Challenges Facing Social Enterprises in the United States

Abstract

Hybrid organizations that combine social purpose and profit motive appear to have grown significantly in number in the U.S. in recent decades. However, these organizations, which we call “social enterprises,” face challenges that impede their growth and hinder their ability to deliver greater benefits. To better understand what these challenges are, this paper surveys the growing literature on social enterprises which suggests that social enterprises now face these major obstacles: ill-fitting legal forms, obstacles to effective governance, problems in evaluating impact, weak supportive networks, difficulties in raising funding, and management tensions. Deepening understanding of the challenges facing social enterprises should help guide those interested in strengthening public policy toward social enterprise and other aspects of the support system for these organizations.

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“…A substantial body of academic literature on social enterprises has emerged, on both theoretical [21][22][23][24][25] and empirical [26][27][28] aspects. Others have sought to characterize the phenomenon [29,30], the forms of management [31][32][33] their governance structures [34], and the kind of entrepreneurs that establish them [35,36]. The theoretical literature on social enterprises deals principally with their key and most distinctive feature: their hybrid form based on competing institutional logics [37,38].…”

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“…For instance, the identity perspective of funders and beneficiaries about what social enterprises differ. Extant studies such as Deloitte (2013) in the United Kingdom summarized the challenges of social enterprises as financial, procurement, customer, and advocacy while Abramson and Billings (2019) study conducted in the United States of America on the challenges facing social enterprises found ill-fitting legal forms, ineffective governance, evaluating impact issue, weak supportive networks, difficulties in raising funding, and management tensions as the major obstacles of social enterprises. A study conducted by Yung, Yenchun, & Shiann (2018) in Taiwan, mentioned human resources, services, products, and financial resources as the challenges confronting social enterprises in the country.…”

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“…In the case of access to finance, barriers are caused by situations where the business models of social enterprises are not attractive to investors. This type of barrier is discussed also by Abramson and Billings (2019). In terms of access to human resources, as stated by Davies, Haugh and Chambers (2019) social enterprise growth is constrained in terms of both recruitment and employee retention due to limited pools of human capital and low rewards for achievement.…”

“…In most cases, we can consider external barriers as institutional. These barriers are, for example, absence of clear approach to social enterprise definition (Pelucha, Kourilova & Kveton, 2017;Blanda & Urbancikova, 2020), consumer behaviour (Davies, Haugh & Chambers, 2019), administrative complexity (Blanda & Urbancikova, 2020) or insufficient social enterprises' platforms and networks (Pelucha, Kourilova & Kveton, 2017;Abramson & Billings, 2019).…”