The Janus face of participatory governance: How inclusive governance benefits and limits the social innovativeness of social enterprises

According to Schumpeter, the creativity and motivational ability of distinguished entrepreneurs drive innovation in enterprises. It is the individual entrepreneur who comes up with new ideas and paves the way for their realization. Conversely, social enterprises are regarded as making decisions in a collaborative manner and in close participation with stakeholders. Accordingly, the question arises as to how participative governance and the loss of the individual business leader’s importance is reflected in the innovativeness of social enterprises. Does collaborative decision-making hamper the development of innovative solutions or do social enterprises benefit from their capacity to innovate? This question guided a cross-case analysis of four social enterprises, and the results are presented in this paper. The investigation revealed that participatory governance can have different consequences for the innovative strength of social enterprises. While the involvement of internal stakeholders (members, employees) appears to be beneficial for developing novel solutions but generates limited social impact, close collaboration with external stakeholders, such as local communities or regional authorities, is less advantageous with respect to identifying new trends, ideas, and opportunities. However, the involvement of external stakeholders in decision-making is beneficial concerning the safeguard of community interests and the legitimization of social enterprise activities. The results suggest that a balanced involvement of both internal and external stakeholders would be beneficial for enhancing the social innovativeness of social enterprises.