Effective Succession of Social Entrepreneurs: A Stewardship-Based Model

Abstract

IntroductionINCREASED DISSATISFACTION WITH TRADITIONAL INSTITUTIONS towards addressing social needs has motivated entrepreneurs to identify and pursue ventures aimed at creating value by tackling pressing social issues (London, 2008; Mason, 2010). While many social ventures have considerable impact on their constituent stakeholder group (Seanor & Meaton, 2007), unfortunately, very few survive their first succession (Adams, 2004; Froelich, McKee, & Rathge, 2011). The failed succession of a social venture, unlike the failure of successions in other contexts (e.g., commercial or family firms), primarily affects a non-financially vested targeted social group towards which the organizational mission intends to benefit. This is concerning because social ventures "are more consequential than generating income, as people's lives may be in the balance" (Miller et al., 2012, p. 362). However, despite the increased importance of social entrepreneurship in general and the poor succession rates of social ventures, research on the succession of founding social entrepreneurs has been neglected (Balser & Carmin, 2009; Block & Rosenberg, 2002; Froelich, McKee, & Rathge, 2011).Succession in social ventures differs from succession in other contexts because the primary purpose of the organization is social value creation and not personal wealth accumulation (Carsrud & Brannback, 2011; Fauchart & Gruber, 2011). This difference is important because it reflects divergent founder motivations and contrasting assumptions of the 'model of man' underlying agency and stewardship theories (Donaldson & Davis, 1991). Furthermore, the elevated failure rates of social ventures after the succession of the founder suggest that measures should be taken to prepare the organization for such an event.Through their ability to develop policies and engage in practices reflecting their values, founders of social ventures have a significant and enduring influence on organizational culture (Eddleston, 2008; Fauchart & Gruber, 2011). Therefore, in this paper we posit that by espousing the assumptions of stewardship theory and creating a steward-based organizational culture, social entrepreneurs may facilitate effective succession. This line of research contributes to the extant literature by using the framework developed by Davis, Schoorman, and Donaldson (1997) to explain how social entrepreneurs can use situational mechanisms to influence the psychological mechanisms of internal stakeholders, thereby creating a stewardship culture that results in an effective succession process.The Social Entrepreneur and SuccessionSocial entrepreneurship is an emerging field of inquiry (Short, Moss, & Lumpkin, 2009) that is still at a pre-paradigmatic stage without an agreed upon definition (Zahra, Gedajlovic, Neubaum, & Shulman, 2009). Broader conceptualizations suggest that social entrepreneurship "encompasses the activities and processes undertaken to discover, define, and exploit opportunities in order to enhance social wealth by creating new ventures or managing existing organizations in an innovative manner" (Zahra et al., 2009, p. 519). However, while the broad social entrepreneurship definitions encompass ventures in the for-profit sector, most social entrepreneurial activity takes place in the non-sector (Weerawardena & Mort, 2006). Due to the emphasis placed on satisfying social constituents over wealth creation, most social ventures explicitly state this emphasis in their mission statement. An organizational mission that lends primacy to social value creation over economic accumulation has important implications for corporate governance and consequently on succession (Gedajlovic, Lubatkin, & Schulze, 2004).Succession is the transfer process of leadership and ownership (Le BretonMiller, Miller, & Steier, 2004), and is recognized as "an important mechanism for organizational renewal" (Steier, Chrisman, & Chua, 2004, p. …