Social Entrepreneurship, Employment, and Financial Performance: A Latent Growth Modeling Approach

Abstract

The social value created by organizations has been in the spotlight during periods of rapid social change, such as COVID-19. However, the existing literature has been limited by the inability to demonstrate the cumulative effects of social value over time, which has led to academic and practical limitations. Drawing on stakeholder theory, socially responsible customer behavior, and institutional theory, the author collected data from 208 social enterprises in South Korea over 3 years, from 2017 to 2019, and tested hypotheses using latent growth modeling. This analytical technique, which uses structural equation modeling, estimates the latent growth rate of each data measure by year and analyzes the causal relationship between the growth rate of each variable. The results show that higher levels of social entrepreneurship are associated with higher growth rates of total employment and vulnerable worker employment, followed by higher growth rates of financial performance. The implications of this paper are as follows. First, this study reports that social entrepreneurship can help social enterprises develop sustainably by increasing financial performance. Second, this study overcomes the methodological limitations of the existing literature by reporting the relationship between growth rates. Third, this study reports that social enterprises can help solve employment problems for vulnerable populations, who are often the first to be affected by the economic crisis. Fourth, this study contributes to resolving the conflicting and contradictory perspectives of practitioners and academics on the relationship between social and economic value. Fifth, it offers suggestions for the future direction of the academic field.