The impact of absorptive capacity and ordinary capabilities on both financial and social performance: the case of social enterprises

  • Kim Man Erica Lee

    Student thesis: Doctoral Thesis


    Social enterprises (SEs) are playing an increasingly important role in fostering a more sustainable and equitable society around the world. Previous studies have suggested that developing capabilities to manage knowledge is a key driver of an SE's success (Domenico et al., 2010; Guclu et al., 2002; Tracey et al., 2011). An SE operates much like a business, but manages operations and directs its surpluses towards the pursuit of social goals (Austin et al., 2006; Dart, 2004; Dees, 2001; Granados et al., 2011; Mair & Marti, 2006; Nicholls, 2006) in an unstable or unpredictable market (Jaworski & Kohli, 1993; Mair & Marti, 2009; Nicholls, 2010; Sharir & Lerner, 2006). When the market is highly turbulent, customers' product expectations and preferences change over time. In such a situation, an SE has to pay more attention to the development of high-quality new innovative products and solutions that satisfy the social needs of specific customer segments, including underprivileged groups and socially responsible consumers, thereby more effectively addressing societal problems in a sustainable way. Indeed, the question of how absorptive capacity contributes to an SE's financial and social return is largely under-researched (Dacin et al., 2011; Granados et al., 2011; Haugh, 2005). Drawing on the dynamic capabilities perspective, this study proposes a research model in which absorptive capacity affects an SE's firm performance in both financial and social terms via marketing capabilities. It advances the existing SE-related literature by investigating the mediating role of marketing capabilities in the relationship between absorptive capacity and firm performance in the context of SEs. Also, market turbulence is theorized to moderate the relationship between marketing capabilities and performance. To perform this study, I collected data using questionnaires based on a list generated randomly from the database of the Hong Kong Council of Social Service SE Directory, and the contacts obtained from other sources such as Fullness Social Enterprises Society and the Workforce Development Agency, Ministry of Labour Taiwan. The data collection was performed over an eight-month period, with 109 valid responses being collected for this study. Multiple regression and a bootstrapping approach were used to test the hypotheses. The results provide support for most of the proposed hypotheses. Specifically, an SE's absorptive capacity is positively related to its marketing capabilities. Likewise, an SE's marketing capabilities are positively linked to its financial performance. In addition, an SE's marketing capabilities mediate the relationship between its absorptive capacity and its financial performance. Furthermore, the results show a positive moderating role of market turbulence in an SE's marketing capabilities-financial performance relationship. In summary, this study lends support to previous studies that show dynamic capabilities do not necessarily result in better financial performance directly in the context of SEs. It contributes to unpacking the black box of the absorptive capacity-financial performance relationship, and it shows that an SE's marketing capabilities play an important role as an underlying mediation mechanism. It also extends and contributes to the social enterprises literature by revealing the mediating role of marketing capabilities between absorptive capacity and financial performance, and the moderating effect of market turbulence on the relationship between marketing capabilities and financial performance in the context of SEs.

    Date of Award24 Jan 2018
    Original languageEnglish
    SupervisorWei Ping WU (Supervisor)

    User-Defined Keywords

    • Absorptive capacity (Economics)
    • China
    • Finance
    • Hong Kong
    • Marketing
    • Nonprofit organizations
    • Social entrepreneurship

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