Scaling social enterprises through product diversification

Abstract

Scaling has remained a challenge for social enterprises, which strive to balance social impact with financial performance to facilitate sustainable development. Product diversification, a common scaling strategy in commercial enterprises, has been recently proposed as a strategy to scale social enterprises while keeping their dual goals in balance. We empirically investigate this using a combination of qualitative and quantitative analyses of microfinance institutions in India. Our inductive analysis reveals that product diversification in social enterprises varies along two dimensions—relatedness and locus of impact—to give four distinct diversification strategies. Each of these strategies impacts the social and financial goals of the organization differently. To scale successfully, social enterprises need to deploy a deliberate and dynamic mix of product diversification strategies. The paper makes an important contribution to the field of social entrepreneurship by exploring how diversification strategy can help social enterprises scale. It also provides important insights to social entrepreneurs on how they should deploy a mix of diversification strategies to maintain a balance between their social and financial goals.