Effects of Inter-Organizational Network Characteristics of Social Enterprises on Organizational Performance : Focusing on Network Centrality

Background and Purpose

Since the Social Enterprise Promotion Act was introduced in 2007, the number of certified social enterprises has reached approximately 1,000(as of December 2013). This demonstrates that domestic social enterprises, rather than being unfamiliar, are recognized as an active part of the community. At the same time, the Ministry of Employment and Labor has also provided the Social Enterprise Promotion Plan in July 2013 to emphasize inter-organizational network activity as an important policy for strengthening the constitution of social enterprise. Also, social enterprises have been continuously generating much interest in ‘healthy eco systems’ in sustainable discussion. In other words, it is believed that inter-organizational network activity may be a useful tool to increase the propagation of social enterprises. This study aims to closely examine the structural characteristics of networks to determine how the relationships between social enterprises are formed. Furthermore, network characteristics, herein identified as a major factor contributing to organizational performance were carefully observed to examine whether these characteristics could act as a rational and persuasive predictor for social enterprises, by observing the effects of network characteristics on social and economic outcome.

Methods

First, the structural characteristics of inter-social-enterprises were assessed by combining nine types of relationships including information exchanges, inter-organizational consultation, resource exchanges, market liaison, intercompany transaction, and joint enterprises as an entire network to measure centrality using Social Network Analysis. Second, for a hypothesis test, organizational performance variables were validated and the effect of centrality between social enterprises on social and economic outcome was assessed by multiple regression analysis.

Results

The results are as follows: 1) Intercompany transaction and inter-organizational consultation were
active but resource (human/material) exchanges and market liaison were inactive. 2) Five organizations with superior centrality were found to be core organizations with a pivotal role and served as a conduit of information in the entire network and as important mediators for organizational cooperation activities. 3) The univariate analysis, which was used to determine the effect of network centrality on social and economic outcomes, indicated that all centrality measures, degree, closeness, and betweenness, affected the outcomes significantly.

Conclusion and Implications

As a result, the following implications were obtained: First, in the seven years during which social enterprises have operated, many have had access to information exchange with the entire network, but a solution required to corporate isolated organizations into the integrated network environment. Second, organizations with superior centrality were developing and broadening their network through network meetings and these meetings or activities, which serve as a key opportunity to gain support and as a valuable operational strategy. Third, this study showed that all three types of centrality influence the organizational performance of social enterprises, a result which provided an opportunity to confirm that more organizational networks increasingly affect organizational outcomes positively at this point in time, where activities and network requirements between social enterprises are suggested