The Fork in the Road for Social Enterprises

Published: Brown, J. A., Forster, W. R., & Wicks, A. C. The Fork in the Road for Social Enterprises: Leveraging Moral Imagination for Long-Term Stakeholder Support. Entrepreneurship Theory and Practice, DOI 10422587211041485 (in 2021); in print ET&P, 2023, 47(1), 91-112 (2023).

This manuscript was accepted for a special issue on stakeholder theory and entrepreneurship. It went online September 20, 2021, and in print in 2022/23. Entrepreneurship Theory and Practice (ET&P) is considered a top, AJG-4 rated journal,¹ applied to journals that “publish the most original and best-executed research.”² It has a five-year impact factor of 14.105. The paper has been downloaded over 1000 times as of May 2023. I am lead and corresponding author on the article. In 2022, it won the Best Published Paper Award at the annual International Association of Business & Society (IABS) conference—an international conference and institution dedicated to research and teaching about the relationships between business, government and society.

This article was motivated by reading about the popular philanthropic shoe company, the TOMS company. Founder Blake Mycoskie introduced a “one-for-one” business model, where he promised that for every purchase of shoes, the company would give away a pair of shoes to some needy child or person. The initial response from customers was highly supportive, but less than five years from its formation, the company found itself subject to a firestorm of critique from disillusioned observers who accused the company of being more focused on getting consumer dollars than making a tangible impact through their social mission. The cause of the criticism was associated mainly with TOMS’s failure to create opportunities for needy communities to better themselves. TOMS was accused of making people in developing countries dependent on the goodwill of others, in addition to preventing local markets from thriving.

Hence, my co-authors and I decided to unpack the issues that left TOMS (at least temporarily) on the bad side of its stakeholders. We were left wondering, what are the key factors for social enterprises (SEs) like TOMS that enable a company to sustain the support of their stakeholders beyond their nascent stage? Put another way, how can SEs capture positive social judgments and avoid a loss of moral legitimacy and stakeholder support, as happened in the TOMS case? And finally, what aspects of stakeholder theory are most relevant to social entrepreneurs in their quest to create and sustain long-term value creation?

To answer these questions, we develop a conceptual process model and testable propositions that have both theoretical and practical significance. The model shows that after SEs secure the support of primary stakeholders like financiers, suppliers and customers, they then face a “fork in the road” where they are assessed for social impact. If they continue their focus on primary stakeholders to the exclusion of secondary stakeholders like communities, they risk losing the moral legitimacy of both their primary and secondary stakeholders, which will ultimately cause their failure (i.e. they end up on the “low road”). However, our model shows how social entrepreneurs and their enterprises can leverage their moral imagination---the ability to understand the activities of business from a number of perspectives---to affect the ways their stakeholders envision their legitimacy (i.e. they end up on the “high road”). They can do this: 1) in broadening stakeholder awareness and engagement, 2) in empathizing with secondary stakeholders, and 3) in establishing microsocial norms. Thankfully, TOMS became aware of broader stakeholder concerns and chose to engage with both primary and secondary stakeholders, using moral imagination to regroup and take ‘the high road’. In sum, our manuscript provides a nuanced stakeholder lens that identifies factors critical to the longevity of SE businesses.

I use the TOMs case study and my developed process model in my current graduate classes, in executive education and in my pro bono ethics/stakeholder training for compliance professionals. There is a message for social entrepreneurs in the need to pay attention to secondary stakeholders, and I find that it is received well by leaders across all stages of entrepreneurship.

In sum, this article has been recognized by a highly regarded journal and is beginning to contribute to the advancement and refinement of stakeholder theory and social entrepreneurship.