Business Models in Social Entrepreneurship – Linking Founder Imprinting and Financial Performance

Abstract

We examine the relationship between founder imprinting and the financial performance of their social enterprises (SEs) and the important role of business model choice in shaping it. We do this by studying microfinance institutions (MFIs). We argue that business imprinting on the founders influences their business model choice (target market) for their social enterprises. This choice is vital for explaining the subsequent financial performance of their SEs. The enduring effect of business imprinting is such that it leads to a lower likelihood of them selecting rural customers as their target market. This in turn influences their ability to generate interest income from their loan portfolio as well as to manage their business risk, due to the prevailing institutional context. The results obtained from a generalized multilevel structural equation model on data based on Indian MFIs between the years 2013 and 2018 support our hypotheses. Overall, our findings have important theoretical and practical implications for business models and social entrepreneurship literatures.