Strategy for Sustainability of Social Enterprise in Indonesia: A Structural Equation Modeling Approach

Abstract

Social enterprise (SE) is a significant global phenomenon that occurs when an organization with social concerns can grow concurrently with its commercial activities. However, the factors that influence the sustainability of SE remain relatively understudied. This study argues that innovation is a prerequisite for SE’s sustainability. Therefore, this study aims to find alternatives to SE’s sustainability strategy, considering the need for SE to have dynamic capabilities, to anticipate changes in the ecosystem, and to manage the company’s internal resources to build on SE’s innovation and sustainability. The dataset was obtained from a survey of 187 SEs in Indonesia, which was then processed using SEM. Results indicate that internal factors have no direct significant effect on sustainability, but the ecosystem and innovation have been shown to have a direct and significant positive effect on sustainability. Dynamic capabilities have a significant but negative direct relationship to sustainability. Internal and ecosystem factors cannot be mediated by dynamic capabilities when it comes to sustainability, whereas innovation can only mediate internal factors towards sustainability. Finally, serial mediation of dynamic capabilities and innovation are key elements that contribute to sustainability. It is proven that if dynamic capabilities are directed to foster innovation, it will increase sustainability.