The transition from traditional nonprofit organization to social enterprise in France: A qualitative study on managers’ perception

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qualitative study on managers’ perception

Manon Dehareng

Bachelor’s Thesis and Thesis Seminar Management in the Digital Age Faculty of Economics and Business - University of Amsterdam

Sonia Vidal June 30th, 2022

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Statement of Originality

This document is written by Manon Dehareng who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document are original and that no sources other than those mentioned in the text and its references have been used in creating it.

UvA Economics and Business is responsible solely for the supervision of completion of the work and submission, not for the contents.

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Table of Contents

Abstract 4

Introduction 4

Theoretical framework 7

Business Model and Business Model Innovation 7

Social Enterprises and Social Entrepreneurship 8

Nonprofit Organizations 9

Business Model Innovation of Nonprofit Organizations 9

Different Domains undertaken by NGOs to transform into Social Enterprises 10

Methodology 12

Nature of Research 12

Organizational Description of Petits Princes 13

Data collection 14

Methods of Analysis 15

Results 16

Effectively creating partnerships with for-profit organizations as a commercial revenue

strategy 16

Creating a professionalized organization as an enabler for establishing effective partnerships 19

Summary of findings 21

Discussion 21

Discussion of the main findings 21

Methodological limitations & recommendations for future research 24

Conclusion 25

References 27

Appendices 30

Appendix A: Descriptive Model of Codes 30

Appendix B: Open, Axial, and Selective Coding Table 30

Appendix C: April 26th, 2022 - Interview #1 with Board of Directors from Petits Princes -

42:01 minutes 32

Appendix D : May 24th - Interviews #2 with Co-Founder/General Manager and Director of

Communications - 43:05 minutes 43

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Abstract

Traditional nonprofit organizations have increasingly implemented business-like operations and professionalized organizational forms to increase their financial independence and stability in response to the reduction of donations, increasing competition, and growing social needs. To implement commercial revenue streams, nonprofit organizations need to innovate their business model and transform themselves into social enterprises. Specifically, this study aims to understand the perception of managers and identify the individual practices that nonprofit organizations need to first undertake to transform into a social enterprise in France.

Through qualitative research, interviews were conducted with managers from the association Petits Princes. Then the data was labeled with specific codes, and grouped together to develop a grounded theory. The results established that nonprofit organizations need to first create tailored partnerships with for-profit organizations as a sustainable commercial revenue stream when transforming into social enterprises. Additionally, it is practical to create a professionalized organizational form to enable the creation of effective partnerships.

Introduction

In today’s world, organizations of all different purposes face significant environmental changes and economic uncertainties. Therefore, it is in the best interest of organizations to introduce conditions that reduce the perception of uncertainty by encouraging creative and innovative activities (Hoyt & Gerloff, 1999). For instance, traditional nonprofit organizations aim to innovate their business model and become more business-like organizations to respond to the emergence of competitive procedures for public service contracts, reduction of private donations or government funding, and growing levels of social needs to meet (Suykens, De Rynck, & Verschuere, 2018). In particular, the European Parliament estimated about 2 million registered nonprofit organizations within the French sector to depend on the funds and donations from government and corporations (Fici, 2021). In response to these challenges, scholars suggest that nonprofit organizations (NGOs) seek profitable activities, implement performance measures, and incorporate management tools to increase their autonomy and become financially independent (Bush, 1992).

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Nonprofit organizations (NGOs) must innovate their business models and organizational structure to effectively implement commercial revenue activities and procedures in order to confront industrial challenges (Fitzgerald & Shepherd, 2018). This form of organization focuses on social entrepreneurship, commercial performances to effectively reach its social mission, and corporate management tools to ensure successful operations and performance. These organizations are called social enterprises (SEs), which introduce commercial strategies to establish financial stability while creating social value and environmental well-being (Suykens, De Rynck, & Verschuere, 2018). Indeed, scholars believe that the business model of SEs can guide and help NGOs to diversify their financial resource base, reduce their dependence on property risks, and guide the double value creation of social and economic factors (Bacq &

Janssen, 2011). Notably, top managers should take the roles of social entrepreneurs and engage in activities to help solve societal problems by incorporating profitable processes, thus, transforming traditional NGOs into SEs (Andersson & Self, 2015).

The current body of research concentrates on understanding the different activities and domains NGOs should engage in to transform into a SE (Ko & Liu, 2021). Researchers have investigated the different factors and challenges that influence the performance of SEs, which attempt to pursue a social mission while sustaining their business through commercial activities such as having a dual focus (Battilana et al., 2014). Indeed, studies have mainly focused on the rise of SEs from traditional NGOs and try to identify the different processes, risks, and opportunities of hybridization in the market sphere (Suykens, De Rynck, & Verschuere, 2018).

Specifically, researchers Ko & Liu (2021) studied the transformation of NGOs into SEs in England due to the Brexit and explored the three domains NGOs should engage in to successfully innovate their business model. The three domains involve engaging in commercial revenue strategies, creating professional organizational forms, and legitimating socio-commercial business models. Although these researches have generated valuable insights for social entrepreneurs, the one area that remains underdeveloped is understanding the individual practice that is the most relevant when NGOs seek commercial practices. Notably, this research extends the body of current research to explore the most relevant individual practices for NGOs to innovate their business models. This research will answer the following: which of the three domains and individual practices inferred by Ko & Liu (2021) is perceived to be the most relevant for an NGO to innovate its business model to become a SE in France?

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In particular, this research focuses on a non-profit organization, Petits Princes, based in Paris, France. Although France was one of the first countries to develop the concept of “social enterprise”, the term is less used in France than in other European Countries such that it is not widely used by policymakers and not well-known by the public (Petrella & Richez-Battesti, 2020). Although some events show progress made toward the social enterprise concept within French society, there still remains a lack of recognition relating to public programs. For instance, there are no existing measures and supporting schemes designed to help all entities within the social and solidarity economy (SSE) in France (Petrella & Richez-Battesti, 2020). Indeed, policy schemes and supporting structures in France are focused on associations or specific activity fields of cooperatives within the SSE, and little attention is given to other types of groups of entities such as social enterprises. Thus, one of the goals of “Collective Interest Cooperative Society” (société coopérative d'intérêt collectif, SCIC) is to launch methodological and financial support mechanisms to guide social entrepreneurship, such as increasingly integrating social causes within the French public market (Fraisse, 2007; Petrella & Richez-Battesti, 2020). The SCIC is a private organization that aims to introduce a range of legal organizational forms available to social economy enterprises and tries to show the benefits and opportunities of introducing more social enterprises to the French economy (Fraisse, 2007). Moreover, French law does not precisely define the importance and the purpose of social enterprise within society or even define it negatively (Fici, 2021, p.27). Thus, the French government is taking steps and legal decisions toward reforming the status of social enterprises to better account for the pursuit of a social mission (Battilana, 2018). Altogether, institutions try to progressively expand knowledge about social enterprises to the French public, and aim to increase their impact on the economy.

In developing the arguments, this research aims to make multiple contributions. Firstly, this research identifies the different domains and individual practices that support the incorporation of business-like practices within the business model of NGOs. In particular, this research sheds a light on which of the individual practices is perceived by managers to be the most important for NGOs to transition into becoming a SE in France. This contribution is critical because it identifies the most relevant activity to undertake to become an independent organization while successfully maintaining a social mission. Additionally, previous research has focused on the transformation of NGOs into SEs in other parts of the world, which limits the

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conclusions that one can draw for different countries. This study particularly focuses on France.

Lastly, although a law was passed in 2014 to give legal ground to the SSE and gave rise to the notion of “enterprises from the SSE”, there is still a limited use of the notion of social enterprises in France (Petrella & Richez-Battesti, 2020). Thus, this research will shed light and guide NGOs in France on the first activities and actions to take forward to innovate their business model (Battilana, 2018).

As an overview, this research will start with a theoretical framework defining important terminology needed to understand the findings and discussing the different domains and individual practices inferred by Ko & Liu (2021). Next, the methodology of this research is described in detail regarding the nature of the study, organizational description of Petits Princes, and methods of data collection and analysis. Then in the results section, the data collected is analyzed and later discussed and interpreted within the discussion section. Finally, the research question is answered, and limitations of this study are considered, as well as opportunities for future research.

Theoretical framework

Business Model and Business Model Innovation

An organization is a stable association of employees engaged in activities directed to accomplish a common objective and implement programs of actions that involve rational planning and structuring of activities (Bittner, 1965). Indeed, for an organization to succeed financially, it should implement a business model. A business model is considered a plan for business operations, such as an architecture of the business, a framework of the activities carried out, and a structural template of how an organization creates and delivers value (Zott, Amit &

Massa, 2011). The business model of an organization varies based on which type of services and products the organization delivers to customers. Organizations will have different strategies, competencies, resources, and networks that compose their business model (Wirtz, 2020, p.95).

However, when an organization finds itself in a difficult financial situation or when there are unexpected changes in their environments, it is beneficial for them to innovate their business model. Organizations should reconfigure new processes within their current business model with novelty and uniqueness to react to the changes in their environment (Massa & Tucci, 2013).

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Indeed, innovating an organization’s business model provides a way to outperform competitors and sustain their business (Mitchell & Coles, 2003).

As previously discussed, there is a limited use of the notion of social enterprises in France. Thus, there are limited guidelines and frameworks for the business model of social enterprises within the SSE. The lack of infrastructure for newly developed social enterprises in France affects their ability to deliver solutions to various social problems (Lindsay & Hems, 2004). Overall, due to the lack of understanding, support, resources, and underdevelopment of the business model of social enterprises in France, the opportunities for NGOs to innovate and transform their business model are impeded (Lindsay & Hems, 2004).

Social Enterprises and Social Entrepreneurship

Social enterprises are organizations that are neither pure NGOs nor for-profit organizations (Agafonow, 2015). Indeed, social enterprises are organizations that carry out commercial strategies to achieve a social mission; for instance, they aim to maximize social and environmental well-being and serve social issues rather than maximize profits of their stakeholders (Tortia et al., 2020; Seelos & Mair, 2005). Social enterprises are viewed as innovative responses to fulfilling NGOs needs and enhancing the activities of NGOs to improve their social impact and sustainability (Defourny & Nyssens, 2006). Specifically, social entrepreneurs aim to create social wealth and bring structural change in pressing times where social needs are abundant (Bacq et al., 2016). However, a trade-off arises for social enterprises between maximizing profits to create more impact or conserving their social mission; social entrepreneurs need to reconcile the demands for financial stability and address the need for mission-related outcomes (Agafonow, 2015).

Social entrepreneurs are a set of individuals who have the capacity to create greater value by implementing business-like activities and innovative approaches to the mission of delivering value to social needs (Peredo & McLean, 2006). Typically, social entrepreneurs try to discover opportunities to contribute to social, human, and economic development and aim to create sustainable development (Seelos & Mair, 2005). Sustainable development can be defined as satisfying basic human needs, creating communities that establish behaviors to participate in social and environmental development, and converting abstract needs of future generations into

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action today (Seelos & Mair, 2005). Importantly, social entrepreneurs attempt to create opportunities and value by building portfolios of resources and commercial activities and constructing a set of strategic decisions to address unsatisfied social needs (Perrini & Vurro, 2006, p.62).

Nonprofit Organizations

An important reason for the development of social enterprises is attributed to traditional NGOs’ incorporation of commercial and institutional logic (Gopakumar, 2022). The nonprofit sector is a sum of private and voluntary associations that has gained prominence in recent years in the fields of welfare provision concerning education, human rights, public health, international relations, environments, art, or culture (Anheier, 2005). Indeed, non-profit organizations (NGOs) are organized businesses that do not earn profits but receive donations or money made through fundraising activities to serve a social cause and provide public benefits. The nonprofit sector is expanding and recognized as a significant economic and social force at the local, national, and international levels due to the greater demands for social needs (Anheier, 2005, p.12).

Furthermore, NGOs are recognized as organizations that rely on grants and donations to fulfill their social mission. Indeed, the resource dependence theory refers to the increasing reliance on commercial activity and transactions with other actors and organizations in their environments, negatively influencing organizational missions and can result in interorganizational difference in power (Hillman et al., 2009). The resources NGOs need from other organizations may be scarce, under the control of uncooperative actors, or constrained due to competition of donor dollars, resulting in uncertainty and scarcity of resources from differences in power, authority, and access to resources (Lettieri et al., 2004). Thus, to avoid such dependencies, NGOs should innovate their business model to become more financially independent and stable to pursue their social mission (Lettieri et al., 2004.).

Business Model Innovation of Nonprofit Organizations

As of 2014, there were about 223,000 entities within the social economy of France and slowly concentrated on shifting to the form of enterprise or becoming more business-like due to heightened transformation of their environments (Petrella & Richez-Battesti, 2020). Indeed, entities within the SSE are increasingly relying on profitable markets, commercial activities, and

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corporate management tools as a source of organizational improvements to ensure financial independence and develop a sustainable business model (Suykens, De Rynk, & Verschuere, 2018). Accordingly, NGOs have been experimenting with management practices and new revenue strategies to reduce their philanthropic dependency and focus more on the measurability of results to effectively fulfill their social mission (Perrini & Vurro, 2006, p.60). Importantly, the transition towards a social enterprise creates more jobs, increases the organization’s impact, and helps prosper the social economy, which can create more acknowledgement of social enterprises (Ferrie & Matthaes, 2021). However, the emergence of SEs from traditional NGOs involves a shift in the social mission, such that the social mission pertains to a dual focus on both social and commercial goals (Gopakumar, 2022). The shift in social mission can incorporate aggressive and competitive operations and mindsets within the organization which can be controversial to the original mission of the association.

Different Domains undertaken by NGOs to transform into Social Enterprises

In the study by Ko & Liu (2021), the authors developed a framework on the different domains and individual practices NGOs need to address to innovate their business model. After Brexit, the authors analyzed the transformation of 64 UK-based social enterprises. They concluded that NGOs must execute activities within three different domains, which can serve as guidelines for future NGOs that wish to innovate their business model to become SE. The three domains included: engaging in commercial revenue strategies, creating a professionalized organizational form, and legitimizing their socio-commercial business model.

Firstly, engaging in commercial revenue strategies emphasizes the need to seek business practices through income-generating activities that support the social mission and establish business partnership with for-profit organizations (Ko & Liu, 2021). Indeed, this domain emphasizes the development of a revenue model by offering goods or services that relate to the charitable practices of the nonprofit organization. When organizations build new operating procedures and organizational structures, they are better at responding to changes in their environments or uncertainties (Greenwood & Suddaby, 2006). Additionally, NGOs can partner with for-profit organizations to obtain generic resources and to leverage more organization-specific resources such as knowledge, capabilities, and infrastructure (Austin &

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Seitanidi, 2012). Some scholars argue that strategies emphasizing on new revenue opportunities and protecting stabilized relations with other organizations is an essential strategic directive for NGOs because it allows the organizations to manage the challenges of economizing their mission (Jäger & Beyes, 2010). In fact, partnerships can result in effective resource management and benefit both sides of the alliance (Nijhof, de Bruijn, & Honders, 2008; Mathie & Cunningham, 2005).

Secondly, the existing arrangements of traditional NGOs prevent them from effectively performing these activities, and experts suggest that NGOs create professional organizations to cope with environmental changes (Broadbridge & Parsons, 2003). Therefore, it is recommended for NGOs to create professionalized organizational forms and new operating procedures to respond to the changing environment (Ko & Liu, 2021). For instance, NGOs should engage in business-like working processes and supporting structures to establish operational procedures and guidelines and develop workforce capacity to manage business-like operations. Indeed, NGOs should establish departments and associated operational guidelines to effectively generate revenue, as well as coordinate activities between the departments to create an entrepreneurial culture to establish a centralized control mechanism and guide the behaviors of employees (Maier, Meyer & Steinbereithner, 2016). NGOs are also encouraged to recruit professional staff, implement training programs, learn practices from external parties, and encourage accountability to develop an effective workforce (Ko & Liu, 2021). In particular, Reficco, Layrisse & Barrios (2021) argued that creating a professionalized organizational form focused on people events generates successful transformation. Such that the people and the management team allow firms to generate successful testing of value propositions and allow the business to function correctly and effectively.

Lastly, NGOs must legitimize its new socio-commercial business model to address stakeholders’ concerns and inform them about the innovation made within the organization (Ko

& Liu, 2021). This domain is concerned with advocating the strategic business direction and communicating the positive and negative aspects of adopting commercial processes. Indeed, the newly developed social enterprise needs to communicate the strategic direction and maintain its charitable organization status to continue accessing the resources of its stakeholders. Moreover, it needs to demonstrate the organization’s ability to deliver public services and indicate that the SE

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still focuses on pursuing its social mission (Ko & Liu, 2021). Indeed, scholars argue that without establishing legitimacy about the organizational change to the stakeholders, the newly developed social enterprise will struggle to survive and will lack the resources and guidance to overcome the challenges of business model innovation (BMI) (Battilana & Lee, 2014).

Nevertheless, there exists much research on the transformation of NGOs, emphasizing the different activities and challenges that NGOs will face when innovating their business model to become social enterprises (Zahra et al., 2009; Lettieri et al., 2004; Naderi et al., 2020).

Changes in the business environment have amplified the need for organizations to address new ways of capturing value and creating new revenue streams, leading to an increasing need for social innovation and entrepreneurship research (Teece, 2010). Today, leaders of NGOs need to establish effective ways to incorporate business-like processes and operations into their business model to become financially independent and stable. However, existing literature does not pay attention to attitudes of managers towards transforming their business model, and their opinions on the important steps to take. Therefore, this paper aims to contribute to the previous literature by exploring which individual practice is perceived to be the most pertinent in becoming a SE according to managers.

Methodology

Nature of Research

This research aims to analyze which of the three domains discussed by Ko & Liu (2021) is the most prominent for NGOs to undertake to innovate their business model. In particular, this study is based on qualitative research, which addresses questions concerned with developing an understanding of events, situations, and dimensions of the social world (Fossey et al., 2002). A qualitative approach helps develop, derive, and create general principles and theories from qualitative data that could potentially be supported by further quantitative research. In fact, exploring the most pertinent activity to innovate the business model of NGOs and understanding why falls into the classification of qualitative research objectives, such as understanding the social world and generating new ideas and concepts that will benefit future research.

Furthermore, this research is based on grounded theory which implies the formation of general

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principles or theories from specific observations, such that the data drives the development and analysis of theories. Accordingly, an inductive was used to answer the research question because it allowed for the creation of concepts and theories once the data has been collected. Indeed, this research aims to investigate the first activity NGOs should take to become a social enterprise.

Thus, creating a new concept and theory from qualitative data in accordance with the theories and models already constructed by researchers.

Importantly, this research is based on a single case study about the organization Petits Princes. A case study is an intense study about a person, group of people, or unit which aims to generalize to several units within the same context. This research will apply and generalize the results to NGOs in France. Furthermore, case studies typically give the readers a common knowledge about the topic in question. In the case of this study, since there is limited framework and supporting structures for social enterprises in France, this case study will give insight to NGOs in France on how to transform and innovate their organization.

Using a single case study allowed for the exploration within the case, such that data was collected from interviewees with different positions throughout the organizations, which increased the reliability and validity of the study. Moreover, single case study allows for the creation of high-quality theory and allows for a deeper understanding of the subject, such that it allows for a better comprehension of the phenomenon at hand (Gustafsson, 2017). Particularly, a single case study was performed due to the limited access to other resources. Indeed, the access to the interviews was due to personal relationship with executives from Petits Princes, which further increases the study’s reliability due to the interviewees’ high trustworthiness. The direct access to Petits Princes and honest conversation with the interviewees allowed this research to collect real-life data and scenarios with hypothetical insights on activity to perform when a charity wants to transform its business model. Thus, the single case study of this research allowed for the creation of a high-quality theory, a deeper understanding of the subject.

Organizational Description of Petits Princes

In order to explore the research question, it was decided to interview executives and board of directors of a French nonprofit organization named Petits Princes to obtain different perspectives on the subject of matter. Petits Princes was founded in 1987 with the mission of making the wishes come true for critically ill children and adolescents. Their activities include

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fulfilling the dream of critically ill children, taking charge of projects related to the children’s passion, gathering the family, the medical team, and future friends around the project, and proposing all forms of actions and help to the children and their families. Petits Princes is the only association in France to make several dreams come true for the same child if their medical conditions allow it, depending on the evolution of their pathology and treatments. Volunteers are strictly recruited and trained by the association to have regular contact with the children, the families, and the medical staff and accompany the child through the realization of the dream and later provide long-term support. The association approximately realizes 500 to 550 dreams per year with a budget of 3 million euros.

Petits Princes is run by 22 employees divided among four different departments and 98 volunteers working in hospitals all around France. Indeed, 150 pediatric services in the rural areas of France reach out to Petits Princes with wishes. Approximately 7 out of 10 wishes are initiated by the department that maintains the relationships with the hospitals. The four different departments are: “Équipe Rêve” is in charge of realizing the dreams, “Équipe des Communications” is in of all types of communication, “Équipe Hôpitaux” is in charge of maintaining the relationships with hospitals around France, and “Équipe des Partenariat” is in charge of maintaining the relationships with for-profit partners.

Importantly, Petits Princes acquire their income from their partnerships with 65 for-profit organizations. The selection process to partner with the companies involves ensuring that the enterprises’ mission is in line with the mission of Petits Princes. Since 1987, the association has supported many enterprises in their sponsorship process by benefiting them from their expertise and image. “Équipe des Partenariats” builds with the companies a tailor-made project regarding their objectives and their values. Projects can involve selling products with the Petits Princes’

logo, fundraising events through the company, sporting events, and others. Lastly, the associations report to the companies with the different dreams they accomplished with their specific funds and donations.

Data collection

To answer the research question, semi-structured interviews were conducted with two groups of two people. Both interviews were conducted face to face, increasing the reliability of the data collected. The first group consisted of two board of directors of Petits Princes, and the

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second group consisted of the co-founder and the director of communications of Petits Princes.

These executives manage a successful association within France, thus they give their perception on the important individual practices to be executed to become a social enterprise. Furthermore, a non-probabilistic and purposive sampling method was performed due to the direct access of participants. Obtaining and analyzing the data from executives increases the accuracy of the research.

The first step of collecting data was sending an email to the participants with the developed interview protocol such that participants had more time to think about their answers and give their best considerations to reduce procedural bias. Importantly, the interviews asked the participants questions about different individual practices and their perceived importance.

Both interviews occurred face-to-face on April 26th and on May 24th at the office of Petits Prince in Paris and in London. However, the interviews had different protocols. The first interview asked both interviewees general questions about the organizations and descriptions of their financial situations; then, the Ko & Liu (2021) model was shown and broadly asked which domain they thought was the most important. Then, the second interview focused more on getting detailed information about the different domains and their importance for the innovation of nonprofit organizations. Based on the responses, further questions were asked to elicit additional insights. Lastly, only primary data was collected through semi-structured interviews and transcribed through amberscript, as well as a translator facilitator as the interviews were conducted in French.

Methods of Analysis

To analyze the interviews, coding was used to clarify and identify data patterns and generate new findings and theories. When each interview had been transcribed and translated, common words and topics were identified and coded into identified themes. Firstly, the interviews are broken down into open codes, then connections are drawn between the open codes to form axial codes, which then a central category is established to connect all the codes analyzed. The analysis was derived from the model of Ko & Liu (2021), such that the researcher identified common words and topics related to the different domains. Then, cluster labels identified which activities were the most pertinent for NGOs to transform their business model into SE.

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Results

As economic uncertainties and competition increase in today’s world, NGOs increase their chances of being exposed to shortages of funds and donations; therefore, nonprofit organization’s managers must take into consideration innovating their business model to obtain a more sustainable revenue stream. Indeed, managers of NGOs must undertake pertinent activities to become more business-like organizations. The interview’s content revealed that NGOs must effectively create tailored partnerships with for-profit organizations as a sustainable revenue stream. In order to do this, nonprofit organizations must (a) identify opportunities to collaborate with for-profit organizations and (b) maintain these partnerships. Furthermore, to enable the creation of effective partnerships, participants mentioned that it is essential to professionalize the organization, such as (c) developing capacity for managing business-like operations and (d) constructing business-like processes and supporting structures. Each of these points mentioned will be further discussed below.

Effectively creating partnerships with for-profit organizations as a commercial revenue strategy Prior research has emphasized that entrepreneurs must exploit fresh opportunities by incorporating new practices within their business model (Greenwood & Suddaby, 2006).

Accordingly, the analysis of this research suggests that incorporating commercial revenue strategy within NGOs involves the creation of tailored partnerships with for-profit organizations.

Firstly, managers of NGOs must identify opportunities and actively collaborate with for-profit organizations. An interviewee explained,

So Petits Princes tried very early on to have partnerships with companies. So their mix is really the opposite. So it is 20% donations from the public or events, and then it is 70 to 80% of what they called private corporations. So just partnerships with companies where they go to a specific company, they try to set up something.

Indeed, all interviewees mentioned that collaborative relationships between NGOs and for-profit organizations could offer a sustainable revenue stream, and offer a wide range of new management capabilities. Importantly, a member of the board of directors mentioned that creating partnerships with for-profit organizations creates value by motivating and engaging the

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employees with the mission and purpose of the NGOs. Indeed, NGOs that already use corporate fundraising through partnerships will have an easier transition to a social enterprise model as they have built partnerships thus far. Moreover, managers must recognize the opportunities collaborations could enable and improve their organization to become more sustainable and flexible. Indeed, identifying opportunities of collaboration will allow the newly developed SE to survive and remain within their competitive environment, and help the organization achieve its social mission. According to the interviewees, it is important to partner with for-profit organizations that reinforce the organization’s social mission, such as prioritizing the social impact rather than the amount of money received from the for-profit organization. The co-director of the association explained:

There are two themes that we forbid ourselves, alcohol and tobacco. So that, a company who would knock on the door of the association, we would do nothing with them in relation to the mission of the association. We had a few products, a few sectors where we are vigilant depending on who the company is, how it will communicate. [...] It happened to us to refuse very substantial sums, see in partnership more than 100,000 €. We didn't take the money because we didn't think we were in line with who the company was.

Once a collaboration is formed, managing and maintaining these partnerships is important. Interviewees explained that it is in the organization’s best interest to customize each collaboration with partners, and accommodate the needs of each for-profit organization because they face different demands from these alliances. Customizing these partnerships will create a durable relationship with for-profit organizations, which will create a recurring revenue stream.

Prioritizing collaborations and frequently communicating with partners can better accommodate the needs and demands of partners and allow for the creation of connections and links in the long term. Indeed, interviewees mentioned that frequent communication and creating a connection and link with the for-profit organization is critical to maintaining their relationships. The co-founder explained that dedicating time to communicate with the organizations is important to make them feel involved and engaged with the mission of the NGO. Furthermore, creating a connection and link emphasizes that their relationships do not stop at donations but also offer

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mechanisms for for-profit organizations of corporate social responsibility. An interviewee mentioned their situation:

We actually have very strong ties with the partners and that's why they stay and that's what they come for, that is to say the concrete side, because they too, they know right away that when they help the association, concretely, it's children, it's smiles. Here, we give them feedback, they have the images, it speaks for itself, they have feedback.

Although communicating with partners is time-consuming, it is easier and more cost-effective to develop and expand current business partnerships or start new commercial arrangements with current partners rather than finding new ones. Thus, NGOs should focus on developing long-term relationships. Importantly, interviewees mentioned the importance of building notoriety and credibility of the SE to open up opportunities for long-term alliances with for-profit organizations. Indeed, interviewees explained that establishing credibility and building a strong image of the organization is crucial for the for-profit organizations to believe in the NGOs’ mission, understand the worth of collaborating with that organization, and desire to propel the cause of the NGO.

Lastly, to sustain relationships, interviewees explained that it is also important to communicate the use of the for-profit organizations’ investments and proactively support and learn from each other. In particular, newly developed SEs must use systematic approaches to manage and retain their alliances. An interviewee explained that some companies stopped being partners with big social enterprises because they felt drowned and undervalued among all the other partners, thus it is essential to:

Often intervene with companies during conventions and seminars. Companies often come here, live immersions with our volunteers, our doctors. So there is still a very, very strong link. [...] This is what makes us accessible. [Being] accessible is extremely important, I believe. The human [side] is what has been lost in recent years. We have always maintained it. It's always been something important to me. It goes into the success of Petits Princes, it's a whole package and that's it.

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Altogether, actively seeking alliances with for-profit organizations and maintaining these

relationships represent traditional NGOs’ efforts to pursue opportunities to generate revenue and become sustainable and financially stable in France.

Creating a professionalized organization as an enabler for establishing effective partnerships Additionally, managers of newly developed SEs need to consider new organizational structures and processes, as well as develop capacity for managing business-like operations. In line with this aspect of entrepreneurship, this research analysis indicates that forming a professionalized organizational form acts as an enabler for the organization to effectively form alliances with for-profit organizations. In particular, interviewees describe that training employees is important to increase the productivity and effectiveness of their work towards the social mission. The training of employees can increase the successful creation of relationships with partners, implement a gradual growth of the organization, and create a financial discipline throughout the organization. The director of communication explained that the quality of professionals is more important than the quantity which can be executed through training:

So the keyword is we are quality professionals, it's quality. We are not in the quantitative race on the number of dreams, we do two more because we are the reference in France on this in this field, but we are the first and only one to follow the children over time, this is obviously due to training teams, including volunteers. And then also in the organization, the commitment of volunteers.

Prioritizing the quality of professionals by implementing training and engaging the employees with the social mission such that they have strong commitment is essential to developing capacities for managing business-like operations. Keeping employees on track and committed to the social mission keeps the company’s purpose at the forefront and increases productivity towards achieving it. Furthermore, traditional NGOs need to learn new sets of knowledge. This research revealed that surrounding oneself with experts from different sectors and departments is crucial to performing activities effectively. Acquiring new knowledge from external parties allows the employees to gain insights from different sectors and tools or capabilities to exceed the organization’s goals and allow the organization to innovate. The association’s co-founder

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said, “There is a golden rule, and I stick to it. I repeat, you always have to surround yourself with people who have the skills you don't have.”

Another institutional work to enable the creation of alliances with for-profit organizations is constructing business-like processes and supporting structures. To guide staff and employees towards a more SE business model, entrepreneurs can establish professional departments to cope with new operating procedures. The term professional departments indicate the division of departments within traditional NGOs, which are run by trained staff and have the skills to perform within that function. An interviewee mentioned the importance of having structured guidelines for each department to improve the effectiveness and efficiency of its operations.

These guidelines enable employees to know what is expected from them and hold them accountable for their actions.

Furthermore, an interviewee explained that having interdependence and clear communication between the departments is crucial to support the newly established procedures and organizational structure:

The communication and partnership departments, we are at the service of the other teams.

My colleague, for dreams to take place after us, we need dreams to communicate. So you always have to think globally, always always. [...] There is enormous interdependence and all the teams have to move in the same direction and at the same pace.

Coordinating activities across the departments permit the newly developed organization to carry out new practices, avoid conflicts between the different activities, and establish a professionalized common culture. The analysis of this research suggests that newly formed SE should implement cross-departmental coordination to allow for the creation of business practices and functions that are dramatically different from traditional NGOs. Cross-departmental coordination can quicken the pace of problem-solving and work together to achieve successful results for the social mission.

Furthermore, a challenge identified by the interviewees is the installation of entrepreneurial culture. As mentioned by a board of directors, the transformation may “create a culture a bit more aggressive around managing the company, cutting costs, not recruiting, laying off people if needed, performance, performance, accountability, etc.” Thus, it is important to

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effectively manage employees and staff to keep them committed to the original social mission and encourage personal growth. Also, the implementation of monitoring performances and evaluating the employees can encourage individuals to keep focus on the original mission, better perform in tasks, and be accountable for their actions to deliver results accordingly.

Summary of findings

Altogether, the analysis of this research suggests that the most prominent activity for newly developed SEs to undertake is to effectively create tailored partnerships with for-profit organizations as a commercial revenue strategy. Interviewees explained that it is important to identify opportunities for alliances and maintain these relationships to realize the benefits of those partnerships. Furthermore, creating a professionalized organization such as developing capacity for managing business-like operations and constructing business-like procedures and supporting structures can enable the organization to effectively create relationships with for-profit organizations. For instance, creating a culture of commitment and gradual growth, implementing training for employees, and surrounding the organizations with different experts can develop capacity and structure for the organization to manage business-like operations.

Discussion

Discussion of the main findings

When discussing the transformation of NGOs into SEs, it is important for entrepreneurs operating in NGOs to recognize the most pertinent activity to realize first. Indeed, NGOs aspire to become SEs due to increasing competitive landscapes, shortage of donations and governmental funds, and increasing social demands. Thus, this research aims to explore which of the domains inferred by Ko & Liu (2021) is perceived by managers to be the most prominent to first undertake when NGOs transition into SEs in France.

Specifically, this qualitative research contributes to the previous literature by discovering that to effectively become a SE, NGOs should first create tailored partnerships with for-profit organizations as a commercial revenue strategy to be the most appropriate activity to undertake for NGOs. The findings indicate that organizational transformation starts with engaging and allying with for-profit organizations as a commercial revenue strategy to support the social

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mission. Indeed, as supported by previous literature, collaborating with for-profit organizations allows NGOs to obtain generic resources and to leverage more organizational-specific resources, capabilities, and knowledge; as a result, this allows the NGOs to become sustainable and financially independent (Austin & Seitanidi, 2012; Suykens, De Rynck, & Verschuere, 2018).

Previous research implied the importance of implementing new commercial revenue strategies such as selling products or services; however, this study emphasizes the creation of partnerships as income-generating activities (Jäger & Beyes, 2010; Nijhof, de Bruijn, & Honders, 2008;

Mathie & Cunningham, 2005; Austin & Seitanidi, 2012). As mentioned by interviewees, associations within France can offer corporate social responsibility services for for-profit organizations. Although this is already regarded as corporate fundraising, NGOs already using corporate fundraising with for-profit organizations will be able to transition quicker towards a SE business model. Lastly, Jäger and Beyes (2010) argued that NGOs should emphasize creating new revenue opportunities because it allows the organization to manage the challenges of economizing its social mission. This research confirms and contributes to this research by highlighting the creation of partnerships through identifying opportunities and maintaining these alliances.

In particular, to create these alliances, NGOs need to identify opportunities for collaboration and maintain these relationships to ensure the long-term flow of resources, financial independence, and ability to cope with environmental uncertainties. These findings add to Ko & Liu’s (2021) research by describing the basic steps to effectively create partnerships in France. For instance, identifying partnerships as a service, focusing on social impact, getting more donations from the enterprises, frequent communication, proactive support with customized relationships, and more are all activities that can be undertaken to preserve and expand current or new partnerships.

Although some scholars argue that professionalizing the organization is the most pertinent activity, interviewees argued that professionalizing the entity’s organizational form is instead seen as an enabler to creating successful and long-term partnerships. Indeed, the findings of this study imply that the employees and the effective management of the business-like operations allow the organizations to successfully fulfill their social mission and allow the organization to properly function, which confirms the findings of Reficco, Layrisse, & Barrios (2021). Effectively training employees, learning skills from external parties, prioritizing the

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quality of individuals, and having a financial discipline allow the firm to develop capacities for managing business-like operations and cope with uncertainties. Additionally, the results of this study confirmed a previous study by Maier, Meyer, & Steinbereithner (2016), such that interviewees implied the importance of establishing departments and associated operational guidelines to effectively manage employees and activities. As well, coordinating activities and transparent communication between the departments is essential to establish a common professionalized culture and centralized control mechanism and avoid conflicts. Additionally, surrounding yourself with experts and exploiting your network will allow managers to create opportunities and value by building portfolios of resources and constructing strategic decisions, thus, becoming social entrepreneurs (Peredo & McLean, 2006).

Furthermore, in line with the research of Gopakumar (2022) and Hillman et al. (2009), a board of directors mentioned that the emergence of SEs from a traditional NGO would prospect a shift in the social mission to be more aggressive and competitive. Indeed, the shift in the social mission to a dual focus on social and commercial objectives can incorporate a competitive and hostile culture within the organization, diverting the organization away from the original non-profit social mission. As explained by Reficco, Layrisse & Barrios (2021), focusing on people and the management team will allow the firm to generate greater value propositions and allow the business to function accordingly. Thus, the transformation should focus on people's events to innovate the organization’s business model without implementing an aggressive social mission. Although this research emphasizes the need to create partnerships with for-profit organizations, focusing on people and its management is also important to concentrate on the original mission and execute it effectively.

Subsequently, the participants of this research did not elaborate on legitimating the new socio-commercial business model to the stakeholders. Although previous literature argued that legitimizing the business model to stakeholders is important for the survival of SEs, interviewees explained the importance of managing the employees effectively to minimize the effects of shifting the organization’s culture (Battilana & Lee, 2014). Indeed, to overcome BMI challenges, interviewees claimed that maintaining partnerships through frequent communication and effectively organizing employees into departments is a more efficient approach to dealing with cultural change and changes in the organizational form.

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Recent studies on the emergence of SEs look at the different activities and domains for NGOs to incorporate to innovate their business model and highlight the different individual practices to undertake (Ko & Liu, 2021). This study analyzes the individual practice that is the most prominent to undertake. In sum, NGOs should create effective partnerships with for-profit organizations as a means of commercial revenue strategy by identifying opportunities and maintaining collaborations, as well as creating a professionalized organization as an enabler for establishing effective partnerships. This will allow NGOs to become financially independent and stable and deal with competitive uncertainties.

Methodological limitations & recommendations for future research

However, this study is not without limitations. The first limitation concerns the reliability and validity measure, such that interviews were conducted in groups of two interviewees. As a result, the findings of this research could have been affected by the quality of the responses, where interviewees may have been influenced by each other's responses and felt constrained to express their honest opinions. Another limitation is the limited number of participants, which influenced the validity of the research. Furthermore, the participants were non-randomly selected and came from the same association, which questions the generalizability of the findings. Future studies can use more extensive qualitative data all around France to test the research’s findings to further establish generalizability. Furthermore, Petits Princes is an association that is financially stable and has not thought about transforming into a social enterprise. Although the responses were honest due to the close relationships with the interviewees, this case study is taken as a hypothetical case which decreases the validity and reliability of participants’ responses. Future studies should collect data from NGOs in France that have already changed their business model and become SEs.

Despite the fact that all interviewees explained the importance of creating a professional organizational form to enable the creation and maintenance of partnerships in France, the reliability of this finding is questioned. In fact, Petits Princes is a very professional organization with different departments that coordinate and have current professionalized methods and guidelines for communicating. Thus, the organization does not require more professionalization

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and rather emphasizes the significance of partnerships with for-profit organizations, which questions the quality of their responses.

Although the findings of this research identified that creating partnerships with for-profit organizations is essential for the innovation of NGOs, the findings also reveal other future study opportunities. Indeed, further research can be designed to explore the different methods and challenges of creating partnerships such as the procedures to identify opportunities to collaborate and to maintain these alliances. The findings of such research can yield practical implications on how to build and maintain effective alliances as a commercial revenue strategy.

Conclusion

Overall, all types of organizations are faced with uncertainties and challenges within their respective environments and industries. In particular, NGOs confront challenges such as the emergence of competitive procedures for public services, reduction of donations, and growing demands for social needs. Previous literature suggest NGOs to focus and turn their attention to implementing business-like processes and organizational supporting structures to become financially independent and stable. Although there has been extensive research on the different domains and individual practices for NGOs to undertake to transition into a SE, there are limited studies that identify the most essential activity to perform in the early phase of the transition in France. Although France was one of the first countries in Europe to develop the concept of social enterprise, there still remains a lack of supporting structure and frameworks for the development of social enterprises (Petrella & Richez-Battesti, 2020). Therefore, this research aimed to understand and explore the first and most important practice for NGOs to undertake to effectively achieve their social mission and transition into becoming a SE. Based on the perception of managers of an NGO in France, this research was able to identify that NGOs should create tailored partnerships with for-profit organizations as a commercial revenue activity.

In order to ally with for-profit organizations, NGOs need to identify opportunities and maintain these partnerships to sustain a recurring revenue stream. By forming alliances with for-profit organizations, NGOs can acquire knowledge, expertise, and resources to further build their organization and generate a more significant social impact. Additionally, this study identified that creating a professionalized organization can help the newly developed SE to develop

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long-term and effective partnerships. Importantly, developing managerial capacities and constructing business processes and supporting structures will give the organization a solid foundation for exploiting their partnership through the development of skills and expertise, interdependent departments, and build an effective management team. Altogether, this will allow managers and employees to effectively and efficiently carry out newly emerged operations to maintain and build partnerships.

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Appendices

Appendix A: Descriptive Model of Codes

Appendix B: Open, Axial, and Selective Coding Table

Open coding Axial coding Selective Coding

- more donations from companies than from the public

- focus on social impact/

mission

- fundraising events through partnerships

- identifying collaborations - partnerships as sustainable revenue stream

Identify opportunities to collaborate with for-profit organizations

1. Effectively creating tailored partnerships with for-profit organizations as a commercial revenue activity

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- motivation for employees of for-profit organizations - partnerships as a service - create relationships with hospitals

- customized relationships with partners

- prioritizing collaborations - communicating the use of for-profit’s money

- proactive support for companies

- frequent communication with partners

- creating a link or connection with partners

- involvement of partners with mission of association - Build strong image of association to keep partners -Building notoriety and credibility

Maintaining partnerships

- trainings for volunteers and employees

- strong management team - financial discipline

- importance of commitment of employees

- prioritize quality over quantity of professionals - learning skills from external parties and surrounding yourself with people from different expertise

- gradual growth

Developing capacity for managing business like operations

2. Creating a professionalized organization as an enabler for

establishing effective partnerships

- understanding the importance of effective management

- usage of different departments

Constructing business-like processes and supporting structures

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- structured departments and guidelines

- interdependence between departments

- effectively managing volunteers/employees - creating a professionalized culture

Appendix C: April 26th, 2022 - Interview #1 with Board of Directors from Petits Princes - 42:01 minutes

Okay. So first, I wanted to thank you for taking time to answer my questions and

cooperating with me so I can complete this research. So first, I wanted to begin with asking you questions about the association overall. So could you tell me the different activities and the overall.

[Interviewee #1] Mission we're talking about? Yes. Okay. So it's like Make-A-Wish, right? So making the dreams come true of the critically ill children is really important [focus on social impact / mission]. So usually children with cancer, most of them or, um, all genetic diseases. Uh, and so the charity they make probably now close to two dreams come true every day. So yeah, could it be, yeah, they are at 550 and what they do is they, they start with a child who wants to meet someone famous, wants to go to Disneyland, wants to go to a zoo, wants to go to New York, whatever. They work on the dream, they set it up and then they follow up throughout the entire childhood of that child. So an average child would get to his or her age at 18 or 20, like three or four dreams. And that's really tied to the disease. Right. So that's really to the end in hand with the physicians that are checking on the status. Not only do they tell us when a dream can be realized based on their illness, but also it's tied to, you know, if a specific tough treatment is coming or has just been administered so that the child is, if you will, re boosted by that dream.

So that's what the charity does.

And what is the mission of the association overall?

[Interviewee #1] The mission statement, I should know it, but yeah, it's probably making dreams come true for critically, critically ill children, something like that.

And how do you choose which dreams to realize? Is there a specific selection process?

Figure

Updating...

References

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