Background: Social enterprises pursuing both social and economic aims have been challenging in achieving performance in the competitive and rapidly changing business environment. In order to survive in the circumstance, social enterprises are required to be responsive to the changes. Prior literature indicates that transformational leadership plays a critical role in responding to the changing environment, which in turn, can lead to performance (Bass & Avolio, 1993; Dionne et al., 2004). Community relationship is regarded as an important factor affecting success of organization (Sharir & Lerner, 2006; Sink, 1996) in that it helps find the changes occurring in communities and facilitate to make changes by using available resources from communities. A transformational leader can better build community relationship and it can link to performance. Social aims can be obtained by assuring economic performance. Regardless of the need for securing performance of social enterprises in the changing environment, little knowledge on the relationships between transformational leadership, community relationship, and social and economic performance exists. As such, using a sample of social enterprises in Korea, this study seeks to answer the following research questions: 1) Does transformational leadership influence economic and social performance?; 2) Is there a mediating effect of community relationship in the tranformational leadership-performance relationship; 3) Does economic performance influence social performance?
Methods: Of 565 social enterprises certified from the Korean Ministry of Labor in 2011, the CEO or President of each social enterprise was recruited to complete a written questionnaire. The final analytic sample is comprised of 235 respondents, resulting in a 41.6% response rate. Information about fundamental characteristics of social enterprises and respondents, leadership, community relationship, and economic and social performance were gathered. All main variables were measured using a 7-point Likert scale and showed high reliabilities. Whether the social enterprise is for-profit or non-profit is included as a control variable. A confirmatory factor analysis (CFA) was conducted to assure the adequacy of the measurement model for all variables. Then, a structural equation modeling (SEM) was employed to examine the hypothesized relationships. As model fit indices, the chi-square test, RMSEA, CFI and TLI were used.
Results: As the results of CFA, the measurement model fitted the data well (χ2=355.04, p<.001, RMSEA=.075, CFI =.929, TLI=.917) As the results of SEM, the model fitted the data well (χ2= 362.53 , p<.001, RMSEA=.073, CFI=.926, TLI=.912). Tranformational leadership was directly associated with economic performance . However, the indirect relationship between transformational leadership and economic performance through community relationship was not found. However, considering social performance, transformational leadership was positively associated with social performance through community relationship while it is not directly associated with social performance. Economic performance was positively associated with social performance. Being non-profit social enterprises was linked to social performance .
Discussion and Conclusions: The study provided empirical evidence to support the relationships between transformational leadership, community relationship, economic and social performance among social enterprises. The results revealed that the importance of transformational leadership to gain economic performance and inform human resource interventions to promote transformational leadership. Further, the results highlighted the mediating role of community relationship in the transformational leadership-social performance relationship. Social enterprises should regard building a quality of community relationship as a strategy to accomplish sustainability of social enterprises. Also, social entrepreneurs should be aware of economic performance as a inevitable factor to achieve social performance. By considering the suggestions above, we can assure performance of social enterprises and ultimately obtain sustainability.
Keywords: Leadership, Community Relationship, Economic Performance, Social Performance, Korean Social Enterprise
References
Bass, B. M., & Avolio, B. J. (1993). Transformational leadership and organizational culture. Public Administration Quarterly, 17(1), 112-121.
Dionne, S. D., Yammarino, F. J., Atwater, L. E., Spangler, W. D. (2004). Transformational leadership and team performance. Journal of Organizational Change Management, 17(2), 177-193.
Sharir, M., & Lerner, M. (2006). Guaging the success of social ventures initiated by individual social entrepreneurs. Journal of World Business, 41, 6-20.
Sink, D. (1996). Five obstacles to community-based collaboration and some thoughts on overcoming them. In C. Huxham(Ed.), Creating collaborative advantage. London, UK: Sage.
