Relationship Of
Organizational Identity to
Organizational Performance in
Social Entrepreneurial
Organizations
Angela French & G. Tyge Payne
Agenda
• What is social entrepreneurship and why does
social entrepreneurship matter
• Organizational identity
• Organizational performance
• Performance in social entrepreneurship
• Implications
Social entrepreneurship
Why is it important?
• Social entrepreneurship impacts the global
community by providing services that cannot be
effectively offered by government or commercial
entities (Sqauzzoni, 2009).
• In 2007, public charities reported over $1.4
trillion in total revenues and $2.6 trillion in total
assets (NCCS Core Files 2007)
• 26.4% of Americans over 16 volunteered for an
organization in fiscal year 2008 (Current Population Survey, September,
2008)
Social entrepreneurship
What is it?
• Nonprofit organizations that have characteristics
business (Lasprota & Cotton, 2003)
• Organizations that exploit opportunities and pursue
innovation to tackle social problems (Zahra et al., 2009)
• Individual or organizations that perform entrepreneurial
action to reach a social goal (Certo & Miller, 2008)
• Organizations that focus on creating social wealth over
economic wealth (Mair & Marti, 2006)
Organizational identity
• The characteristics of an organization that
− Define the organization
− Make it distinctive from other organizations
− Endure over time
(Albert & Whetten, 1985)
Organizational identity in social
entrepreneurial organizations
• Has both normative and utilitarian identities (Albert & Whetten, 1985;
Moss et al., 2010)
• Each identity has its own set of conventions and beliefs
(Foreman & Whetten, 2002)
• Multiple organizational identities may be problematic
when the identities are in conflict or one identity is
emphasized over (Foreman & Whetten, 2002; Glynn, 2000)
• The organization’s identity influences the way the
organization interprets issues, resolves conflict, establish
competitive advantage, frames strategies, and sets goals
(Dutton & Dukerich, 1991; Foreman & Whetten 2002)
Organizational identity in social
entrepreneurial organizations
• Multiple identities impact performance and resources
(Foreman & Whetten, 2002; Golden-Biddle & Rao, 1997; Whetten, 1981)
• Organizational goals, performance measures, and actions
shape and are shaped by organizational identity (Fox,-Wolfgramm,
Boal, & Hunt, 1998; Scott & Lane, 2000)
Organizational performance
• Organizations need financial and nonfinancial
performance measures that are aligned with the
organization’s strategy or value drivers (Ittner, Larcker, &
Randall, 2003; Kaplan & Norton, 1992, Venkatraman & Ramanujam, 1996)
• Organizational performance consists of three
categories
− Financial performance
− Operational performance
− Organizational effectiveness
(Venkatraman & Ramanujam, 1996)
Organizational performance in social
entrepreneurship
• Organizations with normative identities struggle to
measure organizational effectiveness because it is
impossible to measure ideological goal fulfillment (Albert &
Whetten, 1985)
• Social entrepreneurial organizations define their goals as
they align to their organizational mission as opposed to
defining operational or financial goals
• There is not a standardized way to calculate social value
creation (Patton, 2003)
Organizational performance in social
entrepreneurship
• Organizations like the Better Business Bureau Wise
Giving Alliance attempt to quantify the relationship
between donations and social impact by measuring the
percentage of administrative costs to total expenses and
other ratios
− The validity of these measures as indicators of organizational
performance is questionable (Bhattacharya & Tinkelman, 2009).
• Performance is from the perspective of stakeholders and
social entrepreneurial organizations have multiple
stakeholders with dissimilar needs (Herman & Renz, 1998)
Relationship between organizational
identity and organizational performance
Relationship between organizational
identity and organizational performance
• Proposition 1: Since organizational identity impacts organizational
goals and strategies, the degree to which an organization identifies
with its normative versus its utilization identity will impact the goals
and organizational performance measures the organization sets.
• Proposition 1A: The stronger the normative identity of an
organization, the more difficult it will be for the organization to
measure organizational performance.
• Proposition 2: An organization’s social impact is influenced by the
organization’s financial and operational performance.
• Proposition 3: An organization’s financial performance will be
influenced by the organization’s social impact.
Implications
• If social entrepreneurship is about building social
wealth over economic wealth, then social
ventures need both a strong normative and
strong utilitarian identity that impacts their goals
and strategies in order to thrive
− Social entrepreneurs need to have business savvy to
fulfill their social goals (Vega & Kidwell, 2007)
Implications
• Social entrepreneurial organizations need to have
both identities manifest in their organizational
goals and strategies which are then translated
into measureable performance goals
− Scholars and practitioners have introduced multidimensional performance indicators to social
entrepreneurship like the balanced score card and
social return on investment (Kaplan, 2001; Nicholls, 2009).
Implications
• Operational performance and financial
performance are antecedents for social impact,
so financial and operational measures could be
effective, though only partial, methods to
measure organizational performance in social
entrepreneurship
Implications
• Further research is necessary to understand the unique
organizational structures of social entrepreneurial
organizations
• Understanding and possibly generalizing key
performance characteristics of social entrepreneurial
organizations could lead to determining key performance
referents, which could lead to ways to improving way
social ventures operate
• This type of model could be adapted to other
organizations that exhibit multiple identities
Questions
& Comments
References
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