The impact of B Corp certification on financial stability: Evidence from a multi-country sample

B Corps are firms certified by the non-profit B Lab for pursuing both economic and non-economic goals. Whether B Corps realize a higher financial performance has met mixed evidence. Drawing on the stability-change framework, we ask whether B Corp certification is associated with the level and volatility of financial performance. Also, expecting a greater focus on non-economic activities after certification, equity ratio may decline as shareholders may question the increased non-economic focus. Using nearest neighbor propensity score matched pair method, we draw on a multi-country sample of 355 B Corps and 623 non-B Corps. Our findings are not encouraging. B Corp certification does not provide financial gains nor financial stability, and equity ratio declines and becomes more volatile following certification. Our findings paint a gloomy picture of limited economic benefits and declining participation of equity holders following B Corp certification.     

Category membership,identity control,and the reevaluation of prosocial opportunities

We extend current knowledge on prosocial organizing by explaining how membership in organizational categories lead entrepreneurs to reevaluate their firms' activities and opportunities. Through a qualitative study of 46 firms that pursued B Corp certification, we developed an identity control model of prosocial opportunity. Our findings suggest that joining a prosocial category catalyzes identity-driven reflexivity, which can alter the firm's engagement in prosocial activity. This identity-driven process occurs in tandem with evaluations of opportunity viability and attractiveness, the potential for intra-organizational conflict, and the relative power and position that category legitimacy affords the firm. Our findings contribute to literature streams on prosocial organizing, identity, and categories.     

Properties of emerging organizations: An empirical test

The process of new venture creation is central to the field of entrepreneurship. The effects of initial organizing have a direct influence on survival, yet empirical examination of the dimensions of emergent organizations is limited. Using longitudinal data on nascent entrepreneurs, this paper empirically tests four properties of emerging organizations-intentionality, resources, boundary and exchange- and their effect on likelihood of continued organizing [Katz, J., Gartner, W.B., 1988. Properties of emerging organizations. Academy of Management Review 13(3), 429–441]. Our results suggest that all four properties are necessary for firm survival in the short-term and those firms that organize more slowly are more likely to continue to organize. Further, nascent ventures in which intentionality preceded the other organizing properties were not significantly more likely to continue in the organizing effort. Our results suggest an extension of the original Katz and Gartner [Katz, J., Gartner, W.B., 1988. Properties of emerging organizations. Academy of Management Review 13(3), 429–441] framework.     

A configural framework of practice change for B corporations

There is increasing scholarly attention toward understanding how enterprises seeking prosocial impact organize their practices. However, this research has primarily explained changes in isolated practices and has not fully explored the mechanisms for such changes. This omission is relevant for social entrepreneurship scholars who seek to better understand how practices operate not simply internally but can effect a positive impact. We address this omission by drawing from a unique longitudinal dataset – assessment scores of enterprises seeking to be certified and recertified as B Corporations (B Corps). We also conducted 24 interviews with B Corp leaders, B Lab staff, and venture fund managers. We found that B Corps shifted their practice configurations as they underwent assessment and reassessment for certification. We also found that exogenous factors such as size and sector, and endogenous factors such as the nature of practices explained shifts in practice configurations. Our contribution is twofold. First, we test deductive claims that social enterprises re-organize for impact. We show that enterprises update their practice configurations over time. Second, we propose an inductively derived theoretical framework with three building blocks: affordability, interpretability, and social referents to explain the shifts in practice configurations.

From Caring Entrepreneur to Caring Enterprise: Addressing the Ethical Challenges of Scaling up Social Enterprises

This paper advances the conception of social entrepreneurs as caring entrepreneurs. We argue that the care ethics of social entrepreneurs, implying the pursuit of caring goals through caring processes, can be challenged when they engage in the process of scaling up their ventures. We propose that social entrepreneurs can sustain their care ethics as the essential dimension of their venture only if they are able to build a caring enterprise. Organizational care designates the set of organizing principles that facilitate the embedding of care ethics at an organizational level, beyond the imprinting induced by social entrepreneurs’ personal ethics.     

Multilateral R&D alliances by new ventures

We examine the antecedents and outcomes of new ventures' formation of multilateral R&D alliances. Our results show an inverted U-shaped relationship between market uncertainty and a new venture's likelihood of forming multilateral R&D alliances. Top management team's social capital and ventures' technological capabilities are critical for new ventures to identify and capture alliance opportunities. Moreover, our analysis reveals value creation effects of multilateral R&D alliances for new ventures despite the challenges and difficulties associated. We further show that the value creation effect is a function of the type of exchange relationship (i.e., net- vs. chain-based) in the multilateral R&D alliance and that governance structure moderates this relationship.     

Imprinting with purpose: Prosocial opportunities and B Corp certification

Certified B Corporations are ventures that have chosen to embrace third party voluntary social and environmental audits conducted by an entrepreneurial non-profit enterprise called B Lab. In this special issue, we focus on the lifecycle of Certified B Corporations and its relation to the entrepreneurial journey. We highlight research at the intersection of opportunities and prosocial certification to identify patterns and processes which add significant value to ongoing conversations in the field of entrepreneurship while charting new research pathways. We develop a framework of prosocial venturing and certification that pinpoints several elements of likely consequence and curiosity. This offers new insights about the entrepreneurial process that hint at the importance of opportunity, identity metamorphosis and sedimentation/superseding work. We thereby interpret how the exploration of prosociality may add to conversations on how and why ventures resist or embrace change over time, to what effect and ultimately, how opportunities may be reBorn.     

A longitudinal comparison of capital structure between young for-profit social and commercial enterprises

We develop a new perspective on capital structure differences between for-profit social and commercial enterprises by combining imprinting and social entrepreneurship theory. Using a longitudinal matched sample, we find that for-profit social enterprises have 40% to 13% lower leverage and up to four times greater leverage stability over time than commercial enterprises. Our results suggest that these differences in capital structure derive from the process of prosocial organizing, which goes beyond the primary focus on financial preferences. Thus, for-profit social enterprises—and similar hybrid organizations, such as B corporations—may require theories adjusted to their context.     

Toward a theory of international new venture survivability

In this longitudinal study, we explore in-depth how entrepreneurs acquire legitimacy for their new ventures in an attempt to internationalise and survive before and after the dot.com bubble. We adopted a longitudinal multiple-case study methodology for the purpose of theory building. Five firms were selected on the basis of purposeful sampling logic from a homogeneous empirical context: they were small, software firms from Scotland that internationalised and struggled for survival between 1999 and 2001. To explore these companies’ critical events and episodes, the method of critical incident technique was employed. The method of constructing typologies by reduction was employed to advance the typology of hype defined as the overall sentiment of the environmental context, within which the firm is embedded, about the future. Grounded in data, there emerged a middle-range theory of international new venture survivability that postulates that the closer the new venture is to the hype, the higher the likelihood of failure. Several implications to the theory of new venture legitimacy could be singled out. The paper makes an attempt to understand the nature of a legitimacy threshold. The data in the study points to the continuous nature of the legitimacy threshold and suggest that it may be defined by the time when the emergent industry moves away from hype towards risk decision making settings. A set of propositions is put forward to stimulate future research in the area of new venture legitimacy.     

Practice makes perfect: Entrepreneurial-experience curves and venture performance

This study tackles the puzzle of why increasing entrepreneurial experience does not always lead to improved financial performance of new ventures. We propose an alternate framework demonstrating how experience translates into expertise by arguing that the positive experience–performance relationship only appears to expert entrepreneurs, while novice entrepreneurs may actually perform increasingly worse because of their inability to generalize their experiential knowledge accurately into new ventures. These negative performance implications can be alleviated if the level of contextual similarity between prior and current ventures is high. Using matched employee–employer data of an entire population of Swedish founder-managers between 1990 and 2007, we find a non-linear relationship between entrepreneurial experience and financial performance consistent with our framework. Moreover, the level of industry, geographic, and temporal similarities between prior and current ventures positively moderates this relationship. Our work provides both theoretical and practical implications for entrepreneurial experience—people can learn entrepreneurship and pursue it with greater success as long as they have multiple opportunities to gain experience, overcome barriers to learning, and build an entrepreneurial-experience curve.     

Out of sight but not out of mind: Why failure to account for left truncation biases research on failure rates

We note at least three major issues in entrepreneurship theory that can be clarified by studying the survival chances of new ventures: the extent to which entrepreneurs are so constrained by initial founding conditions that they are unable to learn; the degree to which heterogeneity and innovative capabilities are lost due to the failure of new ventures; and the imprinting effects of new ventures' early days on their subsequent development. However, previous research on these issues has been inconclusive because of problems in research design and data analysis. In this paper, we shed light on new venture failure rates by assessing the validity and generalizability of previous findings. We argue that research using registration data to study new ventures is very likely to generate biased results and that research attempting to track new ventures from a very early stage can still suffer from selection bias due to left truncation. Using a sample of new ventures from the Panel Study of Entrepreneurial Dynamics II, we provide evidence for the extent of such biases. We offer a statistical solution to left truncation that can be easily applied in widely used statistical programs.     

Dysfunctional competition & innovation strategy of new ventures as they mature

Drawing on a sample of 288 new ventures from three disperse locations in China, we examine how dysfunctional competition impacts the innovation strategy of new ventures as they mature. Our results show that: 1) innovation strategy has a positive effect on new venture competitive advantage; 2) the impact of dysfunctional competition positively moderates this relationship in the early stages of the venture; 3) dysfunctional competition negatively moderates it as the venture matures. Thus, dysfunctional competition forces new ventures to focus on their resource shortages through innovation strategy. However, as these ventures mature, they accumulate greater resources, and dysfunctional competition acts to limit the firm's competitive advantage. With these findings, we contribute to the theoretical understanding of innovation strategy in a dysfunctional competition environment and how new ventures strive for competitive advantage in such a setting.     

New venture internationalization: The role of venture capital types and reputation

This study examines how different types of venture capital relate to new venture internationalization. Using a sample of 646 U.S. new ventures that executed IPOs between 1995 and 2010, we find that ventures with foreign or corporate venture capital have higher levels of international intensity. We also investigate the moderating role of VC reputation on the relationship between foreign venture capital and international intensity and corporate venture capital and international intensity. Our results suggest that VC reputation weakens the positive relationship between corporate VC and international intensity.     

Positively deviant: Identity work through B Corporation certification

Despite widespread and growing public interest in sustainability certifications, many social entrepreneurs have opted not to obtain such certification. Drawing on recent studies highlighting the salience of both gender and context in shaping differences among social enterprises, we develop an identity-based framework for explaining heterogeneity in the adoption of sustainability certification. We test our ideas using a sample of 1251 U.S. firms obtained from B Lab, the organization responsible for assessing Certified B Corporations. Our results show that woman-owned businesses are twice as likely to qualify for certification and more than three times as likely to certify. Moreover, this propensity to certify is amplified in contexts where sustainability norms are weak, mimetic pressure to obtain sustainability certification is low, and woman-owned businesses are less prevalent. These findings support our central theoretical argument that certification differences are due to actors' efforts to engage in identity work, strengthening their sense of self-coherence and distinctiveness by way of this authentication process. We conclude by highlighting our contributions to existing scholarship on social entrepreneurship, identity work, and certification adoption, as well as strategic implications for B Lab.     

Socio-cognitive traits and entrepreneurship: The moderating role of economic institutions

We examine how country-level institutional context moderates the relationship between three socio-cognitive traits—entrepreneurial self-efficacy, alertness to new business opportunities, and fear of failure—and opportunity entrepreneurship. To do this, we blend social cognitive theory (SCT) with institutional theory to develop a multi-level model of entrepreneurial entry. We merge data from the Global Entrepreneurship Monitor (GEM) surveys and the Economic Freedom of the World (EFW) index for 45 countries from 2002 to 2012. Our results, which are based on a multi-level fixed-effects model, suggest that entrepreneurs' self-efficacy and alertness to new opportunities promote opportunity entrepreneurship while fear of failure discourages it. However, the strength of these relationships depends on the institutional context, with entrepreneurial self-efficacy and alertness substantially more likely to lead to new opportunity-driven ventures in countries with higher levels of economic freedom. These results provide suggestive evidence that economic freedom not only channels individual effort to productive entrepreneurial activities, but also affects the extent to which individuals' socio-cognitive resources are likely to mobilized and lead to high-growth entrepreneurship.     

Learning from Referents across Geographic Distance and Institutional Contexts: The Perceived Speed of ISO 9000 Certification in Chinese High‐Technology New Ventures

Learning by observing the behaviors and choices of other (referent) firms is an important way for firms to augment their stock of knowledge. However, new ventures face unique challenges with vicarious learning. In particular, their referent firms may not be spatially close, which makes it difficult to collect and make sense of information. In a field study of 175 high‐technology new ventures, we examine and find that distance and the maturity of the legal environments of the observed firms, along with the moderating effect of the size of referent firms, can influence new ventures’ observation and processing of information. Such learning is reflected by the perceived speed of new ventures fulfilling ISO 9000 certification.     

Coworking spaces: Understanding,using, and managing sociomateriality

Companies increasingly embrace the new types of work associated with coworking spaces. Coworking spaces started with the idea of a melting pot of open social interaction, collaboration, entrepreneurship, and innovation for freelancers, new ventures, or solo entrepreneurs. Companies may use coworking spaces to invigorate targets and further motivate and inspire their employees. Fundamental to achieving those targets is the coworking space’s interior design and architecture that incorporates emotional and social values that may benefit companies. Our sociomateriality perspective helps to analyze conditions in coworking spaces and guides suggestions on how companies revitalize by using coworking spaces. The purposeful design of the different social and work areas in coworking spaces can improve communication, collaboration, and innovation in companies.     

Legitimating first: organizing activities and the survival of new ventures

The process by which firm founders create new organizations is of considerable interest to evolutionary theorists and entrepreneurship researchers. This article tracks the life histories of 223 Swedish new ventures started between January and September 1998 by a random sample of firm founders. We explore the effect of legitimating activities on the hazard of disbanding and the transition to other firm organizing activities during their first 30 months of life. We find that undertaking activities to generate legitimacy reduces the hazard of venture disbanding and facilitates the transition to other organizing activities.     

Domestic versus foreign listing: Does a CEO's educational experience matter?

Where to list an initial public offering (IPO) is a critical decision for an entrepreneurial firm. Our study investigates IPO location choice between home country and foreign country by examining a sample consisting of the entire population of 1479 Chinese private issuers during the period from 2005 to 2014. We enrich upper echelons theory by bringing in the insights of imprinting theory. Our results indicate that the sources of imprint − prestigious domestic education and foreign education − influence CEOs' preference for an IPO location. More specifically, CEOs with prestigious domestic degrees tend to list their firms in China whereas CEOs with foreign degrees tend to list outside China. Given that the imprinting effects of education have a lasting influence on CEOs, despite subsequent environmental changes, long tenures allow such effects to be imparted to other top management team members. Another finding is that when the CEOs are also the founders, there are two separate imprinting effects.