How social enterprises address legitimacy issues during the start-up phase Master Thesis:

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Master Thesis:

How social enterprises address legitimacy

issues during the start-up phase

By

JESSE WIERSMA

University of Groningen

Faculty of Economics and Business

MSc BA Small Business & Entrepreneurship

22

nd

_{of August 2018}

Theodorus Niemeyerstraat 95

9726BR Groningen

0612587718

j.r.wiersma.1@student.rug.nl

Student number: 2525623

Supervisor: prof. dr. A.J. Groen

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Abstract

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1. Introduction ... 6 1.1 Research Question ... 8 2. Literature Review ... 9 2.1 Social Entrepreneurship ... 9 2.2 Legitimacy ... 9 2.2.1 Definition of legitimacy. ... 9 2.2.2 Importance of legitimacy. ... 10 2.3 Stakeholders ... 11 2.3.1 Definition of stakeholders. ... 11 2.3.2 Importance of stakeholders. ... 11

2.4 Legitimacy, Stakeholders and Social Entrepreneurship ... 12

2.4.1 Gaining legitimacy in the start-up phase. ... 12

2.4.2 Legitimacy issues of social enterprises ... 13

2.4.2 The continuum social enterprises move along. ... 15

2.4.3 How start-ups gain legitimacy with angel investors. ... 15

2.5 Research Framework ... 17 3. Research Methodology ... 20 3.1 Sampling ... 20 3.2 Operationalization of Variables ... 21 3.2.1 Social Entrepreneurship. ... 21 3.2.2 Legitimacy. ... 21 3.2.3 Stakeholders. ... 22

3.2.4 Legitimacy conflicts and tensions. ... 22

3.2.5 Legitimacy strategies. ... 23

3.3 Data Collection ... 23

3.4 Data Analysis ... 24

3.5 Quality statement ... 24

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4.1 Case Bolderburen ... 26

4.1.1 Stakeholders and their importance. ... 26

4.1.2 Legitimacy conflicts. ... 27

4.1.3 Legitimacy Strategies. ... 29

4.1.4 Legitimation actions. ... 30

4.2 Case De Verbinding B.V. ... 32

4.3 Van Hulley ... 37

4.4 Cross-case Analysis ... 43

4.4.3 Legitimacy strategies. ... 48

5. Discussion & Conclusion ... 52

5.1 Managerial Implications ... 54

5.2 Limitations... 55

5.3 Directions for Future Research ... 55

References ... 56

Appendix A. Operationalization of the interview ... 60

Appendix B: Dutch Interview Guide ... 63

Appendix C: English Interview Guide ... 70

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1. Introduction

This chapter introduces the problem statement of this research. It will briefly state what relevant research regarding the topic has been studied and what research gaps still remain. Furthermore, it demonstrates why these research gaps are worth to be studied. Finally, the research questions will be presented.

This thesis will investigate how social enterprises address legitimacy issues during the start-up phase. The following three paragraphs will introduce social entrepreneurship and legitimacy.

Social entrepreneurship is receiving more and more attention from scholars and practitioners the last two decades. One trend practitioners identified is that companies today must be “social” in a truly external sense (Agarwal, D., Bersin, J., Lahiri, G., Schwartz, J., & Volini, E., 2018). All stakeholders have an enormous impact on a company’s brand, profitability, and growth. Being a social enterprise means going beyond a focus on profit and revenue and clearly understanding that we operate in an ecosystem, and all these relationships are of equal importance.

Over the last two decades, scholars have suggested multiple definitions. For example, Zahra, Gedajlovic, Neubaum & Shulman (2009) view social entrepreneurship as true entrepreneurial exploitation of opportunities, by stressing the innovative character of combining commercial and social goals in one business format. A more specific view is that of Doherty, Haugh & Lyon (2014), who pose that social entrepreneurship entails an adoption of some form of commercial activity targeting at generating revenue as a means to succeed in certain social goals. It is more specific because it only includes firms who set the social goal(s) as their main goal(s), where the commercial goal is subordinate. This last definition will be used for this research.

Legitimacy theory is a field widely researched by scholars. For example Singaram (2016) researched cognitive and moral legitimacy of social ventures. He focused on the first three years of social start-ups. In this way he learned to understand the relationship between resource acquisition and legitimacy. Additionally, Bhutiani (2016) discusses how established enterprises create awareness at stakeholders. As different stakeholders take their own perspectives, it is a challenge to gain and maintain legitimacy as a social enterprise. In order to do this, social enterprises should implement a legitimation strategy (Suchman, 1995) and also convince stakeholders of their social impact (Singaram, 2016).

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combining this notion with Suchman (1995), one could conclude that legitimation strategies could be used both to gain legitimacy and to address legitimacy conflicts.

Legitimation strategies are approached differently in different life-cycle stages. According to Ashforth & Gibbs (1990), who studied traditional commercial firms, during the start-up phase firms should aim for gaining legitimacy, while in latter stages this transforms into maintaining, defending and extending legitimacy strategies.

In this thesis there will be a focus on the start-up phase, due to the fact that more than 40 percent of all start-ups fail within three years (Census, 2014). This figure also applies to social enterprises according to E3M (2014). An explanation for their failure could be that these enterprises were unable to surpass the liabilities of newness, which also applies to social enterprises (Stinchcombe & March, 1965). Stinchcombe & March (1965) stated that liabilities of newness cover the reasons for high failure rate of new ventures owing to inadequate resource endowments during the start-up phase derived from insufficient levels of legitimacy. Additionally they state that legitimacy mitigates liabilities of newness. This is in line with Singaram (2016), who claims that with sufficient legitimacy an enterprise is able to acquire sufficient means to survive the start-up phase, and allow for further growth, also known as overcoming the liabilities of newness. So Singaram (2016) and Stinchcombe & March (1965) provide argumentation that legitimacy is an important factor during the start-up phase.

Focusing on the start-up phase leads to a focus on how enterprises gain legitimacy, and how they address conflicts arising during this phase. Suchman (1995) came up with three different types of legitimation strategies on how to gain legitimacy. These are (1) conform to environment, (2) select environment and (3) manipulate/influence environment. Explanations can be found in the next chapter. These strategies could also be applied to address conflicts with stakeholders. Social enterprises could (1) adjust their orientation towards the desired direction of the stakeholder, (2) select a different stakeholder that fits with the current orientation or (3) manipulate or influence the current stakeholder to consent the current orientation.

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during the start-up phase specifically for social enterprises, which has, to the best of my knowledge, in line with Doherty et al. (2014), not been fully addressed before. To facilitate this research three case studies are used from three different social enterprises. Below the research question can be found with sub research questions.

1.1 Research Question

As stated in the previous paragraph, the main research question will be:

• How do social enterprises address legitimacy issues during the start-up phase? In order to facilitate this research some sub questions are made:

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2. Literature Review

This section will explain the constructs and variables that will form a research framework for this study. Additionally, a basis for discussion will be presented. Finally, the research framework is provided.

2.1 Social Entrepreneurship

The interesting research domain of social entrepreneurship is relatively young. But definitions on social entrepreneurship are however not scarce. Kickul & Lyons (2016) recently wrote a whole book on social entrepreneurship stating at least eight different definitions. Their own definition of social entrepreneurship is the following: “the application of the mindset, processes, tools, and techniques of business entrepreneurship to the pursuit of a social and/or environmental mission”. Another definition is posed by Alvord, Brown, & Letts (2004): “Social entrepreneurship creates innovative solutions to immediate social problems and mobilizes the ideas, capacities, resource, and social arrangements required for sustainable social transformations”. Additionally, Zahra, Gedajlovic, Neubaum & Shulman (2009) view social entrepreneurship as true entrepreneurial exploitation of opportunities, by stressing the innovative character of combining commercial and social goals in one business format. But the view that will be leading for this thesis is that of Doherty, Haugh & Lyon (2014), who pose that social entrepreneurship entails an adoption of some form of commercial activity targeting at generating revenue as a means to succeed in certain social goals.

These social goals can be specified in two broad categories. First, with a focus on human wellbeing. Second, with a focus on addressing environmental issues (Glavas & Mish, 2015). A firm is perceived a social enterprise with a double bottom line approach if either one of them is combined with a commercial goal. And it is perceived a triple bottom line approach if all three goals are implemented. The last situation is also referred to as the People, Planet and Profit approach (Harris, 2003). Addressing all three goals can create major challenges as different stakeholders have different expectations and the social enterprise has to align those stakeholders in such a way that all three goals are reached.

For this research a definition is formed through combining the definition of Doherty et al. (2014) with the definition of Harris (2003). So a firm is a social enterprise if it uses a double or triple bottom line approach and uses the generated revenue from the commercial activity as a means to succeed in the social goal(s).

2.2 Legitimacy

2.2.1 Definition of legitimacy.

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matter regarding legitimacy. However these studies mainly focused on cognitive legitimacy. This regards firms to be legitimate when stakeholders concern them to be “understandable”. Next to cognitive legitimacy there is evaluative legitimacy. This regards firms to be legitimate when stakeholders concern them to be “desirable” (DiMaggio & Powell, 1991).

Suchman (1995) came up with a definition combining both forms: “Legitimacy is a generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions”. In this case, desirability encompasses actions that are wished for and seen as attractive by stakeholders, fitting the evaluative approach. Additionally, proper refers to actions that are understandable and reasonable for stakeholders, fitting the cognitive approach. Furthermore, appropriate regards actions to be suitable and convenient for stakeholders, fitting both the evaluative and cognitive approach. These three determinants are highly subjective, complicating the determination of legitimacy.

Suchman (1995) developed three different legitimacy types in order to give meaning to the before mentioned determinants. Namely, pragmatic legitimacy, which is determined through how beneficial stakeholders perceive the direct exchange between them and an enterprise (Singaram, 2016). Secondly, cognitive legitimacy, caused by the appropriateness, and comprehensibility of a firm’s actions and behavior by and for society, which are perceived as taken-for-granted when actions and behavior are found to be appropriate and comprehensible. Thirdly, moral legitimacy, defined by normative approval of a firm’s actions by and for society.

2.2.2 Importance of legitimacy.

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Figure 1: Model of legitimation and scaling/firm survival. (Singaram, 2016; Suchman, 1995; Zimmerman & Zeitz, 2002)

2.3 Stakeholders

This paragraph discusses the definition of stakeholders and which attributes are used to mark a stakeholder as important. In this way the research question can be better understood.

2.3.1 Definition of stakeholders.

For this research the broad and frequently used definition of Freeman (1984) is used. Stakeholders of a firm are defined as individuals and groups who can be affected or influence by the specific firm. In order to specify this definition a more narrow approach is needed, that will facilitate this research. Jansen (2017) recently specified seven stakeholder groups, based on other literature, which he used to research legitimacy in social enterprises. These are, (1) suppliers, (2) customers, (3) investors, (4) owners, (5) employees, (6) other social organizations and (7) other non-social organizations. These groups will be used as stakeholder categories for this research.

Additionally, the stakeholder group where a social enterprise devotes it (main) social mission to is categorized as the social target group (Jansen, 2017). These are mostly (1) suppliers, (2) customers or (5) employees.

2.3.2 Importance of stakeholders.

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(1) Power is defined as “the probability that one actor within a social relationship would be in a position to carry out his own will despite resistance. Therefore, a party to a relationship has power, to the extent it has or can gain access to coercive (violence/force), utilitarian (resources), or normative means (symbols), to impose its will in the relationship” (Mitchell et al., 1997).

(2) Legitimacy: see section 2.2.

(3) Urgency is defined “as the degree to which stakeholder claims call for immediate attention” (Mitchell et al., 1997). According to Mitchell et al. (1997) a stakeholder is considered urgent when two conditions are met: (1) when that claim or relationship is critical or important to the stakeholder and (2) when a claim or relationship is of a time-sensitive nature. Hence, Mitchell et al. (1997) argue that urgency rests on the following two attributes: (1) criticality: the importance of the claim or the relationship to the stakeholder, and (2) time sensitivity: the degree to which managerial delay in attending to the relationship or claim is unacceptable to the stakeholder.

When a stakeholder has all three attributes, it is called a definitive stakeholder and stakeholder salience is high. These stakeholders are most important, but the attributes can differ in level at each stakeholder so not all definitive stakeholders are equally important. In other words the importance increases as the levels of the three attributes increase.

To conclude, it is expected that the higher stakeholder importance or salience the greater the magnitude of legitimacy issues that could arise from them. Leading to proposition 1: The higher

stakeholder importance, the more concerning legitimacy tensions become.

2.4 Legitimacy, Stakeholders and Social Entrepreneurship

Singaram (2016) states that, enterprises who focus on “creating sustainable and positive change with respect to social impact confers moral legitimacy on social ventures”. However, this is only true when social enterprises can prove their social impact to their stakeholders. So this could mean that a social enterprise has an advantage when compared with commercial enterprises concerning moral legitimacy. This provides support that legitimacy issues concerning social enterprises differ from that of commercial enterprises, which is in line with Yang & Wu (2016), who argue that extant legitimacy literature cannot one on one be applied to social enterprises.

2.4.1 Gaining legitimacy in the start-up phase.

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as a result of its legitimacy and the resource stream, in turn, adds to the legitimacy of the firm (Zimmerman & Zeitz, 2002) (see: ‘recursive loop’ in figure 1). Additionally, being able to survive confers legitimacy and being able to grow after establishing survival confers even more legitimacy to the enterprise (Singaram, 2016; Zimmerman & Zeitz, 2002).

As different stakeholders take their own perspectives, it is a challenge to gain and maintain legitimacy as a social enterprise. In order to do this, social enterprises should overcome resistance to change by employees and also convince (potential) customers of their social impact (Bhutiani, 2016).

To gain legitimacy an enterprise could uses three different types of strategies. Namely: (1) “conform the dictates of preexisting audiences within the organization's current environment”, (2) “select among multiple environments in pursuit of an audience that will support current practices” and (3) “manipulate environmental structure by creating new audiences and new legitimating beliefs” (Suchman, 1995). Based on Suchman (1995) the table below is made to create an overview, presenting what strategies and actions fit with the different types of legitimacy. These strategies and the corresponding actions will be used to examine how firms gain legitimacy. In this way answering the research question will be accommodated. Also another proposition is made to enhance this research.

Proposition 2: When a fitting strategy, for a certain stakeholder, is chosen and applicable actions are implemented, legitimacy will be conferred by that stakeholder.

Figure 2: Summary of legitimacy strategies (Suchman, 1995)

2.4.2 Legitimacy issues of social enterprises

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Firstly, conflicts concerning the (1) organizational missions could arise from the following tensions: (a) conflicting demands between the needs of stakeholders and the needs of clients or the company mission and (b) disagreements on priorities held by different parties (Doherty et al., 2014). An example of such a conflict could be the phenomenon called mission drift. Mission drift (Doherty et al., 2014). Mission drift is defined as losing sight of social concerns in favor of profit-seeking activities (Ramus & Vaccaro, 2017). This phenomenon often surfaces when a social enterprise is financed by parties that are solely or mainly interested in obtaining financial gain, for example venture capitalists or mainstream banks. These parties often demand a high return on investment, which is very hard to achieve if a firm is not focusing on profit maximization. In this way pressure rises for social enterprises to shift focus from social goals to economic goals in order to survive. This can in turn cause problems with stakeholder legitimacy as other stakeholders expect that social goals are priority, resulting in conflicts for the social enterprises, not being that social anymore, with the other stakeholders. As an alternative source of capital a social enterprise could seek financial resources at impact investors. Impact investors aim at maximizing the total value of their investment in terms of financial returns and social and sustained environmental impact, also known as blended value (Bugg-Levine & Emerson, 2011). These investors expect a lower economic return on investment but seeks a compensation in the attainment of social goals. Targeting this source of capital can also address tension 2d in the following paragraph, which is similar to tension 1a.

Secondly, conflicts concerning (2) mobilization of financial resources could arise from (a) the relative importance of other versus earned income, (b) ethical issues involved in access to different sources of income, (c) operating under financial constraints due to insufficient financial resources and (d) conflicting demands between the needs of stakeholders and the needs of clients (Doherty et al., 2014). An example of such a conflict could be cross-subsidization. Cross-subsidization business models use revenue generated from one customer group, often not the target customer group for social goals, but only or mainly for commercial gain, to subsidize the cost for the target customer group for social goals (Doherty et al., 2014). If profits from the commercial customer group become of such a magnitude that not all commercial gains are reinvested in the social goals, then mission drift could arise for the social enterprise. Which, as discussed before, can cause legitimacy problems as stakeholders expect the social enterprise to keep the social goals as their main goals. It is also possible that stakeholder agree on the objectives, if the social enterprise still appears to have social goals as their main goals, but disagree on the means of achieving them. This situation is according to Doherty et al. (2014) mildly challenging for social enterprises, and is mainly dealt with by avoidance and compromise.

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conflict could arise if a social enterprise both hires volunteers and employees. If employees of a social enterprise are paid a high salary, for example because they possess rare expertise and skills, then the attractiveness of the enterprise to donors, volunteers and other stakeholders is reduced (Doherty et al., 2014). A way to assess this conflict is to reward and motivate employees with non-pecuniary incentives. Legitimacy conflicts can be seen as the result of aggravated tensions caused by inconsonance between stakeholders and the social enterprise. To address these issues one could extrapolate Suchman’s (1995) legitimation strategies mentioned in section 2.4.1. Social enterprises could (1) adjust their orientation or practice towards the desired direction of the stakeholder, (2) select a different stakeholder that fits with the current orientation or practices, or (3) manipulate or influence the current stakeholder to consent the current orientation or practices.

To conclude, it is expected that with an appropriate strategy a legitimacy conflict or tension can be solved. Leading to proposition 3: When a legitimacy conflict is appropriately addressed, by using

a fitting strategy with applicable actions, the legitimacy conflict will be solved

2.4.2 The continuum social enterprises move along.

From Yang & Wu (2016) one could conclude that social enterprises are positioned somewhere along a continuum, which they define as a wide spectrum. With at one end (1) a social enterprise almost only using resource for their social mission and only minor resources for their economic mission. In the middle (2) a social enterprise is considered fully hybrid, perfectly balancing economic and social value. and on the other end (3) the social enterprise reaches a point at which it is almost considered a commercial enterprise. In alignment with Yang & Wu (2016) social enterprises at point one will be named (1) social-oriented and at point three (3) commercial-oriented. Moving from point one to point three means that social enterprises shift resources from their social mission to their economic mission. At the latter point the social enterprise has reached the limit with the mix of economic value and social value. After this point the social enterprise is no long considered a social enterprise but a commercial firm also targeting corporate social responsibility, in other words, embedding the social mission as subordinate to the economic mission.

Moreover, Yang & Wu (2016) postulate that (1) social-oriented social enterprises consider moral legitimacy as a priority, in contrast to pragmatic legitimacy. Furthermore, they also postulate that (2) commercial-oriented social enterprises consider pragmatic legitimacy as a priority, in contrast to moral legitimacy. Additionally, they claim that social enterprises have more flexibility in prioritizing pragmatic or moral legitimacy, as they are flexible to prioritize between economic or social goals.

2.4.3 How start-ups gain legitimacy with angel investors.

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which to examine angel investments. In their research they found observable attributes associated with potential angel investors’ willingness to formally review an investment opportunity. Some attributes are (1) top management team industry experience, (2) venture-specific education, (3) revenue and (4) legal counsel. Their results show a positive relation of these attributes with angel evaluation, mostly in consistence with evidence from Zimmerman & Zeitz (2002), among others. Surprisingly, having advisors with technical or scientific training is negatively associated with angel evaluation. This could be explained by the view that angel investors expect that their involvement in the enterprise will be diminished when less of their expertise is needed as it might be replaced by those advisors. Additionally, Becker-Blease & Sohl (2015) also state that formal business plans did not seem to affect the judgment of banks or external capital providers which is consistent with many other papers.

When looking at the attributes which favor investment decisions of angel investors, one can see that social goals are not part of these attributes. So one could conclude that angel investors will be less likely to invest in a social enterprise, which typically earn less (3) revenue than comparable commercial enterprises, which are the alternative. Nevertheless, it is possible to make up for this disadvantage by scoring better on the other attributes. But one has to bear in mind that the other attributes are partly dependent on the economic value creation of the enterprise. This is due to the fact that better human resources (1 & 2) and legal counsel (4) mostly need to be compensated with economic value, unless these parties are willing trade part of economic value with social value, which is considered a non-pecuniary incentive (Doherty et al., 2014).

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2.5 Research Framework

In order to facilitate the research question a research framework is made:

Research Question: How do social enterprises address legitimacy issues during the start-up phase?

Figure 3: Research Framework (Doherty et al., 2014; Mitchell et al., 1997; Singaram, 2016; Suchman, 1995; Zimmerman & Zeitz, 2002)

1. Inconsonance between stakeholders and the social enterprise cause legitimacy tensions. (Doherty et al., 2014)

2.

a. Each stakeholder is defined by a different set of power, urgency & legitimacy attributes specified for the Social enterprise. (Mitchell et al., 1997)

b. This set can quantify the level of importance (Mitchell et al., 1997)

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3. Logical assumption 1: Aggravated legitimacy tensions result in legitimacy conflicts

4. Logical assumption 2: Legitimacy conflicts negatively impact conferred legitimacy to the social enterprise.

5. (Suchman, 1995)

a. A strategy will be chosen suitable to resolve to conflict:

i. adjust their orientation or practice towards the desired direction of the stakeholder ii. select a different stakeholder that fits with the current orientation or practices iii. manipulate or influence the current stakeholder to consent the current orientation or practices.

b. Based on the chosen strategy, actions will be chosen and implemented to address the legitimacy conflicts.

Proposition 2: When a legitimacy conflict is appropriately addressed, by using a fitting strategy with applicable actions, the legitimacy conflict will be solved

6. (Suchman, 1995)

a. A strategy will be chosen suitable to gain legitimacy, tailored to each stakeholder. i. conform the dictates of preexisting stakeholders within the social enterprise’s current environment

ii. select among multiple environments in pursuit of a stakeholder that will support current practices

iii. manipulate/influence environmental structure by creating new stakeholders and new legitimating beliefs

b. Based on the chosen strategy, actions will be chosen and implemented to gain legitimacy Proposition 3: When a fitting strategy, for a certain stakeholder, is chosen and applicable actions are implemented, legitimacy will be conferred by that stakeholder.

7.

a. Social impact will be produced due to being a social enterprise (Singaram, 2016) b. Proven social impact confers moral legitimacy on social ventures (Singaram, 2016) 8.

a. Conferred legitimacy by stakeholders results in a resource stream for the enterprise (Zimmerman & Zeitz, 2002)

b. When all critical resources, which are necessary to survive, are obtained the Legitimacy Threshold will be crossed. (Zimmerman & Zeitz, 2002)

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9. ‘Recursive Loop: the resource stream, and showing firm survival and growth, adds to the legitimacy of the enterprise (Zimmerman & Zeitz, 2002)

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3. Research Methodology

This section will present how the research is designed. After a short recap of the goal of this study, the sampling method will be discussed. Additionally, the relevant variables will be operationalized. Furthermore, a description will follow of the data collection and analysis. At the end a quality statement is present.

This study aims to contribute to the field of legitimacy theory focusing on social enterprises. To accomplish this, there is attempted to gain insights in how social enterprises address legitimacy issues during the start-up phase.

3.1 Sampling

As this study is interested in a scarcely researched specific phenomenon, namely, how social enterprises address legitimacy issues during the start-up phase, theory development seems to be the appropriate knowledge generating process (Van Aken, Berends, & Van der Bij, 2012). Theory development is achieved by using qualitative research, which is also proposed by Doherty et al. (2014). The process of using qualitative research exists out of four steps. Firstly, the research question is be defined. Secondly, an interview guide is be created. Thirdly, participants are recruited. And fourthly, interviews are carried out (Cassell & Symon, 2004). Furthermore, case studies can be used to facilitate theory development (Eisenhardt, 1989). Therefore, three case studies will be used for this study.

Three social enterprises, were selected and interviewed using semi-structured interview. The selection will be based on theoretical sampling (Glaser & Strauss, 1967). Using theoretical sampling several criteria need to be taken in account. First, the cases have to include social enterprises that have a double or triple bottom line approach (Harris, 2003). Second, cases have to supply information transparently (Eisenhardt, 1989). Finally, homo- and heterogeneity among cases have to be taken into account (Eisenhardt, 1989). Heterogeneity is reached through selecting social enterprises from different industries. Homogeneity is reached through selecting social enterprises from social-enterprise.nl where most of all social enterprises are affiliated.

The selected social enterprises are: Van Hulley, De Verbinding B.V. and Bolderburen (source:

social-enterprise.nl). These are picked because they all qualify to having at least a double bottom line

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3.2 Operationalization of Variables

Appendix A contains an overview of the operationalization of the interview, below the variables are operationalized which will be used for the interview. Additionally, figure 3 shows an overview of all variables and relationships.

3.2.1 Social Entrepreneurship.

If an enterprise is considered a social enterprise is operationalized in the following way. An enterprise should have the following two characteristics. (1) It should have a double or triple bottom line approach (Harris, 2003). And (2) it should see any economic activity as a means to reach both or either of the following goals: addressing environmental issues and improving human wellbeing. Additionally, it is attempted to determine what the position is of the social enterprise on the continuum explained in section 2.4.2. To determine this position, theory of Yang & Wu (2016) will be applied. They theorized that social enterprises who are social-oriented prioritize moral legitimacy and who commercial-oriented prioritize pragmatic legitimacy. So by measuring the relative weight social enterprises put on each legitimacy type, one could determine the position on the continuum. The next subsection will explain how the different legitimacy types are measured.

3.2.2 Legitimacy.

For the operationalization of legitimacy the three different legitimacy types of Suchman (1995) are used. These are:

(1) Pragmatic legitimacy: determined through how beneficial stakeholders perceive the direct exchange between them and an enterprise (Singaram, 2016)

(2) Cognitive legitimacy, caused by the taken-for-grantedness and comprehensibility of a firm’s actions by and for society.

(3) Moral legitimacy, defined by normative approval of a firm’s actions by and for society. Fueled by moral and ethical aspects of business activities.

To operationalize these variables, interviewees will be asked which of the actions presented in figure 2 are used during the legitimation process, they are also asked how important these actions were in gaining legitimacy. Depending on how important these actions were and which actions were taken a score will be given to each legitimacy type, to determine the relative weight.

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3.2.3 Stakeholders.

A stakeholder is considered important, or salient when it is concerned not only (1) powerful but also (2) legitimate and (3) urgent. To operationalize these attributes indicators need to be formulated (Mitchell et al., 1997).

(1) A stakeholder has power, to the extent it has or can gain access to coercive (violence/force), utilitarian (resources), or normative means (symbols), to impose its will in the relationship. (2) See 3.2.2

(3) A stakeholder is urgent, to the extent it has the following two attributes: (1) criticality: the importance of the claim or the relationship to the stakeholder, and (2) time sensitivity: the degree to which managerial delay in attending to the relationship or claim is unacceptable to the stakeholder.

Additionally, the stakeholder group where a social enterprise devotes it (main) social mission to is categorized as the social target group (Jansen, 2017).

3.2.4 Legitimacy conflicts and tensions.

Conflicts Tensions 1. Organizational Missions 2. Mobilization of Financial Resources 3. Mobilization of Human Resources a. conflicting demands between the needs of stakeholders and the needs of clients or the company mission

the relative importance of other versus earned income

managing motivation and rewards of employees and volunteers

b. disagreements on priorities held by different parties

ethical issues involved in access to different sources of income

volunteers not perceived to have skills and experience in some area of service delivery

c. operating under financial

constraints due to insufficient financial resources

selection process of board members to provide a balance of social and commercial expertise

d. conflicting demands

between the needs of stakeholders and the needs of clients

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3.2.5 Legitimacy strategies.

To address legitimacy conflicts, social enterprises could:

(1) adjust their orientation or practice towards the desired direction of the stakeholder, (2) select a different stakeholder that fits with the current orientation or practices, or

(3) manipulate or influence the current stakeholder to consent the current orientation or practices. (Suchman, 1995)

To gain legitimacy in general, social enterprises could:

(1) “conform the dictates of preexisting audiences within the organization's current environment”, (2) “select among multiple environments in pursuit of an audience that will support current practices” and

(3) “manipulate environmental structure by creating new audiences and new legitimating beliefs” (Suchman, 1995)

The table below summarizes the different actions belonging to the three strategy types and three legitimacy types assigned to gaining legitimacy.

Figure 2: Summary of legitimacy strategies (Suchman, 1995)

3.3 Data Collection

To answer the research question primary and secondary data will be used. This data will contain three types of data. Firstly, secondary data from corporate websites and social networks to check if the frim is a social enterprise and gather some general information. Secondly, qualitative data, from in-depth semi-structured interviews will be gathered. Finally, secondary data will be used again to double check, if possible, answers given from the interview. In this way triangulation is used to provide “stronger substantiation of constructs and hypotheses” (Eisenhardt, 1989).

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• Because they are actively part of the business on a daily basis. They have the complete overview and therefore can best provide valuable information about the enterprise’s legitimacy strategies with regard to all stakeholders.

• Additionally, this approach is suitable for identifying the most important stakeholders for the enterprise.

• Finally, considering the time constraints of this research, this approach provides the best chances to gain valuable information in time.

A list of questions that will be used for the interviews can be found in appendix C in Dutch.

3.4 Data Analysis

In this paper different methods will be used to analyze data following directions from Eisenhardt (1989). A within-case analysis will be conducted for each case. All gathered data from desk research will be analyzed by interpreting and reading, with regard to the operationalized variables. The generated output will be used as input for designing interviews. In turn, interviews will be analyzed by coding, reading and interpreting them. At the end a cross-case analysis will be performed by comparing outcomes of individual cases. Moreover, similarities, patterns or contradictions will be investigated. After analysis, a comparison will be made with similar literature. Finally, based on the data propositions will be composed, that can be examined in future research.

This research is aiming to find possible legitimacy strategies specifically for the start-up phase of social-enterprises. Indications for these strategies could be found using the cross-case analysis, to see where outcomes overlap, and to discover patterns.

3.5 Quality statement

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4. Results

This chapter presents the analyses of the different cases. Firstly, an individual within-case analysis is performed. Thereafter, a cross case analysis will be conducted to identify patterns and singularities. In appendix D descriptions of the three cases can be read. To gain some background information it is recommended to read it before this chapter.

4.1 Case Bolderburen

As a social enterprise Jesika Kersting, one of the owners of Bolderburen, sees making profit as a means to reach their main (social) goal. Which is developing ecological housing concepts, where social welfare of people comes first. She has always pursued this goal, and has no plans to change this in the near future. She rated social goal ‘Planet’ as important (4, at 5 point Likert scale), social goal ‘People’ as very important (5, at 5 point Liker scale) and commercial goal ‘Profit’ as important (4, at 5 point Likert scale). Additionally, she rated gaining legitimacy during the start-up phase from stakeholders as very important to the survival and growth of the enterprise. Furthermore, she mentioned that stakeholders did not influence Bolderburen’s main goal.

Moreover, according to her stakeholders were aware of the social impact but some needed prove. Prove for the ‘Planet’ goal was given through showing which materials were used and by receiving the energy neutral certificate. Prove for the ‘People’ goal was given trough explaining customers about how a community in an ‘eco village’ should be and organizing socials with the future inhabitants. In addition, we addressed our customers with personal conversations so that it mattered to us who would live in the ‘eco village’. But the real ‘People’ impact will only start when the ‘eco village’ is inhabited.

Finally, she mentioned that the social impact of Bolderburen played an important role in gaining moral legitimacy. “We connect with the moral convictions of society. For example, we are also very much in demand for interviews. Since social impact, participation society, being more self-sufficient, grow food locally and sustainability is becoming more broadly supported and topical, societal convictions fit well with our goals.

4.1.1 Stakeholders and their importance.

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Customers Suppliers Municipality

Power 3 3 5

Legitimacy 4,3 4 5

Urgency 2,3 2,3 5

Salience 3,2 3,1 5

Table 2: rating importance of stakeholders Bolderburen

Additionally, the interviewee was asked to rate how legitimate stakeholders would perceive Bolderburen to be. This was rated as a 5, meaning to a very high degree.

4.1.2 Legitimacy conflicts.

The interviewee was asked in which of the three categories legitimacy conflicts occurred during the first three years, and from what tensions they arose (see table below for conflicts with accompanying tensions). The conflicts and tensions which were apparent in Bolderburen are made yellow in the table below. Conflicts Tensions 1. Organizational Missions 2. Mobilization of Financial Resources 3. Mobilization of Human Resources a. conflicting demands between the needs of stakeholders and the needs of clients or the company mission

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In the case of tensions 1a & 1b with conflict 1 Bolderburen did have some struggle to address this conflict. In the interview the following was said: “Because I really wanted to take different aspects in account from the beginning, I occasionally make the conscious decision to go for an affordable option that gives something in on the environmental aspect. This is because that option makes it more affordable for the customer and yields more profit for us. You have to explain this to the customer sometimes. There are customers who feel that we are not going far enough. We call our project ‘eco village’, and in their eyes a village can only be called so when everything is done as socially and environmentally friendly as possible. Some of these customers will therefore not stay with us.”

From the quote above could be concluded that one of the owners consciously chose to not go fully for the goal ‘Planet’ but choses to also incorporate ‘Profit’ and ‘People’, as affordability seems to me as an important factor for gaining human welfare. As a result, a conflict arose between Bolderburen and some customers, as they disagreed on priorities. Furthermore, it could be stated that there were conflicting demands between the needs of some customers and the company mission. Some customers prioritized environmental goals, which demanded including the most environmental options (goal: ‘Planet’) for the houses. This was in conflict with Bolderburen’s company missions who not only wants to focus on ‘Planet’ but also on ‘Profit’ and mostly on ‘People’.

Additionally, customers tried to influence the project a lot. Some wanted a bigger personal garden, but this would go at the expense of the common garden. Bolderburen had to legitimize their choices to the customers and explain why a smaller private garden and a bigger common garden would be better for the community. Chances are high that more profit could be made when granting customers a bigger private garden (goal: Profit) but this would go at the expense of the community (goal: People) at which they aimed. Eventually, they stayed very close to their original plans and customers were happy with that. Which is not very surprising, after all, they consciously chose for this concept.

In the case of tensions 2c & 2d with conflict 2 Bolderburen also struggled to address this conflict. In the interview the following is said:

We were registered as a project developer and then you have some kind of monitor by the DNB (dutch central bank) where we were seen as risky. So it took a very long time to find a bank that dared to give us a payment account. We changed the articles of association to address this issue.

Everyone wanted us as a customer because of our goals, but the banks were still not willing to cooperate. The banks want your annual figures and expectations, before issuing a loan. Because this was such a hassle we chose to finance this company with our other company (Huisje van Hout/Kvist). Also to maintain autonomy and prevent conflicts.

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were expected to be too much of a strain. Because of this, to maintain autonomy and to prevent conflicts it was chosen to finance Bolderburen from capital gained in their other company Huisje van Hout/Kvist. Moreover, they also experienced legitimation conflicts arising from tension 2c: operating under financial constraints due to insufficient financial resources. As capital from their other company proved to be insufficient, they had to negotiate with suppliers to extend payment terms. And they also needed down payments from their customers, which they had to explain why. Through their personal approach and their creativity they managed to legitimize themselves to receive these arrangements.

When asking about mobilization of HR, which in their case mostly were self-employed builders (Dutch: ZZP’ers) from Eastern Europe, she said that being a social enterprise only helped. “Sustainability is so widely supported, that almost everyone really likes to take part in our enterprise. Contributing to sustainability makes people more enthusiastic and makes finding and motivating personnel easier”. So one could say that being a social enterprise positively contributes to legitimizing oneself to possible employees.

Furthermore, it was asked what conflict had the most adverse effect on the enterprise. The answer was, the conflict with the municipality, because negotiation space is very limited. Some part of the building site was not allowed to build on because of archeological findings. It was very hard to gain information from the municipality, so eventually we adjusted the whole plan so that there would not be buildings on the archeological finding site. This had costed a lot of time and effort and the village we planned was very different then the adjusted village. Additionally, we had to legitimize these adjustments to the customers, which was a strain. Eventually it all worked out fine. Normally, the only way to gain legitimacy from the municipality is to conform. But I have learned that it can be smart to start a lobby at a higher level in the future, and try to influence and gain more information from the municipality.

4.1.3 Legitimacy Strategies.

When gaining legitimacy in general it was chosen to select stakeholders who are in alignment with the goals of Bolderburen.

When addressing legitimacy conflicts/tensions every stakeholder needs a tailored strategy.

Stakeholder Strategy

Customers Select

Suppliers Select

Municipality Conform

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Customers

Bolderburen designed an ‘eco village’ with houses in Swedish style and with current trends on sustainability and community building in mind. When the design was ready they presented this to potential customers and they would have personal conversations with potential customers that showed serious interest. After that they selected a pool of house buyers for their ‘eco village’. Along the progress of the project some customers who did not agree with the plans anymore were told to look somewhere else, and new customers were selected.

Suppliers

A supplier from Sweden was selected whose goals were in alignment with the goals of Bolderburen. In this way conflicts were prevented.

Municipality

In case of the municipality, Bolderburen was forced to conform to their demands. This is due to the fact that the negotiation space is very limited.

4.1.4 Legitimation actions.

For gaining legitimacy Suchman (1995) proposed several actions, tailored to each strategy. For the strategy selecting the following actions were taken. The rating measures the level of importance to contributing to legitimacy, rated by the interviewee (1 being not important and 5 being very important).

Actions Type Rating

a. Localize stakeholders where your company already met the legitimacy requirements

Pragmatic 4

b. Finding respected entities that want to be associated with your company:

i. Triodos bank, tried but failed. ii. Affiliated with Social Enterprise NL.

Pragmatic 3

c. Setting goals Moral 5

d. Obtaining certification:

i. Energy neutral -> very essential to the customer and the banks. ii. Consciously not gone for green certificate at Rabobank, too much hassle, in principle we meet the requirements but the certifications from Sweden do not match those in the Netherlands. This was also more important to the customers, because they would receive an interest discount. We also felt like we did not need it.

Cognitive 4

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Additionally, the interviewee was asked why she chose to undertake the abovementioned actions. She answered: “These actions improve your network and knowledge about the goals you have when you look for stakeholders with aligned goals. And associating oneself with respected entities results in getting access to some kind of community with people who pursue the same goals.”

Furthermore, it was asked if she would add actions that affected the legitimacy of Bolderburen. She answered: “Consciously try to gain media attention with our story. Media attention works stronger than certification, most potential customers do not know the certificates anyway. To gain legitimacy it is really helpful when potential customers receive a consistent story in the course of time about your company”. This is only true because it is Business to Consumer and not Business to Business. In the latter case, certification would have more value as Businesses know what they are and often demand certain certification.

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4.2 Case De Verbinding B.V.

As a social enterprise Toine van Bijsterveldt, the owner and CEO of De Verbinding, sees making profit as a means to reach their main (social) goal. Which is organizing meaningful work for deaf people. He has always pursued this goal, and has no plans to change this in the near future. He rated social goal ‘Planet’ as somewhat important (2, at 5 point Likert scale), social goal ‘People’ as very important (5, at 5 point Liker scale) and commercial goal ‘Profit’ as important (4, at 5 point Likert scale). Additionally, he rated gaining legitimacy during the start-up phase from stakeholders as very important to the survival and growth of the enterprise. Furthermore, he mentioned that stakeholders did not influence De Verbindings’ main goal.

Moreover, according to him stakeholders were aware of the potential social impact but needed prove that deaf people were able to construct high quality products. Prove for the ‘People’ goal was given trough showing customers the products made by deaf people.

Finally, he mentioned that the social impact of Bolderburen played an important role in gaining moral legitimacy.

4.2.1 Stakeholders and their importance.

The social target group of De Verbinding are their employees, which are builders of window frames (during the first three years). The interviewee also named customers and the UWV (Institute for Employee Insurance, see: uwv.nl) as important stakeholders. The table below shows how these stakeholders were rated using Mitchell, Agle & Wood (1997). The rating for stakeholder salience is an average of the three parameters (Power, Legitimacy & Urgency).

Customers Employees UWV

Power 4 1,5 4

Legitimacy 5 4 5

Urgency 4,3 5 3,3

Salience 4,4 3,5 4,4 Table 6: rating importance of stakeholders of De Verbinding

Additionally, the interviewee was asked to rate how legitimate stakeholders would perceive De Verbinding to be. This was rated as a 5, meaning to a very high degree.

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4.2.2 Legitimacy conflicts.

The interviewee was asked in which of the three categories, legitimacy conflicts occurred during the first three years, and from what tensions they arose (see table below for conflicts with accompanying tensions). The conflicts and tensions which were apparent in De Verbinding are made yellow in the table below. Conflicts Tensions 1. Organizational Missions 2. Mobilization of Financial Resources 3. Mobilization of Human Resources a. conflicting demands between the needs of stakeholders and the needs of clients or the company mission

Table 6: Summary of legitimacy tensions and conflicts: De Verbinding. (Doherty et al., 2014).

In the case of tensions 1a with conflict 1 De Verbinding did have some struggle to address this conflict. In the interview the following was said: “Some employees have low performance. So firing these employees would be good for profit, but when a deaf employee is fired, chances are high that he or she never finds a job again. But we need some degree of performance otherwise De Verbinding will go out of business. Keeping the balance of performance (goal: ‘Profit’) and incorporating deaf people in the working world (goal: People) is a challenge.”

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Only not all deaf people, even with good training, are able to deliver high quality products in a timely manner. This tension sometimes evolves in a conflict, where an employee is not able to legitimize oneself, because he or she is delivering low performance (= low pragmatic legitimacy). At a certain point this employee needs to be fired in order to keep fulfilment of customer needs on track.

In the case of tensions 3a with conflict 3, mobilization of HR, De Verbinding also struggled to address this conflict. In the interview the following is said:

“Volunteers are unqualified deaf people who work at De Verbinding voluntarily to gain educational and practical experience. These people could not be given a paid job due to their incapacity. Officially, the UWV only provides employee insurance payout during a period of 2 months for these people. But only after a period of 6 months are these people able to qualify for a payed job. We told this to the UWV, but they said: the rules say 2 months, so 2 months it is. I did not put up with this and went to the main office of the UWV and spoke to their boss. I explained my case and he agreed that we needed a special treatment, so we got the 6 months we needed. After this period of 6 months most of these people either get a job at De Verbinding or are admitted to secondary vocational education. Next to the previous conflict, we also experienced tensions with volunteers who, according to themselves, already qualified for payed work and wanted to be treated in that manner. Only we did not always agree with them, which sometimes resulted in a conflict. In that case they gave them a choice, either keep working as volunteer, with a chance to get a payed job in the future, or to stop working at our company.”

From the quote above could be stated that there were tensions with managing rewards and motivations of volunteers. Additionally, there was a conflict with the UWV arising from conflicting demands between the needs of De Verbinding and the rules of the UWV. If they had not resolved this conflict then De Verbinding needed to pay these people the remaining 4 months as if they were fully qualified employees. This would be very detrimental for De Verbinding as they would lose much money to pragmatically illegitimate employees who firstly need time of other employees to train them and secondly do underperform.

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4.2.3 Legitimacy Strategies.

With gaining legitimacy in general it was chosen to Conform to stakeholders’ legitimacy demands. In the start-up phase De Verbinding was not in a position to make any demands or select other stakeholders.

Customers Conform

Employees Select

UWV Manipulate/Influence

Funds Select

Table 7: Strategies for each stakeholder: De Verbinding.

Customers

They had one customer who granted them a segment of their production. They were very thankful and felt lucky that they were given this opportunity. Additionally, they had no track record. So the negotiating position of De Verbinding was very weak. So they did not have any other option then conform to the demands made by this customer. This can be illustrated by the following case: De Verbinding agreed with the launching customer to produce plastic window frames, but when they were operational a few months later it suddenly had to be aluminum window frames. De Verbinding had to adjust to this and lost a significant amount of money in the process, as they already had all machines for the production of plastic window frames in place.

Employees

Employees were selected who either qualified from the start, or volunteers were selected, of which a part was selected to work as paid employee after they got through the training period.

Financial sources

Funds were selected who had their goals aligned with those of De Verbinding.

UWV

In case of the UWV, De Verbinding influenced them by reaching out to high level officials. In this way they were able to change the demands of the UWV to the demands of De Verbinding.

4.2.4 Legitimation actions.

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Actions Type Rating

a. conform to needs / legitimacy requirements of stakeholders Pragmatic 5 b. Finding respected entities that want to be associated with your

company:

i. Associated with Schipper Kozijnen ii. Affiliated with Social Enterprise NL.

Pragmatic 2

c. Building a reputation Pragmatic 2

d. Produce proper outcomes Moral 5

e. Embed in institutions Moral 2

Table 8: Legitimation actions De Verbinding

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4.3 Van Hulley

Jolijn Creutzberg is the owner (100% shareholder), founder and CEO of Van Hulley. As a social enterprise Van Hulley sees making profit as a means to reach their main (social) goal. Their goal is to recycle clothes that have fallen into disuse (1) and delivering work experience for women who do not have the necessary qualifications for their ambition on the labor market (2). A day and a half every week these women go to school in order to get their diploma at the end of the year. She started pursuing the second goal 1,5 years after establishment, but has no plans to change this in the near future. She rated social goal ‘Planet’ as important to fairly important (3,5 at 5 point Likert scale), social goal ‘People’ as very important (5, at 5 point Liker scale) and commercial goal ‘Profit’ as very important, but slightly less important then ‘People’ (4,5, at 5 point Likert scale). Additionally, she rated gaining legitimacy during the start-up phase from stakeholders as very important to the survival and growth of the enterprise. Furthermore, she mentioned that stakeholders did not influence Van Hulley’s main goal. She added that stakeholders did supply input which was helpful for Van Hulley to reach their social goals.

Moreover, according to Jolijn Creutzberg stakeholders were convinced of the social impact, but she thought real social impact only got realized after 1,5 years. Nevertheless, the women with low employability were already involved since the beginning, which aroused the interest of funds.

Finally, she mentioned that the social impact of Bolderburen played an important role in gaining moral legitimacy.

4.3.1 Stakeholders and their importance.

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Customers Employees Municipality

Power 3 3,3 4

Legitimacy 5 4 5

Urgency 3,2 4,3 4

Salience 3,7 3,9 4,3 Table 9: rating importance of stakeholders of Van Hulley

Additionally, the interviewee was asked to rate how legitimate stakeholders would perceive Van Hulley to be. This was rated as a 5, meaning to a very high degree.

4.3.2 Legitimacy conflicts.

The interviewee was asked in which of the three categories, legitimacy conflicts occurred during the first three years, and from what tensions they arose (see table below for conflicts with accompanying tensions). The conflicts and tensions which were apparent in Van Hulley are made yellow in the table below. Conflicts Tensions 1. Organizational Missions 2. Mobilization of Financial Resources 3. Mobilization of Human Resources a. conflicting demands between the needs of stakeholders and the needs of clients or the company mission

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In the case of tensions 1a with conflict 1 Van Hulley did have some struggle to address this conflict. In the interview the following was said: “What is always a tension is to find a good balance between good productivity at the workplace and addressing a vulnerable group of women (the seamstresses) who also need to feel safe and feel comfortable to speak their minds and who sometimes just have a bad day while it is really busy at the workplace, so you do not make the aimed production level. Because of this, you cannot push them to work harder. Also you cannot say: we are with so many staff today, then we will produce a certain number of boxer shorts. These things result in daily shifts between profit and social.” The abovementioned situation is describes a tension where the needs of the seamstresses are not always in line with the needs of customers. Customers demand high quality products, within a certain amount of time. And these seamstresses demand a working environment where their social needs can be met in order to improve performance in the long run and to make sure they take in their training and education well. One could say that these seamstresses, are given an opportunity at Van Hulley to improve their legitimacy. Especially, their pragmatic legitimacy is improved by Van Hulley, as the seamstresses get more experienced at their job and also get an education, which eventually improves their performance as an employee. The abovementioned tension sometimes evolves in a conflict, in the situation that employees are not able to produce products in time. Then customers need to be informed that their order is delayed. Luckily, most customers sympathize with Van Hulley’s goals and do not mind a delay. But these incidents should not happen too often, as then customers might lose trust in Van Hulley’s capability to do their job.

In the case of tensions 2c with conflict 2, mobilization of financial resources, Van Hulley also struggled to address this conflict. In the interview the following is said:

“When someone dropped out of my staff, and I had to take his work over, the sales collapsed also because of a very small staff. In this way I got insignificant cash flows. Because of this I have noticed how vulnerable the company is, I do not have much in reserve. I have always been able to set up funds, municipality and sales campaigns, but that is also limited. Nevertheless, the funds and the municipality provide a safety net, because they do not want this company to go out of business. But limited financial resources have not been at the expense of the social goal. When there is trouble in the company I do not give myself any salary, because I do not want the vulnerable seamstresses to suffer because of bad financial circumstances.”

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Additionally, the top three tensions were named. The most important tension was finding the balance between the commercial (pro productive) and the social (contra productive, short term) goals. Second, mobilization of sufficient financial capital, how to access resources. Third, how to efficiently function with a small staff and get the best out of everyone.

Furthermore, it was asked what conflict type had the most adverse effect on the enterprise. Conflict type 1: organizational mission was answered.

4.3.3 Legitimacy Strategies.

When gaining legitimacy during the start-up phase in general it was chosen to select stakeholders who are in alignment with the goals of Van Hulley.

Customers Select

Employees (seamstresses) Select

Funds Select

Municipality Conform

Table 11: Strategies for each stakeholder: Van Hulley.

Customers

Van Hulley launched their product knowing that it would appeal to a selective group of customers. They customers both Van Hulley’s products because they either or both wanted to recycle their shirt or/and wanted to contribute to strengthening the employability of women distanced from the labor market. Chances are high that customers do not buy at Van Hulley just because they need underwear. This because one piece of underwear costs €29,50 at Van Hulley (source: vanhulley.nl) , with mainstream underwear being priced around €10. So it could be concluded that Van Hulley selected an environment where they already complied with the legitimacy demands of customers.

Employees

Employees, seamstresses, were selected who were in need of help to improve their employability and who had affinity with sewing. These employees fit with the goals of Van Hulley

Financial sources

How social enterprises address legitimacy issues during the start-up phase Master Thesis:

Master Thesis: