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Social Enterprises: Examining Accountability for Social and Financial Performance

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Social Enterprises: Examining Accountability for Social and Financial Performance SOCIAL ENTERPRISES: EXAMINING ACCOUNTABILITY FOR SOCIAL AND FINANCIAL PERFORMANCE Gloria Astrid Guraieb Izaguirre B.A. Financial Management Principal supervisor: Associate Professor Belinda Luke Associate supervisor: Dr Craig Furneaux Submitted in partial fulfilment of the requirements for the degree of Master of Business (Research) School of Accountancy QUT Business School Queensland University of Technology December 2015 Keywords Accountability, social enterprise, financial, social, performance, non-profit, third sector, Australia Social enterprises: Examining accountability for social and financial performance i Abstract This study explores the accountability of social enterprises with respect to their dual objectives of social and financial performance. During the last two decades, social enterprises have been subject to increasing public attention and research. This interest derives from the potential role of social enterprises to pursue a social mission through a self-funding commercial business model, rather than relying on philanthropy to survive. However, there is little research exploring how social enterprises exercise their accountability for both social and financial performance. Given that social enterprises seek to balance dual objectives, maintaining financial sustainability for long-term survival while also fulfilling their social mission, it is important to examine how these organisations balance accountability for these potentially conflicting goals. There is limited literature on social enterprise accountability, however, as third sector organisations, literature on accountability of non-profit organisations is a useful point of reference. In the context of non-profit organisations, concerns of mission drift and prioritising accountability to donors (as a main funding source) have been raised, where financial objectives may inadvertently override social objectives. Given the social and financial objectives of social enterprises, these issues are also relevant to their accountability. Accordingly, this research focused on the dual accountability of social enterprises, and in particular the influence of customers (as a main commercial funding source) on social enterprise accountability. Specifically, social enterprises with a dominant versus a diversified customer base, to consider whether this also impacts on their accountability in practice. Four social enterprises in Australia are examined, one with a dominant commercial customer and three with a diversified commercial customer base. Drawing on accountability, stakeholder and legitimacy theory, stakeholder management strategies and the accountability mechanisms of social enterprises are explored. While only one social enterprise had a dominant commercial customer, the findings revealed that social enterprise accountability was largely influenced by the social enterprises’ main stakeholder (either a dominant commercial customer or a parent organisation). Specifically, social enterprises’ accountability practices were ii Social enterprises: Examining accountability for social and financial performance focused on fulfilling their main stakeholders’ accountability demands, and reporting to them (either formally or informally) rather than reporting on social and financial performance to a broader range of stakeholders. This research enhances the understanding of stakeholder impact on social enterprises’ accountability in practice, and develops an understanding of accountability theory in the context of social enterprises. Social enterprises: Examining accountability for social and financial performance iii Table of Contents Keywords .................................................................................................................................. i Abstract .................................................................................................................................... ii Table of Contents .................................................................................................................... iv List of Figures ........................................................................................................................ vii List of Tables ......................................................................................................................... viii Statement of Original Authorship ............................................................................................ x Acknowledgements ................................................................................................................. xi Chapter 1: Introduction ............................................................................................. 1 1.1 Introduction .................................................................................................................... 1 1.2 Background .................................................................................................................... 2 1.3 Research question .......................................................................................................... 5 1.4 Research method ............................................................................................................ 5 1.5 Structure of thesis ........................................................................................................... 6 Chapter 2: Literature Review .................................................................................... 7 2.1 Introduction .................................................................................................................... 7 2.2 Examination of social enterprise .................................................................................... 8 2.3 Social enterprises as hybrid organisations ..................................................................... 9 2.4 Accountability theory ................................................................................................... 12 2.5 To whom social enterprises are accountable: Accountability directions ..................... 14 2.5.1 Accountability relationships .............................................................................. 15 2.6 For what are social enterprises accountable ................................................................. 19 2.6.1 Strategic, fiduciary, procedural and financial accountability ............................ 20 2.7 How social enterprises are accountable: Accountability mechanisms ......................... 22 2.8 Stakeholder theory ....................................................................................................... 24 2.8.1 Stakeholder management ................................................................................... 26 2.9 Legitimacy theory ........................................................................................................ 28 2.10 Research questions ....................................................................................................... 30 2.11 Summary of this chapter .............................................................................................. 33 Chapter 3: Methodology ........................................................................................... 35 3.1 Introduction .................................................................................................................. 35 3.2 Research perspective .................................................................................................... 35 3.3 Rationale for case study research design ..................................................................... 36 3.4 Sampling strategy ......................................................................................................... 38 3.4.1 Profile of participating social enterprises .......................................................... 40 3.5 Data collection ............................................................................................................. 41 iv Social enterprises: Examining accountability for social and financial performance 3.5.1 Data collection strategies .................................................................................... 43 3.5.2 Designing the interviews and questionnaires ..................................................... 44 3.5.3 Conducting the interviews .................................................................................. 47 3.5.4 Conducting the online questionnaires ................................................................ 48 3.5.5 Secondary data ................................................................................................... 49 3.6 Data analysis ................................................................................................................. 50 3.6.1 Coding ................................................................................................................ 51 3.7 Ethical considerations ................................................................................................... 52 3.8 Trustworthiness of the research .................................................................................... 52 3.9 Limitations of research design ...................................................................................... 54 3.10 Summary ....................................................................................................................... 55 Chapter 4: Findings .................................................................................................
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