Does Leadership Matter in Performance of Social Enterprises in South Korea?

Abstract

In social enterprises, which are hybrid organizations that create social and economic values, the role of leaders is important to achieve goals. However, prior research on social enterprises overlooked the importance of a leader, and some research that considered leadership was insufficient to concern the characteristics of social enterprises. This study aims to find whether there is no problem in applying the leadership emphasized in a profit-firm to a non-profit-firm such as a social enterprise, since social enterprises pursue economic and social objectives simultaneously. To do so, we examined the effects of four leadership styles (transactional leadership, transformational leadership, servant leadership, and entrepreneurship) used mainly in commercial enterprises on the performance of social enterprises. In review of prior studies, it was assumed that transactional leadership would not have a significant effect on performance, and the other three kinds of leadership were hypothesized to have a positive effect on performance. Additionally, to clarify the relationship between leadership and performance of social enterprises, leader trust and calling were considered as mediators. Using the list of Korea Social Enterprise Promotion Agency, questionnaires were distributed via e-mail to employees of 318 social enterprises located in Seoul, and 251 copies were collected and analyzed. The results of this study show that transactional leadership only affects economic performance and does not show significance with the rest of the variables as was expected. Transformational leadership had positive relationships with variables considered as performances of social enterprises, and the mediating effects of leader trust and calling were also verified. Entrepreneurship was positively related to three performances of social enterprises, but servant leadership had a positive relationship with organizational commitment. This study contributes to highlighting the need for research to find appropriate leadership styles that focus on the characteristics of social enterprises.