Financing social enterprise: social bricolage or evolutionary entrepreneurialism?

Abstract

Purpose This paper aims to examine the extent to which urban social enterprises (SEs) have diversified their funding sources and shifted towards loans and development finance in recent years. The paper seeks to consider the underlying reasons for a limited demand for loans by comparing two theoretical perspectives on SE development. The concept of “social bricolage” implies SEs do not seek conventional business loans or equity finance, because they survive in resource poor environments by improvising and re‐using redundant capital. A second evolutionary approach implies that SE financing will be dominated by a reliance on habits and practices learnt from the contexts in which social entrepreneurs have operated. Design/methodology/approach The paper is based on analysis of interviews with 40 SEs in four English cities. Findings The paper finds a limited degree of change and scant evidence of local decentralisation in social enterprises' financial contexts. It argues that both conceptual approaches offer important insights into the causes of the low level of demand for development finance by emphasising the importance of practical and improvised financial management. This is an adaptive response to uncertainty but is also a manifestation of SEs' inherited capabilities in public and charitable finance. Research limitations/implications The research is based on a relatively small sample of social enterprises in central and deprived urban areas. The financial practices of social enterprises in other types of environment also require examination. Practical implications It is unrealistic to expect the majority of SEs to secure conventional loan finance, instead they require “softer” finance and intensive support from intermediaries. Originality/value The paper makes a novel empirical contribution by revealing social enterprises' views and recent experiences with funding. Its approach allows an intensive examination of key financial issues. It makes an original theoretical contribution by seeking to apply, develop, and evaluate two theoretical perspectives on the form and practices of social enterprises.