Social enterprises are described as organizations with dual objectivessocial and commercial.While the measurement of commercial performance is relatively straightforward and well understood, our understanding of the factors related to measuring social performance are more ambiguous. Is the adoption of social performance measurement (SPM) practices more related to external pressures, such as the need to demonstrate legitimacy to funders and peers, or is it more closely related to the growing rationalization within the social sector? We examine the relationship between external and internal factors and the adoption of SPM using a novel dataset of 1864 nascent social enterprises from around the world. Our findings suggest support for the argument that the adoption of SPM in social enterprise is related to the growing rationalization of the social sector, which challenges some of the past research on this topic, and provides a more nuanced perspective of SPM in social enterprise.

Although early-stage finance is critical to the growth of most ventures, it is even more important for social ventures as they face the challenges of balancing their social and commercial objectives. Drawing on institutional logics and signaling theory, this study uses a panel data set of 3,401 nascent social ventures to investigate the important role philanthropic grant funding plays in the organizational and financial development of social ventures. We find mixed results, with positive effects on employment and subsequent access to debt finance, but no effects on revenues and access to equity. Our findings connect these theories by suggesting philanthropic grants provide social ventures with flexibility to invest in human capital without pushing them to pursue short-term financial objectives, and that receiving a philanthropic grant provides a signal that is interpreted differently by debt and equity financiers. These findings are especially relevant as funders increasingly use grants to support social entrepreneurship.

While the links between the fields of social enterprise and social finance appear apparent, academic research on the relationship lags behind practice. This study examines how social enterprises interact with social finance organizations in the context of impact measurement. Through qualitative research with eight social enterprises and their respective funders, I find evidence that both sides view impact measurement primarily as a means for establishing legitimacy prior to engagement, and in the early stages of their relationship. These relationships are hierarchical and rigid at early stages, but over time evolve into more collaborative partnerships. Eventually, social enterprises embrace impact measurement as a tool for organizational learning, and social finance organizations develop more empowering approaches for impact measurement. The level of flexibility and the closeness of the relationship between social finance organizations and social enterprises suggests important lessons for the development of a more enabling use of impact measurement.

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