SOCIAL INNOVATION AND SOCIAL ENTREPRENEURSHIP AS … · 2020. 7. 21. · Noorasiah Sulaiman Universiti Kebangsaan Malaysia . ABSTRACT . This study examines the role of social capital

International Journal of Business and Society, Vol. 21 No. 2, 2020, 837-856

SOCIAL INNOVATION AND SOCIAL

ENTREPRENEURSHIP AS MEDIATORS OF THE RELATIONSHIP BETWEEN SOCIAL CAPITAL AND

INCOME LEVEL OF B40 HOUSEHOLDS

Syahrin Suhaimee Malaysian Agricultural Research and Development Institute

Mohd Azlan Shah Zaidi♣

Universiti Kebangsaan Malaysia

Mohd Adib Ismail Universiti Kebangsaan Malaysia

Noorasiah Sulaiman

Universiti Kebangsaan Malaysia

ABSTRACT

This study examines the role of social capital in improving the B40 household income, where social innovation and social entrepreneurship act as mediators. Past studies provided a limited explanation of the role of social innovation and social entrepreneurship in describing the relationship between social capital and income. The study involved 304 respondents selected through purposive sampling. Using a Partial Least Square Structural Equation Model, the findings showed that social capital factors in all dimensions influence social innovation and social entrepreneurship. Social networks and social responsibility are essential social capitals for increasing social innovation and social entrepreneurship. The findings imply that social entrepreneurship should be empowered to effectively strengthen its role in boosting the B40 household income. Social capital development with an emphasis on social innovation and social entrepreneurship is expected to create an innovative society that can reduce income inequality and enhance well-being of the B40 households. Keywords: Social capital; B40 income; PLS-SEM; Social innovation; Social entrepreneurship. ___________________________________

Received: 3 January 2019 Accepted: 20 May 2020

1. INTRODUCTION

The bottom 40 percent household income group (B40) is given the priority to achieve zero poverty rate in multidimensional aspects under the 2030 agenda (United Nations, 2016). In Malaysia, poverty eradication has become the national economic agenda since the independence in 1957. Despite the tremendous reduction, from 49.3 percent in 1970 to 0.6 percent in 2014 (Malaysia,

♣ Center for Sustainable and Inclusive Development Studies, Faculty of Economics and Management, Universiti Kebangsaan Malaysia, 43600 UKM Bangi, Selangor, Tel: +60389213462. Email: [email protected]

838 Social Innovation And Social Entrepreneurship As Mediators of The Relationship Between Social Capital And Income Level of B40 Households

2016), there are other aspects that should be of concern, in order to ascertain sustainable economic development, which are income inequality and wealth distribution among households. The wealth ownership gap, measured by wealth Gini coefficient, shows an increasing trend from 80.8 in 2014 to 82.0 in 2017 indicating a widening inequality in wealth distribution (Shorrocks et al., 2017). Stiglitz (2012) asserted that a serious income inequality and wealth gap can affect economic, political and social stability, especially for a country that has diverse social backgrounds including multi-ethnicity and beliefs such as Malaysia. The unequal distribution of income and wealth may be solved if more population have abilities to increase their income through human capital investment (Rahmah & Ishak, 2010). However, to become a sustainable and inclusive nation, social development is an important element to establish social stability and reduce income gap through social transformation (Stiglitz, 2002). This element is urgently crucial for multi-ethnic and multi-religious nations that need to prioritize social cohesion in the society. Thus, an investment in social capital is essential in order to achieve a sustainable and inclusive developed nation status in the near future. Based on the importance of social capital to support the creation of social entrepreneurs and formation of social innovation that potentially can assist government to increase income of the B40 group, this study is designed to analyze the role of social innovation and the social entrepreneur as mediators in the relationship between social capital and income of the B40 group. The social capital dimensions used for this study are structural, relationship and cognitive. This study is important in that it provides empirical evidence regarding the role of social capital in influencing social innovation, social entrepreneur and income. Accordingly, the study may facilitate the formulation of a new policy and program that may effectively elevate the wellbeing of the B40 group as targeted in the 11th Malaysia Plan. This article is organized into five sections. After the introduction section in Section 1, Section 2 reviews the relevant literature related to social capital and its relationship with income, and the relationship between social innovation, social entrepreneurship and income. Section 3 explains the methodology which comprises the data collection method, models and data analysis. Section 4 empirically tests all hypotheses in the study and deliberates on the results. Finally, Section 5 provides the conclusion.

2. LITERATURE REVIEW 2.1. Social Innovation Neumeier (2012) defines social innovation as a change in attitudes, behaviours and perceptions of a group that possesses similar interest in improving collaboration activity or a process of producing products that related with community development, social changes (Baker dan Mehmood, 2015), social challenges, and meet society needs (Osburg & Schmidpeter, 2013). “Social innovation” is different from “normal innovation”. First, social innovation is an organization-centered approach and only initiated from collaborative actions of a different individual through social networks (Neumeier, 2017). Second, social innovation produces a solution that potentially changes the shared goals of a specific group of people. Similar to technological innovation, social innovation is triggered by people who need a change in doing things.

Syahrin Suhaimee, Mohd Azlan Shah Zaidi, Mohd Adib Ismail, Noorasiah Sulaiman 839

As stated by Neumeier (2012), social innovation is constructed by applying three stages which are problematization, expression of interest, and delineation and coordination. The first stage starts when a few people discuss social issues that they are facing and possibly some solutions to address those issues with a motive force of seeking a solution to the identified need (Herrman & Neumeier, 2007). The second stage continued when people joined the group after seeing the same interests and advantages in participation, thus share their thoughts, know-how and skills. The final stage is crucial to determine the failure or success of the social innovation process. A high-level social capital among group members could produce better collaboration and control in the group. 2.2. Social Entrepreneurship Social entrepreneurship is defined as an individual or enterprise whose primary objective to involve in undertaking any work that produces social impacts rather than profit to any party (Schoning, 2013), involved in innovation process to produce and maintain social values and emphasizes in exerting social impact on the society (Dees, 1998; Dees, 2003). Social entrepreneurship has been used interchangeably with social entrepreneurs and social enterprises with various definitions. Nevertheless, social entrepreneurship has focused on three main pillars: sociality, innovation and market orientation (Nicholls & Cho, 2006). The term “sociality” is referred to social entrepreneurship that focuses on social and environmental impact. The innovation approach of social entrepreneurship uses either incremental or disruptive changes with the “creative destruction” process. Finally, market orientation in social entrepreneurship focuses on alliance or partnership that potentially produces sustainable outcomes. Based on social entrepreneurship description in the main pillars, social entrepreneurship is categorized into three types: integrated, re-interpreted and complementary (Huybrechts & Nicholls, 2012). Social entrepreneurship falls into an “integrated” category when social entrepreneurship involves an economic activity that produces social outcomes. “Re-interpreted” category happens when a not-for-profit organization raises up their income and “complementary” social entrepreneurship exists when business organization funds or subsidizes social programs not for the purpose of acquiring profit. 2.3. Social Capital Being used extensively to evaluate the relationship between human and income levels, social capital is defined as aggregate resources as related to human interaction that contains social traits (Bourdieu, 1986; Putnam, 1996), but focuses on the norms and values (Coleman 1990) that encourage or hinder good behaviour (Coleman, 1988). Social capital is categorized into three dimensions: structural, relational and cognitive (Hazleton & Kennan, 2000; Nahapiet & Ghoshal, 1998). Leana & Pil (2006) explained all three dimensions in chronological order. When individuals interact with others, they enter the structural social capital dimension. Repeated and continuous interactions by individuals or groups will create trust in others and, the relational social capital dimension is thus formed. The cognitive social capital dimension on the other hand is created when the individuals share the same vision and understanding on the specific topic until all achieved the same targets or goals.


In this study, the structural social capital is discussed from aspects of a community environment and a social network. This study then deliberates on relational social capital from the perspective of social responsibility. Finally, this study discusses the shared values in society as part of the cognitive social capital. 2.4. Relationship of Social Capital with Social Innovation and Social Entrepreneurship Community is defined as a group of people that exists on the basis of their similar backgrounds (Embong, 2007). A good environment in the community, with the necessary infrastructures and facilities that later become assets to the community, can assist growth in social capital and encourage them in generating social innovation (Butkevičienė, 2009; Neumeier, 2017). A number of studies has found that the attraction and excellent community environment has facilitated social innovation by providing access to ICT and digital technology especially in public spaces (Mačiulienė, Skaržauskienė, & Botteldooren, 2018) to share their thoughts and decisions in resolving local social issues (Stewart-Weeks, 2010). The community environment has also facilitated social entrepreneurship by providing satisfactory infrastructures that are located near major commercial and cultural centres (Marwell & Mcinerney, 2005) to ensure the survival of the social enterprise (Douglas & Cuskelly, 2007). With this consideration, the following hypotheses are proposed in this study: H1: Community environment has a positive relationship with social innovation H2: Community environment has a positive relationship with social entrepreneurship A social network is the concrete relationship or linkage between humans in abstract relationship so they may communicate in the group and share knowledge, interest and fulfill their social needs through social networks (Geraldine, 2009). The social network is the most important social capital since the other elements in social capital can be developed further depending on the level of a social network (Dijk, 2006). The critical success factor in social innovation depends on the networks that exist in society and active participation and assistance from stakeholders by creating awareness and encouraging community involvement thus creating a strong bonding of social relations among people and nurture team member to perform better (Neumeier, 2017; Nikula, Kopoteva, Niska, Butkevičienė, & Granberg, 2011; Sarmila et al., 2015). By using social media, for example, social entrepreneurs can create projects with the advantage of social networks among friends that can reach beyond their circle and thus speed up their set performance targets (Suraiya & Ahmad Raflis, 2015). As such, the following hypotheses are suggested: H3: Social networks have a positive relationship with social innovation H4: Social networks have a positive relationship with social entrepreneurship Wray-Lake et al., (2015) described social responsibility as a set of individual values and beliefs or commitments that determine individual responsibility in getting involved in social activities and in making a contribution to society as a whole to improve the current state of community and society (Wentzel, 1991). The implementation of effective social responsibilities can spread benefits to


society through improvement in the quality of life and environmental conservation (Suraiya & Ahmad Raflis, 2015). Past empirical studies showed evidences that social responsibilities conferred positive influence on social innovation and social entrepreneurship. A study by Suraiya & Ahmad Raflis (2015) discovered a social responsibility trait in a particular NGO to provide cleaning services for female praying hijab or telekung in public areas. The responsible NGO has since extended its services by providing other charity works through social media. On this perspective, the following hypotheses are suggested: H5: Social responsibility has a positive relationship with social innovation H6: Social responsibility has a positive relationship with social entrepreneurship Kenter et al. (2015) defined shared values as normative values and shared principles that were practiced and adopted by the group or community may increase economic and social conditions in the community (Porter dan Kramer, 2011). A study by Mair & Schoen (2007) and Pirson (2012) find that a successful social entrepreneur practise who shared values in his/her group makes an effort to apply certain values to other groups as well to achieve their social goals. The findings from a study on selected companies in Malaysia show that social innovation and social entrepreneur traits in these companies were contingent on the shared values as practised in the organizations and imparted on the customers and society. Such values may produce innovation revolution with the potential to transform an industry (Muhamad & Adham, 2013). Thus, the ensuing hypotheses are suggested: H7: Shared values have a positive relationship with social innovation H8: Shared values have a positive relationship with social entrepreneurship 2.5. Relationship between Social Innovation and Income Social innovation has given various impacts to society including raising income among the target groups. A study by Van Raemdonck (2018) shows that social innovation has successfully boosted the income of the refugees in South Africa and cater to social needs based on the concept of micro-entrepreneurship. Although they receive income to operate the business, the main priority is to provide affordable services for locals and solve current local issues in the communities. The finding is consistent with findings of past studies by van Niekerk et al (2017), which showed how social innovations have greatly assisted his clinical staff, improved service quality among participating clinics, created new job opportunities and indirectly improved income in poor households. On the contrary, and social innovation rarely achieves its objective on providing basic income if political leaders are not supportive and does not free the recipients from dependencies in receiving financial assistance (Froud, Johal, Montgomerie, & Williams, 2010; Koistinen & Perkiö, 2014). This is supported by Moulaert & Nussbaumer (2005) that believe the primary objective of generating social innovation is to address social and human needs. Based on the mixed results found in past studies, the following hypothesis is suggested: H9: Social innovation has a positive relationship with household income


2.6. Relationship between Social Entrepreneurship and Income Within three categories of social entrepreneurship as explained before, the goal of social entrepreneurship to generate income falls under the “re-interpreted” category (Huybrechts & Nicholls, 2012). The model of social entrepreneurship is a practice among the community to produce impact from social perspective while earning income as underneath strategy to sustain their day-to-day operation by generating income (Agrawal & Hockerts, 2013; Defourny & Nyssens, 2010; Tracey, Phillips, & Haugh, 2005). Activities organized by social entrepreneurs have the potential to generate social innovation, improve quality of life, empower the target group and reduce the poverty rate (Schoning, 2013; Suraiya & Ahmad Raflis, 2015). Although numerous studies have found that social entrepreneurship could successfully generate income, some scholars stated that social entrepreneurship should not really generate income since the bottom line of social entrepreneurship is about the social impact (Dees, 2003; Martin & Osberg, 2007). Furthermore, the term social entrepreneurship should be used for only social-benefit activities (Martin & Osberg, 2007). Accordingly, the following hypothesis is suggested: H10: Social entrepreneurship has a positive relationship with household income 2.7. Social Innovation and Social Entrepreneurship as Mediator Past studies conducted on a direct relationship between social capital and income did not include analyses on the effect of social innovation and social entrepreneurship. Social capital and income have had not only a direct relationship but also an indirect relationship through social innovation and social entrepreneurship. In comparison, the present study conducted similar analyses but examines the relationship between social capital components (community environment, social network, social responsibility and shared value) and income, mediated by social innovation and social entrepreneurship. A community environment has the potential to assist small businesses through social entrepreneurship to expand the market that address the particular living situations of clients (Crea, Loughry, O’Halloran, & Flannery, 2017). To increase participation of the community in social innovation, the social entrepreneurship model needs to focus on enhancing physical and mental well-being in the surrounding environment thus, possibly generating sustainable income for participants. The research is done by Van Raemdonck (2018) found that the community environment is crucial in enhancing social innovation by providing a safe and child-friendly workspace and other facilities as well. Thus, the following hypothesis is proposed: H11: The relationship between community environment and income is mediated by social innovation and social entrepreneurship A study on refugees was conducted by Potocky-Tripodi (2002) to cater to psychological problems among them. Knowledge about employment, business opportunity and practices were disseminated easier when the social network level was high. As a result, social innovation programs were highly supported by refugees and able to create a sustainable income stream. Van Raemdonck (2018) suggested to form a self-help group, to enhance it with social capital and to spread it among


the community. The community with a strong social network has capabilities to have higher growth in generating income through social innovation programs. This finding is supported by a study by Baron (2003) in implementing a psychosocial community-based program. Refugees were initially enhanced with social network, to overcome difficulties adapting cultural differences in the new country. With this consideration, the following hypothesis is proposed in this study: H12: The relationship between social network and income is mediated by social innovation and social entrepreneurship A cooperative has converted its priority to accumulate social returns for its members and the larger community (Voltan, Sagebien, & Sarmiento, 2016). The management of cooperative decided to reprioritize their cooperative for social returns to fulfil their social responsibility towards the community and created self-employed accounting services to private and public institutions. As a result, the cooperative is managed to receive social returns as well as opportunities in leveraging income. As highlighted by Friedman (2007), social responsibility has a role in generating profit for the enterprise through social-related activities. Nevertheless, most business companies hesitate to implement social responsibility initiatives since they do not want to pay their expenses. As such, the following hypothesis is suggested: H13: The relationship between social responsibility and income is mediated by social innovation and social entrepreneurship Enterprises gain leadership for trust from stakeholders by creating shared value between management and society. Shared value is created by addressing social problems and developing business opportunities when conducting social activities. Social innovation functions as a bridge between enterprise and society to build leadership and trust from society and create societal value with profit accumulation as well (Schmidpeter, 2013). This finding is supported by Porter & Kramer (2011) which suggest that shared value in a group of people has the ability to support social enterprise and create income opportunities. For example, members of the group share similar problems to help each other rather than depending on the help of a helping person (Baron, 2003). Thus, they are able to sustain and maintain their business during unstable times by sharing values and practising in other groups as well. On this perspective, the following hypothesis is suggested: H14: The relationship between shared value and income is mediated by social innovation and social entrepreneurship Past studies on the role of social innovations and social entrepreneurship in elevating income provided limited explanations on their relationship with social capital. As such, this study will address these shortcomings from the aspects of social capital with a focus on the B40 income which is presently included in the 11th Malaysian Plan agenda. Using a partial least squares structural equation model (PLS-SEM), the results have elucidated the relationship between social capital, social innovation, social entrepreneurship and household income more comprehensively including the impact of the three social dimensions on income.


3. METHODOLOGY 3.1. Data and Sampling Technique The data were sourced from surveys conducted throughout Malaysia, on households with income less than RM3,855 per month, selected from the e-Kasih database in the Economic Planning Unit. Respondents were selected through the use of purposive sampling and the meet-up sessions were held in six locations: Kuala Lumpur, Johor Bahru, Taiping, Kuala Terengganu, Kuching and Kota Kinabalu by using purposive sampling (Table 1). Respondents were required to answer structured questionnaires with assistance from enumerators. A Likert scale from 1 (least agree) to 10 (most agree) was used to measure the response for each question. In all, 344 respondents participated. Out of the total, only 304 questionnaires were used since the remainder were invalidated for exceeding the income ceiling.

Table 1: Survey Locations Locations Frequency Percentage (%) Kuala Lumpur 64 21.1 Johor Bahru 33 10.9 Taiping 18 5.9 Kuala Terengganu 58 19.0 Kuching 67 22.0 Kota Kinabalu 64 21.1 Total 304 100 3.2. Conceptual Framework Based on past empirical studies, a conceptual framework was established for this study comprising social dimensions and their relationships with social innovation, social entrepreneurship and income (Neumeier, 2012; Noorasiah, Syazuani, Mohd Nasir, & Rahmah, 2014), as shown in Figure 1. As social capital becomes more important in contributing household income and national development (Noorasiah Sulaiman, Rahmah Ismail, & Mohd Nasir Mohd Saukani, 2016), expansion of studies in this area is required by scholars to further investigate the relationship between social capital and income. Past studies focus on a specific kind of social capital, either on one specific dimension or specific definition (van Tubergen & Volker, 2015). The structural equation model (SEM) is capable of simultaneously assess the relationship among multiple variables including measured variables and latent variables (Hair, Hult, Ringle, & Sarstedt, 2014). Descriptive, correlation and factor analyses were conducted using the IBM SPSS 23.0 package together with a partial least squares structural equation model (PLS-SEM) using SmartPLS v3.2.6. The PLS-SEM analysis which comprised a measurement model and a structural model was suitable for exploratory research (Hair et al., 2014) since it was capable of estimating complex models with multi-relationships between variables (Henseler, Ringle, & Sinkovics, 2009). The measurement model analyzed the relationship between items while the structural model analyzed the relationship between constructs/variables (Hair et al., 2014). The data analysis commenced with an exploratory factor analysis conducted to assess the validity and reliability of instrument data. To test research


hypotheses, a path model analysis was conducted to analyze significant relationships between constructs when the t-value exceeds 1.96 for a two-tail assessment and 1.645 for one-tail assessment (Henseler et al., 2009). The value of R2, Q2 and f2 were used to assess the relationships between paths. This study combines all three social capital dimensions to evaluate the effect of social capital on social innovation, social entrepreneurship and household income. The community environment and social network constructs are used to represent the structural dimension while the social responsibility is representative of the relational dimension and finally, the shared value constructs is employed to explain a cognitive social capital dimension.

Figure 1: Research Framework on Social Capital and Household Income

4. DATA ANALYSIS AND RESULTS

4.1. Respondent Profiles Respondents comprised of women (61%) and men (39%) spanning the age of 20 to 69 years (Table 2). The majority of respondents were mid-aged, 35 to 44 years (33%) and 45 to 54 years (27%). The highest number of questionnaires were received from Malay respondents (61%) followed by Bumiputra Sabah (20%) and Bumiputra Sarawak (11%). Most respondents were secondary school leavers (71%), primary school leavers (17%) and married (66%). The participants were fairly balanced between urban areas (43%) and rural areas (57%).


Table 2: Descriptive Analysis on Respondent Profiles Variables Frequency Percentage (%) Gender Male 116 38.7 Female 184 61.3 Age < 25 years old 17 5.7 25 – 34 years old 59 19.9 35 – 44 years old 97 32.7 45 – 54 years old 79 26.6 > 54 years old 45 15.2 Ethnic Malay 183 60.8 Chinese 4 1.3 Indian 19 6.3 Bumiputra Sabah 61 20.3 Bumiputra Sarawak 34 11.3 Education background No school 7 2.6 Primary school 46 17.2 Secondary school 189 70.5 Diploma/STPM 20 6.7 Degree 8 3.0 Marital status Single 25 8.4 Married 195 65.7 Divorced 30 10.1 Widowed 47 15.8 Areas Urban 130 43.2 Rural 171 56.8 4.2. Measurement Model The factor analysis was used to compare loading values for every item. The selected items to represent constructs were based on loading values of 0.7 and above (Table 3). A construct was considered to have valid discriminant when its square root value for AVE through the Fornell-Larcker criterion was the highest in the same row and column compared to other constructs (Table 4). The AVE value must be at least 0.5 to determine data validity (Table 5) (Hair et al., 2014).


Table 3: Factor Loading for Each Item Based on Constructs

Constructs Factor loading Social innovation

Potential to make improvement on the social aspect 0.830 Social innovation is important to create a healthy economy in the long term Prefer social change or creating social value over innovation on business, trade and financial

0.867 0.743

Social entrepreneurship Social entrepreneurship are important in business 0.797 Social entrepreneurship are important to expand business 0.852 Good financial planning in business is important to run social activity 0.825 Awareness of the benefits in business when running social activity Business-related to societal needs

0.816 0.789

Community environment Residential area has complete infrastructures 0.713 Residential area is comfortable and clean 0.740 Waste disposal is systematic and on schedule 0.758 Public hall is large and comfortable to do community activities 0.827 Public area for religious activity is suitable for all ethnics Public area is provided for recreational activities

0.781 0.819

Social network Receive assistance from others when not feeling well 0.820 Receive assistance from others when doing difficult work Receive advice and view about life

0.784 0.717

Social responsibility Effort to improve the standard of living in a society 0.747 Increase social participation and cooperation in society 0.777 Ready to involve in social responsibility 0.770 Active in social organization 0.788 Responsible for finding solution related to social problems 0.737 Serve society without expecting any return 0.797 Achievement in society is more important than individual achievement Involvement as a committee member in social organization

0.714 0.757

Shared value Shared value in the religious aspect 0.769 Shared value in the educational aspect Strong family-bonding and always spending time together

0.846 0.907


Table 4: Fornell-Larcker Criterion

Social innovation Social

network Shared value

Community environment

Social responsibility

Social entrepreneurship

Social innovation 0.8147 Social network 0.2563 0.7746 Shared value 0.2867 0.1678 0.8422 Community environment 0.2785 0.2088 0.2413 0.7740

Social responsibility 0.7007 0.1856 0.3858 0.2631 0.7613 Social entrepreneurship 0.6632 0.2373 0.3727 0.3173 0.6436 0.8158

The analysis of composite reliability and Cronbach’s Alpha is used to evaluate internal consistency reliability and instrumental data (Table 5). Constructs in the model must have at least 0.7 value of composite reliability and at least 0.8 for Cronbach’s Alpha to ensure high internal consistency (Henseler et al., 2009).

Table 5: Composite reliability, Cronbach’s Alpha and Average variance extracted (AVE) Constructs Composite reliability Cronbach’s Alpha AVE Social innovation 0.746 0.855 0.664 Social entrepreneurship 0.874 0.909 0.666 Community environment 0.867 0.899 0.899 Social network 0.766 0.818 0.818 Social responsibility 0.896 0.917 0.917 Shared value 0.792 0.879 0.879

All selected social capital constructs (community environment, social network, social responsibility, shared value, and both social innovation and social entrepreneurship constructs) met the acceptance level for the above criteria. As such the items and data in this study were found suitable to represent the respective constructs for conducting the empirical study. 4.3. Structural Model Table 6 shows the values of the coefficient of determination (R2) and the Q2 in the structural model. The R2 is used to measure the predictive accuracy of the model. The R2 values for social innovation and social entrepreneurship models are high, recording 0.52 and 0.46 respectively. The selected social capital constructs which are community environment, social network, social responsibility and shared value can explain that 52 percent of variance existed in social innovation construct and 46 percent in social entrepreneurship construct. A good PLS model must have a value of R2 more than 0.36 (Wetzels, Oderkerken-Scroder, & van Oppen, 2009); therefore only social innovation and social entrepreneurship models meet the criterion and are considered good models. Income models lower than the minimum acceptance value of R2 are expected due to the other prominent factors other than social factors that have a stronger influence on income (Mohd. Nasir, Rahmah, & Ishak, 2010).


Table 6: R2 and Q2 Values Model R2 Q2

Social innovation 0.520 0.318 Social entrepreneurship 0.460 0.218 Income 0.028 0.021

In addition to R2, the Q2 is used to measure the predictive relevance of the model. Q2 values greater than zero indicate the relevancy of endogenous latent constructs in predicting the path model with particular constructs (Hair et al., 2014). All three models have Q2 values greater than zero with the highest value in the social innovation model (Table 6). This would suggest that social innovation, social entrepreneurship and income are relevant as predictive models. An analysis on a path coefficient between constructs was conducted on the structural model using the bootstrapping procedure to derive β, t and f2 values (Table 7). The findings show that the significant paths are 1) social network to social innovation, 2) social network to social entrepreneurship, 3) shared value to social entrepreneurship, 4) community environment to social entrepreneurship, 5) social responsibility to social innovation, 6) social responsibility to social entrepreneurship, and 7) social innovation to income. Three paths were found not significant and as such the three hypotheses were rejected which are H1, H7, H10.

Table 7: Results of Hypotheses Testing (Direct Effects) Hypotheses β (t-value) f2

H1: Community environment -> Social innovation 0.082

(1.002) 0.003

H2: Community environment -> Social entrepreneurship 0.126** (3.065) 0.031

H3: Social network -> Social innovation 0.118** (2.449) 0.025

H4: Social network -> Social entrepreneurship 0.090* (1.832) 0.015

H5: Social responsibility -> Social innovation 0.660** (10.471) 0.727

††

H6: Social responsibility -> Social entrepreneurship 0.549** (8.659) 0.452

††

H7: Shared value -> Social innovation -0.008 (0.169) 0.001

H8: Shared value -> Social entrepreneurship 0.115** (2.426) 0.021

H9: Social innovation -> Income 0.132* (1.810) 0.011

H10: Social entrepreneurship -> Income 0.042

(0.581) 0.001

Notes: *p< 0.05, **p< 0.01; †Large effect size.


The f2 is used to measure the effect of exogenous constructs on the endogenous ones. The larger the f2 value, the larger the effect size of the model. With the f2 value larger than 0.35 should indicate a large effect on the exogenous constructs (Cohen, 1988). The f2 test shows that two paths have larger effects; namely, are a social responsibility to social innovation, and social responsibility to social entrepreneurship. Based on the path analysis and the f2 value tests, the main element of social capital that has the potential to generate social innovation and social entrepreneurship is social responsibility which displayed significant paths analysis and very large f2 values. Table 8 shows the analysis of mediating hypothesis using the indirect effect approach with the bootstrapping method between social capital constructs and household income in assessing the social capital influence on the household income of the B40 group and the difference between findings of this study those of past studies. The analysis shows that the community environment, social network and social responsibility significantly influenced the increment of household income in the B40 group (Table 8). Contrary to the hypothesis, shared value under cognitive social capital did not indirectly affect the income of B40. In other words, only the structural and relational social capital can increase income.

Table 8: Results of Hypotheses Testing (Indirect Effects) Mediating hypothesis H11 β (t-value)

Community environment -> Social innovation/social entrepreneurship -> Income 0.017* (1.662) Social network -> Social innovation/social entrepreneurship -> Income 0.020* (1.854) Social responsibility -> Social innovation/social entrepreneurship -> Income 0.012**(3.302) Shared value -> Social innovation/social entrepreneurship -> Income 0.004 (0.323)

Notes: *p< 0.1, **p< 0.01.

5. DISCUSSION Based on the findings of this study, all social capital dimensions and social capital constructs influence either social innovation and social entrepreneurship or both. This indicates that selected social capital constructs are relevant in explaining factors influencing social innovation and social entrepreneurship in the B40 group. A community environment is a valid predictor of social entrepreneurship as revealed in the study. This is consistent with past studies whereby satisfactory infrastructure is crucial in assisting the social entrepreneurship model (Douglas & Cuskelly, 2007; Marwell & Mcinerney, 2005). However, the relationship between community environment and social innovation is insignificant although showing a positive relationship. Our interpretation in understanding the findings of this study is that the current social innovation in Malaysia has not contributed much impact. Our findings indicated that social network has a positive relationship with both social innovation and social entrepreneurship. These findings reflect the cultural norms of Malaysians, specifically the B40 group. Malaysians have a gregarious trait and prefer to work in groups despite their diverse ethnicity and religious background. Due to this trait, the social network becomes an important and core element in producing social innovation and social entrepreneurship. This is supported by Geraldine (2009) who also discovered that social network has an important role in expanding other social capital elements.


Social responsibility is also a valid predictor of both social innovation and social entrepreneurship. The present findings also support Suraiya & Ahmad Raflis (2015) study which concluded the positive contribution of social responsibility traits towards social innovation and social entrepreneurship. Social responsibility conferred a positive influence on social innovation and social entrepreneurship by assisting an NGO to extend its service by creating various activities in other locations as well. This study revealed that shared values are significant and have a positive relationship with social entrepreneurship. The finding is consistent with findings of past studies by Mair & Schoen (2007) and Pirson (2012). Nevertheless, shared values are found to have a negative relationship with social innovation. This finding shows that Malaysians have not yet reached the level of cognitive social capital dimension to show income increment of the B40 group. This result however contradicts that recorded by Nur Sa’adah dan Khairul Akmaliah (2013). The difference is nevertheless expected since the latter study was conducted on business companies as opposed to the B40 household group as targeted in this study. Consistent with finding by van Niekerk et al., (2017) and Van Raemdonck (2018), the present study reported that social innovation is a valid predictor of income. However, despite past studies suggesting the positive outcome of social entrepreneurship and income (Agrawal & Hockerts, 2013; Defourny & Nyssens, 2010; Tracey et al., 2005), our studies found that social entrepreneurship is non-significant with income although showing a positive relationship. The non-significant paths between social entrepreneurship and income is due to the majority of social entrepreneurs conducting social community activities that did not normally receive payment and most resort to using their own money to ensure that activities are conducted. The present findings also support Dees (2003) and Martin & Osberg (2007) studies which concluded that social entrepreneurship does not generate income. Also, social entrepreneurship in Malaysia is under the “integrated” category (Huybrechts & Nicholls, 2012) and unable to generate a sustainable income stream due to insufficient funding sources (Cheah et al., 2019). The study also revealed that social innovation and social entrepreneurship are the important mediator constructs in analyzing the relationship between social capital and household income. Social innovation and social entrepreneurship are positive and significant mediators between community environment and household income. This is supported by Crea et al., (2017) and Van Raemdonck (2018) studies that found community environment has changed the way people work, socialize and help others that leads to profitable and sustainable social innovation, thus contributes to the income growth of households. The relationship between social network and income is also significant with social innovation and social entrepreneurship as mediators. The parenting style in Malaysia effectively encourages family participation in community social activities such as generating social innovation (Kling, 1995), resulting in the establishment of a strong social network in the community. A community with a high-level of social network has a higher possibility of generating higher growth of income in social innovation programs (Van Raemdonck, 2018). Our findings revealed that social innovation and social entrepreneurship are significant mediators between social responsibility and income. Friedman (2007) and Voltan et al., (2016) found the importance of social innovation and social entrepreneurship in explaining the relationship between


social responsibility and income. When implementing a social entrepreneurship model, community leaders in Malaysia organize group activities by forming committees with specific roles assigned to the members to ensure social activities meet goals such as generating income (Kesharavarz & Baharudin, 2009). However, the relationship between shared value and income is insignificant with social innovation and social entrepreneurship as mediators. It contradicts with a number of past studies by Baron (2003), Porter & Kramer (2011) and Schmidpeter (2013). The difference in finding is nevertheless expected since Malaysia is a multi-ethnic and multi-religion nation which practices various values, belief system and socialization goals in society (Kesharavarz & Baharudin, 2009). The finding has connections with the previous findings on the relationship between shared value and social innovation which was also found insignificant.

6. CONCLUSION

This study re-evaluates social capital factors that influence social innovation, social entrepreneurship and income of the B40 group. Social capital influences social innovation and social entrepreneurship, especially from aspects of social networks and social responsibility. Additionally, other elements of social capital such as community environment and shared value also influence social entrepreneurship. The government should extend programs that focus on social network and social responsibility so as to increase social innovation and income of the B40 group. The social entrepreneur roles in the community should be empowered since it is presently not effective in increasing incomes. Based on this study, social capital investment is found important in increasing income for the B40 group, except for the shared value component. The human capital development which is focused on increasing the standard of living appears less successful in reducing the gap in income distribution in the economically isolated group. As such, social capital development with an emphasis on social innovation and social entrepreneurship is expected to be more effective in producing an innovative society capable of reducing income gap and ensuring a sustainable community poised towards an inclusive developed nation status.

ACKNOWLEDGEMENT

This study is funded by a research grant, EP-2016-014. Our sincere appreciation to the Economic Planning Unit (EPU) and United Nations Development Programme (UNDP) for funding the study and for their collaboration and assistance.

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Syahrin SuhaimeeMalaysian Agricultural Research and Development InstituteMohd Azlan Shah Zaidi0F(Mohd Adib IsmailNoorasiah SulaimanKeywords: Social capital; B40 income; PLS-SEM; Social innovation; Social entrepreneurship.1. INTRODUCTIONThe bottom 40 percent household income group (B40) is given the priority to achieve zero poverty rate in multidimensional aspects under the 2030 agenda (United Nations, 2016). In Malaysia, poverty eradication has become the national economic agenda si...The unequal distribution of income and wealth may be solved if more population have abilities to increase their income through human capital investment (Rahmah & Ishak, 2010). However, to become a sustainable and inclusive nation, social development i...Based on the importance of social capital to support the creation of social entrepreneurs and formation of social innovation that potentially can assist government to increase income of the B40 group, this study is designed to analyze the role of soci...This article is organized into five sections. After the introduction section in Section 1, Section 2 reviews the relevant literature related to social capital and its relationship with income, and the relationship between social innovation, social ent...2. LITERATURE REVIEW3. METHODOLOGY4. DATA ANALYSIS AND RESULTS4.1. Respondent ProfilesRespondents comprised of women (61%) and men (39%) spanning the age of 20 to 69 years (Table 2). The majority of respondents were mid-aged, 35 to 44 years (33%) and 45 to 54 years (27%). The highest number of questionnaires were received from Malay re...REFERENCES

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SOCIAL INNOVATION AND SOCIAL ENTREPRENEURSHIP AS … · 2020. 7. 21. · Noorasiah Sulaiman Universiti Kebangsaan Malaysia . ABSTRACT . This study examines the role of social capital