Social Entrepreneurship and Circular Business Models: creating a triple bottom line value

Written by Eva Laláková

University of Amsterdam Master of Business Administration Entrepreneurship & Innovation Track Author: Eva Laláková Student number: 11811641 Supervisor: Dhr. Balazs Szatmari Second reader: dhr. Dr. Tsvi Vinig

Date: June 22nd, 2018

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0 Statement of originality

This document is written by Student Eva Laláková who declares to take full responsibility for the

contents of this document.

I declare that the text and the work presented in this document is original and that no sources other

than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of

the work, not for the contents.

1 Table of contents Abstract ...... 4 1. Introduction ...... 5 2. Literature review ...... 9 2.1. Business model literature ...... 9 2.1.1. The concept of business models ...... 9 2.1.2. Business model innovation ...... 10 2.1.3. The triple bottom line...... 11 2.1.4. Towards sustainable business models ...... 11 2.2. The concept of social entrepreneurship ...... 14 2.2.1. Social entrepreneurship and multiple value creation ...... 14 2.2.2. Social enterprises and sustainable business model components...... 15 2.3. The concept of Circular Economy ...... 17 2.3.1. Circular Economy and sustainable business models...... 19 2.3.1.1. Circular Economy related Offerings, Revenue Models and Partnerships ...... 20

2.4. Conceptual Model ...... 23 2.4.1. Hypothesis 1 ...... 23 2.4.2. Hypothesis 2 ...... 24 2.4.3. Hypothesis 3 ...... 27 2.4.4. Hypothesis 4 ...... 29 3. Methodology...... 33 3.1. Sample ...... 33 3.2. Measures ...... 33 3.2.1. Independent variable: Social entrepreneurship ...... 34 3.2.2. Dependent variable: Triple bottom line value creation ...... 34 3.2.3. Mediating variable: CE enabled offerings ...... 34 3.2.4. Mediating variable: CE enabled revenue model ...... 35 3.2.5. Mediating variable: CE enabled partnerships ...... 35 3.2.6. Control variables ...... 35 4. Data Analysis ...... 36 4.1. Dataset and demographics ...... 36 4.2. Reliability analysis ...... 37 4.3. Factor analysis ...... 38 4.4. Check for Normality ...... 38 5. Results ...... 40

2 5.1. Correlations...... 40 5.2. Mediation effect - separate ...... 41 5.3. Mediation effect – simultaneous ...... 46 6. Discussion ...... 51 6.1. Theoretical Implications ...... 51 6.2. Practical Implications ...... 55 6.3. Limitations and future research ...... 56 7. Conclusions ...... 59 8. References ...... 61 9. Appendices ...... 69

3 Abstract This research examined a research question of how do social enterprises create a triple bottom line

value by incorporating circular economy principles into their business models. While the triple bottom

line value creation was measured by three sub-constructs of environmental, social and economic

performances, circular economy business model components concerned circular economy related

offerings, circular economy related revenue models and circular economy related partnerships. The

study utilised cross-sectional survey design, by collecting data from 121 organisations in the

Netherlands including both social enterprises and regular for-profit businesses.

The findings suggested that social enterprises create a triple bottom line value. This indicates

that social enterprises as an organisational form can be considered as sustainable enterprises adopting

sustainable business models. This allows businesses aiming for a positive triple bottom line

performance to adjust their business operations accordingly. It can also stimulate investments into

social enterprises and inspire policy makers to create more favourable regulatory environment for this

type of organisations. Other important finding shows that Circular Economy related Revenue Models

and Partnerships mediate the relationship between social entrepreneurship and triple bottom line value

creation, while Circular Economy related Offerings have a positive mediating effect on environmental

and social aspects of the triple bottom line. Though when the mediating effect is tested

simultaneously, Circular Economy related Offerings become the most important business model

component for explaining positive environmental performance of companies, while Circular Economy

related Revenue Models is the only business model component leading to positive economic

performance. This shows the value of Circular Economy principles in promoting sustainable value

creation of companies, while drawing managerial attention upon the specific business model

components that have the capacity to do so.

Key words: business model innovation, circular economy, circular business models, entrepreneurship,

social entrepreneurship, sustainability, sustainable business models, triple bottom line value

4 1. Introduction

Nowadays, there is a wide agreement in the scientific community that business activities are one of the

most significant contributors to many social and environmental problems, such as growing inequalities

or climate change (Cohen & Winn, 2007). The urgent need to find solutions to such problems has

allowed for the rise of the concept of sustainable development, which calls for initiatives that would

"meet the needs of the present without compromising the ability of future generations to meet their

own needs" (WCED, 1987). The practise of sustainability is often referred to as triple bottom line

(TBL), which urges businesses to generate social, environmental and economic value simultaneously

(Aguinis & Glavas, 2012).

Traditionally, sustainable development has been mostly tackled by non-profit, governmental or

corporate social responsibility initiatives of for profit businesses (Hockerts & Wüstenhagen, 2010).

However, such approaches are insufficient to achieve the necessary radical change of organisations to

allow for substantive progress towards sustainable development, since companies tend to put financial

matters above the societal interest. Instead, the core of businesses, and thus their underlying business

models (BM), needs to be transformed to become more sustainable (Schaltegger et al., 2015).

In the past decade, social entrepreneurship (SE) has emerged as a novel form of doing business.

In contrast to conventional companies, SEs are primarily driven by a social mission, and generate an

economic value as means of sustaining themselves (Mair & Marti, 2006). SEs often produce goods or

services which allow them to contribute to the society, while adopting innovative BMs enabling them

to tackle diverse social problems (Zahra et al., 2009). However, in terms of the sustainability

perspective, it is unclear whether and how could SEs create an environmental value to contribute to

TBL simultaneously. In addition, scholars suggest that the social entrepreneurial research would

benefit from a more quantitative approach (Wilson and Post, 2013), since existing SE literature is

largely contextual and case study based.

One particular phenomenon closely associated with environmental value creation is called

‘Circular Economy’ (CE). It represents an alternative to the dominant linear economy defined by

‘make-take-waste’ patterns of consumption and production (Lucy & Rutquist, 2015), which focuses

5 primarily on economic objectives, while neglecting the negative environmental externalities resulting

from resource consumption and waste disposal (Jonker, 2012), such as extensive virgin resource

extraction, generation of waste and pollution along the extraction, production, and post-consumption

processes (Sauve et al., 2016; Banaite, 2016). It also disregards its negative impact for the wide

society, such as causing greater inequalities and stimulating the need for competition over scarce

resources (Greyson, 2007). Among others, Haas et al. (2015, p. 765) defines CE as a “strategy, which

aims at reducing both input of virgin materials and output of wastes by closing economic and

ecological loops of resource flows”, such as through reusing or recycling materials. The concept has

been increasingly promoted by firms and different governments around the world, with China

adopting it as a top down approach since 2002 (Zhijun & Nailing, 2007), and European Union

following a CE action plan since the 2015 (European Commission, 2015). While CE has the potential

to innovate BMs (Bocken et al., 2014; Ghisselini et al., 2016), and several authors suggested potential

CE related BM components (Bocken et al., 2016; Lucy & Rutquist, 2015), this topic has been

empirically under-researched (Murray et al., 2015). Moreover, if CE is to represent a viable

framework for sustainable development, scholars call for future researchers to re-examine the CE

concept to show how CE can lead to greater social equality or equality of social opportunity and thus

recognize and incorporate the societal value dimension in its conceptual framework to reflect the TPB

value creation (Geissdoerfer et al., 2017; Murray et al., 2015).

Hence on one hand, social enterprises are a new organisational form directed towards social and

economic value creation. On the other hand, CE is a strategy suggested to create an environmental

value through closing material loops. Thus, it is unclear whether either of the concepts can fully

contribute to sustainable development by creating a TBL value simultaneously. At the same time, both

concepts are likely to be linked with innovative business models, which have been empirically under-

researched.

BM literature suggests that value creation can be explained by BMs (Zott et al., 2011). While

the concept of BMs has proved to be a useful unit of analysis, the research on the design of sustainable

business models and how it translates to value creation is yet insufficiently researched (Boons et al.,

2013; Wirtz et al., 2016). Since the business model of SEs focuses on creating both social and

6 economic value, how will it be transformed?

Furthermore, Bocken et al. (2014) argue that approaches to embedding sustainability into BMs

can be used either separately, or combined. Such approaches include social entrepreneurship and

organisational and technological innovation associated with strategies for environmental sustainability,

such as using closed-loop systems. Since the latter is directly related to the principles of CE (Bocken

et al., 2016), it can be argued that SEs business model can be complemented by CE principles, which

would then facilitate TBL value creation.

Thus, this research aims to answer the following research question:

How do social enterprises create a triple bottom line value by incorporating Circular Economy

principles into their business model?

This study expects to contribute to the BM literature, CE literature and SE literature in different

ways. First of all, this paper aims to extend the existing BM and sustainable BM literature by

incorporating the TBL value creation within the acknowledged value creation concept. By combining

the concepts of SE and CE, this research aims to show whether such combination jointly allows for

achieving sustainable organisational outcomes, which has been proposed by Bocken et al. (2014) in

his discussion of potential innovative organisational approaches to embedding sustainability into BMs.

This paper also aims to contribute to CE scholarly knowledge, which is currently an emerging research

area. By examining the link between CE and TBL value creation, in particular the social value, this

research aims to fill a research gap proposed by Geissdoerfer et al. (2017) and Murray et al. (2015)

concerning lack of knowledge about whether the Circular Economy concept can be linked to societal

value creation, in addition to environmental or economic. This will also inform practitioners of the

relevance of CE principles in enhancing sustainable development. Moreover, Bocken et al. (2016) and

Lacy & Rutquist (2015) have proposed a conceptual framework of the potential circular business

model strategies likely to be adopted by organisations. This research aims to contribute to such

framework by investigating the link between such strategies and organisational TBL performance. It

also aims to show which particular circular business model components can explain such TBL value

creation. Lastly, this paper will advance current understanding of SEs. While previous qualitative

research suggests the relationship between SE and the creation of social and environmental value

7 (Boons & Ludeke-Freund, 2016; Stevens et al., 2015; Wilson & Post, 2013), this research aims to

corroborate such relationship quantitatively. Previous research also shows discrepancy in terms of

whether SEs have the capacity to create TBL value simultaneously and hence adopt truly sustainable

business models (Boons & Ludeke-Freund, 2013; Yunus, 2010). This research aims to contribute to

resolving this issue.

Empirical evidence is provided by the means of data derived from an online questionnaire that

was distributed to 720 Dutch companies, from which half were social enterprises and half were regular

for profit businesses. The final dataset consists of 121 completed questionnaires, which allowed this

research to employ a deductive approach to data analysis.

The paper is structured as follows. Chapter two presents an overview of the existing theory on

the constructs of business model innovation and triple bottom line value creation, social

entrepreneurship and circular economy. These constructs form the bases of the conceptual model,

which is also presented in chapter two, along with several proposed hypotheses. Chapter three will

describe the design of this research, including the sample and the measurement scales. Subsequently,

the data will be analysed and hypotheses will be discussed in chapter four. The paper finishes with a

critical discussion of the results in chapter five, and an answer to the research question provided in the

conclusion in chapter six. Furthermore, practical recommendations for both managers and policy

makers, limitations of the study and future research suggestions will be discussed.

8 2. Literature review This chapter shows an overview of the literature associated with business models, social

entrepreneurship and Circular Economy. These concepts are of a principal importance for the research

question to be answered and frame the hypotheses of this study presented in the conceptual model.

2.1. Business model literature

Since this paper considers BMs as a vehicle for TBL value creation within SEs, it is necessary to

identify what business models are, what are its components, and how it is theoretically linked with

innovation and sustainability.

2. 1.1. The concept of business models

Over the past decades, business model literature has been gaining a broad attention from both scholars

and practitioners (Zott et al., 2011). Yet, despite the increased attention of the concept, Wirtz et al.

(2016) concludes his extensive BM literature review by arguing that the BM field of research is still at

a very early stage, and the concept has been depicted by a highly fragmented literature. Similarly, Zott

et al. (2011) reviewed BM literature to suggest that it is theoretically underdeveloped.

While a general consensus over the BM definition does not exist, it is often referred to as a

framework, design, architecture, or a conceptual logic of the mechanisms inherent to value creation,

delivery and capture (Björkdahl, 2009; George & Bock, 2011; Teece, 2010; Zott et al., 2011). At the

same time, there is a widespread scholarly consensus over few aspects of BM: (1) BMs can be used as

a unique unit of analysis distinct from the product, firm, or industry, which focuses on the focal firm

but can extend its boundaries (2) BMs reflect many interdependent activities needed to realize firm’s

intended strategy (3) BMs can explain firms value creation, not just value capture (George & Bock,

2011; Zott et al., 2011; Seelos & Mair, 2005).

This paper adopts two definitions proposed by the same authors, who initially defined BM with

an explicit emphasis on its value creation function: it is “the content, structure, and governance of

transactions designed so as to create value through the exploitation of business opportunities” (Amit &

Zott, 2001, p. 511). Such definition, however, does not specify the kind of value to be created, and is

likely to be associated with Porter’s (1985) notion of economic value measured by total revenues. The

9 creation of social or environmental value, beyond financial profits, requires a definition that transcends

organisational boundaries. Such definition was provided by the same authors ten years after: it is “a

system of interdependent activities that transcends the focal firm and spans its boundaries” (Zott &

Amit 2010, p. 216).

To create a clearer understanding of the concept of BMs, its definition needs to be

complemented by an understanding of its components. While most authors differ on what components

they focus on, the analysis of existing literature reveals that the strongest scholarly consensus exists

around three components: (1) the product/service directed to customers, (2) the way the firm creates

and delivers the product/service to its customers through own value chain and through an external

network of suppliers and partners, and (3) revenue model showing how economic value is captured

from the former (Wirtz et al., 2016; Yunus, 2010).

2.1.2. Business model innovation

In recent years, there has been a growing scholarly and managerial interest in innovative BMs, which

reflect recent advances in information technology and subsequent rise in e-commerce, the rise of

knowledge economy, and increasing societal concern over the sustainability of mainstream business

practises (Teece, 2010; Bocken et al., 2014). As a result, many firms need to modify their value

proposition presented to customers, or the mechanisms of creation and capture of value from new

products and services (Björkdahl, 2009; Teece, 2010). Business model innovation can be distinguished

in terms of intensity. While BMs can represent a form of innovation themselves, such as when

technology is the enabler of novel BM forms, they can also support the marketing of other innovative

products, services or processes (Teece 2010; Boons & Ludeke-Freund, 2013).

Sustainable entrepreneurs are individuals who use businesses to facilitate environmental and

societal progress through innovative solutions concerning sustainable products or services (Hall et al.,

2010; York & Venkataraman, 2010). Such solutions are often triggered by market failures leading to

social or environmental degradation, such as organisational inefficiencies, negative externalities,

flawed pricing mechanisms, or information asymmetries (Dean & McMullen, 2007; Cohen & Winn,

2007). Based on such market imperfections, new opportunities for the creation of radical technologies

10 or adoption of innovative business models emerge. In this respect, business model innovation can be

seen as an essential instrument to facilitate sustainability-orientated businesses (Boons & Lüdeke-

Freund, 2013).

2.1.3. The triple bottom line

Before further discussing sustainable business models (SBMs), it is necessary to describe the

concept of Triple Bottom Line (TBL), which is associated with the practise of sustainability, driving

businesses to simultaneously generate social, environmental and economic value, with respect to

people, planet and profits (Elkington, 1994). It is also considered as a tool for measuring sustainable

organisational performance across a range of aspects, adding the social and environmental measures to

the traditionally assessed economic performance (Hahn et al., 2015). The economic dimension refers

to different measures of economic performance at a firm level, such as profitability and shareholder

value. The financial performance of companies can then contribute to the creation of welfare in the

country where it operates (Porter & Kramer, 2006; Prahalad & Hammond, 2002). The environmental

dimension focuses on protecting the natural environment and reducing corporate footprint, by the

means of pollution reduction, or the (efficient) use of resources. Lastly, the social dimension captures

the (positive) impact of corporations on people and society (Bansal, 2005), by the means of social

value creation.

2.1.4. Towards sustainable business models

Existing literature does not provide a wide conceptual definition of SBMs (Boons & Lüdeke-

Freund, 2013). Despite, SBMs are often referred to as being driven by sustainability concerns with the

goal of social and environmental value creation, which shape the overall business strategy and all

subsequent decision making (Stubbs & Cocklin, 2008). Here the economic value creation is seen as a

by-product, or a facilitator (Cohen & Winn, 2007; Seelos & Mair, 2005). This can be contrasted with

conventional BMs, which provide social benefits, such as access to products or employment, as an

add-on of prioritized economic value creation (Stormer, 2003).

To compensate for the lack of SBM definitions, Boons & Lüdeke-Freund (2013) introduced four

normative requirements under which SBM should operate: (1) Value proposition: product or service

have an embedded social or environmental value, (2) Supply chain: suppliers are actively involved

11 with the focal firm to promote sustainability, such as through jointly closing material cycles that reuse

or avoid waste, and are held responsible towards wider stakeholder groups, (3) Customer Interface:

customers have close relationships with the firm to allow them to take responsibility for own

consumption, such as through take-back policies and value co-creation, and (4) Financial/revenue

model: fair distribution of economic value among actors involved. Similarly, a case study research on

sustainable business models suggests that firms can aim to achieve its sustainability objectives through

particular BM components, including firms’ offerings (i.e. sustainable products or services, such as

those produced by closed loop systems), revenue model (i.e. means of capturing financial value to

ensure operational sustainability), and stakeholder collaboration (i.e. being proactively supported by

not only internal, but also external stakeholders, by the means of collaborative partnerships, while

considering needs of all stakeholders) (Stubbs & Cocklin, 2008). While the above mentioned SBM

attributes are rather broadly defined and have not been empirically tested (Boons & Lüdeke-Freund,

2013), it appears that stakeholder collaboration/partnerships, revenue model, and company offerings

can be seen as key potential BM components which could shape the TBL value creation by SEs

through circular economy principles, which are closely associated with closing material loops (Murray

et al., 2015).

The concept of sustainable entrepreneurship also includes social enterprises, which use market

mechanisms as means of achieving the primary goal of social value creation (Schaltegger & Wagner,

2011). The BM of social enterprises have been empirically under-researched, with the exception of

Yunus (2010) who proposed a theoretical framework of BMs of social businesses, which depicts as a

subset of social enterprises. As compared to conventional BM components reviewed in section 2.1.1.,

a social or environmental value creation component has been added, while economic value creation

through revenue models is viewed as necessary for a full cost recovery.

Furthermore, the social BM depicted by Yunus (2010) bears similarities with the previously

discussed SBM attributes. First of all, both concepts include value proposition associated with a

product or service. However, while SBM require social and environmental value creation to be

embedded within the value proposition, the social BM does not specify how the social or

environmental value is derived from the value proposition. This implies that such link could be

12 indirect, such as through the employment of disadvantaged individuals in the manufacturing process.

Secondly, both concepts include an economic value creation component, depicted as a revenue model,

or an economic profit equation. Lastly, both concepts include a notion of stakeholder involvement.

However, while Boons & Lüdeke-Freund (2013) only discuss the role of suppliers and customers in

the value chain, Yunus (2010) and Stubbs & Cocklin (2008) include a broader notion of stakeholders.

In this respect, Yunus (2010) argues that setting up collaborative partnerships is a key component of

social BMs, whereby complementary resources and expertise can be leveraged by the parties involved

to serve the customers and all relevant stakeholders. Nevertheless, it remains unclear how can

individual components of SE BMs jointly contribute to multiple value creation.

Where Yunus (2010) suggests that social ventures tend to focus on either environmental or

social value creation, other authors suggest that such phenomena may be interconnected and mutually

reinforcing (Bocken et al., 2014; Boons & Lüdeke-Freund, 2013). Case study research by Wilson &

Post (2013) suggests that SEs social mission can be multi-faceted and hence can incorporate

environmental concerns alongside the social mission. Furthermore, extensive literature review by

Boons & Lüdeke-Freund (2013) showed that SBMs are mostly associated with technological, social,

and organisational innovation. Same categories have been used by Bocken et al. (2014) in his

discussion of potential innovative organisational approaches to embedding sustainability into BMs.

Here social innovation is used interchangeably with social entrepreneurship, and organisational and

technological innovation captures approaches to reducing environmental footprint, such as closed-loop

systems, using renewable energy sources, delivering functionality rather than ownership and creating

value from waste. Since the latter is directly related to the principles of Circular Economy (Murray et

al., 2015), and the authors argue that such various approaches to embedding sustainability into BMs

may be used in combination (Bocken et al., 2014), it can be argued that SEs business model can be

complemented by CE principles, which could then facilitate TBL value creation.

Overall, it has been discussed that business models can be utilised as vehicles for value creation

of businesses. When such value creation is to reflect the triple bottom line, organisations need to adopt

sustainable business models. Since existing literature indicates that collaborative partnerships, revenue

models and company offerings are among the key components of any business models, the following

13 chapters will focus on these, as well as on the concepts of social entrepreneurship and circular

economy which are likely to jointly facilitate environmental, social and economic value creation.

2.2. The concept of social entrepreneurship Even though SE has become an increasingly prominent area of research in a range of disciplines

(Dacin et al., 2010; Di Domenico et al., 2010) scholarly literature does not have a clear consensus of

its definition. Hence much of the literature has been focusing on defining the concept (eg. Mair &

Marti 2006; Peredo & McLean 2006; Zahra et al. 2009).

Definitions of social entrepreneurship range from social responsible activities of the for-profit

sector firms (Sagawa & Segal, 2000; Waddock, 1988) to the government or non-profit sector

organisations employing market principles (Austin et al. 2006; Dees, 1998). Dacin et al. (2010, p. 38)

examined an extensive body of research into SE definitions and concluded that consensus exists in

social entrepreneurships’ ‘ability to leverage resources that address social problems’. Zahra et al.

(2009, p. 522) proposed a SE definition based on existing literature: “Social entrepreneurship

encompasses the activities and processes undertaken to discover, define, and exploit opportunities in

order to enhance social wealth by creating new ventures or managing existing organizations in an

innovative manner". Similarly, other leading scholars consent over such essential characteristics of

SEs, irrespective of the terminology, legal or organisational form (Stevens et al., 2015) - they refer to a

market based activity concerned with social value creation and revenue generation, and in which a

relative priority and explicit focus is given to the former over maximising economic returns (Mair &

Marti, 2006; Peredo & McLean 2006; Zahra et al. 2009).

2.2.1. Social entrepreneurship and multiple value creation

The fundamental reason for the existence of social enterprises is to create a social value to serve

societal needs, which can be captured by organisational social mission (Austin et al., 2006; Stevens et

al., 2015). The social needs addressed tend to be the neglected problems in the society such as

responding to the basic human needs in developing countries by providing access to products and

services, (Santos, 2012; Certo & Miller, 2008), providing employment (Karnani, 2007), enabling

social participation and promoting equality, or reducing poverty (Murphy & Coombes, 2009). To

14 further distinguish the characteristics of social value within the SE context, Dacin et al. (2010) argues

that a subjective assignment of the normative connotation of ‘social’ is needed. For instance, whereby

providing services to low-income people is SE, doing so for high-income people is not. Similarly, a

consensus exists within the SE literature that social value creation within SE is directed towards

specific groups of beneficiaries, i.e. disadvantaged segments of populations in unfavourable

circumstances (Murphy & Coombes, 2009; Seelos & Mair, 2005), such as the socially excluded, racial

minorities, disabled, poor, or long-term unemployed. Such groups are also less powerful, with little

resources and low ability for collective action (Santos, 2012). However, it is important to acknowledge

that SEs can also aim to address environmental issues, such as climate change (Murphy & Coombes,

2009; Wilson & Post, 2013; Yunus, 2010), and less radical social issues, such as enhancing

cooperation and community development (Lumpkin et al., 2013).

Apart from creating a social value, SEs also need to become financially sustainable, through

generating an economic value by trading (Mart and Marti, 2006; Zahra et al., 2009). This can be

contrasted with commercial enterprises which are primarily concerned with maximising profits for

shareholder wealth, and with non-for profit organisations, which mainly rely on grants or donations,

rather than employing market mechanisms to sustain themselves (Chell, 2007). Nevertheless, some

authors suggest that SEs may differ in their ambition for economic value creation (Stevens et al.,

2015) and may also rely on external financial support to some extend (Austin et al., 2006).

2.2.2. Social enterprises and sustainable business model components

Similarly to regular ventures, SEs pursue profit generating activities through producing and selling

products and/or services to generate an economic value (Stevens et al., 2015). When such products and

services reflect the needs of the community, they can be also directly linked to generating social value

(Weerewardena & Mort, 2006). This also ensures that the social outcomes of SEs are integral to their

economic performance and vice versa (Peredo & Chrisman, 2006). Alternatively, it appears that the

trading activities can be linked to a social value creation indirectly, for instance when it is used as

means of financing social purpose (Di Domenico et al, 2010). Nevertheless, revenue generation

activities have been argued to increase the autonomy and flexibility of SEs to adjust to and respond to

15 the needs of the beneficiaries they serve (Di Domenico et al., 2010). This implies that both products

and services and revenue models implemented by SEs are integral to economic value creation, and can

be directly or indirectly linked to social value creation. However, could these business model

components also create an environmental value, which would allow SEs to create a TBL value? Austin

et al. (2006) suggests that SEs apply not only innovative BMs, but also novel BM strategies to provide

solutions to global problems. We argue that such strategies could be linked to the principles of CE,

which will be discussed in the next chapter.

Furthermore, SEs create their offerings in line with the interests of diverse stakeholder groups,

and are likely to incorporate collaborative partnerships with different stakeholders into their BMs, as

suggested by the SBM literature (Stubbs & Cocklin, 2008; Yunus, 2010). Stakeholders refer to any

individuals or groups that either affect or are affected by the ventures’ activities (Freeman, 1984). This

implies that a broad range of possible stakeholders exists and that such stakeholders differ from

company to company. At the same time, partnerships are characterised by relationships formed

between two separate entities to realize specific benefits and objectives through the means of

cooperation, such as increasing operational performance of the members (Maloni & Benton, 1997;

Utting & Zammit, 2009). Such partnerships can be set up within the same sector, or increasingly

across sectors (Selsky, 2005), with the latter commonly aiming to address social or sustainability

orientated business goals (Parmigiani et al., 2011).

There is a lack of empirical studies which would clearly explain the role of SE stakeholders in

value creation. Earlier case studies undertaken by Di Domenico et al. (2010) suggest that SEs actively

involve stakeholders including employees, volunteers, local communities and policy makers in their

creation, governance structures, decision making, or strategy implementation. Furthermore, such

social networking strategy allows them to generate new contacts with external actors and access

expertise and valuable resources. Similarly, Santos (2012) argues that collaborative partners of SEs are

likely to be empowered to become an integral part of the solution to social problems.

In his qualitative study on SBMs, Jonker (2012) found that sustainable enterprises produce value

jointly with their entire value creating network consisting of various stakeholder groups, through the

means of cooperative partnerships. This opposes traditional ventures which organise their

16 stakeholders, i.e. suppliers and customers, as a vertical value chain consisting of upstream and

downstream stakeholders. Hence even though the notion of sustainable enterprises is somewhat

broader than that of SE due to its inherent focus on TBL, it can be argued that when SEs aim for TBL

impact, such as through employing CE strategies, they may employ a similar mechanism of integrating

external stakeholders within their BMs.

To summarise, based on the literature presented in chapter 2.2 social entrepreneurship concerns

a market based activity associated with social value creation and revenue generation, in which priority

is given to the former over maximising economic performance. While social enterprises adopt revenue

models, produce products or services and incorporate collaborative partnerships with different

stakeholder groups integral to social and economic value creation, it is unclear whether they can create

a triple bottom line value simultaneously. In addition, social enterprises are argued to apply novel

business model strategies to provide solutions to global problems. Hence the next chapter will

investigate whether such innovative business models could concern circular economy principles.

2.3. The concept of Circular Economy

The traditional model of linear economy which has dominated the society for many decades is based

on the take-make-waste pattern of consumption, in which natural materials are extracted, used in the

product manufacturing processes and finally sold to customers who dispose of it (Ellen McArthur,

2014). While the primacy is given to economic objectives, it neglects the negative environmental

externalities resulting from resource consumption and waste disposal (Jonker, 2012). In contrast, CE

recognizes the need for reducing the effect of economy on the environment through its focus on

minimizing resource depletion. In his extensive analysis of the origins of the term CE, Murray et al.

(2015) suggests that while different authors link the concept with different meanings and associations,

general agreement exists that CE refers to a cyclical closed material loop system, i.e. the circulation of

products and materials.

Geng & Doberstein (2008, p.232) propose a rather broad definition of CE: "It advocates that

economic systems could and should operate according to the materials and energy cycling principles

that drive natural systems". This suggests that CE should avoid the use of new (raw) materials and

17 should pursue cycling of resources similar to the cycling process inherent to the nature (Murray et al.,

2015), leading to creation of a value cycle. Geissdoerfer et al. (2017, p. 759) formulated a different

definition based on his analysis of previous conceptualisations: it is " a regenerative system in which

resource input and waste, emission, and energy leakage are minimised by slowing, closing, and

narrowing material and energy loops. This can be achieved through long-lasting design, maintenance,

repair, reuse, remanufacturing, refurbishing, and recycling". This definition appears to be fairly all-

encompassing, as it includes both the value cycle aspect needed for closing raw material loops, the aim

for value preservation to protect materials and products, as well as instructions on how to become

circular. Overall, it appears that CE has two main objectives: value creation through preserving the

value of existing products and/or materials to avoid the use of new ones, and keeping away from

waste, i.e. value destruction, to protect the environment (Murray et al., 2015).

Most of the CE literature focuses on strategies for the use of materials. Two principal strategies

for the cycling of resources are distinguished: (1) Slowing resource loops and (2) Closing resource

loops (Bocken et al., 2016; Stahel, 1999). The former contributes to slowing down the flow of

materials from manufacturing to recycling by extending and/or intensifying the use period of products

through strategies to prolong an existing product’s life (eg. reuse, repair), or designing durable

products. The latter aims to close the loop between post-use and production period and results in

circular resource flow through the means of recycling.

Such strategies can be realised by the implementation of the core 3R principles of CE: (1)

reduce; (2) reuse; (3) recycle (Ghisellini et al., 2016; Hu et al., 2011; Zhijun & Nailing, 2007).

However, the reduce principle focuses on a reduced consumption of resources through the increased

production and delivery efficiencies, rather than addressing the cycling of materials and goods

inherent to CE (Lieder & Rashid, 2016; McDonough & Braungart, 2002) and thus will not be further

considered in this paper. The Reuse principle is a process whereby products in good condition, or its

components, are directly or indirectly, such as through repair, reused for the same purpose for which

they were formulated, and is aligned with the ‘slowing resource loop’ CE strategy (Bocken et al.,

2016). It can be linked with other re-strategies essential for extending a product life-cycle: (1) Repair

is the maintenance and adjustment of products so they can be used again, (2) Refurbish refers to

18 restoring older product to their original or modern state, (3) Remanufacture depicts the use of

components of rejected products in new products with the same function, and lastly, (4) Repurpose

refers to the use of rejected products or its components in new products with a different function

(Bocken et al., 2016; Ghisellini et al., 2016). The Recycle principle refers to a mechanism whereby

waste materials are re-processed to obtain products, materials or substances for original or other

purposes (Ghisellini et al., 2016), and corresponds to the ‘closing resource loop’ CE strategy depicted

by Bocken et al. (2016). The recycle principles encompasses two types: upcycling which transfers

waste components into materials of improved value, and downcycling which leads to the creation of

materials of lower value (Andresen, 2007; McDonough & Braungard, 2002). Furthermore, Ellen

McArthur (2015) suggests that shift to renewable energy is another key principle of CE.

2.3.1. Circular Economy and sustainable business models The previously discussed re-strategies are mainly concerned with material use, with the goal of

preserving the highest possible value from products and materials. Hence it can be argued that the

concept of CE is inherently linked with the creation of an environmental value, by the means of

different strategies, such as creating value from waste. However, if CE principles are to create other

forms of value, they need to be embedded into organisations through innovative forms of BMs (Ellen

MacArthur, 2014). Here circular business models (CBMs) can overlap with other concepts, such as

closed-loop supply chains, and exemplify a SBM subcategory (Linder & Williander, 2017), despite the

fact that thus far the CE literature fails to explicitly recognize the social implications of CBMs

(Geissdoerfer et al., 2017; Murray et al., 2015), which is among the goals of this study.

Current literature focuses on CBM development, leaving a literature gap about assessing it in

terms of value creation. Based on existing SBM literature, Bocken et al. (2016) proposed a conceptual

overview of the potential business model strategies for CE, distinguishing between those for slowing

resource loops (Access and Performance Model, Extending product value, Classic long-life model)

and those for closing resource loops (Extending Resource Value, Industrial Symbiosis). His

framework resembles the five potential circular BMs identified by Lacy & Rutquist (2015): (1)

Circular Supply Chain, (2) Recovery and Recyling, (3) Product Life Extension, (4) Sharing Platform,

(5) Product as a service.

19 2.3.1.1 Circular Economy related Offerings, Revenue Models and Partnerships The work of Bocken et al. (2016) and Lacy & Rutquist (2015) have been analysed and merged, and

will be briefly discussed below, with particular focus on BM components including circular offerings,

circular revenue models, and circular partnerships with a diverse set of stakeholders. Such components

are linked with SBMs (Bocken et al., 2014; Stubbs & Cocklin, 2008) and hence have the potential to

create TBL value when implemented by SEs. These three components will be explained within the

review of the various circular business models types, and will be illustrated with examples. This leads

to the development of their respective conceptual definitions, which are presented in the end of the

chapter.

First of all, the access and performance model, also referred to as product service systems

(Bocken et al., 2014), allows for a value proposition concerned with delivering product as a service,

i.e. providing the capability of products to serve customer needs without the need for ownership. Here

the link between production volume and profit is broken, and companies instead aim to maximise

consumer use of products. Since manufacturers retain ownership of the assets, they have economic

incentives for slowing resource loops, for instance by increasing profits from designing durable,

upgradable, reusable or reparable products, while reducing production throughput of materials

(Bocken et al., 2014; Bocken et al., 2016).

The access and performance model is closely associated with the sharing platform model, which

provides an online platform connecting product owners and users. Here under-utilised assets can be

considered as a form of wasted value, which can be recaptured through sharing and collaborative

consumption (Bocken et al., 2014). In such BMs, the revenue model can take several forms, such as

paying per use or renting, leasing or charging a fee per transaction (Bocken et al., 2016; Lacy &

Rutquist, 2015). The viability of such BM is strongly dependent upon active involvement of various

stakeholders, from the focal firm developing relations with new partners such as insurance companies

to collaborating with product owners to jointly allow for the sharing platform value proposition.

The classic long-life model has a value proposition linked with providing a high-quality, durable

products, which can be complemented by services such as repairs or upgrades. The revenue model can

take various forms. While products can be sold at a single point of time, often at a premium price,

20 alternative revenue models are also possible, such as freemiums (free products, revenues generated

from add-ons), or pay per use (Bocken et al., 2016; Lacy & Rutquist, 2015). Furthermore, new forms

of collaborative partnerships for circular economy are likely to be needed, for instance to handle

customer inquiries or to undertake maintenance services.

The extending product and resource value models have a value proposition based on utilising

the residual value of products and waste materials. In particular, waste materials can be collected and

re-sold as a service, end-of-life products can be reused or repaired to be re-sold and new products can

be created from discarded materials through recycling. Similarly, the industrial symbiosis model refers

to exchanging by-product materials between industries to be used in novel production processes. Such

BMs are ownership based, and allow for one time transaction revenue models when businesses simply

sell their products, while additional economic value is captured through reduced material cost. To

allow for such BM, companies need to implement take-back systems to collect pre-owned products or

waste materials (Bocken et al., 2014; Lacy & Rutquist, 2015). Hence companies are likely to directly

depend on collaborative partnerships with different stakeholder groups, for instance with customers,

but also with intermediaries such as retailers, collections points, or logistic companies. Here the

relationships can vary from very close, with high amount of trust and commitment, to rather weak, for

instance when remanufacturers simply buy the used products from some constituencies, such as

customers (Östlin et al., 2008). Such tight circular partnerships can mitigate potential challenges

associated with return flows, such as predictability and reliability, which create capacity planning

difficulties (Östlin et al., 2008).

Overall, all of these potential circular BMs share three fundamental components: Circular

Economy related Offerings, Circular Economy related Revenue Models and Circular Economy related

Partnerships (Bocken et al., 2014; Bocken et al., 2016; Lacy & Rutquist, 2015), which are likely to

play a key role in explaining multiple value creation of organisations. To summarise, Circular

Economy related Offerings define what the firm offers to solve the problems of their

customers/beneficiaries or satisfy their needs in novel or enhanced ways, by the means of utilising

circular economy principles. Therefore, it includes novel circular products (i.e. Durable, reused,

repaired, made from recycled materials) or services (i.e. Product service systems; product sharing

21 platforms; collection and reselling of wasted products/materials). Similarly, the construct of Circular

Economy related Revenue Models concerns encouraging customers to pay for offerings, in which

revenues are not generated through one-time transactions, to allow for more sustainable streams in

which revenues are generated indirectly or over time. Hence circular revenue models concern novel

ways of transactions (i.e. leasing, renting, pay-per-use, transaction fee charges), and new revenue

opportunities through circular economy related activities (eg. selling waste materials; maintenance

services to accompany durable circular products). Lastly, Circular Economy related Partnerships refer

to a collaboration of the focal firm and any external stakeholder group(s), which is vital for the focal

firm in enabling the successful implementation of circular economy principles into its business model,

by the means of proactive support and/or key resource provision and/or undertaking key activities.

In summary, the concept of Circular Economy has two main objectives: (1) preserving value of

existing products and/or materials, and (2) avoiding the use of new materials, while keeping away

from waste. The concept is formed by the principles of reuse, recycle, repair, refurbish, remanufacture

and repurpose, which can be also embedded into organisations through multiple types of circular

business models. These share three fundamental components: (1) Circular Economy related Offerings,

(2) Circular Economy related Revenue Models and (3) Circular Economy related Partnerships. Such

components have the potential to explain multiple value creation of organisations, including social

enterprises, and will form the basis of the conceptual model of this paper.

22 2.4. Conceptual Model

This research aims to advance the understanding of the relationship between social entrepreneurship

and triple bottom line value creation. Circular Economy related Offerings, Revenue Models and

Partnerships are considered as mediators of such relationship. Hence the research question proposes:

How do Social Enterprises create a triple bottom line value by incorporating Circular Economy

principles into their business model? The following section presents the theoretical framework leading

to the multiple hypotheses proposed. These hypotheses are visually represented in Figure 1.

Figure 1: Conceptual Model

2.4.1. Hypothesis 1

As suggested by the SE literature reviewed in section 2.2.2, the primary goals of social enterprises is

to create a social value to serve various social needs, which can be captured by the ventures’ social

mission (Austin et al., 2006; Stevens et al., 2015). At the same time, most authors consent that SEs

also strive to create an economic value as means of financially sustaining themselves through

employing entrepreneurial market mechanisms (eg. Mair & Marti, 2006; Austin et al., 2006).

To consider SEs as sustainable enterprises which have the capacity to create a triple bottom line

value, an environmental concern also needs to be addressed. Earlier case studies by Wilson and Post

(2013) show that the social mission of SEs can be multi-faceted and can incorporate an environmental

dimension. Similarly, other authors acknowledge that SEs can also aim to address environmental

23 issues (Murphy & Coombes, 2009; Wilson & Post, 2013; Yunus, 2010). In the sustainable

entrepreneurship context, it has also been suggested that social and environmental performance may

be interconnected and mutually reinforcing (Bocken et al., 2014; Boons & Lüdeke-Freund, 2013).

Therefore, this research proposes:

H1: There is a positive relationship between Social Entrepreneurship and Triple Bottom Line value

creation

2.4.2. Hypothesis 2

2.4.2.1. Hypothesis 2a

As discussed in section 2.2.3., SEs undertake trading activities and produce and implement products

and services which allow them to become financially sustainable and to address deeply rooted social

issues (Mart & Marti, 2006; Zahra et al., 2009). It has been argued that SEs adopt innovative and

creative business models (Wilson & Post, 2013) and approaches to address multiple and complex

social problems, satisfy multiple stakeholders, and actively maximise the value they create (Lumpkin

et al., 2013). Since it has been shown that SEs often consider the environment as their stakeholder

(Wilson & Post, 2013), it can be argued that the principles of CE could be utilised by SEs as an

innovative approach to value maximisation and tackling the environmental issues associated with

resource depletion and disposing of waste. Indeed, the link between SEs’ products and CE principles,

including reuse, remanufacture and recycling has been indicated in a case study research by Wilson &

Post (2013).

At the same time, environmental sustainability of social entrepreneurial products and activities

is often perceived to be a necessary condition for SE (Lumpkin et al., 2013), hence their solutions to

social problems (i.e. products and services) should not produce a negative environmental effect (Dean

& McMullen, 2007). This further implies that SEs may incorporate CE principles into their products

or services, since linear economy thinking neglects the negative environmental externalities which

result from resource consumption and waste disposal (Jonker, 2012), and SEs often actively aim for a

positive environmental impact (Wilson & Post, 2013) or utilise product stewardship strategies (Hlady-

Rispal et al., 2018). This is in line with Bocken et al. (2014), who argue that ventures aiming for

24 embedding sustainability into their BMs often use a combination of innovative approaches, which

include, among others, social innovation and various circular strategies (eg. closed-loop systems or

delivering functionality rather than ownership).

Another reason for why SEs might incorporate the principles of CE into their offerings refers to

the notion of legitimacy and institutional theory. It has been argued that institutional theory can

explain why entrepreneurs choose to set up a particular form of venture, since it can be linked to socio-

cultural processes from which particular ideas and organisational forms gain legitimacy to emerge

(Suchman, 1995; Tolbert et al., 2010). In turn, legitimacy, which refers to the compatibility of actions,

ideas or organisational forms with social values, beliefs, or laws (Suchman, 1995), shapes the decision

to adopt a specific organisational form or business model, such as that of CE. In this respect, there has

been an increasing demand of both the public, as well as powerful resource providers, such as social

sector consultants or venture capitalists not only for greater accountability for pro-social activities of

companies (eg. social value creation), but also for greater embeddedness of environmentally

sustainable practises in their operations (Grimes, 2010; Nicholls, 2009). Further, CE is currently

stimulated in different ways at both macro and meso levels. Europe utilises a bottom-up approach,

providing initiatives for circularity from NGOs and civil societies (Ghisellini et al., 2015). The

European Commission has formulated the European Union action plan for transitioning to CE in 2015

(European Commission, 2015). Recently, the Dutch government has introduced a program "The

Netherlands circular in 2050", stressing out the urgency of the move towards CE for businesses, while

highlighting its many benefits, such as opportunities for innovative offerings or for efficiency

improvements (Rijksoverheid, n.d.a.). In turn, greater pressure from powerful stakeholders for

environmental sustainability and the active promotion of CE at the macro level renders the pursuit of

CE legitimate, likely heightening attention of corporations to CE related offerings and its resulting

implementation. In particular, this paper argues that this may be the case for social ventures, since they

often act as first movers of innovation and change for the transformation of whole industries towards

more sustainable ones (Hockers & Wüstenhagen, 2010; Zahra et al, 2009) and are argued to be highly

susceptible to the adoption of innovative practises in response to environmental degradation (Haugh,

2007). Hence it is proposed:

25 H2a: There is a positive relationship between Social Entrepreneurship and CE enabled

offerings

2.4.2.2. Hypothesis 2b

The existing literature on SBMs suggests that the value proposition of sustainable enterprises

has an embedded social or environmental value creating component (Stubbs & Cocklin, 2008; Boons

& Ludeke-Frend, 2013). Within the social business model context, the way social or environmental

value is derived from value proposition is not specified (Yunus, 2010). However, when CE principles

drive the creation of products or services, the environmental value is indeed embedded within it

(Bocken et al., 2016). As discussed in section 2.3.2., the CE principles can be utilised within various

CBMs, enabling the creation of novel products (i.e. Durable, reused, repaired, made from recycled

materials) or services (i.e. Product service systems, product sharing platforms, collection and reselling

of waste materials) (Bocken et al., 2014; Lacy & Rutquist, 2015; Lewandowski, 2016), in which

environmental value is created by, for instance, the efficient use of resources or an increased use of

physical assets, implying reduction of natural resource consumption (Ellen McArthur, 2015). In turn,

such environmental benefits indicate social gains of more opportunities for future generations, which

is in line with TBL value creation. Indeed, it has been argued that environmental and social aspects of

sustainable development are inextricably linked (Hockerts & Wüstenhagen, 2010).

Furthermore, when SEs’ offering reflects the needs of the intended beneficiaries, it can create a

social value directly (Weerewardena & Mort, 2006), through the delivery of the core product or

service (Wilson and Post, 2013). Since the product or service can also be used to generate revenues to

finance social goals (Di Domenico et al., 2010), it can be argued that it can also contribute to social

value creation indirectly, such as when circular products are produced by disadvantaged workers,

leading to their greater integration through increased employment prospects.

Moreover, the offerings of SEs are traded (Mair & Marti, 2006), ultimately leading to an

economic value for the venture through the means of profit generation. At the same time, empirical

evidence suggests that environmental product innovation can lead to cost reductions (eg. reduced cost

of material or resources) and ultimately to an enhanced economic value (Stefan & Paul, 2008). We

26 propose that this can be realised by CE principles, for instance through enhanced resource productivity

(Murray et al., 2015) or lower material or energy input costs per product (Ellen McArthur, 2015).

Hence building upon the existing literature, it is proposed:

H2b: There is a positive relationship between CE enabled offerings and Triple Bottom Line

value creation

H2: The positive relationship between Social Entrepreneurship and Triple Bottom Line value

creation is mediated by CE enabled offerings

2.4.3. Hypothesis 3

2.4.3.1. Hypothesis 3a

Another BM component that can help to explain value creation is the firms’ revenue model (Stubbs &

Cocklin, 2008; Wirtz et al., 2016), which captures the specific ways in which firms generate revenues

(Amit & Zott, 2012). It can be argued that since SEs undertake trading activities, they are likely to

adopt a revenue model which allows them to appropriate resulting economic value (Santos, 2012), in

order to generate profits to maintain its operations, reinvest in expansion, and to achieve its social

mission (Dacin et al., 2010). In particular, since the specific revenue model adopted depends on the

venture’s value proposition (Lewandowski, 2016) and in the previous section, it has been hypothesised

that SEs are likely to produce circular offerings, it can be argued that SEs will adopt revenue models

which are also related to CE thinking. As outlined in section 2.3.1, when the principles of CE are

incorporated in firms’ BM, such revenue model can take alternative forms, in addition to the more

conventional, one transaction revenue models, linked to selling circular products or services.

Specifically, circular offerings which involve product service systems or sharing platforms and in

which customers become users, rather than owners, are associated with novel ways of transactions

such as leasing, renting, paying per use, or charging transaction fees (Bocken et al., 2016; Ellen

McArthur, 2015; Lacy & Rutquist, 2015; Lewandowski, 2016).

Furthermore, it has been argued that the adoption of innovative organisational forms and

associated alternative revenue models can be influenced by institutional pressures (Tolbert et al., 2010)

or performance benefits to be realised (Stefan & Paul, 2008). As stated in the previous section, there

27 has been an increased promotion of CE by various coercive institutions, including the European

Commission or the Dutch government (The European Commission, 2015; Rijksoverheid, n.d.a.).

Among the key areas emphasised by such institutions to be focused on at the organisational level are

the CE related revenue models, which may both facilitate the broader transition towards CE at the

system level, and help companies improve their economic performance (Rli Council, 2015). Hence it

is likely that SEs will adopt such revenue models, since they often act as first movers of innovation

and change when particular practises allow them to maximise pro-social gains, while enabling them to

remain financially sustainable (Zahra et al., 2009).

Furthermore, since SEs produce social wealth by not only providing innovative products or

services, but often also by reconfiguring the processes enacted to deliver them (Zahra et al., 2009) to

jointly maximise multiple value creation (Miller et al., 2012), it can be argued that SEs are likely to

adopt the CE related revenue models. This is due to its potential for enabling organisations to realise

both economic gains, but also social gains, such as enabling the less affluent segments of population to

afford to use a particular product through pay per use, or renting (Bocken et al., 2016; Lacy &

Rutquist, 2015). Therefore, it appears that:

H3a: There is a positive relationship between Social Entrepreneurship and CE enabled revenue

model

2.4.3.2. Hypothesis 3b

While a revenue model can be directly linked with producing an economic value for a company

in the form of profit generation (George & Bock, 2011; Zott et al., 2011), it can also indirectly

contribute to other forms of value. Indeed, Nichols (2009) argues that firms’ financial performance can

be intrinsically linked with its social and environmental outcomes. Furthermore, qualitative findings

on sustainable BMs show that sustainable enterprises align their revenue models with its sustainability

purpose (Jonker, 2012).

The SE literature suggests that for SEs, revenue generation is essential for sustaining its

operations (Zahra et al., 2009), and hence is a facilitator of its main mission, i.e. social value creation

(Mair & Marti, 2006). Hence the financial resources obtained from SE’s revenue model can be further

28 employed to achieve the ventures social mission (Dacin et al., 2010) and ultimately generate a social

value. This is also supported by the qualitative findings of Di Domenico et al. (2010) which suggest

that revenue generating activities can enhance the autonomy and flexibility of SEs to respond to the

needs of the beneficiaries they serve.

Furthermore, revenue model is a key BM component which defines whether the business and

hence its products or services will be successful (Prahalad & Bettis, 1995). Since an environmental

value is embedded within circular products or services (Murray et al., 2015), it can be argued that SEs

revenue model indirectly contributes to the environmental value creation. Without the successful

consumer adoption of SE’ products or services and subsequent revenue streams generated, the positive

environmental impact of circular offerings would not be realised. Therefore:

H3b: There is a positive relationship between CE enabled revenue model and Triple Bottom Line

value creation

H3: The positive relationship between Social Entrepreneurship and Triple Bottom Line value

creation is mediated by CE enabled revenue model

2.4.4. Hypothesis 4

2.4.4.1. Hypothesis 4a

The general BM literature suggests that BMs can extend the focal firm boundaries to explain the value

creation (George & Bock, 2011; Zott et al., 2011). At the same time, collaborative partnerships with

stakeholders have been argued to be a BM component which can contribute to the sustainability

objectives of sustainable enterprises (Stubbs & Cocklin, 2008; Boons & Ludeke-Frend, 2013).

Qualitative findings on SBMs show that cooperative collaboration of focal firms and new types

of partners within its value network is the key element of such models, in which long-term

commitment and trust exists (Jonker, 2012) and in which both tangible and intangible resources, such

as people, ideas, knowledge, networks, equipment, data, or key activities are shared or exchanged.

Similarly, Bocken (2014) emphasises the role of two way loyalty, trust and equity, if sustainability

orientated collaborations are to be effective.

In the SE context, case study researches show that SEs actively involve multiple shareholders in

29 their creation, governance, decision making or strategy implementation (Di Domenico et al., 2010),

can utilise same-sector and cross-sector partnerships to help them achieve their mission (Sakarya et al.,

2012) and use them to gain access to talent, know-how and resources (eg. Di Domenico et al., 2010;

Zahra et al., 2009), create favourable policies, justify need for their products or services and generate

community support (Lumpkin et al., 2013).

While the exact stakeholders to be engaged in the SEs are unique to each venture (Lumpkin et

al., 2013), qualitative findings on SE success factors show that the long-term cooperation with a range

of public, private, and non-profit sector companies is among the key variables contributing to the

success of social ventures in terms of achieving their declared goals and financial sustainability (Sharir

and Lerner, 2006), which can be linked to TBL value creation. The formation of such collaborations

requires a significant emotional as well as managerial effort from both parties involved, and is

characterised by synergetic sharing of resources, risk, work, responsibilities and information (Sharir &

Lekner, 2006), inherent to the notion of partnerships (Jonker, 2012).

Furthermore, the findings by Sharir & Lerner (2006) suggest that another key variable associated

with the success of SEs is that of the funding teams’ ability to proactively utilise and expand its social

network, by the means of investing time and effort in its formation. According to Baron & Markman

(2000), the social capital embedded in entrepreneur’s social network functions is in itself as one of the

firms’ most valuable resources and can supplement the venture’s human capital, for instance by

enabling firms to gain access to external partners.

Hence, despite the qualitative nature of the various findings discussed, it can be proposed that if

SEs are to achieve TBL value creation, they are likely to actively form partnerships with different

stakeholders. With the integration of CE into their BMs, such partnerships become circular, meaning

that when companies adopt CE principles into their BMs, new forms of collaborations need to be

formed (Bocken et al., 2014; Lacy & Rutquist, 2015). This is due to the fact that the shift from liner to

circular BMs cannot be effectively done by a single company (Kortmann & Piller, 2016). Slowing and

closing material loops inherent to CE requires reverse logistics or prior collecting back of products or

resources through take-back management systems. To do so, literature suggests that companies need

to build trusted, long term relationships with suppliers and customers (Govindan et al., 2014) and

30 diverse partners for CE along the production value chain and supply chains (Lewandowski, 2016).

Similarly, as discussed in section 2.3.1, new circular partnerships are necessary for other CBMs, such

as sharing platform models (Bocken et al., 2014). Therefore, this paper argues that:

H4a: There is a positive relationship between Social Entrepreneurship and CE related partnerships

2.4.4.2. Hypothesis 4b

The collaborative partnerships for circularity between companies, customers, suppliers and other

stakeholders enable the focal firm to obtain support and resources and to perform certain key

activities. This suggests co-creation of value (Ellen McArthur, 2015; Govindan et al., 2014),

collaborative production (Lewandowski, 2016) and the existence of value networks (Tyl et al., 2015).

Qualitative research on SBMs suggests that such value networks differ from the traditional value

chains in a way that a high level of equality exists among the focal company and its stakeholders

(Jonker, 2012). Hence value is produced jointly between the focal firm and its value creating network -

network of relations with external partners (Hlady-Rispal et al., 2018; Zott et al., 2011), which can be

that of TBL value. Such partnerships can exist across sectors and industries or between corporations

and policy makers (eg. suppliers, customers, institutions, regulators) (Bocken et al., 2014; Ellen

McArthur, 2015).

Nevertheless, it can be argued that stakeholder involvement realized through collaborative

partnerships is essential for the implementation of CE into social enterprises’ business models, in

particular into circular offerings and associated revenue models. This allows for slowing and closing

material loops, utilising under-used capacity of products and eliminating life-cycle waste (Ellen

McArthur, 2015). This can be directly linked to environmental value generation. Studies have also

ascertained an association between the close integration of operations between manufacturers,

customers and suppliers and an enhanced economic performance in terms of profitability, market share

or return on investment (Frohlich & Westbrook, 2001). At the same time, establishing new

partnerships is considered as a major success factor for pro-active corporate social responsibility

strategies of ventures (Brugmann & Prahalad, 2007), which can be conceptually linked to TBL value

creation.

31 Overall, the findings above suggest that when SEs aim for TBL value creation through

employing CE principles into their BMs, they need to establish partnerships for circular economy with

various stakeholders. This is then likely to be directly or indirectly linked with the TBL value creation.

Hence additional hypotheses are proposed:

H4b: There is a positive relationship between CE related partnerships and Triple

Bottom Line value creation

H4: The positive relationship between Social Entrepreneurship and Triple Bottom Line value

creation is mediated by CE related partnerships

32 3. Methodology

This study will be explanatory in nature, aiming to explain relationships between variables identified

within the conceptual model. The research will follow the research philosophy of positivism, as it will

aim to use a structured research method based on statistical analysis to facilitate replication and to

ensure that the results can be generalised. A deductive approach to data analysis is employed to test

the previously specified theoretical hypotheses in terms of assessing a causal link between SE and

TBL value creation, and whether the link can be explained by the mediating factors of CE related

business model components. A cross-sectional survey design was utilised for employing statistical

analyses to test hypotheses while aiming for generalizable findings. The data was collected through an

online questionnaire administered in English.

3.1. Sample

The unit of analysis of this study is at the organisational level. The population of interest is Dutch

SMEs which include both traditional enterprises and social enterprises, to allow for a variance in the

independent variable of this study. To maximise the chances of an equal representation of both

traditional and social ventures, the sample was selected from two company lists: a database of 360

Dutch social enterprises (socialenterprise.nl) and a database of 1303 Dutch start-up SMEs with less

than 200 employees (startupmap.iamsterdam.com). A sample of 720 was derived by selecting all 360

social enterprises and 360 SMEs on random basis. Of those, 121 respondents filled in the survey,

resulting in a response rate of 17%. The non-probability sampling technique was utilised, since the

sampling lists employed are not exhaustive in terms of the wider population.

3.2. Measures All constructs were measured using five point Likert scales, ranging from 1 = “firmly disagree” to 5

“firmly agree”. Wherever possible, standardised measures of constructs validated by other researchers

were applied. However, since the circular economy related constructs used in this study have been

only defined conceptually in the existing literature, there is an absence of existing scales to measure

33 them. Hence some scales were adopted from a closely related literature and were adapted to reflect the

specific constructs based on their respective conceptual definitions.

3.2.1. Independent variable: social entrepreneurship

The 12 item measurement scales of four dimensions of Social Entrepreneurial Orientation developed

by Kraus et al. (2017) was used as a proxy for social entrepreneurship, namely social innovativeness,

social risk-taking, social pro-activeness, and the degree of socialness. Such SEO scale has been created

as a metric for identifying ventures’ social entrepreneurial characteristics and ultimately for

identifying whether a venture can be categorised as a SE, in contrast to mainstream enterprises, which

is the reason why the scale was chosen as appropriate for this study. This is further supported by the

literature which suggests that the concept of entrepreneurial orientation can be related to organisational

performance and value creation (Madsen, 2007; Wales et al., 2013), indicating the appropriateness of

the SEO construct to be linked with the dependent variable of this study. The measure was validated by

Abaho et al. (2017), who established the Cronbach’s Alpha to range between 0.7 and 0.870, for all of

the four dimensions.

3.2.2. Dependent variable: Triple bottom line value creation

The triple bottom line value creation was measured by three sub-constructs: environmental, social, and

economic performance. The environmental performance was assessed using Zhu et al. (2010) six item

scale, which was selected due to being developed for the purpose of assessing performance in the

circular economy context, which indicates a good fit with this study. The economic and social

performance was measured using Miles et al. (2013) six and nine item measures, respectively. These

measures were selected since they were developed in the context of social entrepreneurship, which

indicates fit with the independent variable of this study. The wording of some of the items of the

constructs was slightly modified to fit the context of this study, and can be reviewed in the Appendix.

3.2.3. Mediating variable: CE enabled offerings

The existing research does not offer a validated scale for the measurement of this construct. Hence it

was measured using an adapted four item scale “Eco Design” retrieved from Zhu et al. (2010), who

34 used it as a product-related dimension of circular economy practises among manufacturing firms. To

extend the measure so it includes the broader notion of circular offerings and is relevant not only to

manufacturing companies, the scale was adapted, based on the circular economy principles and the

conceptual definition of the construct (see the Appendix).

3.2.4. Mediating variable: CE enabled revenue model

The existing research does not have a validated scale for the measurement of this construct. Hence it

was assessed using an adapted four item scale by Clauss et al. (2017), initially developed to measure

"New revenue models" in the context of business model innovation. Some of the items within the scale

have been slightly adapted to explicitly represent revenue models related to circular economy based on

its conceptual definition (see the Appendix).

3.2.5. Mediating variable: CE related partnerships

The existing research does not offer a validated scale for the measurement of this construct. Hence it

was measured using a four item scale “New partnerships” retrieved from Clauss et al. (2017),

developed in the context of business model innovation. The wording of the items was adapted to

capture its relation with implementing circular economy principles (see the Appendix).

3.2.6. Control variables

Prior literature has suggests that firm size, age and industry may influence the constructs of this study.

For instance, it has been argued that firm size, age, and industry elements may disturb corporate social

and financial performance (Berman et al., 1999). Furthermore, larger sized and more mature social

enterprises are argued to have the potential to contribute to achieving higher economic performance

with regard to attracting sponsors and facilitating fund-raising (Liston-Heyes & Liu, 2010), when

compared to its smaller or younger counterparts. Previous research also found that firm age is

positively associated with organisational CSR engagement (Chang et al., 2011). At the same time,

larger and more mature enterprises are more likely to implement CE practises due to greater internal

resources and external pressures (Zhu et al., 2010). Hence, the company size and age were be

controlled for. Following other environmental scholars such as Liu et al. (2014), the firm size will be

35 measured by an indication of the number of employees within the organisation and the firm age will

then be calculated by the number of years since the firms’ origin. Lastly, to control for any potential

industry effects on TBL performance, industry dummies were included on nominal basis.

4. Data Analysis

4.1. Dataset and demographics

Initially a frequency check was undertaken to examine whether there were any data errors. There were

no errors found. Subsequently, all variables under investigation were reviewed for missing data. A

frequency check was run for all variables. Missing data was identified only for Economic

Performance, Circular Revenue Model and Circular Partnership constructs with the amount of missing

data below 5%. The SPSS default option for treating missing data was kept, which involves the

listwise deletion. One particular case was an exception with missing data for 9 out of 11 variables. The

case was excluded from the dataset, leading to a total of 121 cases. Subsequently, the data was

checked for counter-indicative items, but no reversed coding was needed.

The demographics of the dataset correspond to the firm characteristics. Overall, all industry

options are represented in the dataset. The majority of firms concentrated in the categories ‘Other’

(13.2%) and Food and Catering (10.7%). Care and Well-being firms are less represented in the dataset

(1.7%), and so are Facility Management (3.3%), Trading and Retail (3.3%) and Merchant Services

(3.3%). The size of the companies within this dataset ranges from 1 to 500 employees (M= 40.48, SD=

69.669), with 4 being the most common number of employees. The firm age ranges from 0 to 47 (M=

11.5, SD= 22.663 ), and the most common age is 4.

Table 1: Respondents - Industry

Industry Frequency Percent Cumulative Percent Construction and Real Estate 6 5.0 5.0 Sharing Economy 5 4.1 9.1 Energy 7 5.8 14.9 Facility Management 4 3.3 18.2 Financial Services 10 8.3 26.4

36 Food and Catering 13 10.7 37.2 Logistics and Transportation 5 4.1 41.3 Media and Journalism 6 5.0 46.3 Fashion 9 7.4 53.7 Education 7 5.8 59.5 Production and Manufacturing 6 5.0 64.5 Travel, Culture, Leisure 8 6.6 71.1 Trading and Retail 4 3.3 74.4 Technology and Telecommunication 9 7.4 81.8 Merchant Services 4 3.3 85.1 Care and Well-being 2 1.7 86.8 Other 16 13.2 100.0

4.2. Reliability analysis

A reliability analysis was run on all the items of the variables SE, ENV, SOC, EC, COFF, CRM and

CPAR. As exhibited in table 2, all seven variables have a Cronbach's Alpha > .7, indicating that the

scales have a high level of internal consistency. The corrected item-total correlations of all items of the

seven variables were above 0.30, therefore all items have a good correlation with the total score of the

scale. Hence it has been concluded that all items in the scales measure the same, and all of the

questions were kept for the analysis. Moreover, none of the items would substantially impact the

reliability if they were deleted. (Norusis, 2008; Saunders & Lewis, 2014).

Table 2: Cronbachs Alpha

Variable Cronbach's Variable abbreviation Alpha Social entrepreneurship SE 0.968 Environmental performance ENV 0.943 Social performance SOC 0.969 Economic performance EC 0.947 Circular Economy related Offerings COFF 0.912 Circular Economy related Revenue Models CRV 0.894 Circular Economy related Partnerships CPAR 0.942

37 4.3. Factor analysis

Factor analysis was undertaken to examine whether the items belong to one factor (Thomson, 2004).

The Kaiser-Meyer-Olkin measure verified the sampling adequacy for the analysis, SE = .950. Barlett’s

test of sphericity 풳2 (66) = 1474.498, p < .001 showed that correlations between items were

sufficiently large for PAF.

The triple bottom line scales – SOC, ENV and EC – passed both tests as well, scoring .934, .861

and .865 on Kaiser-Meyer-Olkin measure sample and 풳2 (36) = 1280.225, p < .001, 풳2 (15) =

674.375, p < .001 and 풳2 (15) = 728.029, p < .001 on the Barlett’s test of sphericity respectively.

These scores indicate that correlation between all the items was also sufficiently large for PAF.

Similarly, all three circular economy related business model variables – OFF, RV and PAR have

sufficient results on both tests undertaken, with scores of .814, .809 and .807 on the Kaiser-Meyer-

Olkin test and 풳2 (6) = 345.278, p < .001, 풳2 (6) = 286.225, p < .001 and 풳2 (6) = 427.059, p < .001

on the Barlett’s test of sphericity respectively. Therefore, all items belong to the initiated factors and

no items were required to be deleted. The factor loadings of the individual items of all the constructs

can be viewed in the Appendix.

4.4. Check for Normality

In a final preliminary step, all seven constructs SE, ENV, SOC, EC, COFF, CRM, CPAR were

individually computed into new mean variables and can be seen in table 2, along with standard

deviations. In respect to Social Entrepreneurship, while the mean has a relatively high value (M =

3.601), the standard deviation shows that there is enough variation (SD = 1.526), indicating that the

results can be generalised not only to social enterprises, but to mainstream companies also.

The seven means were then checked for normality to examine whether the distribution of scores is

approximately normal and to indicate the degree and direction of asymmetry (Field, 2009).The

distribution of scores is visually represented in table 3. It can be seen that six out of the seven

measures have a moderate or high negative skewness, which indicates a build-up of high scores in the

distribution of responses in the right tail. All TBL measures – ENV, SOC and EC – are highly skewed

because they are greater than 1 and have a positive leptokurtic distribution with kurtosis close to 0 and

38 0.5, which indicates a low to moderate pointedness and a heavy-tailed distribution. SE, COFF and

CPAR are moderately skewed because their values lie between -.5 and -1. While SE has a slightly

negative kurtosis close to 0 indicating that the distribution is close to being a normal distribution,

COFF and CPAR have a kurtosis between -0.5 and -1 which indicates that the distribution is light

tailed and moderately flat. Lastly, CRM has a skewness near zero, which indicates that the measure is

the closest to being normally distributed. However, its kurtosis is between -1 and -2 which indicates

that the distribution is flatter than normal.

Overall, looking at the values of both the skewness and kurtosis of the seven constructs, none of

the measures appear to be normally distributed with both values close to 0. However, the skewness

and kurtosis of all measures fit within the boundaries of -2 and 2 for an acceptable normal distribution

to run regressions with (George & Mallery, 2016). Furthermore, according to Lumley at al. (2002),

regressions do not require the assumption of normal distribution to be met to allow for interpreting the

relationships between variables in large samples around N = 100. Since this research has N = 121, the

values are not expected to substantially influence the results.

Table 3: Descriptive Statistics – Normal Distribution Min. Max Mean Std. Deviation Skewness Kurtosis Std. Statistic Statistic Statistic Statistic Statistic Std. Error Statistic Error SE 1.00 5.00 3.6006 1.23528 -.977 .220 -.198 .437 ENV 1.00 5.00 3.8581 1.24864 -1.326 .220 .551 .437 SOC 1.00 5.00 3.7640 1.19787 -1.265 .220 .483 .437 EC 1.00 5.00 3.7364 1.14940 -1.092 .220 .358 .437 COFF 1.00 5.00 3.6012 1.37825 -.825 .220 -.645 .437 CRV 1.00 5.00 3.2013 1.32741 -.327 .223 -1.137 .442 CPAR 1.00 5.00 3.5129 1.37637 -.719 .225 -.783 .446

39 5. Results

This section discusses several analyses. First of all, a correlation analysis was applied to identify the

relationships between all of the constructs of this research. Secondly, regression analysis was

undertaken to allow for the prediction of ENV, SOC and EC, based on its relationships with SE.

Lastly, the mediated effect of COFF, CRM and CPAR was tested via PROCESS.

5.1. Correlations

To examine the relationships between all of the constructs of this research, a bivariate correlation

analysis was undertaken. As presented in table 4, multiple significant correlations were identified.

First of all, as this study expected, a positive large significant correlations are present between SE and

the TBL constructs, specifically ENV (r = .847, p = .00), SOC (r = .911, p = .00) and EC (r = .735, p =

.00). The same applies for the mediating variables. A positive large significant correlations have been

found between SE and COFF (r = .837, p = .00), CRM (r = .744, p = .00) and CPAR (r = .829, p =

.00). COFF significantly and to a large extent correlates with ENV (r = .827, p = .00), SOC (r = .818, p

= .00) and EC (r = .682, p = .00). The same positive large significant correlation is found between

CRM and ENV (r = .749, p = .00), SOC (r = .729, p = .00) and EC (r = .752, p = .00). Similarly,

CPAR significantly correlates with ENV (r = .743, p = .00), SOC (r = .848, p = .00) and EC (r = .807,

p = .00). All of the correlations are on a .01 interval level, which almost eliminates the possibility of

the existence of these relations based on a chance. The effect of the relations between the seven main

variables of this study correlates in a positive way on a large scale, with values between .682 and .911.

This means that the respondents of this study that score high on SE also have large scores on all TBL

constructs (ENV, SOC, EC) and on COFF, CRM and CPAR. Similarly, those that score high on

COFF, CRM and CPAR also score high on ENV, SOC and EC.

When looking at the two control variables company size and age, they show a moderate

significant correlation with each other (r = .304, p = .00). No other relationship between any of the

constructs and any of the control variables has been found.

To conclude, the examination of the Pearson product-moment correlation coefficient has

showed a strong evidence for all of the hypotheses of this study. Furthermore, the effect of all of the

40 relationships was found at a large scale.

Table 4: Means, Standard Deviations, Correlations

Variables M SD 1 2 3 4 5 6 7 8 9 1. Size 40.48 69.669 2. Age 11.50 22.663 .304** 3. SE 3.6006 1.23528 -.059 -.015 (.968) 4. ENV 3.8585 1.24864 -.029 -.033 .847** (.943) 5. SOC 3.7640 1.19789 -.008 -.035 .911** .878** (.969) 6. EC 3.7364 1.14940 .078 .003 .735** .723** .791** (.947) 7. COFF 3.6012 1.37825 -.083 -.050 .837** .827** .818** .682** (.912) 8. CRM 3.2013 1.32741 .033 -.072 .744** .690** .749** .729** .752** (.894) 9. CPAR 3.5129 1.37637 -.081 -.079 .829** .761** .804** .743** .848** .807** (.942) **Correlation is significant at the .01 level (2-tailed)

5.2. Mediation effect - separate

Since the seven main constructs of SE, ENV, SOC, EC, COFF, CRM and CPAR significantly

correlate with each other, the total and indirect effect of these constructs can be examined. To identify

the relations between the independent variables SE, COFF, CRM and CPAR and the dependent

variables, the models of mediation by Preacher and Haynes (2008) are utilised. In particular, model 4

is applied to test the separate mediation effects of COFF, CRM and CPAR on the relation between SE

and the ENV, SOC and EC performance.

Overall, as expected from the hypothesis 1, results from this mediation analysis confirm that

there is a positive significant correlation between SE and TBL value creation, independent on its effect

on the mediating variables of COFF, CRM and CPAR, with scores of ENV (c1' = .527), SOC (c1' =

.742) and EC (c1'= .526), with p <.001.This confirms hypothesis one.

From a simple mediation analysis conducted using ordinary least squares path analysis, the

construct of SE indirectly influenced ENV and SOC through its effect on COFF. As depicted in Table

5, companies relatively higher in SE are also estimated to be higher in their COFF (a1 = .934, p =

.000), which supports the hypothesis 2a. In turn, participants relatively higher in COFF are estimated

to be higher in their ENV and SOC (b1 = .356, p = 000; b1 = .160, p <.01). However, the mediating

effect of COFF is not significant for EC (b1 = .184, p = .0507), due to its p value being slightly above

the 0.5 threshold. Further, bias- corrected bootstrap confidence interval for the indirect effect of both

41 the ENV and SOC (ab = .322; ab = .149) based on 5,000 bootstrap samples was above zero (.183 to

.478 and .037 to .288), indicating a tendency for those companies who perceive themselves as social

enterprises to adopt COFF into their business models, which in turn translates into greater ENV and

SOC. This supports the ENV and SOC aspects of the hypothesis 2b.

Table 5: Mediation effect (process) – SE, COFF, ENV

COFF ENV Coeff. SE p Coeff. SE p Size -.001 .001 .000 .001 Age -.001 .003 .003 .003 Industry -.011 -.015 .004 .012 SE a1 .934 .057 <.001 c1' .527 .083 <.001 COFF b1 .356 .075 <.001 Constant i1 .373 .259 i2 .659 .207 <.01 R2 = .706 R2 = .774 F(4, 114) = 68.319 F(5,113) = 77.393

Table 6: Direct, total and indirect effects of SE & COFF on ENV Effect SE p Direct effect c1' .527 .083 <.001 Total effect c1 .859 .049 <.001 Boot SE Boot LLCI Boot ULCI Indirect effect a1b1 .332 .077 .183 .478

Table 7: Mediation effect (process) - SE, COFF, SOC COFF SOC Coeff. SE p Coeff. SE p Size -.001 .001 .001 .001 Age -.001 .003 .003 .002 Industry -.011 .015 -.009 .009 SE a1 .934 .057 <.001 c1' .742 .065 <.001 COFF b1 .160 .058 <.01 Constant i1 .373 .259 i2 .531 .162 <.01 R2 = .706 R2 = .852 F(4, 114) = 68.319 F(5, 113) = 129.678

Table 8: Direct, total and indirect effects of SE & COFF on SOC Effect SE p Direct effect c1' .7417 .065 <.001 Total effect c1 .891 .036 <.001 Boot SE Boot LLCI Boot ULCI Indirect effect a1b1 .149 .064 .037 .288

42 Table 9: Mediation effect (process) - SE, COFF, EC COFF EC Coeff. SE p Coeff. SE p Size -.001 .001 .003 .001 <.05 Age -.001 .003 .001 .003 Industry -.011 .015 .006 .015 SE a1 .934 .057 <.001 c1' .526 .104 <.001 COFF b1 .184 .093 Constant i1 .373 .259 i2 1.143 .259 <.001 R2 = .706 R2 = .585 F(4, 114) = 68.319 F(5, 113) = 31.798

Table 10: Direct, total and indirect effects of SE & COFF on EC Effect SE p Direct effect c1' .526 .104 <.001 Total effect c1 .697 .057 <.001 Boot SE Boot LLCI Boot ULCI Indirect effect a1b1 .172 .105 -.0278 .3915

In terms of the Circular Revenue Model construct, the simple mediation analysis suggests that SE

indirectly influences the three TBL constructs – ENV, SOC and EC through its effect on Circular

Revenue Models. As can be seen from table 11, companies relatively higher in SE are also estimated

to be higher in their CRM (a1 = .807, p <.001), which supports the hypothesis 3a. Subsequently,

companies that score relatively higher in their CRM are estimated to have a higher ENV, SOC and EC

(b1 = .148, p <.01; b1 = .129, p <.05, b1 = .319, p <.001). The bias- corrected bootstrap confidence

interval for the indirect effect of all three TBL constructs of ENV, SOC and EC (ab = .119; ab = .104;

ab = .259) based on 5,000 bootstrap samples was above zero (.001 to .244; .014 to .203; .128 to .401).

This shows a tendency for companies reporting themselves as social enterprises to adopt CRMs, which

leads to greater ENV, SOC and EC. Hence a support has been found for hypothesis 3b, stating that

CRM indeed significantly influences the relation between SE and TBL value.

Table 11: Mediation effect (process) - SE, CRM, ENV CRM ENV Coeff. SE p Coeff. SE p Size .003 .001 p <.05 -.000 .001 Age -.004 .004 .004 .003 Industry -.036 .017 p <.05 -.001 .013 SE a1 .807 .064 c1' .740 .077 p <.001

43 CRM b1 .148 .073 p <.05 Constant i1 .603 .291 p <.05 i2 .695 .228 p <.01 R2 = .600 R2 = .738 F(4,111) = 41.630 F(5,110) = 62.022

Table 12: Direct, total and indirect effects of SE & CRM on ENV Effect SE p Direct effect c1' .740 .768 <.001 Total effect c1 .859 .050 <.001 Boot SE Boot LLCI Boot ULCI Indirect effect a1b1 .119 .061 .001 .244

Table 13: Mediation effect (process) - SE, CRM, SOC CRM SOC Coeff. SE p Coeff. SE p Size .003 .001 p <.05 .001 .001 Age -.004 .004 .003 .002 Industry -.036 .017 p <.05 -.006 .010 SE a1 .807 .064 c1' .787 .056 p <.001 CRM b1 .129 .054 p <.05 Constant i1 .603 .291 p <.05 i2 .516 .167 p <.01 R2 = .600 R2 = .848 F(4,111) = 41.630 F(5,110) = 123.043

Table 14: Direct, total and indirect effects of SE & CRM on SOC Effect SE p Direct effect c1' .787 .056 <.001 Total effect c1 .891 .037 <.001 Boot SE Boot LLCI Boot ULCI Indirect effect a1b1 .104 .048 .014 .203

Table 15: Mediation effect (process) - SE, CRM, EC CRM EC Coeff. SE p Coeff. SE p Size .003 .001 p <.05 .002 .001 Age -.004 .004 .001 .003 Industry -.036 .017 p <.05 .001 .014 SE a1 .807 .064 c1' .450 .083 p <.001 CRM b1 .319 .079 p <.001 Constant i1 .603 .291 p <.05 i2 1.034 .248 p <.001 R2 = .600 R2 = .639 F(4,111) = 41.630 F(5,110) = 38.898

Table 16: Direct, total and indirect effects of SE & CRM on EC Effect SE p Direct effect c1' .450 .083 <.001

44 Total effect c1 .697 .057 <.001 Boot SE Boot LLCI Boot ULCI Indirect effect a1b1 .257 .069 .128 .401

Lastly, from a simple mediation analysis conducted using ordinary least squares path analysis, the

construct of SE indirectly influenced ENV, SOC and EC organisational performances through its

effect on CPAR. As depicted in Table 17, companies relatively higher in SE are also estimated to be

higher in their CPAR (a1 = .923, p = .000), which supports the hypothesis 4a. In turn, companies

which scored relatively higher in CPAR are estimated to be higher in their ENV, SOC and EC (b1 =

.220, p <.05; b1 = .150, p <.05; b1 = .350, p <.001). Once again, the bias- corrected bootstrap

confidence interval for the indirect effect of ENV, SOC and EC (ab = .203; ab = .138; ab = .323) based

on 5,000 bootstrap samples was above zero (.043 to .366, .007 to .295 and .147 to .495), indicating the

existence of a tendency for social entrepreneurial companies to utilise CPARs in their business

models, which in turn translates into greater ENV, SOC and EC. Hence hypothesis 4b is supported.

Table 17: Mediation effect (process) - SE, PAR, ENV CPAR ENV Coeff. SE p Coeff. SE p Size .001 .001 -.000 .001 Age -.010 .003 p <.01 .005 .003 Industry -.020 .014 .013 .013 SE a1 .923 .053 p <.001 c1' .663 .096 p <.001 CPAR b1 .220 .089 p <.05 Constant i1 .488 .240 p <.05 i2 .649 .227 p <.01 R2 = .746 R2 = .747 F(4,109) = 80.233 F(5, 108) = 63.865

Table 18: Direct, total and indirect effects of SE & CPAR on ENV Effect SE p Direct effect c1' .663 .096 <.001 Total effect c1 .859 .050 <.001 Boot SE Boot LLCI Boot ULCI Indirect effect a1b1 .203 .083 .043 .366

Table 19: Mediation effect (process) - SE, CPAR, SOC CPAR SOC Coeff. SE p Coeff. SE p Size .001 .001 .001 .001 Age -.010 .003 p <.01 .004 .002 Industry -.020 .014 -.008 .010 SE a1 .923 .053 p <.001 c1' .750 .071 p <.001

45 CPAR b1 .150 .066 p <.05 Constant i1 .488 .240 p <.05 i2 .525 .169 p <.01 R2 = .746 R2 = .846 F(4,109) = 80.233 F(5,108) = 118.889

Table 20: Direct, total and indirect effects of SE & CPAR on SOC Effect SE p Direct effect c1' .750 .071 <.001 Total effect c1 .891 .037 <.001 Boot SE Boot LLCI Boot ULCI Indirect effect a1b1 .138 .073 .007 .295

Table 21: Mediation effect (process) - SE, CPAR, EC CPAR EC Coeff. SE p Coeff. SE p Size .001 .001 .002 .001 p <.05 Age -.010 .003 p <.01 .003 .003 Industry -.020 .014 -.006 .015 SE a1 .923 .053 p <.001 c1' .384 .107 p <.001 CPAR b1 .350 .099 p <.001 Constant i1 .488 .240 p <.05 i2 1.060 .254 p <.001 R2 = .746 R2 = .628 F(4,109) = 80.233 F(5,108) = 36.410

Table 22: Direct, total and indirect effects of SE & CPAR on EC Effect SE p Direct effect c1' .384 .107 <.001 Total effect c1 .697 .057 <.001 Boot SE Boot LLCI Boot ULCI Indirect effect a1b1 .323 .088 .147 .495

5.3. Mediation effect – simultaneous A simple mediation analysis using ordinary least square path analysis was further applied to the three

mediators of COFF, CRM and CPAR at once to test their simultaneous effect on the relation between

SE and the ENV, SOC and EC performance. As shown in table 27, companies relatively higher in SE

score relatively higher in COFF, CRM and CPAR (a1 = .932, p <.001; a1 = .908, p <.001; a1 = .923, p

<.001). This supports hypotheses 2a, 3a and 4a. The simultaneous mediating effect of COFF, CRM

and CPAR on the variables of social entrepreneurship and environmental performance is only

significant for COFF (b1 = .339, p <.001). Hence when the three mediators are applied at once, CRM

and CPAR become insignificant for the explanation of environmental performance of social

46 enterprises. For the social performance, none of the three mediators of COFF, CRM and CPAR have

been found significant when applied simultaneously, with p value being above the 0.5 threshold in all

three cases. For the economic performance, the indirect effect of the three mediating variables COFF,

CRM and CPAR is only significant for CRM. Therefore, out of the three variables tested

simultaneously, circular revenue model is the only significant indicator of the economic performance

of social enterprises. The bias- corrected bootstrap confidence interval for the indirect effect of COFF

on SE and ENV (ab = .316) and of CRM on EC (ab = .185) based on 5,000 bootstrap samples was

above zero (.138 to .495 and .013 to .361). This indicated a tendency of social enterprises to have a

greater environmental performance explained by the adoption of circular offerings and to have a

greater economic performance explained by the adoption of circular revenue models. This partially

supports hypotheses 2 and 3, which is indicated in Figure 3.

Figure 3: Conceptual model and simultaneous mediation results – effect sizes and p values

Table 23: Direct, total and indirect effects of SE & COFF, CRM, CPAR on ENV Effect SE p Direct effect c1' .509 .099 <.001 Total effect c1 .866 .050 <.001 Boot Boot Boot SE LLCI ULCI R2 Indirect effect total a1b1 .357 .104 .172 .568 .778 Indirect effect COFF a1b1 .316 .091 .138 .495 Indirect effect CRM a1b1 .032 .065 -.091 .162 Indirect effect CPAR a1b1 .009 .088 -.179 .167

47

Table 24: Direct, total and indirect effects of SE & COFF, CRM, CPAR on SOC Effect SE p Direct effect c1' .673 .077 <.001 Total effect c1 .888 .037 <.001 Boot Boot Boot SE LLCI ULCI R2 Indirect effect total a1b1 .215 .083 .066 .398 .854 Indirect effect COFF a1b1 .121 .088 -.067 .287 Indirect effect CRM a1b1 .063 .049 -.037 .160 Indirect effect CPAR a1b1 .038 .088 -.131 .211 .778

Table 25: Direct, total and indirect effects of SE & COFF, CRM, CPAR on EC Effect SE p Direct effect c1' .300 .115 <.05 Total effect c1 .707 .058 <.001 Boot Boot Boot SE LLCI ULCI R2 Indirect effect total a1b1 .407 .117 .180 .648 .651 Indirect effect COFF a1b1 .046 .132 -.216 .304 Indirect effect CRM a1b1 .185 .089 .013 .361 Indirect effect CPAR a1b1 .176 .120 -.091 .392

An overview of all of the hypotheses is presented in table 26. The overall hypotheses conclusions have

been derived from both separate mediation and simultaneous mediation effects. Due to the high

multicollinearity of the mediating variables (see section 5.1.), all of the hypotheses are either accepted

or partially accepted when the respective mediation effects were undertaken separately. However,

when all of the three mediators have been controlled for, the effect sizes and p values of the mediation

effects differ. This implies that certain mediating variables have more important roles in the

relationship between social entrepreneurship and the respective sub-constructs of the triple bottom line

value creation – environmental, social and economic performances.

Table 26: Overview of the results of the mediation effects

Hypothesis Results – separate Results – simultaneous

mediating effect mediating effect

1 There is a positive relationship between Accepted Accepted

48 Social Entrepreneurship and Triple Bottom

Line value creation

2a There is a positive relationship between Accepted Accepted

Social Entrepreneurship and CE enabled

offerings

2b There is a positive relationship between CE Partially accepted Partially accepted

enabled offerings and Triple Bottom Line (for social and (for environmental

value creation environmental performance)

performance)

3a There is a positive relationship between Accepted Accepted

Social Entrepreneurship and CE enabled

revenue model

3b There is a positive relationship between CE Accepted Partially accepted

enabled revenue model and Triple Bottom (supported for economic

Line value creation performance)

4a There is a positive relationship between Accepted Accepted

Social Entrepreneurship and CE related

partnerships

4b There is a positive relationship between CE Accepted Rejected

related partnerships and Triple Bottom Line

value creation

49 50

Table 27: Mediation effect (process) - SE, COFF, CRM, CPAR, ENV Consequent COFF CRM CPAR ENV SOC EC Coeff. SE p Coeff. SE p Coeff. SE p Coeff. SE p Coeff. SE p Coeff. SE p Size -.001 .001 .002 .001 .001 .001 .000 .216 .001 .001 .002 .001 p Age -.001 .003 -.004 .004 -.010 .003 <.01 .004 .003 .003 .002 .002 .003 p Industry -.008 .015 -.036 .017 <.05 -.019 .014 -.000 .013 -.007 .009 -.001 .014 p p p p p SE a1 .932 .057 <.001 a1 .808 .0649 <.001 a1 .923 .053 <.001 c1' .509 .099 <.001 c1' .673 .077 <.001 c1' .300 .115 p <.05 p COFF b1 .339 .093 <.001 b1 .130 .072 b1 .049 .107 CRM b1 .039 .079 b1 .077 .061 b1 .228 .091 p <.05 CPAR b1 .010 .105 b1 .033 .082 b1 .190 .115 p p p p Constant i1 .370 .256 i1 .603 .294 <.05 i1 .488 .239 <.05 i2 .602 .216 <.01 i2 .487 .168 <.01 i2 p <.01 R2 = .716 R2 = .599 R2 = .747 R2 = .778 R2 = .851 R2 = .651 F(4,109) = 68.703 F(4,109) = 40.783 F(4,109) = 80.233 F(7, 106) = 52.954 F(7, 106) = 88.646 F(7, 106) = 28.233

6. Discussion

The following chapter discusses the significance of this paper by evaluating the results, linking them

to prior research and presenting possible explanations for different outcomes. Both theoretical

contributions and practical implications of the results will be presented, followed by limitations of the

research and recommendations for future studies.

6.1. Theoretical Implications

The goal of this research was to examine whether social enterprises create a triple bottom line value

and whether this could be explained by the application of Circular Economy principles in the

organisations’ business models. In particular, Circular Economy related Offerings, Circular Economy

related Revenue Models and Circular Economy enabled Partnerships were hypothesised as mediating

variables of such relationship. Hence the research question was as follows: How do Social Enterprises

create a triple bottom line value by incorporating Circular Economy principles into their business

model? The proposed hypotheses were empirically tested using an online questionnaire sent to

720 companies of which 121 filled in the survey.

First of all, as this study predicted, a positive relationship has been found between social

entrepreneurship and triple bottom line value creation, supporting hypothesis 1. The evidence for

supporting the relationship between social entrepreneurship and social and economic value creation is

in line with previous research which has suggested that social enterprises tackle diverse social

problems and hence create a social value, while generating an economic return which allows them to

run their operations sustainably (Mair & Marti, 2006; Dacin et al., 2010; Zahra et al., 2009). Since the

previous research discussing such relationship has been only investigated on qualitative basis (Boons

& Ludeke-Freund, 2016; Stevens et al., 2015; Wilson and Post, 2013), this paper advances current

understanding of social enterprises by quantitatively corroborating such relationship. The finding that

social enterprises also create an environmental value, however, adds a new important theoretical

insight to the existing understanding of social enterprises and sustainable business models. Since it has

been found that social enterprises contribute to the triple bottom line simultaneously, it can be argued

51 that social enterprises should be associated with sustainable business models, which are conditioned

by creating an environmental, social and economic value simultaneously, with respect to people,

planet and profits (Boons & Ludeke-Freund, 2016; Seelos & Mair, 2005). Hence as opposed to Yunus

(2010) who proposed that social enterprises tend to focus on either environmental or social value

creation, this study lent support to authors that argue that such phenomena may be interconnected and

mutually reinforcing (Bocken et al., 2014; Boons & Ludeke-Freund, 2013; Wilson & Post, 2013).

Therefore, this research indicates that social enterprises can be considered as sustainable enterprises

which have the capacity to create a triple bottom line value simultaneously. Social enterprises can

therefore protect the natural environment and minimise its corporate footprint, create a positive impact

on people and society and contribute to the creation of economic welfare in the country it operates

(Hahn et al., 2015; Porter & Kramer, 2006; Prahalad & Hammond, 2002).

Furthermore, it was found that social enterprises tend to adopt business practises which follow

the Circular Economy principles, incorporating Circular Offerings, Circular Revenue Models and

Circular Partnerships into their business models (hypothesis 2a, 3a and 4a accepted). This provides

evidence to the notion that organisations in general and social enterprises in particular can utilise

multiple innovative organisational approaches to embedding sustainability into their business models

(Bocken et al., 2014; Wilson and Post, 2013) and thereby address multiple and complex social and

environmental issues and satisfy different stakeholders (Lumpkin et al., 2013). It also empirically

supports the conceptual framework of Bocken et al. (2016), which proposes the potential circular

business model components that are likely to be implemented by organisations.

In terms of the individual mediating variables, unless controlled for all mediators

simultaneously, the findings of this study suggest that Circular Economy related Offerings partially

mediate the relationship between social entrepreneurship and triple bottom line value creation, in

particular its environmental and social performance aspects (hypotheses 2b partially accepted). This

supports prior research which has proposed that Circular Economy related Offerings create an

environmental value through preserving the value of existing products and materials and keeping away

from waste (Murray et al., 2015). This finding also theoretically contributes to the existing knowledge

of the Circular Economy concept by showing that when Circular Economy related Offerings are

52 adopted by companies with a strong adherence to its social mission, they can contribute to greater

social equality and create a social value. This fills in the research gap proposed by Geissdoerfer et al.

(2017) and Murray et al. (2015) concerning lack of knowledge about whether the Circular Economy

concept can be linked to societal value creation, rather than purely environmental or economic.

However, in contrast to the expectations of this research, when the mediating effect of Circular

Economy related Offerings on the relationship between social entrepreneurship and social

performance has been tested simultaneously with the other two mediators, no significant effect has

been found. Furthermore, no mediating effect of Circular Economy related Offerings has been

demonstrated for the relationship between social entrepreneurship and economic performance. This

contradicts the findings of Stefan & Paul (2008) suggesting that environmental product innovation

associated with circular economy principles leads to cost reductions and ultimately to an improved

economic performance. Hence while Circular Economy related Offerings are likely to enhance

resource productivity (Murray et al., 2015) and lower resource input costs per product (Ellen

McArthur, 2015), this research does not provide evidence that such offerings would lead to an

economic value creation for the firm.

Furthermore, the mediating effect of Circular Economy related revenue models on the

relationship between social entrepreneurship and triple bottom line value creation has been supported

when tested separately from the other two mediators (hypothesis 3b accepted). This presents an

important theoretical contribution to the sustainable business model literature, since Circular Economy

related Revenue Models not only allow businesses to create an economic value through profit

generation (George & Bock, 2011; Yott et al., 2011), but can also directly contribute to social and

environmental value creation. For instance, it can enable the less affluent segments of population to

use certain products on pay-per-use basis. This also benefits the environment since the use of assets

and resources is maximised through collaborative consumption. However, when the mediating effect

of Circular Economy related revenue models is tested simultaneously with other mediators, the effect

is only significant for the economic value creation and becomes insignificant for the environmental

and social value creation. This could be due to the fact that since high correlations between the three

mediators exist (see section 5.1), other variables become more important for explaining the

53 relationship between social entrepreneurship and social and environmental value creation.

Lastly, the mediating effect of Circular Economy related Partnerships on the relationship

between social entrepreneurship and triple bottom line value creation has been supported when tested

separately from the other two mediators (hypothesis 4b accepted). From a theoretical point of view,

this provides evidence for prior social entrepreneurship research which suggests that social enterprises

collaborate with an extensive network of partners along its value chain which is among the key

variables contributing to achieving its performance objectives (Jonker, 2012; Sharir & Lerner, 2006).

It also contributes to the Circular Economy literature by supporting the proposition that when

companies adopt Circular Economy principles into their business models, new types of partnerships

need to be formed to make the shift from linear to circular economy feasible and to allow for co-

creation of value (eg. Ellen McArthus, 2015; Govindan et al., 2014; Tyl et al., 2015). Lastly, the

finding provides a quantitative evidence for prior qualitative research which suggests that multi-

stakeholder collaboration is a key aspect of sustainable business models (Boons & Ludeke-Freund,

2013; Stubbs & Cocklin, 2008). However, when the mediating effect of Circular Economy related

Partnerships was tested simultaneously with the other two mediators, no significant effect has been

found. Once again, this may be explained by the high multicollinearity of the mediators which would

indicate that the mediating effect of Circular Economy related Partnerships is perhaps not as essential

for explaining the relationship between social entrepreneurship and the triple bottom line value, as

compared to the other business model components. It is also possible that some elements of the

research design have affected the results. To the researcher’s knowledge, this study is the first of its

kind and hence has opened many opportunities for future research concerning the role of individual

circular business model components in the environmental, social and economic aspects of

organisational performance.

Overall, the findings of this research suggesting that the relationship between social

entrepreneurship and triple bottom line value creation is either fully or partially mediated by Circular

Economy related Offerings, Revenue Models and Partnerships enrich the conceptual framework of

Bocken et al. (2016) which discusses Circular Economy related business model components in a rather

narrow view, without providing evidence for its links with organisational performance. It also lends

54 support to the research by Ellen MacArthur (2016), which indicates that when Circular Economy

principles are to create multiple forms of value, they need to be embedded into organisations through

innovative forms of business models. From a practical point of view, it can then be argued that the

adoption of social innovation exemplified by the social entrepreneurial approach to doing business, as

well as circular business model components can facilitate triple bottom line value creation.

6.2. Practical Implications

The findings of this study bear multiple interesting implications not only for social enterprises among

various industries, but also for all companies aiming to enhance their understanding of factors that can

explain triple bottom line value creation or those companies that wish to adopt Circular Economy

principles into its business models.

Due to the finding that social enterprises create a triple bottom line value, companies aiming to

improve its environmental, social and/or economic performance should consider what makes social

enterprises unique and possibly adapt its ways of doing business accordingly. In particular, the most

fundamental characteristics of social enterprises include its fundamental commitment to its social

and/or environmental mission (Austin et al., 2006; Stevens et al., 2015), the engagement of multiple

stakeholders in all aspects of the business and the application of innovative ways to opportunity

recognition, such as identifying market failures (Lumpkin et al., 2013). These characteristics then

allow social enterprises to adopt innovative and creative business models which facilitate multiple

value creation (Wilson & Post, 2013). Social enterprises also differ from commercial enterprises

through its social entrepreneurship orientation, in particular by exemplifying social innovativeness,

social risk-taking and social pro-activeness (Kraus et al., 2017). Hence companies which endeavour to

improve its triple bottom line performance can consider adopting a corresponding decision-making

mind-set, behaviours and processes which would likely allow them to formulate strategies and

management philosophy aligned with multiple value creation (Hughes et al., 2015). In particular, this

can be done by constantly developing new ways to serve its stakeholders or beneficiaries, not being

afraid to take risks and undertake bold action when serving its social purpose, setting ambitious

sustainability related goals and placing a strong focus on partnerships with other organisation and/or

55 the government which may facilitate a greater and accelerated achievement of the social and/or

environmental mission (Kraus et al., 2017). Furthermore, since this research indicates that social

enterprises can be considered as sustainable enterprises due to its ability to create a triple bottom line

value simultaneously, policy makers should consider implementing favourable regulatory conditions

for social entrepreneurs, while pro-social or green investors may have clear reasons to invest in such

enterprises.

In terms of the particular business model components which can explain such triple bottom line

performance, this study has presented empirical evidence that Circular Economy related Offerings,

Circular Economy related Revenue Models and Circular Economy related Partnerships have a positive

impact. This implies that managers of various organisations should consider adopting such circular

business models to maximise its value creation. However, as the results from the mediation test

applied simultaneously on all three mediating variables suggested, Circular Economy related Offerings

play a more important role in explaining a positive environmental performance of organisations, while

Circular Economy related Revenue Models play a dominant role in explaining positive economic

performance. Hence these two business model components deserve a particular managerial attention.

Companies are advised to consider adopting either circular products which are durable, repairable,

reused or made from recycled materials, or focus their value proposition around service provision,

such as a product service system, product sharing platform, or the collection and reselling of wasted

products and materials. At the same time, the economic performance of companies can be optimised

by adopting more sustainable revenue streams generated indirectly or over time, rather than focusing

on one time transactions. This involves adopting novel ways of transactions, such as leasing or pey-

per-use, and finding new revenue opportunities through circular economy related activities, such as

selling waste materials or offering maintenance services to accompany durable circular products.

6.3. Limitations and future research

Despite the researcher’s effort to design and undertake a reliable and valid research, there are several

limitations in this study. This section will provide an overview of such shortcomings, along with

suggestions for future research.

56 First of all, the method design limits the study in several ways. The correlational design and

cross-sectional nature of the data employed bear limitations in regards to being measured at a single

point in time, making it difficult to presume causal relationships between variables. Hence the risk of

low internal validity due to possible inverse causality is acknowledged. This suggests the need to

apply a longitudinal research design in future studies to adequately capture the relationships between

proposed variables.

Furthermore, the sample also limits the study in several ways. The non-probability nature of the

sampling method suggests that companies included in the study may be different from those who were

excluded. Therefore, the study cannot guarantee the representativeness and generalizability of the

results (Neuman, 2012) and acknowledges the risk of its low external validity. Future studies should

examine whether the findings of this study are replicable and should aim to apply a probability

sampling method to ensure a greater generalizability of the results.

The self-reported nature of the responses by a single source within a company, based on Likert-

type scales, means that the study may be prone to a common method bias (Podsakoff et al., 2012). By

stressing the anonymous nature of the responses and emphasizing the need for honest responses in the

introductory letter, the researcher aimed to lower the risk of possible biases. Future research could

address this problem by using a multiple data sources and multiple time points to collect data.

Moreover, the measures employed in the online questionnaire were slightly adapted from its

original sources to better reflect the constructs of this study. This was necessary due to the fact that

this study was the first of its kind to measure Circular Economy related business model constructs on

quantitative basis. Since modified measures contribute to the risk of their low reliability, future

research would benefit from adopting validated, non-adapted measures of the constructs.

Other potential future research could build on the findings of this study and elaborate on certain

theoretical or practical issues and aspects of the mediating variables employed. First of all, the reasons

for why social enterprises adopt Circular Economy related business model components remain

unclear. While Lumpkin et al. (2013) suggest that the use of combination of innovative approaches to

business models can be used by organisations to actively maximise value creation, institutional theory

provides a different explanation. Organisations could use such business models as means of gaining

57 legitimacy in front of various stakeholders (Suchman, 1995), such as the public, resource providers or

the regulators who increasingly demand companies to be involved in pro-social activities and embedd

environmentally sustainable practises into their operations (Grimes, 2010; Nicholls, 2009). Future

research could examine this issue to allow for a complete understanding of the role of circular business

model components in social enterprises.

Future research could also differentiate between the different types of Circular Economy related

Offerings, such as those based on durability and those made out of recycled materials, and between the

various types of circular revenue models, such as pay-per-use, renting or freemium (Bocken et al.,

2016; Lacy & Rutquist, 2015). In particular, it should be examined whether the extent of their

respective impact on triple bottom line value creation differs among these types.

Lastly, future research could elaborate on the Circular Economy related Partnerships

component, and provide a detailed examination of the nature of such partnerships, including power

relationships, the types of partners involved, and key tangible or intangible resources exchanged or

activities performed. This would allow for a deeper understanding of the nature of such partnerships

which contribute to positive organisational triple bottom line performance. In turn, this would likely

lead to both new theoretical implications, as well as practical implications for managers.

58 7. Conclusions

The aim of this research was to examine whether social enterprises have the capacity to create a triple

bottom line value and whether this can be explained by Circular Economy principles adopted by

companies into their business models. Hence the aim was to determine whether either of the concepts

of social entrepreneurship and Circular Economy have the capacity to fully contribute to sustainable

development, and whether the two concepts are compatible in the context of business model

innovation. This is due to the fact that prior literature discusses social entrepreneurship as a business

form centred round social and economic value creation, while the Circular Economy literature is

focused on its environmental benefits due to its contributions to closing material loops.

While the independent variable social entrepreneurship was indicated by the extent to which

companies demonstrated Social Entrepreneurship Orientation, the dependent variable triple bottom

line value creation was considered in terms of three sub-constructs of environmental, social and

economic performances. Three Circular Economy related business model components were examined

as mediating variables, in particular Circular Economy related Offerings, Circular Economy related

Revenue Models and Circular Economy related Partnerships. A cross-sectional survey design was

utilised, by means of data collection of 121 organisations in the Netherlands, which included both

social enterprises and regular for-profit businesses. The study was explanatory in nature and a

deductive approach to data analysis was adopted.

The findings suggest that social enterprises indeed create a triple bottom line value. This

enhances existing social entrepreneurship and sustainable business model literature by showing that

social enterprises adopt sustainable business models and can be considered as sustainable enterprises.

This bears practical implications for companies aiming to enhance their triple bottom line

performance, as well as for policy makers and green investors aiming to promote sustainable business

practises.

The findings also suggest that Circular Economy related Revenue Models and Partnerships

mediate the relationship between social entrepreneurship and triple bottom line value creation, while

Circular Economy related Offerings have a positive mediating effect on environmental and social

59 aspects of the triple bottom line. This indicates that companies can utilise social entrepreneurship and

Circular Economy thinking in its business models to facilitate sustainable value creation. It also

provides support to the notion that Circular Economy may lead to social value creation, apart from

contributing to positive environmental and economic performance. Hence managers should consider

adopting Circular Economy related Offerings, Circular Economy related Revenue Models and should

collaborate with an extensive network of partners along its value chain to achieve a positive triple

bottom line impact. In particular, Circular Economy related Offerings is the most important business

model component which allows companies to achieve a positive environmental performance, while

Circular Economy related Revenue Models is essential for explaining their positive economic

performance, based on the simultaneous test of mediation.

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68 9. Appendices

Appendix 1: Measures used in the survey with their respective factor loadings

1) Social entrepreneurship measured by the Social Entrepreneurship Orientation

Factor Name of sub-constructs and items loading 1. Social innovativeness 1) Social innovation is important for our company .887 2) We invest heavily in developing new ways to increase our social impact or to serve our stakeholders or beneficiaries .875 3) In our company, new ideas to solve social problems come up very frequently .834 2. Social risk-taking 1) We are not afraid to take substantial risks when serving our social purpose .830 2) Bold action is necessary to achieve our company’s social mission .841 3) We avoid the cautious line of action if social opportunities might be lost that way .811 3. Social pro-activeness 1) We aim at being at the forefront of making the world a better place .862 2) Our organization has a strong tendency to be ahead of others in addressing its social mission .867 3) We typically initiate actions which other social enterprises/social entrepreneurs may copy .872 4. Socialness 1) The objective to accomplish our social mission precedes the objective to generate a profit .753 2) Our organization places a strong focus on partnerships with other organizations and/or governments in order to ensure a greater and accelerated accomplishment of the social mission .845 3) We set ourselves ambitious goals in regard to sustainability and incorporate them in all strategic decisions .875

69 2) Triple Bottom Line Value Creation measured by environmental, social and economic

performance measures

a) Environmental Performance

Original names of items Adapted names of items Factor loading

1) Our organisation operates with low air 1) Reduction of air emission emissions .732

2) Our organisation operates with low 2) Reduction of wastewater wastewater .804

3) Our organisation operates with low solid 3) Reduction of solid waste waste .767

4) Decrease in consumption of 4) Our organisation consumes low amount hazardous/harmful/toxic materials of hazardous/harmful/toxic materials .729

5) Decrease in frequency of environmental 5) Our organisation has a low frequency of accidents environmental accidents .801

6) In the past few years, our organisation 6) Improve an enterprise’s environmental has achieved improvement in overall situation environmental situation .667

b) Social Performance

Original names of items Adapted names of items Factor loading 1) We operate our organization in an 1) We operate our organization in an environmentally sustainable manner environmentally sustainable manner .834 2) Our donors or investors are very 2) Our donors are very satisfied with us satisfied with us .762 3) Our organization operates in a socially 3) Our organization operates in a socially sustainable manner sustainable manner .829 4) We help inform the community about 4) We help inform the community about the difficulties of our the plight of our beneficiaries beneficiaries/stakeholders .754 5) We help mobilize interest for 5) We help mobilize interest for additional additional social welfare initiatives social welfare initiatives .722 6) We are often perceived and valued by 6) We are perceived and valued by our our beneficiaries as a provider of last beneficiaries/stakeholders as contributing resort to their welfare .794

70 7) In the past few years we have met our 7) In the past few years we have met our objectives in terms of beneficiaries/ objectives in terms of beneficiaries served stakeholders served .763 8) Beneficiaries are satisfied with our 8) Beneficiaries/stakeholders are satisfied services with our services .865 9) Beneficiaries and stakeholders 9) Beneficiaries/stakeholders recommend recommend our services to others our services to others .846

c) Economic Performance

Factor Name of items loading 1) We are more effective in serving our stakeholders or consumers than others .887 2) In the past few years, we have increased our effectiveness .915 3) We are more efficient in serving our stakeholders or consumers than others .963 4) In the past few years, we have increased our efficiency .755 5) In the past few years, our financial situation has improved .759 6) Our organization is financially sustainable .834

3) Circular Economy enabled offerings measured by “Eco-design” scale

Original names of items Adapted names of items Factor loading 1) Design of products for reduced 1) Design of products for reduced consumption of material/energy consumption of material/energy .863 2) Design of products for reuse, recycle, 2) Design of products for reuse, recycle, recovery of material, component parts recovery of material, component parts .789 3) Design of products to avoid or reduce 3) Design of products to avoid or reduce use of hazardous products use of hazardous products .849 4) Design of processes for minimization 4) Design of processes for minimization of waste of waste .921

4) Circular Economy enabled revenue model measured by “New Revenue Models” scale

Original names of items Adapted names of items Factor loading 1) Our new revenue opportunities are 1) We recently developed new revenue related to our circular offering (e.g. repair opportunities (eg. additional sales, cross- services, insurance provision, selling selling). waste). .877

71 2) We increasingly offer integrated 2) We increasingly offer integrated services (e.g. maintenance contracts) in services (e.g. maintenance contracts) in order to realize long-term financial order to realize long-term financial returns. returns. .896 3) We recently complemented or replaced 3) We recently complemented or replaced one-time transaction revenues with long- one-time transaction revenues with long- term recurring revenue models (i.e. term recurring revenue models (e.g. leasing, renting, pay-per-use, transaction Leasing). fee charges). .844 4) We do not rely on the durability of our 4) We do not rely on the durability of our existing revenue sources. existing revenue sources. .712

5) Circular Economy related partnerships measured by “New Partnerships” scale

Original names of items Adapted names of items Factor loading 1) We are constantly searching for new 1) We are constantly searching for new collaboration partners which could help us collaboration partners. produce and/or implement and/or deliver and/or support our circular offerings. .827 2) We regularly utilize opportunities that 2) We regularly utilize opportunities that arise from integration of partners into our arise from integration of new partners processes which are related to our circular into our processes. offerings. .791 3) We regularly evaluate the potential 3) We regularly evaluate the potential benefits of outsourcing some of our key benefits of outsourcing. activities which are related to our circular offerings. .698 4) Our collaboration partners regularly 4) New collaboration partners regularly help us to produce and/or implement help us to further develop our business and/or deliver and/or support our circular model. offerings. .776

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