What to Be (or Not to Be): Understanding Legal Structure Choices of Social Enterprises from a Resource Dependence Perspective

Abstract

Choice of legal structures is a key decision that social enterprises make early in their lives. The range of options now includes not only the traditional for-profit and non-profit structures, but also the new hybrid structures. Viewing legal structures primarily as ‘governance mechanisms to support the mission’, the current social enterprise literature regards ‘mission’ as the normative basis for legal structure choices. Empirical work in the non-profit and social enterprise literatures, however, surfaces another salient, yet under-theorised concern driving legal structure choices, namely resources. In this paper, we aim to develop resource dependence perspectives as an alternate theoretical lens to understand legal structure choices. In this study of 14 New York based socio-tech enterprises, we uncover how, in an interplay of resource needs, autonomy and legitimacy concerns, legal structures emerge as strategic tools to attract the external resource providers that the social enterprises want to form resource relations with and avoid the ones they are wary of. Our findings contribute to advancing the notion of legal structures as a ‘vehicle for resource mobilisation’, and to lay the foundations for a resource dependent framework to examine social enterprise legal structure choices.