Does social performance contribute to economic performance of social enterprises? The role of social enterprise reputation building

Purpose – Literature on the relationship between social performance and economic performance of social enterprises has long been inconclusive. This paper aims to investigate whether and, if so, how social performance contributes to economic performance of social enterprises. Specifically, drawing from the resource-based view and signalling theory, the study examines how the development of reputation, which enables social enterprises to signal their stakeholders’ commitment toward social causes, mediates the relationship between the two. Design/methodology/approach – Employing a quantitative research design, data were collected from a sample of 164 social enterprises in the UK and analysed using structural equation modelling. Findings – The results illustrate that while the direct relationship between social and economic performance is inconclusive, social performance contributes indirectly to improve economic performance through improving social enterprise reputation. Originality/value – To the best of the authors’ knowledge, this study is the first of this kind in the context of social enterprises which sheds light on the long-standing conflicting literature on the relationship between the dual objectives (that is, social and economic) by providing reputation as the mediating variable.