Trends in nonprofit commercialization and other market-based approaches to providing social services have been increasing in the United States (Tuckman, 1998; Guo 2006). Various forms of hybrid organizations from the private and nonprofit sectors seek to blend this market-based approach with social missions. That is, in addition to a profit-maximizing orientation, the organization also has a social mission to improve existing conditions among society's vulnerable populations, creating a "double bottom line" (Lang & Minnigh, 2010; Reiser, 2010).
The rapid growth of these organizations has made it difficult for researchers to keep pace with new developments. Such developments include new legal forms of operation including the low-profit limited liability company, commonly referred to as the L3C. The L3C is a variation on the traditional limited liability company (LLC) in that the organization must carry out a social or educational mission it addition to the ability to turn a profit (Kerlin & Gagnaire, 2009). Comparatively, they are much like Community Interest Companies (CICs) that have developed in the United Kingdom (Low, 2006). Like nonprofit organizations, however, they can accept funds from foundations and other firms as program-related investments (PRIs) (Ragin, 2010). In this sense, foundations are able to invest, rather than merely grant, “thereby capturing the financial––and social––multiplier effect of an investment made for social purposes that may be recovered” and subsequently used over and over again, boosting the sustainability of these services (Lane, 2011: 42). This is viewed as a fundamentally altered approach to the status quo, and there has been little research produced on these specific firms in the U.S. This study seeks to help fill that gap in the research.
This research is designed to provide the initial impact assessment of these organizations, and to give some variance to research in the area of social enterprise. The paper utilizes mixed methodology, including qualitative data from interviews with L3C proprietors, as well as a survey––believed to be the first––administered to L3Cs (n=70) to 1) assess managerial perceptions of the work these organizations are engaged in; 2) to contribute more to our understanding of organizational and environmental attributes of L3Cs; and 3) to provide greater breadth and depth regarding the testing of empirical hypotheses concerning social enterprises.
Because of the significant changes afoot, it is important to study the initial impact of the profusion of these new organizational forms. As social enterprise has developed as a significant research interest of scholars in disciplines such as business administration, nonprofit management, and public administration, there are many cross-sector implications. With the data and preliminary analysis to be presented in this paper, it is anticipated that research questions presented herein will inform hypotheses to be tested in the near future. These are questions that have received little treatment in extant literature, and may lead to new opportunities for research on hybrid organizations and market-based approaches to social service provision.
References
Guo, B. (2006). Charity for Profit? Exploring Factors Associated with the Commercialization of Human Service Nonprofits. Nonprofit and Voluntary Sector Quarterly, 35(1), 123 -138.
Kerlin, J. A. & Gagnaire, K. (2009). United States. In J. A. Kerlin (Ed.), Social Enterprise: A Global Comparison. Lebanon, NH: University Press of New England/Tufts University Press.
Lane, M. J. (2011). Social Enterprise: Empowering Mission-Driven Entrepreneurs. Chicago: American Bar Association.
Lang, R., & Minnigh, E. C. (2010). The L3C, History, Basic Construct, and Legal Framework. Vermont Law Review, 35(1), 15-30.
Low, C. (2006). A framework for the governance of social enterprise. International Journal of Social Economics, 33(5/6), 376-385.
Ragin, Jr., L. M. (2010). Transcript: Program-Related Investments in Practice. Vermont Law Review, 35(1), 53-58.
Reiser, D. B. (2010). Blended Enterprise and the Dual Mission Dilemma. Vermont Law Review, 35(1), 105-116.
Tuckman, H. P. (1998). Competition, commercialization, and the evolution of nonprofit organizational structures. In B. A. Weisbrod (Ed.), To Profit or Not to Profit: The Commercial Transformation of the Nonprofit Sector. Cambridge, UK: Cambridge University Press.
