Legitimacy of Social Enterprises and Customer Patronization

Project: Research

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In recent years, social entrepreneurship has emerged as an important approach to creating public value (Teasdale & Dey, 2019). Social enterprises are a key partner of nonprofits and the government in solving many of the public problems (e.g., inequality) that none of the sectors can do alone (Defourny et al., 2014). The fast-growing interest in social entrepreneurship research (Terjesen et al., 2016) suggests that research in this field needs to go beyond studying the “supply side” of social entrepreneurship – the organizations – (e.g., Tracey & Phillips, 2016). Much research is needed to understand the “demand side”, especially the role of customers as the engine of revenue and value creation for social enterprises. Studying the demand side is important because customer patronization (i.e., purchase behavior) is a key driver of social enterprise’s economic survival. Importantly, an understanding of customer patronage behavior will enable more effective policy interventions (Tummers, 2019). As a relatively new sector and organizational form that combines social and commercial goals (Battilana & Lee, 2014), social enterprises are susceptible to external legitimacy issues as they need to convince external constituents (e.g., customers) of their “good citizenship” while demonstrating commercial viability. Legitimacy is a key determinant of survival and success for all organizations (Hannan & Freeman, 1984) and is crucial to attracting customers and resources (Shepherd & Zacharakis, 2003). Despite the centrality of legitimacy and policy for social enterprise (Dart, 2004; Teasdale & Dey, 2019), very little research investigates the roles and consequences of legitimacy for social enterprise, the effects of policy design and how they influence customers patronization in terms of purchase intention and behavior towards social enterprises. Given the importance of legitimacy, customers and policy for social enterprises, it is valuable to investigate the social enterprise-customer-policy nexus and how relevant factors and mechanisms play out in this nexus. This proposal aims to examine how social enterprise’s economic, moral, and origin legitimacy will interact with policy design (i.e., government financial support) to jointly affect customer patronization (e.g., purchase intention and behavior) towards social enterprises. We propose three complimentary studies to explore and test the relationships among these factors. The first study will be a qualitative, theory building research. The second and the third studies will use field and lab experiments to manipulate different kinds of legitimacy to test how legitimacy and government financial support jointly affect real consumers’ perceptions and purchase behavior in Hong Kong. 


Project number9043480
Grant typeGRF
Effective start/end date1/01/21 → …