Social and financial performance of social enterprises: Win–win or win–lose?

The joint pursuit of social and financial goals confronts social enterprises with unique challenges, as these goals are not always aligned. This study examines the relationship between financial and social performance, addressing inconsistent findings in the literature, by using longitudinal data from Korea and applying a simultaneous equation modeling approach, which allows estimates of reciprocal effects. Results suggest that social enterprises face a trade-off between achieving their social mission and financial profit. Specifically, the pursuit of financial gain by social enterprises appears to hinder their commitment to social objectives, such as employing vulnerable groups; and, correspondingly, successful pursuit of their social mission seems to hinder their financial performance. These findings underscore the challenges social enterprises face in balancing these dual objectives and highlight the need for strategies to manage such trade-offs effectively.