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. Executive summary: We challenge and complement the prevailing assumption that social enterprises incrementally and/or independently improve their practices to achieve their initially intended impact. To do so, we empirically derive a configural framework of how prosocial impact practices evolve over time. In addition, we know from existing research that cues and peers available in prosocial categories, such as B Corporations, provide enterprises with different choices for organizing for impact. However, the existing research only offers a limited understanding of the specific mechanisms that facilitate change in organizational practices. We conducted four studies to better understand how cues, peers, and other mechanisms lead to changes in practice configurations. We used B Impact Assessment (or BIA) data from 346 enterprises assessed between 2008 and 2011 (Wave 1) and 723 enterprises assessed between 2011 and 2013 (Wave 2), all based in the U.S. In addition, we used longitudinal data for a subset of 159 enterprises present in both waves. We also conducted 24 interviews with leaders from certified B Corps, venture capital fund managers, and a B Lab staff member. We found that B Corps change their practices over time, and this change is seen in shifts in practice configurations as the enterprises undergo assessment and re-assessment for certification. We also found that exogenous factors such as size and sector, and endogenous factors such as the nature of practices and their interaction with the enterprise's unique context explain shifts in practice configurations. Our contribution is twofold. First, we test deductive claims that social enterprises re-organize for impact by updating their configuration of practices 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.