Social Enterprise Journal

The importance of theory in social enterprise research

Helen Haugh
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The importance
The importance of theory in social of theory
enterprise research
Helen Haugh
Judge Business School, University of Cambridge, Cambridge, UK 7
Abstract
Purpose – The purpose of this article is to review the importance of theory in social enterprise
research.
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Design/methodology/approach – The article presents and relates previous work on theory

borrowing, theory extension and theory generation to social enterprise research.
Findings – Theoretical embeddeness and social relevance are important for the legitimacy of social
enterprise research.
Research limitations/implications – Social enterprise research offers a promising array of
opportunities for theory extension and development.
Practical implications – In the social sciences, practical relevance is important for good theory
development. Better theories have the potential to improve practice.
Originality/value – The article applies previous research on theory borrowing, extension and
development to the context of social enterprise research.
Keywords Theory borrowing, Theory generation, Social enterprises, Research
Paper type Viewpoint

Introduction
Social enterprise research is a dynamic field of study that has reached an important stage
in development. As social entrepreneurs have developed new triple bottom line products,
services and business models, scholarly interest, measured by conference time and
journal papers, has increased. The rising level of interest has had three effects: a global
community of social enterprise scholars that crosses continents has begun to emerge; the
attention of leading organization and management scholars has been attracted to the
domain (Dacin et al., 2010; Zahra et al., 2008, 2009); and scholars in disciplines beyond
organization and management have become intrigued by the phenomenon (Light, 2008).
The legitimacy of a scholarly field is linked to the quality of the theories that explain and
predict the phenomenon of interest in that field and the social relevance of the theories
and findings. The high visibility of social enterprise in academic, practice and policy
circles has created a vibrant arena for theory testing, advances and development.

Defining theory
Theory is defined as “a statement of relations among concepts within a set of boundary
assumptions and constraints” (Bacharach, 1989, p. 496) and consists of “a set of
well-developed categories (e.g. themes, concepts) that are systematically inter-related
through statements of relationships to form a theoretical framework that explains
some phenomenon” (Strauss and Corbin, 1998, p. 22). Theory commences when we Social Enterprise Journal
Vol. 8 No. 1, 2012
notice a phenomenon of interest (Whetten, 1989) and attempt to describe the emergence pp. 7-15
and continuation of the phenomenon. In our role as scholars we are attracted by q Emerald Group Publishing Limited
1750-8614
inconsistencies between our understanding of, and the conventional wisdom to DOI 10.1108/17508611211226557
 SEJ explain, the phenomenon (Whetten, 1989). Thus, when existing theories cannot account
8,1 for the phenomenon we have noticed – we search for new explanations. Theory
therefore is more than a set of findings – it seeks to explain, and predict, the
phenomenon of interest.
A theory is composed of three elements. To begin we need a phenomenon of interest
to investigate, in our case, social enterprise. Naming and defining the phenomenon of
8 social enterprise is a vital first step in theory generation as it places boundaries around
our research area and helps us to focus our attention on the appropriate and relevant
aspects of economic and social life. Second, we need to define the constructs and
variables that pertain to our phenomenon of interest (Suddaby, 2010). This is when a
robust definition of the phenomenon of interest facilitates our inquiry by delineating
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the boundaries of our research. Finally, a theory specifies the relationships between
phenomena, such as “a story about why acts, events, structure and thoughts occur”
(Sutton and Staw, 1995, p. 378). The explanation that the theory proposes delves deeply
into the processes that underlie the relationships and seeks to elucidate systematic
accounts for a “particular occurrence or non-occurrence” (Sutton and Staw, 1995, p. 378).
Theory thus must go beyond description and explanation to show the logical order of
causal relationships (Sutton and Staw, 1995, p. 376) and explain how and why the
variables or constructs relate to the evidence (Weick, 1989, p. 517; Sutton and Staw,
1995, p. 375).
Abstraction lies at the heart of theoretical explanations of causal relationships
(Sutton and Staw, 1995, p. 377). The theorist distils the essence of the phenomenon
under investigation by moving away from the detailed empirical data to develop
constructs that have broader appeal (Adner et al., 2009, p. 205). Constructs are thus
created to explain a phenomenon but which by their very nature cannot be observed
directly (Bacharach, 1989, p. 498). Concepts, when “further abstracted and specified,
become the constructs that supply a theory with its conceptual clarity and inherent
structure” (Boxenbaum and Rouleau, 2011, p. 275). To qualify as a theory, assertions
need to be integrated into a coherent framework that is sufficiently abstracted to
capture a broad class of empirical situations that in turn might lead to further
propositions and hypotheses (Boxenbaum and Rouleau, 2011, p. 274).
Theory thus can be seen as an attempt to bind together, in a systematic fashion,
knowledge about some particular aspect of the world of experience (Honderich, 1994).
In practice, theory construction in social research is undertaken against the
background of more general and underlying assumptions. These are unlikely to be
grand systems of ideas that encapsulate a whole area of experience, but “sets of
theoretical models which are given empirical meaning only inasmuch as they can be
applied directly to certain limited areas of empirical reality” (Honderich, 1994).
The two primary criteria for theory evaluation (Bacharach, 1989, p. 496) are:
(1) utility; and
(2) falsifiability.

Usefulness has already been mentioned in relation to the capacity of a theory to explain
and predict. A good theory helps us to make sense of a phenomenon and to say what it
is likely to happen in the future if the same set of conditions and relationships occur
again. Falsification specifies whether a theory is constructed in such a way that it is
possible to refute the theory empirically (Bacharach, 1989, p. 501). In empirical
 research, progress “comes primarily from the ability to falsify theories” (Adner et al., The importance
2009, p. 203). As absence of evidence about a phenomenon does not equate with
absence of the phenomenon, most theorists agree that theories can only supported or
of theory
disproved, never proven (Popper, 1959).

Social enterprise research

The phenomenon of social enterprise has attracted the attention of practitioners, policy 9
makers and scholars (Mair and Marti, 2006). For practitioners, social enterprise is
perceived to be an important element in societal organization that aims to solve local,
national and international societal problems. Corporations too have become more
interested in the potential of social enterprise particularly in relation to enabling them
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to fulfil corporate social and environmental responsibilities. Community, voluntary

and charitable organizations in the non-profit sector have also taken an interest in the
business models of social enterprise as a strategy to achieve financial sustainability. In
addition, policy makers at local and national levels, as well as international
development institutions, have acknowledged the potential of social enterprise to
efficiently and effectively deliver goods and services to impoverished and
hard-to-reach individuals and groups.
For scholars, interest in social enterprise has stimulated a range of research projects
that have expanded our understanding of the phenomenon. The scholarly literature
has been published in books, peer reviewed journals and other publications,
e.g. conference papers and industry reports. However, theoretical developments that
explain and predict the phenomenon of social enterprise have, to date, been few. This
might be explained by several factors:
.
Scholars have yet to agree a universal and distinctive definition of social
enterprise. The profusion of definitions found in the first decade of the
twenty-first century (see Dacin et al., 2010, for a review) is gradually giving way
to an emerging consensus that the aim of social enterprise is to achieve economic,
social and environmental value by trading for a social purpose. However, the
context-bound nature of social enterprise and the tautology of using “social” in
both the article and the definition (Santos, 2010) are major obstacles to theory
development.
.
Research has adopted an actor-centred perspective that has focused on
describing the characteristics and qualities of social entrepreneurs. Although
interesting and motivating accounts of individual social entrepreneurs have been
published (Bornstein, 2004), they rarely offer new theories to explain and predict
the emergence and activities of social entrepreneurs.
. Research has produced many detailed descriptions of the historical development
of individual social enterprises. Theory development concerning the
generalizability of findings from individual case studies of social enterprises
to larger populations of organizations and different country contexts is a
valuable contribution to knowledge. Despite this, it has rarely been included in
this type of article.
.
Research has given an account of the policy frameworks associated with
country-level support of social enterprise activity. However, scholarly
explanations for when, why and how such policy interventions have been
adopted are again hard to find.
 SEJ Underlying the criticisms is the perceived tension between research that is oriented
8,1 towards developing theory and that which aims to improve practice. Practice, in the
sense of the act of doing something, is traditionally contrasted with theory as an
abstraction of ideas about a phenomenon. In the academy, theory tends to be put on a
pedestal and elevated above practice, however theory devoid of practice can be
perceived as dry and irrelevant: “there is nothing so practical as a good theory” (Lewin,
10 1951, p. 169). The legitimacy requirement that research in the social sciences is also
socially relevant requires that theorists delineate the practical implications of the new
theories they develop.

Theory and social enterprise research

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Published articles about the phenomenon of social enterprise vary in the extent to
which they engage with established theories, concepts and frameworks. The range of
engagement extends from articles that are devoid of any theory to those that present
new and fully formed theories, and includes articles that borrow, test and extend
existing theories. All of these approaches have their place in social enterprise research,
however, research that extends or creates new theory offers the greatest potential for
building the legitimacy of social enterprise research.

Theory borrowing in social enterprise research

Theory borrowing involves bringing ideas from one theoretical domain, a source, to
address an issue or explain a phenomenon in another, a target, domain (Floyd, 2009).
Not all theories travel well between disciplines and the capacity to do so is related to
the level of theoretical abstraction (Oswick et al., 2011). Higher abstraction confers on
theories greater potential to travel between disciplines when compared to theories that
stay close to context and data. Theory borrowing should go beyond confirming and
reaffirming the utility of an existing theory, and improve the theory in some way
(Whetten, 1989, p. 493). Improvements might be derived from theorization or analysis
of empirical data and may involve re-contextualization, re-positioning or re-framing
the source theory (Oswick et al., 2011). Borrowing and integrating theories across
different domains can be achieved in three ways (Floyd, 2009; Zahra and Newey, 2009):
(1) relatively simple application (or replication) of theory from the source to the
target domain with few, if any, changes;
(2) using ideas in the source domain to extend theory in the target domain; and
(3) using what has been learned in the target domain to extend theory in the source
domain.

Comparing and contrasting how these theoretical lenses explain and predict social
enterprise has led to greater understanding of, as well as creating opportunities to
support, refine and extend, the source theory.
It is a commonplace that organization and management theory draws on a range of
established theories from different disciplines (Whetten et al., 2009; Oswick et al., 2011)
and such is the case with social enterprise research. Articles on social enterprise have
drawn on theoretical perspectives from anthropology, economics, psychology and
sociology (Short et al., 2009). For example, institutional theory, particularly
institutional entrepreneurship (DiMaggio, 1988), has been employed to explain the
complexities of the organization and management of social enterprise (Mair and Marti,
 2006) and structuration theory (Giddens, 1984) has been employed to examine the The importance
social construction of social enterprise (Chell, 2007). Within the domain of business and of theory
management, scholars have borrowed theories from the fields of accounting,
management, marketing, and operations management (Short et al., 2009). For example,
theories to explain networks, social capital and resource acquisition have been applied
to social enterprise (Mair and Marti, 2006). In SEJ[1], articles have drawn on economic
theories of capitalism (Amin, 2008) and sociological theories (Cato et al., 2007; Grant, 11
2008); institutional theory has been employed to examine the context of social
enterprise (Reid and Griffith, 2006) and network theory has been used to investigate
social finance (Nakagawa and Laratta, 2010).
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Theory extension in social enterprise research

Making a theoretical contribution is an essential requirement for research articles to be
published in leading business and management journals. Most theoretical advances
are built on the foundations of existing theories and hence articles in refereed journals
situate their research in a conceptual framework that draws on relevant theories, thus
“references to theory developed in prior work help to set the stage for new conceptual
developments” (Sutton and Staw, 1995, p. 372). Extending theory however is a distinct
conceptual challenge that goes beyond positioning research in the context of previous
work. Knowledge growth by extending established theory also presents a valuable
opportunity to build cumulative theory (Sutton and Staw, 1995, p. 383). Theory
generation by extending existing theories might occur in several ways, e.g. refining the
original constructs of source theories, pushing the boundaries of the extant theory, or
elucidating the processes of the original theory. Extensions or modifications should
alter existing views in important ways and not stretch the theory beyond reason (Van
de Ven, 1989).
For example, theories to explain and predict institutional entrepreneurship have
been extended to the domain of social enterprise by conceptual work to theorize the
relationships between, and processes of, institutional and social entrepreneurship
(Dacin et al., 2010; Tracey et al., 2011), Strauss’s theory of bricolage has been extended
to the domain of social enterprise by proposing a theory of social bricolage (Di
Domenico et al., 2010), and a new theory of social franchising was advanced from
existing work on franchising (Tracey and Jarvis, 2007).

Theory generation in social enterprise research

Within the academy, the greatest esteem is conferred on scholars who make
breakthrough discoveries of major significance. The goal of discovery is thus
fundamental to our identity as individual scholars and the collective legitimacy of the
academy. Although many social enterprise research articles are rich in theoretical
embeddedness, few present new theories to explain and predict when, why and how
social enterprises emerge and create economic, social and environmental value. New
theory emerges from the process of either examining empirical data for new insights or
conceptual translation of existing theories into new theory (Albert, 1977; Albert and
Anderson, 2010). For example, new theories to explain the emergence of community
based enterprises (Peredo and Chrisman, 2005) and community-led social ventures
(Haugh, 2006) have drawn on empirical data from social and community enterprises. In
 SEJ contrast, the development of theory to explain social value creation and appropriation
8,1 is largely conceptual (Santos, 2010).
New theories based on empirical data gathered from social enterprises have also
been developed to explain and predict the creation of markets and processes of
organizational management. For example, Seelos and Mair (2007) investigated the
creation of markets at the Base-of-the-Pyramid (BOP) and developed new explanations
12 to account for market emergence in the context of deep poverty. In organization
research, prior research suggests that hybrid organizations, such as social enterprises,
are unstable and face significant challenges to survival (Dorado, 2005) yet in practice
social enterprises continue to flourish and gain prominence. Institutional theory and
organizational identity theory have been drawn upon to develop new theory to explain
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the emergence and viability of social enterprise (Battilana and Dorado, 2010) and to
explain and predict the process of bridging institutional divides (Tracey et al., 2011).

Challenges to theory generation

Although the relative youth of scholarly endeavour in social enterprise when compared
to established fields in organization and management might explain the small number
of articles that extend existing theories and present new theories to explain and predict
the emergence and sustainability of social enterprise, four other explanations are also
suggested.
(1) New theory development and testing rests on rigorously applied and robustly
defined research methods, and weaknesses such as inappropriate research
design and casual data collection methods impact on the reliability and validity
of data collected, and reduce confidence in theoretical advances arising from the
data.
(2) Accurate and methodical data analysis is essential for identifying new
constructs and new relationships between constructs, and poor data analysis
such as letting intuition dominate over interpretation and lack of attention to
the empirical limits, scope or conditions of enquiry, constrains our ability to
uncover new constructs and relationships that are essential to new theory.
Irrespective of the research strategy and methods we adopt, rigour is essential.
Although tempting, ignoring evidence that does not support our emerging
theory is both unethical and may blind us from refining our new theory further.
(3) In addition to methodological rigour, new theory also requires inspiration,
creativity and receptiveness to the unexpected and the unanticipated. The
combination of the contrasting skills of methodological rigour and creativity
presents a difficult challenge for scholars to embrace.
(4) Generating theory can be a fuzzy, messy, time-consuming and complicated.
However, the struggle to master these challenges can lead us to produce better
explanations and predictions i.e. better theory.

Conclusion
Social enterprise has emerged as a phenomenon of practical and theoretical
significance and has attracted the attention of practitioners, policy makers and
scholars around the world. The global significance of social enterprise has been
recognized twice by Nobel committees: first, when the peace prize was awarded to
 Muhammad Yunus for his work in 2006 on social microfinance in reducing poverty, The importance
and second when the economic sciences prize was awarded to Elinor Ostrom for her of theory
work on economics and communities in 2009. Within the academy interest in the
phenomenon of social enterprise has shifted from the periphery of scholarly research to
a prominent position that is rich in opportunities for theory testing, extension and
development. As the SEJ builds its profile as a leading outlet for publishing research
and sharing case studies about social enterprise with colleagues, it is increasingly 13
important that we are explicit about our engagement with, and extension and
development of new, theories to explain and predict social enterprise. The challenge
therefore, is to ensure that we raise the profile of theory development in social
enterprise research, and communicate clearly the connections between our theoretical
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contributions and the practice of social entrepreneurship.

Note
1. The Social Enterprise Journal (SEJ) was launched in 2005 to publish research about the social
economy and has been an outlet for scholars and practitioners to share their findings with
audiences interested in social enterprise. Between 2005 and 2011 the SEJ has published 77
articles directly related to social enterprise. I systematically analyzed all the articles
published in SEJ in terms of type of paper, engagement with theory, theoretical and research
domain, and research methods.

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Corresponding author
Helen Haugh can be contacted at: [email protected]

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