Stepping UpAN EMPIRICAL ANALYSIS OF THE ROLE OF SOCIAL INNOVATION IN RESPONSE TO AN ECONOMIC RECESSIONAlexandra Graddy-Reed & Maryann P. Feldman

Public Good ProvisionProvision of

Public Goods

For-profits

Hybrids

Nonprofits

Foundations

Charities

Individuals

Government

Changing Practices•For-profit vs. Nonprofit?• For-profits increasing social engagement• Nonprofits increasing earned income revenue streams• Hybrid forms emerging

•Impact of a Recession• Increased community need• Increased risk for existing organizations

•Role of Social Innovation?

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Social Enterprise Social Innovation Social Entrepreneurship

Source: Scopus Database

Terms in Use

Terms in Use

•Social Innovation

•Extension of innovation

Process of creating novel solutions specifically to further a social aim

Routes to Social Innovation

Positive Externality of a

Social Application

CSR Practices

For-profit Social

Involvement

For-profit Innovation

Social Innovation

For-profits, Hybrids, &

Nonprofits with Social Missions

Overview•North Carolina For-Profits & Nonprofits

•Survey on Organizational Practices

•Document the variation in use of socially innovative practices across legal structure

•Demonstrate how social innovation is used in reaction to economic recession

North Carolina Rural-Urban Distribution

Economic Distress Tier Distribution

Grey: Rural; Blue: UrbanData Source: NC Rural Center

Orange: Tier 3; Blue: Tier 2; Grey: Tier 1Data Source: NC Department of Commerce

North Carolina Legal Structures•Traditional options• Corporations, LLP & LLC• Allow for social benefits • Nonprofit corporations • Allow for earned income revenue

•Debate over hybrid forms• B-Corporation (Failed May 2013)• Low-Profit Limited Liability Company (L3C)• Enacted in August 2010; Repealed in June 2013

Survey Design•Identification and measurement challenges of social innovation

•Utilize broad definition of social innovation• Survey wide-range of organizational practices

•Twenty-five question survey, 10-15 minutes• Demographics• Impact of the Great Recession • Environmental, Social, and Employee practices

Survey Distribution

•Winter 2012-2013

• Survey sent to 4,843 organizations

• Received 1,004 responses • 20% response rate• 62% completion rate

Nonprofits23%

For-profits77%

State Population

Nonprofits22%

For-profits78%

Survey Sample

Distribution of establishments by legal structure

Survey-State Comparison

Urban58%

Rural42%

State Population

Urban71%

Rural29%

Survey Sample

Distribution of establishments by rural-urban counties

Survey-State Comparison

Tier 110%

Tier 220%

Tier 369%

Survey Sample

Tier 112%

Tier 234%

Tier 354%

State Population

Distribution of establishments by economic distress tier

State Distribution Comparisons

Questions

What types of organizations engage in socially innovative behavior and what role does legal structure play?

What role does socially innovative behavior play in providing increased social support in response to the recession?

Methods: Scales of Practices

•Measure Practices in Place

•Multiple Scales of Practices• By Focus (Environmental, Community, Employee)• By Type (Basic, Production, Investment)

•What organizational traits are associated with the social innovation scale?• Poisson or Negative Binomial Models

Questions

What types of organizations engage in socially innovative behavior and what role does legal structure play?

What role does socially innovative behavior play in providing increased social support in response to the recession?

Methods: Recession Responses•What types of practices are associated with increasing social support during the recession?

•Logit Models

Findings & Implications

•Hybrids have significantly more investment practices in place than for-profits

•Organizations with more advanced community practices increased social support in response to the recession

Next Steps

•Second round of survey • Expanded distribution by region and industry

•Design additions• Sub-set questions for Coops, L3Cs, Nonprofits with earned income• Additional employee training questions

2014 Survey Distribution•2012 Panels

•Additional Panels• County specific email lists • COOP database• B-Corporation database• L3C Database• NC Breweries & Wineries

•Sent 9,725 surveys & received 1,199

Round Comparison

Nonprof-its

22%

For-profits78%

Round 1 Sample

Nonprofit28%

Hybrid3%

For-profit69%

Round 2 Sample

Descriptive StatisticsFor-profit Hybrid Nonprofit

Average # of Employees 1,936 29.65 68.86

Business Innovation 54.41% 41.67% 57.87%

Offer Paid Maternity Leave 28.72% 40.00% 32.88%

Offer Tuition Assistance 35.04% 26.32% 36.19%

Finance Community Enterprise 26.23% 58.82% 36.84%

Descriptive Statistics

B-Corporation Hybrid Social Enterprise

Full Sample 4.48% 7.04% 17.85%

For-profit 5.80% 4.47% 10.37%

Hybrid 0.00% 50.00% 57.89%

Nonprofit 2.44% 10.18% 31.82%

Descriptive StatisticsFor-profit Hybrid Nonprofit

B-Corporation

Social Enterprise

Strictly For-profit 36.31% 4.55% 0.90% 17.24% 3.33%

For-profit with social assistance 29.16% 13.64% 0.45% 20.69% 9.17%

Provide social good while being for-profit 31.48% 50.00% 2.26% 48.28% 35.00%

Nonprofit with heavy earned income 1.61% 27.27% 32.58% 6.90% 25.00%

Nonprofit with some earned income 0.18% 4.55% 25.79% 3.45% 14.17%

Nonprofit with little earned income 1.25% 0.00% 38.01% 3.45% 13.33%

Plans for Future Research

•Social Innovation Across Legal Structure

• Failure in social practices

• L3C legal structure

• Industry and geographic specific examinations

• For-profit non-profit comparison within industry

Thank You