., 2014). However, it is clear that some social enterprises are international from inception and operate in multiple countries or world regions (Elkington & Hartigan, 2008; Mair & Noboa, 2003; Perrini, 2006; Thompson & Doherty, 2006).
2.2.2. International entrepreneurship
The study of international entrepreneurship lies at the intersection of the fields of entrepreneurship and international business (McDougall and Oviatt, 2000). Oviatt and McDougall (2005) define international entrepreneurship as “the discovery, enactment, evaluation, and exploitation of
opportunities - across national borders - to create future goods and services” (p. 540). The first part
reflects the entrepreneurial part of the term and the importance of opportunities. The second part reflects the internationalization and operating abroad. Studies regarding international entrepreneurship focus on the importance of entrepreneurs as the decision makers within the organization. Their
international orientation and attitude towards internationalization influences the internationalization patterns of SMEs (Acedo & Jones, 2007; Oviatt & McDougall, 1994; 2005). Prior studies researched the importance of entrepreneurs and their influence on international growth. These findings show a positive relationship between the entrepreneurs’ international attitude, orientation, experience and network (Westhead et al., 2001; Zucchella et al., 2007). Additionally, international entrepreneurship is often associated with product-producing companies, as the more tangible the offer, the more likely they will internationalize (Cloninger & Oviatt, 2007). Yet, international entrepreneurship research has ignored a big part of the social entrepreneurship field (Zahra et al., 2014).
For the social entrepreneur an attractive opportunity is one that has sufficient potential for positive social impact and social change to justify the investment of time, energy, and money required to pursue it seriously (Guclu et al., 2002). The social mission equips the social enterprises with a much greater task not only encompassing the home country operating in, but targeting the entire globe (Zahra et al., 2014). The investigation of the literature of international entrepreneurship is perceived as a promising way in this study, to examine the actions of social entrepreneurs at an international level.
The following paragraph describes semi-globalization and variances in distance which is followed by different international strategies that can be applied by social enterprises.
2.3. Semiglobalization
In general, cross-border integration is increasing and in many instances, setting new records, but fall short of complete integration and will continue to do so for decades (Ghemawat, 2007). Borders still matter as operating abroad entails consequences such as the liability of foreignness or newness (Zaheer, 1995). Liability of Foreignness (LoF) is the lack of knowledge with a host country and increases the chance of possible obstacles when operating abroad. These obstacles exist due to spatial distance, unfamiliarity with the host country’s environment as well as possible discrimination and restrictions imposed by the host country (Sethi & Judge, 2009).
Important in the international strategy literature is the trade-off between global integration and local responsiveness (Bartlett & Ghoshal, 1989; Ghemawat, 2008), which means the tension between the pressure for enterprises to unify and standardize their products and activities, and the pressure to adapt to local environments and to differentiate. Prahalad and Doz (1987) elaborate on this tension for
managers into choosing between the global integration and national responsiveness. However, they argue that enterprises can be both globally integrated and locally responsive as in the end there is need for seeking the right balance between the degree of integration and local responsiveness. Ghemawat (2007) argues that we should see cross-border issues from a semiglobalized perspective.
Semiglobalization is what enables the development of a distinctively global approach to strategy (Ghemawat, 2008). Semiglobalization involves consideration of localized interactions and cross-border interactions, instead of a focus on just one or the other. So, semiglobalization involves partial cross-border integration whereby barriers to market integration are high but not high enough to insulate countries completely from each other (Arregle et al., 2013). Business decisions cannot be made on either a country-by country basis or on the one-size-fits all country basis. Important is a business reality that lies in between ‘one country’ and ‘one integrated world’ (Ghemawat, 2003). The rewards include a richer sense of the strategic possibilities. Semiglobalization can therefore be liberating as well as challenging, where borders continue to matter (Ghemawat, 2007). Overall, in a semiglobalized world, both the differences and similarities between countries must be taken into account. Moreover, the effects of differences versus similarities on cross-border economic activity are enormous and do not seem to be vanishing (Ghemawat, 2007). This is according to Zahra et al., (2014) particularly interesting those social enterprises that perceive the world as one market due to their globally oriented social mission, and thus do not focus on specific single markets (Zahra et al., 2014).
2.3.1. The CAGE framework
One way of modelling differences in terms of distance between countries is along a variety of Cultural, Administrative, Geographic and Economic (CAGE) dimensions. The CAGE framework and its four components of distance often intertwine (Ghemawat, 2007). Applications of the CAGE framework include making differences visible, understanding the liability of foreignness, comparing foreign competitors, comparing markets, and discounting market sizes by distance (Ghemawat, 2007). The CAGE framework only helps to map the global landscape; it is not a sufficient basis for setting international strategy. The next paragraph focuses on the international strategies of the AAA framework, for adding value.
2.4. International strategy
Social enterprises need to decide which international strategy to adapt for expanding global business activities. Yet, despite the growing international nature of social enterprises, researchers have not devoted sufficient attention to their internationalization process (Zahra et al., 2008). Moreover, the international strategy of SMEs in general remains a relatively neglected research field (Bell et al., 2004; Hagen et al., 2012). The lack of research of their international strategy can be partially explained by the unplanned and reactive or opportunistic behaviour of (social) entrepreneurs (Westhead et al., 2002). This behaviour makes it even more difficult to gather data regarding international strategy. However, the absence of an explicit and formal strategy does not equate to the lack of strategic vision (Bell et al., 2004). Melin (1992) emphasizes the link between internationalization and strategy as the relationship between strategic orientation, strategic behaviour, and international performance as a relevant issue for entrepreneurs. Ghemawat (2007) established a framework for thinking about differences across countries and came up with the AAA strategy. He emphasized that any firm that engages in international business must select the most suitable strategy.
2.4.1. AAA framework
Based on global integration (standardize and unify) and local responsiveness (adapt to local circumstances), Ghemawat (2007) introduces three dimensions for approaching strategy. The first two, namely adaptation and aggregation, are based on the integrations and local responsiveness (IR) framework (Bartlett & Goshal, 1989; Prahalad & Doz, 1987) and focus on exploiting similarities across countries and face differences as constraints (Prahalad & Doz, 1984). Ghemawat (2007) adds the strategy of arbitrage as an additional response to the challenges of cross-border integration, which focuses on exploiting differences across countries, seeing the difference as an opportunity. These three types of global strategies can be adapted by social enterprises when internationalizing and provide a useful perspective on the tensions of international strategy (Ghemawat, 2008).
As the three A’s represent distinct types of global strategy; adaptation, aggregation, and arbitrage, this framework allows businesses to see which of the three strategies – or combination of strategies – is likely to afford the most leverage for them. Each A is associated with different
organizational types. Recent studies have used the AAA framework for analysing businesses that leverage differences in institutional environments (Surroca et al., 2013) or organizations exposed to organizational uncertainty caused by highly complex and changing environments (Johnson et al., 2013). It is suggested that this framework is useful for deciding on global strategies when differences between countries can be identified.
The AAA framework suggests at least one of its ‘A’ strategies needs to be adapted by enterprises (Ghemawat, 2007), although all three strategies have to be kept in view and a combination of all three strategies can be considered, their strategic implications make it complicated to follow all of them, such an option is highly complex and firms must not underestimate this combined strategy (Ghemawat, 2007). The tensions between the AAA strategies (Ghemawat, 2007) lead to an existing trade-off between those functions. Gaining insight into the differences between, adaptation, aggregation and arbitrage remains inevitable for an organization to understand this kind of trade-off (Ghemawat, 2008). There is not necessarily one best global strategy at each point in time and a company needs to be prepared to change its strategy or combine several options whenever its business evolves (Ghemawat, 2007). Moreover, usually, enterprises may be able to pursue only one of the three A’s; however, Ghemawat (2007) emphasized that a balance among the three A’s would enable firms to maintain competence. Comparable to seeking the right balance between integrating business operations and responding to local conditions, this framework shows a trade-off between adaptation, aggregation and arbitrage.
What changes the understanding of the variety of global strategies as well as the challenge of selecting among them is the attention to the globalization of production as well as the globalization of markets. With limited globalization of markets, adaptation is in order. With extensive globalization of markets, aggregation merits more emphasis. Now the globalization of production transfers the adaptation-aggregation trade-off into the AAA triangle by adding arbitrage (Ghemawat, 2007). The table on the next page highlights the strategic differences across the AAA strategies.
Characteristics Adaptation Aggregation Arbitrage Competitive
advantage: why globalize at all?
To achieve local relevance
through national focus
(while exploiting some
scale)
To achieve scale and scope economies through international standardization To achieve absolute economies through international specialization Coordination: how to organize across borders? By country; emphasis on adjustments to achieve a local face within borders
By business, region, or customer; emphasis on horizontal relationships for cross-border economies of scale By function; emphasis on vertical relationships, including organizational boundaries Configuration: where to locate overseas?
To limit the effects of geographic, or economic on foreign countries that are
cultural, administrative, distance by concentrating similar to the home base.
To exploit some elements of distance by operating in a more diverse set of countries
Controls: what to what out for?
Excessive variety or complexity Excessive standardization or emphasis on scale Narrowing spreads Corporate diplomacy: which external issues might arise?
Relatively discreet and
robust, given emphasis on cultivation of local face
Appearance of, and
backlash against, homogenization or hegemony The exploitation or displacement of suppliers, channels;
potentially most prone to political disruption. Table 1. Differences across the AAA strategies derived from Ghemawat (2008).
2.4.2. Adaptation: adjusting to differences
The global strategy of adaptation is seen as one that seeks to boost revenues and market share by maximizing a firm’s local relevance and is primarily used by enterprises that start expanding beyond their home markets (Luo, 2001; Ghemawat, 2007). Some degree of adaptation is essential for all border-crossing enterprises (Ghemawat, 2007). It is important that these enterprises think through a full array of levers available to adapt to those differences. Variety is the essence of adaptation. The CAGE framework is a suitable way that increases requirements for variety. If adaptation is the main objective for a firm, a country-centered organization suits best, where the firm adjusts to differences between the home country and host country (Ghemawat, 2007). This strategy is to adapt to local environmental- and economic conditions. When adapting to local conditions enterprises will get exposed to various unique conditions and environments to adapt to (Mauri & Figueiredo, 2012).
There are different levers and sublevers for adaptation, the first approach to adapting to differences across countries is variation, a second lever for dealing with adaptation challenges involves the focus on particular geographies, products, and vertical stages, as a way of reducing heterogeneity. The focus is to reduce need for variation. A third lever for adaptation involves externalization, through
joint ventures, partnerships, and so forth as a way of reducing its internal burden, a fourth lever is design to reduce the cost of variation. While the final lever is innovation, which can be characterized as improving the effectiveness of adaptation efforts and to improve of effectiveness of variation (Ghemawat, 2007).
Variation Focus Externalization Design Innovation - Products - Policies - Repositioning Metrics - Products - Geographies - Verticals - Segments - Alliances - Franchising - User adaptation - Networking - Flexibility - Partitioning - Platforms - Modularity - Transfer - Localization - Recombination - Transformation Table 2. The levers and sublevers of the adaptation strategy derived from Ghemawat (2007).
A firm should not underestimate the costs and complexity of adapting to a host-country environment. An adaptation strategy would result in increased complexity of coordination and control. Another limitation is the issues related to economies of scale, particularly the link between volume and costs. Adaptation essentially involves sacrificing global scale economies caused by the lack of leveraging standardized organization structures. The sacrifice is especially painful when adaptation involves incurring significant country-specific fixed costs in situations where either the size of the market of the enterprise’s share of it is quite limited. Besides, centralized decisions are made at the global level and decentralized decisions at the local level, which fails to account for cross-border aggregation mechanisms that operate at levels intermediate to the country and the world. Additionally, adaptation strategies treat differences as constraints to be coped with and thereby ignore the possibilities of capitalizing on them (Ghemawat, 2007).
Linking adaptation to the internationalization strategy for social enterprises, this research argues that social enterprises adapt an adaptation strategy. First, as there are many market opportunities to exploit (e.g., poverty is a major issue in numerous countries), the forces underlying these opportunities are likely to be different, making the internationalization of a standard business model and organizational structure difficult. This lack of standardization raises operational costs because local adaptation is necessary. Such adaptation requires a thorough understanding of local cultures, ideologies, and institutions (Zahra et al., 2014). Zahra (2005) stated that international entrepreneurs use different activities and thus adjusted in the countries of operation. Accordingly, the activities are adapted to the country’s individual features. This is in line with the six characters
Ghemawat (2008) described for adaptation. The first focus is on variation. Second, externalization with alliances, franchising, user adaptation and networking are important features within adaptation. This accounts largely for social enterprises whereas social entrepreneurs rely just as much as other SMEs, on a robust network of contacts that will provide them with access to funding, board members, and management and staff, among other resources (Austin et al., 2006). Third and last, the social mission is what accounts most for social enterprises, more than economies of scale or standardization for reducing costs. Following these three arguments, the next proposition is as follows:
WP1: When social enterprises cross borders, they are likely to adapt an adaptation strategy.
2.4.3. Aggregation: overcoming differences
The previous section dealt with the first of the AAA strategies for dealing with distances and crossing borders successfully. The second of the three A’s is aggregation. Aggregation is about using various cross-border grouping devices to create greater economies of scale than country-by-country adaptation can provide. Aggregation means inventing and implementing cross-border mechanisms that operate at levels somewhere between an individual country and the whole world (Ghemawat, 2007). Like, with adaptation their focus is on overcoming differences between countries. It is primarily to gain advantages by economies of scope and scale based on similarities and complementarities (Mauri & Figueiredo, 2012). Though, aggregation exploits the similarities and advantages more aggressively than traditional adaptation strategies do, but less aggressively than complete standardization would (Arregle et al., 2007; Ghemawat, 2003; Ghemawat, 2007).
There are different kinds of aggregation strategies; yet, its principal approach is to dig into geographic regionalization. Creating regional or global operations does involve a high degree of standardization. Mauri and Figueiredo, (2012) state that the pursuit of standardization is often motivated by a search for efficiencies resulting in patterns of geographic concentration and interdependencies. This is in line with Ghemawat (2007) who states that countries that are relatively close to each other geographically are likely to share commonalities along the CAGE dimensions. When global scale economies are strong enough to permit centralization then at least some activities
happen in one region or location, or the key economies of scale operate at the regional, rather than local or global, level.
Along with aggregation there are some limitations. First, like with adaptation, it sees differences across countries as constraints. Second, aggregation tends to increase organizational complexity, given all the linking mechanisms that it necessitates. Third, since it is usually impossible to implement all imaginable forms of aggregation, important is to select some. Lastly, it takes years to make a basis of aggregation work (Ghemawat, 2007).
Linking aggregation to the internationalization strategy for social enterprises, this research argues that social enterprises do not adapt aggregation strategies. First, because research has shown that social enterprises like other SMEs face internal and external constraints, such as limited financial resources, small firm size, lack of management time and skills (De Chiara & Minguzzi, 2002; De Maeseneire & Claeys, 2012). Due to these constraints, social enterprises cannot aim to leverage on scale and scope economies, which are required for the aggregation strategy (De Chiara & Minguzzi, 2002; Ghemawat, 2003; 2007; 2008). Second, combining the high degree of standardization in the aggregation strategy with the social mission of social enterprises does not work. Since the main objective for internationalization of the social enterprise seems rather clear, taking one’s services and help to the place where people need it most. This is quite different from the motive why ‘commercial’ enterprises expand their operations abroad, namely, with the main focus of increasing profit and expansion of the customer base (Lu & Beamish; 2001). Following these arguments, the next proposition is as follows:
WP2: When social enterprises cross borders, they are unlikely to adapt an aggregation strategy.
2.4.4. Arbitrage: exploitation of differences
The third of the AAA strategies is arbitrage. Arbitrage is exploiting differences between national or regional markets. The strategic option of arbitrage is often adapted by firms that seek opportunities to exploit differences in countries and manage to locate separate parts of the supply chain in different places in order to gain benefits (Ghemawat, 2007). It implies seeking absolute economies, rather than
scale economies gained through standardization. Moreover, it treats differences across borders as opportunities, not as constraints. Arbitrage, according to Ghemawat (2007) is the original cross-border strategy, when looking back at history. This has to deal with arbitraging fundamental factors, such as cheap capital or labour.
Ghemawat (2003) again uses the CAGE framework for the dimensions of arbitrage, arguing that the cultural, administrative, geographical, and economic differences between countries can be each a source of value creation. This argument is based on Kogut’s (1985) initial assessment of arbitrage to which firms differ in location of sourcing of their production, which enables firms to acquire a competitive edge based on the superior exploitation of the comparative advantages among countries. An example of a favourable effect related to cultural arbitrage is the image with country of place of origin overseas. Think about French haute couture, Italian quality or Jamaican reggae. Also, selling products to diaspora based ‘’back home’’ has become easier than ever before (Ghemawat, 2007). Legal, institutional, and political differences from country to country open up another set of strategic arbitrage opportunities. Tax differentials are, perhaps, the most obvious example (Ghemawat, 2007). According to the geographical differences, low transportation costs and greater connectivity have made it much easier for manufacturers and retailers to exploit these opportunities. So there are multiple possibilities for arbitrage by slicing up the value chain ever more finely across geographies. The best known type of economic arbitrage is the exploitation of cheap labour, which is common in labour-intensive, capital-light manufacturing. Overall, the CAGE framework shows a great variety of arbitrage strategies (Ghemawat, 2007).
Arbitrage is best pursued when it plays explicit attention to the balancing of supply and demand within and across organizational boundaries (Ghemawat, 2007; 2008). To summarize, firms may have to make trade-offs between arbitrage and the other elements of their strategy. Some mixing and matching may be possible across the AAAs of adaptation, aggregation, and arbitrage. Yet, to be more than one thing at one point in time can lead to some awkward results (Ghemawat, 2007). Some degree of internal consistency is a basic requirement for a good strategy and organization.
Linking arbitrage to the internationalization strategy of social enterprises, this research argues that social enterprises are likely to adapt an arbitrage strategy. This is the case when the social
enterprise is born global. Born globals often do not start with a regional or local focus. Most of the social enterprises are entrepreneurial and, from their inception, perceive foreign markets as offering opportunities rather than obstacles (Chetty & Camplbell-Hunt, 2004).
Second, because it is hard for social enterprises to pursue aggregation or pure adaptation strategies, this study posits that social enterprises international strategies are mostly related to the notion of arbitrage. The arbitrage strategy is about exploiting differences between countries and achieving absolute economies, which is best suited for social enterprises and can be a critical source for their creation of value. Following these arguments, the next proposition is as follows:
WP3: When social enterprises cross borders, they are likely to adapt arbitrage strategies.
When social enterprises attempt to pursue a combination of two international strategies, this will be a combination of arbitrage and adaptation strategies, because these strategies are best suitable and achievable for social enterprises. Therefore, this study posit the fourth proposition as follows:
WP4: When social enterprises cross borders and rely on a combination of international strategies, they are likely to adapt a combination of arbitrage and adaptation strategies.
3. Research Design
A qualitative multiple case-study design is adapted for this research which is framed around Eisenhardt’s (1989) and Yin’s (1981, 2009) approach to multiple case studies. This design enables an in-depth exploration of the strategic internationalization choices made by four social enterprises. The following chapter starts with introducing the ontological and epistemological foundations that support the research design. Next, the focus will shift to the multiple case study design, including a discussion of quality criteria and the case selection. The chapter ends with how the data was collected and analysed.
3.1. Researcher and reality
The way researchers perceive the world and whether they observe it objectively, is referred to as the ontology of the study and it deals with the nature of reality. Epistemology is concerned with the nature and scope of knowledge (Ryan, 2006) or in other words, how reality is known. A fundamental issue of epistemology is whether people can achieve any form of knowledge that is independent of their own subjective interpretation, since this knowledge is perceived or experienced by them (Morgan & Smircich, 1980).
A central question is whether social entities need to be perceived as objective or subjective (Brannick & Coghlan, 2007). The objectivist view argues that an independent researcher examines the reality as it is (Brannick & Coghlan, 2007). The subjectivist view, contrarily, assumes that the reality is a product of the human mind, where each individual has its own projection of reality (Brannick & Coghlan, 2007). This study adapts an objectivist view and is reflected in the multiple-case study design. Regarding the epistemological stance of this thesis, the post positivist view is adapted, in which researchers cannot know what the real truth is, reality can only be known probabilistically and verification is not possible (Gephart, 2004; Ryan, 2006). The post positivist approach is consistent with deductive procedures and involves the development of a theoretical framework before hypothetical testing through empirical evidence (Brannick & Coghlan, 2007). This paradigm is most appropriate for answering the research question, and is reflected in the qualitative multiple-case study design.
3.2. Qualitative multiple case study design
Qualitative research is suitable to develop deeper understanding of a phenomenon as it is often used to analyses realities and complexities that surround the object of the study (Becker et al., 2012). In this case the complexities underlying the choice of internationalization for social enterprises are related to increasing social impact. Moreover, qualitative research is useful when researchers aim to establish beliefs, perceptions, and/or motivations related to this phenomenon (Eisenhardt, 1989). Case study research is one of the strategies that is used to conduct qualitative research, where it retains the holistic and meaningful characteristics of real-life events. The overall design of this study is a multiple case study design, which is framed around Eisenhardt’s (1989) and Yin’s (1981, 2009) approach to multiple case studies, as these conform to the post-positivist epistemology argued above.
Case study research is generally used when the research concerns a “how” or “why” question (Yin, 2013). The multiple case study design can be defined as ‘’the research strategy that focuses on understanding the dynamic present within single settings’’ (Eisenhardt, 1989). With this the data can be described and ranked with the aim of generating propositions or illustrating existing theory. This is particularly useful in those research context where previous theory seems incomplete and deeper theoretical development is required (Yin 2009; Eisenhardt, 1989). Besides, case study research is appropriate when theory about the phenomenon of the research is in an early, formative stage (Benbassat et al., 1987; Eisenhardt, 1989). A theoretical framework has been developed followed by several working propositions, which are significant to allow generalization to theory (Yin, 2009).
The case study in this research leads to greater insights in the perceptions of how social enterprises internationalize and understand this phenomenon through three different global strategies. The topic of internationalization of enterprises with a social mission, in combination with the triple AAA framework has rarely been studied. Given this, a case study is very suitable to investigate and understand this relationship. Furthermore, the multiple case study is an appropriate research method to study complexities, which fits with the complexities underlying internationalization of social enterprises. Additionally, multiple case study design is considered particularly valuable, with the main unit of analysis being the enterprise (Eisenhardt, 1989; Yin 2009).
The specific choices for this qualitative multiple-case study will now be explained in terms of the appropriate quality criteria for the design, the case selection criteria, the approach to data collection and finally the analytical strategy.
3.2.1. Quality criteria
Case study also brings some disadvantages and limitations. The investigation of a phenomenon with few units of analysis results in the perceived inability to statistically generalize the findings to a broader level (Yin, 2009). It is assumed that case studies are less precise, objective and generalizable than large-scale hypotheses testing (Eisenhardt & Graebner, 2007; Gibbert & Ruigrok, 2010). In order to enhance the credibility of the research, the positivist approach stresses the importance of reliability and validity (Brannick & Coghlan, 2007). Four quality criteria must be followed; construct validity, internal validity, external validity and reliability (Gibbert & Ruigrok, 2010; Yin, 1994).
Construct validity relates to the extent to which a study investigated what is claims to investigate (Gibbert & Ruigrok, 2010), so concerns the measurement of the studied objects and whether these match the research objective (Yin, 2009). In this research, the Triple A perspective is used as the overarching theoretical foundation for the internationalization of social enterprises. Furthermore, construct validity is enhanced by the establishment of a clear chain of evidence (Yin, 2009; Gibbert & Ruigrok, 2010), which allows readers to reconstruct how the researcher went from the initial research questions to the final conclusions (Yin, 2009; Gibbert & Ruigrok, 2010).
Internal validity refers to the presence of causal relationship between the results, and mainly apples to the data analysis phase (Gibbert & Ruigrok, 2010). The researcher should establish a plausible causal argument that is strong enough to defend the research conclusions. Yin (2009) states that one way to ensure internal validity is to assess whether the research framework was derived from the literature and can be established through developing theoretical propositions, as has been done in this study. Another manner to increase the internal validity is through pattern matching (Yin, 1994; Eisenhardt, 1989) in the analysis of the data, again as adapted in this study. If the patterns from the cases coincide with the patterns from the theoretical framework, it will help increase internal validity (Yin, 1994).
External validity, or generalizability, deals with the belief that results of study are not only valid in the setting in which they are studied, but also apply to a larger environment (Yin, 2009). Multiple cases enable comparisons and are featured by a specific replication logic (Yin, 2008) and therefore create more robust theory because the propositions are more deeply grounded in varied empirical evidence compared to single case research (Eisenhardt & Graebner, 2007).
Reliability is achieved when enabling subsequent researchers to arrive at the same insight if they replicated the study (Yin, 2009). Reliability can be achieved through detailed presentation of the data and careful documentation and clarification of the research procedures (Yin, 2009). Even though data analysis cannot be fully free from assumptions made by the researcher, as many steps as possible in the data collection and analysis phase have been made operational to ensure the ability to replicate the study (Yin, 2009). Replication logic implies that each case serves as an experiment that stands on its own as an analytical unit (Yin, 2009). The cases that are selected may be selected because they either predict similar results or because they predict contrasting results for certain anticipatable reasons (Yin, 2009).
3.2.2. Case selection
Another frequent challenge of case studies is related to the case selection (Eisenhardt & Graebner, 2007). The purpose of this research is to identify what influences internationalization choices of Dutch social enterprises by comparing and combining Ghemawat’s triple A internationalization strategy (Ghemawat, 2008). In qualitative studies, samples are best chosen purposively to yield information-rich cases that exhibit the researched phenomenon (Bangara, Freeman & Schroder, 2012; Patton, 2002). In this study, cases have been chosen within the same sector, namely the Dutch social enterprise sector. Moreover, these social enterprises all focus on global economic development within their social mission. This means that they have an international focus instead of a local one.
McKinsey (2011) published its first report on social enterprises in the Netherlands. The sector was then in an early stage of development – if you could speak of a sector at all. Social enterprises have multiplied since then, and their societal impact has grown (McKinsey, 2016). From 2013 social enterprises in the Netherlands are beginning to organize themselves as a sector (Social Enterprise NL,
2013). The creation of Social Enterprise NL is an expression of this, but also the increasing attention of media and research institutions helps to increase the collective consciousness among social entrepreneurs. The sector is now well recognized and attracts more attention from public, investors and beneficiaries (McKinsey, 2016). Moreover, their research shows that social enterprises are now playing a larger role than ever in the Netherlands, and that they have large opportunities to growth in size and social impact. Over the last five years, this sector in the Netherlands grew by 2,000-2,500 enterprises to 5,000-6,000, expanding the sector by about 70 per cent (McKinsey, 2016).
This research distinguishes between industry and impact area. By ‘industry’, areas of economic activity are meant, which could include multiple products or services. By ‘impact area’ the
primary way an enterprise strives to create social value and/or solve
a societal problem are meant. This relates to that the social value dimension, highlighted earlier, is what make social enterprises different from purely competitive organisations (Corner & Ho, 2010). Moreover, it reflects the hybrid nature of social enterprises (Doherty et al., 2014).
The social enterprise sector consists of a highly diverse group of organizations in a broad range of industries. Industry examples are: health care and well-being; energy supply; culture and arts; food; waste processing; agriculture, forestry and fishing; and production. Their activities can be grouped into seven impact areas where all 17 UN global development goals are addressed, along with important Dutch societal issues (McKinsey, 2016). These seven areas are: stimulating the circular economy and renewables; enlarging labour market participation; improving health and well-being, promote social cohesion; improve the food chain; stimulating international development; improving education; and other.
To employ the multiple case study design, this research considered four Dutch social enterprises. The four social enterprises were judgmentally selected. Judgmental selection is often used for small samples and qualitative research which is most appropriate for the sample selection of this research (Short, Ketchen Jr. & Palmer, 2002). The definition of a micro or small-medium enterprise (SME) maintained by the European Commission (2015) is utilized as the first selection criteria. Micro enterprises count fewer than 10 employees and have an annual turnover below €2 million. SMEs count less than 250 employees, and reporting an annual turnover less than €50 million or an annual
