Business model innovation, legitimacy and performance: social enterprises in China

Abstract

PurposeSocial enterprises pursue growth through business model innovation, and acquiring legitimacy is critical to ensuring such innovation. The purpose of this paper is to examine how business model innovation and legitimacy affect the performance of new social enterprises during different development stages.Design/methodology/approachThis paper uses the hierarchical regression analysis and fuzzy-set qualitative comparative analysis (fsQCA) to examine social enterprise performance and constructs and verifies a moderated mediation effect of business model innovation, based on a survey of 183 new social enterprises in China.FindingsThis paper finds that business model innovation has a positive effect on social enterprise performance and an organization's legitimacy, acting as the partial mediator between them. The mediating effect of legitimacy is more positive when social enterprises are in the early growth stage. A more detailed analysis of fsQCA explores the necessary and sufficient conditions for the growth of social enterprise performance across different stages and reveals five configurations that improve the performance of social enterprises.Practical implicationsThis study explores the role of business model innovation and legitimacy in social enterprise growth and provides empirical evidence about the causal configuration of high-performing social enterprises.Originality/valueThis research clarifies two antecedents of social enterprise performance and proposes a more inclusive framework that addresses the factor of dynamic development stages. This paper deepens the understanding of social enterprise performance in China.