Innovation and performance in social economy enterprises: The mediating effect of legitimacy for customers

Abstract

The link between innovation and company performance has been extensively explored. Nevertheless, the conclusions of most studies on this matter are case specific and should not be considered generally applicable, given the number of factors and variables that an innovation process entails, which vary depending on the type of company. Moreover, scarce little research can be found in the literature on the determinants of innovation in social economy enterprises and the impact of innovation on financial performance. We therefore propose a model with which to comprehend the reasons why social economy organizations institute innovations and the influence their innovations may have on their results, which are mediated by the legitimacy that consumers attribute to those innovations. Structural Equation Modeling (SEM) with Partial Least Squares (PLS) was used as the key method of analysis, in order to check for significant relationships between innovation performance and economic results, to help understand these relations and their impact on financial outputs. The results of our investigation tended to confirm that the results of innovation in social economy enterprises have their root cause in the managerial capabilities of the CEO, as well as in the legitimacy granted to them by customers, clients, and users. In addition, our research might be of some theoretical and practical value, in so far as it contributes to reducing the existing gap in the literature on social economy enterprises with successful innovation processes.