An Exploratory Study on Financial Resources, Scaling, and Performance of Social Enterprises in India
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The limitations of the government and current economic system deprived socio-economic opportunities to certain sections of the communities. The non-profit sector, expected to fill this gap, has been afflicted with fiscal constraints. Furthermore, donors’ emphasis on greater efficiency has influenced the non-profit sector to adopt new managerial practices and pursue alternative sources of income, in effect altering their behaviour to social enterprises. Therefore, social enterprises are considered as a credible alternative to non-profits as well as state-welfare programs, and demonstrated their impact on health, education, skill development, and other relevant areas to enhance the well-being of vulnerable communities. The thesis aims to explore the financial resources, scaling and performance of social enterprises in India, and pursues five research goals enumerated below: 1. To configure social enterprises and explore differences across clusters on financial resources, scaling resources and performance. 2. To study the associations and interactions between capabilities, resources and overall performance. 3. To examine the role of internal capabilities on scaling impact and financial sustainability using the SCALERS model. 4. To explore the capital structure of social enterprises with respect to resources and performance. 5. To develop a benchmarking model for social enterprises using financial indicators. Section-8 companies (Companies Act 2013) meet the definition of social enterprises adopted in the study and Section-8 companies are population of this study, because their legal provisions are similar to social enterprises in USA, UK, France, and Italy. A closed-ended questionnaire was prepared based on a literature review, the pilot data was collected, feedback from the participants was taken, expert opinion was sought, and then changes were made to the questionnaire before proceeding to the data collection. Cluster sampling technique was followed, and respondents were chosen from four states in India – Karnataka, Telangana, Maharashtra, and Tamil Nadu. A total of 207 Section-8 companies participated in the survey. A two-stage exploratory approach was followed to investigate the research goals. In the first stage, the characteristics that lead to different configurations of social enterprises were explored using Two-Stage cluster analysis and one-way ANOVA techniques, followed by a study on relationships of social enterprises that influence their overall performance using PLS-SEM. Acquiring financial resources, and scaling were found to be key factors affecting the overall performance. In the second stage, these two factors – scaling and financial aspects of social enterprises were further explored. The analysis classifies social enterprises into five clusters, namely, service oriented, product oriented, local philanthropic, regional philanthropic and global philanthropic based on grants and donations to revenue ratio, geographical presence, products officered, services offered, type of beneficiaries served, and discounts on products and services. Performance and resources were invariant among the clusters, however financial variables were significant in their differences. The PLS-SEM model finds that when leadership is positively related to market orientation, networking and innovation, it leads to acquisition of financial resources, scaling of resources and improved overall performance. The analysis confirms the role of SCALERS model in scaling of social enterprises in India and extends the SCALERS model to financial sustainability. The study of the fourth research objective reveals age and performance have no relationship with capital structure. Operational self-sustainability, however, has an influence on capital structure. In the last objective, a framework is developed to evaluate the efficiency of the social enterprises through financial proxies. Based on these results, implications for the practitioners – social entrepreneurs, funders, mentors, and incubators – policy makers, and academicians are drawn.