Public policy rules and norms in choice of a nesting place of a social enterprise. Firm or nonprofit?
| DOI | https://doi.org/10.1108/JEPP-12-2012-0055 |
| Published date | 14 October 2014 |
| Pages | 237-253 |
| Date | 14 October 2014 |
| Author | Herrington J. Bryce |
| Subject Matter | Strategy,Entrepreneurship,Business climate/policy |
Public policy rules and norms
in choice of a nesting place
of a social enterprise
Firm or nonprofit?
Herrington J. Bryce
Mason School of Business Administration,
College of William & Mary, Williamsburg, Virginia, USA
Abstract
Purpose – The purpose of this paper is to consider how public policy rules and norms embedded in
the operation and financing of firms and nonprofits may affectthe choice of one or the other for nesting
a social enterprise while reducing the risk of failure due to an initial bad choice.
Design/methodology/approach – The paper is conceptual and literature based. It identifies and
evaluates factors in public policy that are embedded in the rules and norms of operating and financing
firms and nonprofits that could materially affect the choice of a nesting place of a social enterprise.
It treats the choice as a two-stage process: whether firm or nonprofit and what type of firm or what
type of nonprofit.
Findings – The choice of a structural form for nesting a social enterprise is dependent upon
the public policies embedded in each form that affect the probability of venture success and
entrepreneurial remorse.
Research limitations/implications – This paper suggests that public policy norms and rules are
deserving variables in the empirical and experimental determinants of choice and success in social
enterprises.
Practical implications – This paper may be used for conducting experiments of choi ce,
as a teaching or other pedagogical tool, and for guiding entrepreneurs in making informed choices as
to where to nest a social enterprise.
Originality/value – The literature contains several articles on how personality, alertness,
opportunity, context, and similar factors affect entrepreneurial behavior.This pap er is unique in that it
adds public policy to that list by demonstrating that the norms and rules derived from policy (federal
and state) are determinative of an informed choice.
Keywords Entrepreneurs, New ventures, Tax policy, Financing, Organizational structure,
Regulatory policy
Paper type Conce ptual paper
Introduction
Every generation of entrepreneurs has discovered some form of having a social impact
consistent with the prevailing public policy. The general effect of past models is the
separation of operations – between firm and nonprofit. Today’s movement opens
the possibilities and excitement of a strategy that integrates a single entity giving rise
to the question: What form should the aspiring entrepreneur adopt for nesting a social
venture – firm or nonprofit; and within the chosen fo rm, what specific subcategory will
best enable success?
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/2045-2101.htm
Received 8 December 2012
Revised 6 March 2013
Accepted 13 March 2013
Journal of Entrepreneurship and
Public Policy
Vol. 3 No.2, 2014
pp. 237-253
rEmeraldGroup Publishing Limited
2045-2101
DOI 10.1108/JEPP-12-2012-0055
Thanks to the Fall 2012 students of the Flex MBA and public policy programs at Williams
& Mary that allowedthe author to discuss this paper as one of the class lecturesand the reviewers
of this journal. The author is responsible for errors and omissions as the reader may deem.
237
Public policy
rules and norms
in choice
It is commonly held (Martin and Osberg, 2007; Zahra et al., 2009) that a social
enterprise (one that is motivated by the desire to produce a social impact) is achievable
as a firm or a nonprofit. Therefore, what are the public policy r ules and norms
embedded in each of these two that should inform the choice betwe en them for nesting
a social enterprise? The choice is not inconsequential on the outcomes for the
entrepreneur or the venture, and, therefore it is not riskless for either. As Karnani
(2011a, b) no tes, social entrepreneurship is a movement fraught with considerable
“hype” and possibilities for “illusion”; a point also made by Bishop (2010), and often
because of uniformed choices.
The choice of nonprofit or firm is fundamental to creating a social enterprise as an
entity. As Sabeti (2011) acknowledges, these two forms are the only ones commonly
held available to entre preneurs in th e USA. The label “bene fit” corpo ration or the
label “hybrids” (nonprofits operating within the culture of a business or a firm
operating within the objectives of a nonprofit), arises by a firm adopting a social
objective commonly associated with a nonprofit or, reversely, a nonprofit adopting
operational practices common to firms (Schieffer and Lessem, 2009; Battilana and
Dorado, 2010; Battilana et al., 2012). But this choice of a “hybrid” does not change
the fundamental fact that the social entrepreneur must choose between a for-profit
and a nonprofit corporate form when incorp orating or operating the enterprise
(Kassan, 2009; Sabeti, 2011; Schwister, 2009; Doeringer, 2010). These structural
forms have distinctly different operating rules and flexibilities grounded in public
policy, even though the operating objective of creating social value is attainable
in both, e.g. even in large established firms through a commitment to pursuing
a corporate social responsibility strategy (Porter and Kramer, 2006, 2011; Googins
et al., 2007; Brugmann and Prahalad, 2007). Kistruck and Beamish (2010) find that
for-profit social intrapreneurship is generally more successful than nonprofit ones,
which they attribute to the impact of cognitive factors, networks, and cultural
embeddedness.
This paper aims (among other things) to reduce the risk of buyer’s remorse by
increasing the awareness of the impact of policy-generated rules and norms on the
operation of the two forms, andto increase informed choice, rather than yielding to what
Townsend and Hart (2008) describe as choice between the two due to a perception of
ambiguities between them. In short, we are focussed on public policy as a determinant
of choices that affect the entrepreneur andventure outcome, just as others havefocussed
on alertness (Tan et al., 2012) context, personality, and opportunity (Austin et al., 2006),
as determinants of launching an entrepreneurial venture, and as Kistruck and Beamish
(2010) focussed on networks, cultural, and cognitive factors as causes of success in one
over the other.
Background in context of literature, definition of ter ms, and procedure
Peattie and Morley (2008) have found numerous ways in which social enterprise is used
in the literature. Austin et al. (2006) define a social enterprise as an innovative social
value-creating activity as does the pioneering categorization efforts of Porter and
Kramer (2006, 2011). The social entrepreneur in the context of Martin and Osberg
(2007) is a highly innovative person to whom the mission of contributing a social
good takes precedence, or at least diminishes the exc lusive aim of the firm of
maximizing profits for the exclusive personal financial gains of its investors.
A common motive of a social enterprise regardless of the chosen form is benefiting the
common good (Young, 2007).
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JEPP
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