Exploring institutional field emergence: Insights from ... · of the new field. Second, prior studies of field emergence have noted the conflicting pressures whereby isomorphism and

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Exploring institutional field emergence: Insights from social investment

B. Bell

Programme Director

Social Incubator East

Cambridge

[email protected]

H. Haugh

Cambridge Judge Business School

Trumpington Street

Cambridge

CB2 1AG

Tel: 0044(0)1223 766592

[email protected]

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Abstract

In England the amount of money handled by social investment intermediaries is forecast to

increase from £165 million in 2010 to more than £1 billion by 2016. In this paper we explore

the processes involved in creating this new field of activity. Using a grounded qualitative

methodology we analyse key texts produced between 2002 and 2014 to identify how a new

institutional field comes into being. From our analysis we isolate four principal processes of

differentiation, integration, mimesis and innovation which together determine the boundaries,

actors and practices of the new field. We introduce the concept of ethical institutional

entrepreneurship to describe how a new field guided by an explicit social mission is created.

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INTRODUCTION

Understanding the process by which new institutional fields are created is of central

importance to institutional scholars. A field is a “recognized area of institutional life”

(DiMaggio & Powell, 1983: 148) in which there is “a community of organizations that

partakes of a common meaning system and whose participants interact more frequently and

fatefully with one another than with actors outside the field” (Scott, 2001: 84). Field members

therefore engage in common pursuits and face similar pressures (Powell, White, Koput &

Owen-Smith, 2005). Institutional fields develop through interactions between actors which

tend to produce, and reproduce, the values and practices that constitute the field (DiMaggio &

Powell, 1991; Lawrence, Hardy & Phillips, 2002; Scott, 2001). Each institutional field is

distinct from other fields on several dimensions e.g., membership (Maguire, Hardy &

Lawrence, 2004), rules (Scott, 2001; Greenwood & Suddaby, 2006; Maguire & Hardy, 2009),

practices and values (Scott, 1994; Zilber, 2008). In addition to the common meaning system

shared by field members then, an institutional field must in some way be distinguishable from

other fields (Zietsma & Lawrence, 2010); boundaries between fields perform this function.

Previous research has explored how new fields emerge around industries and technologies

and relatively little research has examined how issues influence field development (Hardy &

Maguire, 2010; Hoffman, 1999).

The focus of this paper is the creation of the field of social investment. Social investment

emerged in response to a combination of societal interest in, and entrepreneurial motivations

to establish, businesses that seek to purposefully generate positive economic, social and

environmental impacts (Fisher & Satter, 2001). Public policy has also expressed interest in

the development of new forms of capitalism that are motivated less by maximising profits

and more by striving to achieve social and environmental sustainability. To serve this

collection of interests new forms of finance have been created to direct capital towards

supporting organizations that actively seek to create positive social impact. The aim of the

research presented in this paper is to analyse how social investment was established as a

discrete field of activity in the United Kingdom (UK).

The aim of social investment is to direct capital towards investments that generate social

value as well as financial returns to investors (Brown & Norman, 2011). In England, social

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investment funds were estimated to be £165 million in 2010/11 (Brown & Norman, 2011)

and predicted to exceed £1 billion by 2016 (Brown & Swersky, 2012). Although social

investment is not a new phenomenon, rapid development of the field has occurred in the last

20 years (Nicholls, 2014). We set out to explore how the field of social investment was

institutionalized between 2000 and 2014. To do this we employed a qualitative methodology

and analysed texts in which social investment was first described and then promoted in the

UK. The first text set the agenda for the new field and influenced directly the coalescence of

providers, investors and supporters as the field developed. Subsequent texts continued to both

track progress towards fulfilling the agenda and advance further recommendations to shape

the field. Our analysis finds that in this process the texts were used to designate the

boundaries of the new field as well as establish members and practice guidelines. This was

achieved by four processes: differentiation, integration, mimesis and innovation.

The field of social investment was intentionally created by actors from the public, private and

non-profit sectors in response to a perceived need for finance from organizations oriented

towards addressing social and environmental problems. The field’s development was thus

guided by an explicit ethical mission to foster social change. Fields with similar ethical

missions include Fairtrade (Doherty, Davies & Tranchell, 2013; Goodman, 2004; Renard,

2003) and community-owned wind farms (Devine-Wright, 2005; Walker & Devine-Wright,

2008). Collectively we label the process of creating a new field that is guided by social

mission as ethical institutional entrepreneurship.

The research makes three contributions. First, our data support prior research that field

emergence involves differentiation and integration. Differentiation distinguishes the new

field from existing fields and integration builds the common bond between members of the

new field. In the case of social investment the boundaries lie on the differentiation of social

investment from sources of finance provided by commercial, public and charitable

organizations; and integration draws on the shared social mission and practices of members

of the new field. Second, prior studies of field emergence have noted the conflicting

pressures whereby isomorphism and mimesis foster conformity (DiMaggio & Powell, 1983;

Lawrence & Phillips, 2004), and divergence leads to institutional entrepreneurship (Maguire,

Hardy & Lawrence, 2004). Our data find that the dynamics of field emergence blend

mimesis with innovation. Mimesis occurred when actors and practices that are aligned with

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the aims of the new field were appropriated from other (source) fields. This was achieved by

communicating to audiences how the appropriation of actors and the adoption of practices

that are established in a source field would benefit the development of the new field.

Innovation occurred in the creation of new organizations and practices that were designed to

achieve the aims of the new field. Third, previous research has explored how fields form

around industries and technologies and relatively little research has examined how fields

form around issues (Hoffman, 1999; Wooten & Hoffman, 2008; Hardy & Maguire, 2010). In

our study, the creation of the social investment field is a response to exogenous events

including the demand from social entrepreneurs for investment finance and public sector

commitment to disrupting the status quo and encouraging the growth of both social

enterprises and social investment. Taken together, the contributions advance our

understanding of field emergence and ethical institutional entrepreneurship.

CONCEPTUAL FRAMEWORK

Institutions and Fields

To frame our research we draw on theories of institutions and fields. Institutions are

collective structures that set out the way that things are done in a recognized area of life.

Colloquially summarized as “the rules of the game” (North, 1990: 3), institutions provide the

guidelines that shape which behaviour is deemed acceptable, and that which is not

acceptable. The self-reproducing recurrent patterns of behaviour (DiMaggio & Powell, 1991)

are socially ordered and gradually become accepted as the way to behave. In practice,

institutions are enacted by actors who, through frequent interactions, collectively begin to

perceive themselves to be a group who share interests and practices. Fields refer to such

structures and interactions (Emirbayer & Johnson, 2008) and are composed of norms, values

and practices that are in some way distinct from other structures and associated patterns of

behaviour (Scott, 2001). Fields are sustained by social interactions that maintain, by

reproducing, the values and practices that guide members as to how to act and interact

(Lawrence, 1999). In addition to the influence of social norms, field level values and

practices may also be formally regulated by laws, regulations and rules. In this way

governments also influence field emergence (McDermott, Corredoira & Kruse, 2009).

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Fields form around central issues and bring together actors with different perspectives

(Hoffman, 1999). In a new field, institutional processes are particularly interesting to

investigate as the new field is not encumbered by pre-existing structures and practices and

hence the isomorphic pressures to adopt existing values and practices are not in play (Oliver,

1991). Institutional agents, or actors with the capacity to invest resources, time and effort in

promoting values and practices (Kim, Shin, Oh & Young-Chul, 2007), have some freedom to

employ their resources and skills to influence which actors and practices are aligned with the

new field’s goals, and therefore welcome in the new field. Actors will no doubt carry with

them values and practices from other fields (Markowitz, Cobb & Hedley, 2011; Scott, 1991)

which influence how they perceive, evaluate and respond to their environment (Ocasio, 1997)

however, the relative power of actors will determine their influence on shaping the structures

and interactions in a new field. Yet, just as institutional entrepreneurs are said to disembed

themselves from existing institutional arrangements (Beckert, 1999), the intentional creation

of a new field offers an opportunity to start afresh and establish new structures and practices

oriented to achieving the purpose of the new field.

Boundaries and Practices

The interplay of boundaries and practices is central to field emergence (Zietsma & Lawrence,

2010); they are mutually constitutive in that by institutionalizing practices, field boundaries

are also delineated. Boundaries vary in terms of their strength and permeability (Kent &

Dacin, 2013). Strong boundaries may lead fields to become isolated from or unresponsive to

events in the external environment (Seo & Creed, 2002) however, they may also serve to

protect the distinctiveness of a field and focus resources on field expansion and growth.

Permeable boundaries may be advantageous in the early stage of a field in which support is

required to build the capacity of the new field and strengthen the potential to achieve the

field’s mission.

Practices are the shared routines that conform to social expectations and guide behaviour

(Whittington, 2006) and in so doing specify behaviours that are acceptable by field members

as well as others seeking to join the new field. Studies of field emergence have claimed that

there is a rapid tendency to isomorphism so that the connections between practices in

different fields are influenced by practices in the wider institutional environment (DiMaggio

& Powell, 1983; Lawrence & Phillips, 2004). Such isomorphic pressures originate from

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three sources: coercion in which external forces inflict pain for noncompliance; normatization

in which societal forces impinge on the field; and mimesis in which existing practices are

imitated by others (Oliver, 1991). The transposition of existing practices to fields

(Boxenbaum & Battilana, 2005) may also be explained by the efforts of boundary spanning

actors with the capacity to move between different fields and carry with them values and

practices from other fields. Field level associations are also important actors for legitimizing

and ensuring member compliance with field practices (Lounsbury, 2001). For example, trade

associations provide a forum for professional debates, advocating the interests of members

and play an important role in the maintenance of values and practices in mature fields

through activities such as training, monitoring and celebration (Greenwood, Suddaby &

Hinings, 2002). Formal and informal networks between field members also serve to help

develop shared values, beliefs and frames of references (DiMaggio & Powell, 1983; Podolny,

2001; Scott, 2001). Yet isomorphic pressures are likely to encounter the forcefulness of

institutional entrepreneurship when new fields are under construction (Lawrence, Hardy &

Phillips, 2002).

Thus we seek to investigate how the boundaries surrounding a new field are substantiated and

how values and practices that become characteristic of the new field are established. This is

achieved in the qualitative analysis of the social investment field in the UK.

METHODOLOGY

The research is an in-depth single case study (Yin, 2009) which is ideally suited to

understanding the processual dynamics of new field creation. Case studies have proven to be

a valuable method for investigating the institutional processes in the financial services

industry including analysing the competing logics in community banking (Marquis and

Lounsbury, 2007), practice variation in mutual funds (Lounsbury, 2007), the origins of

developmental venture capital (Rubin, 2009) and to explain how teams carry institutional

logics (Almandoz, 2014). In our research, the case study method sheds light on the multiple

actors involved in new field creation and the simultaneous processes of differentiation,

integration, appropriation and innovation.

Data Sources

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Between 2000 and 2014 five reports were published in which the agenda for and growth of

the social investment market in the UK was recorded. These five reports constitute the

empirical data for the study. In addition, the principal texts are complemented by two other

sources of published data: first, reports produced by the Social Enterprise Unit at the

Department of Trade and Industry (2002, 2003) and second, the annual reviews published by

the Community Development Finance Association (CDFA) between 2004 and 2010. See

Table 1.

Insert Table 1 about here

The data are historically contingent and provide a formal and legitimized record of the

development of the social investment field in the UK. The texts describe the emergence of a

dynamic field and in doing so capture the important actors and activities involved in

establishing social investment in the UK, however not all actors and practices that were

subsequently adopted by the field are captured. It is noticeable therefore that although

crowd-funding for social enterprises has become an important source of finance (Lehner,

2013; Lehner & Nicholls: 2014) it is absent from all reports except Report 5.

Context

Social investment is defined as “financial transactions intended to both achieve social

objectives and to deliver financial returns to investors” (SITF, 2000: 3). Investing funds to

generate social value is not a new phenomenon and there are many examples of the practice

of allocating funds to further social value (Nicholls, 2014) however, there has been an

increase in this type of activity in recent years. Three trends in the late 20th century

stimulated interest in the social investment field. First, a political climate favourable to

policies to address social exclusion, neighbourhood renewal and community regeneration. In

1997 the newly elected Labour administration conducted a large scale review of key aspects

of civil society. Between 1998 and 2000 eighteen policy action team (PAT) reports were

published and their findings developed into the National Strategy for Neighbourhood

Renewal (Social Exclusion Unit, 1998). The business report (Bank of England, 2000; PAT3,

1999) concluded that one of the reasons that enterprises in deprived areas failed to thrive was

because entrepreneurs in such areas had limited access to finance and were therefore reliant

on external sources of funds. The proposed solution was to design new sources of finance

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that would link deprived communities to the mainstream economy (Dayson, 2004). Second,

an increase in the number of social and community organizations seeking investment finance

raised demand for social investment (Nicholls, 2014). Finally, rising government and

investor interest in funds that promise social as well as financial returns stimulated

institutions to create new social investment vehicles (Nicholls, 2014). The effect of the 2008

economic crisis has been to further stimulate interest in social investment and impact on the

flow of resources to specific categories of beneficiary e.g., youth-related services (Kvist,

2013).

In 2000 senior leaders from the finance and voluntary sector were invited by Gordon Brown,

then Chancellor of the Exchequer, to convene a Social Investment Task Force (SITF). The

SITF was a partnership between the UK Social Investment Forum, the New Economics

Foundation and the Development Trusts Association with HM Treasury acting as an

observer. Its Chair was Ronald Cohen “founding father of venture capitalism” (Casasnovas &

Ventresca, 2015) who went on to hold a number of key roles in the social finance field. A

core concern of the SITF was to address the barriers between enterprise and wealth creation

in under invested communities. The aim of the SITF was:

“To set out how entrepreneurial practices can be applied to obtain higher social

and financial return from social investment, to harness new talents and skills to

address economic regeneration and to unleash new sources of private and

institutional investment.” (Report 1: 3).

Report 1 listed five recommendations from the SITF:

1) To establish a Community Investment Tax Credit (subsequently re-named

Community Investment Tax Relief) to encourage private investment in under-invested

communities via Community Development Finance Institutions (CDFIs);

2) To establish Community Development Venture Funds which would match funding

from overnment with funding from the venture capital industry, entrepreneurs,

institutional investors and banks;

3) To advocate for increased disclosure of the lending patterns of banks;

4) To advocate for greater latitude and encouragement for charitable trusts and

foundations to invest in community development initiatives;

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5) To provide support to CDFIs, including through the formation of a trade association

to represent their interests.

The central role played by the SITF in the creation of the social investment market is

manifest in two ways. First, progress was made on four of the recommendations above such

that within three years all but recommendation 3 had been largely accomplished. The

subsequent Reports 2, 3 and 4 track the impact of these recommendations, continue to seek

better implementation of Recommendation 3 and extend calls for additional interventions to

support the development of the social investment field. Second, Report 5 acknowledges the

centrality of the SITF to the development of the sector by first, referring to it in the opening

Foreword (Report 5: 3) and second, using the establishment of the SITF as the first item on a

timeline of principal developments in the UK social investment market. The texts provide a

legitimized account of an intentional endeavour to create a new domain of investment activity

with an explicit social mission. By analysing the texts our case study offers a unique insight

into how the boundaries and practices of social investment came into being.

Data Analysis

The analytical process was guided by the principals of grounded theory (Glaser & Strauss,

1978; Strauss & Corbin, 1998). To begin, each report was analysed independently by the

authors to gain an overview of the key actors and events relating to social investment

between 2000 and 2014. This was followed by focussed reading of each text during which

each phrase and sentence was analysed in relation to the question “what does this comment

tell me about the field of social investment?” Analytical memos (Glaser & Strauss, 1978)

were written to label when actors and actions to create the new field were referred to; and

theoretical memos (Glaser & Strauss, 1978) were written to link the texts and analytical

memos to extant theory concerning institutions, fields, boundaries and practices. Both

authors created an analytical template of key words, phrases and preliminary first order

codes. To stay close to the data in the process of theory generation, the analysis was

conducted manually.

Following the independent analysis of the texts the authors met to share their respective

analytical templates. In a collaborative process, we created a chronology of events and then

analysed the data. Each phrase and preliminary first order code was subjected to critical

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discussion and thoughtful reflection. First order codes were then collated and agreed for each

extract. The first order codes were then compared and contrasted and by moving backwards

and forwards between the data and the literature the first order codes were grouped into

connected themes. During this process we noted that the boundary activity consisted of

emphasising differences between social investment and commercial investment and other

sources of finance; that the field was populated by actors from other fields as well as new

actors that were created specifically to advance social investment; and that some practices

were borrowed from other fields whereas others were designed anew. This led to the creation

of six second order codes to group the first order codes. The analytical process was then

repeated and the second order codes collated into three aggregate dimensions: field

boundaries, field membership and field practices.

Insert Figure 1 about here

RESULTS

Field Boundaries

Field boundaries delineate where the limit of one field metaphorically touches the limits of

another. Analysis identified two themes for delineating boundaries: first, divergent discourse

to highlight and specify the differences between social investment and finance available from

the private, public and charitable sectors; and second, convergent discourse to communicate

the similarities between different members of the new field i.e., providers of social

investment.

Field Differentiation

The emergence of the new and distinct field was communicated in the use of language

that specified that the nascent field is separate from other extant fields.

1. Differences between commercial and social investment. The texts

communicate that social investment is distinct from commercial investment and

that the two practices, although separate, will work alongside each other:

“These CDFIs see their primary purpose as the provision of finance to self-

employed individuals and businesses just outside the margins of conventional

finance.” (Report 1: 11)

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“Links between the social investment and mainstream financial markets.”

(Report 5: 21)

2. Differences between social investment and finance from the public sector

and charities. The data also show that social investment is positioned as

different from finance provided by the public sector, charities and foundations.

The differentiating characteristic is that social investment is repayable finance

and thus borrowers are required to generate a surplus in order to repay investors.

For organizations previously reliant on donated funds from public and

charitable sources, the risk of failure or lack of surplus is a new concept to be

factored into income portfolios. However, the SITF is clear that social

investment is designed to work with, and not replace, other sources of funds

available to social ventures.

“CDFIs look for higher returns than traditional public expenditure and

grants.” (Report 1: 15)

“Social challenges … cannot be addressed by government or the private sector

alone.” (Report 4: 9)

In demarcating the boundaries of the field from other sources of finance, the

ethical mission of social investment to support organizations that provide services

to the disadvantaged and the socially excluded is explicit:

"Access to good advice, banking services and affordable credit for those at the

margins of the marketplace: CDFIs, community banks and credit unions are

clearly key elements of a sustainable solution." (Report 3:11)

“Actors worked collaboratively seeking solutions that started by focusing on

social needs and worked backwards to provide ways in which financial or social

capital could be used to help address those needs.” (Report 5: 27)

Field Density

To build field strength, the texts identify the types of social investment vehicle that

would be aligned with the ethical mission of the nascent field. In doing so the aim is to

foster an identity rooted in the shared ethical purpose and values of field members.

3. Field membership. The reports specify types of organizations whose aims will

align with those of social investment and community development.

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“A thriving community development finance sector comprising Community

Development Banks, Community Loan Funds, Micro-loan Funds and

Community Development Venture Funds.” (Report 1: 6)

Over time the range of field members is widened to include credit unions

(Report 3: 11), the Social Stock Exchange (Report 4: 6) and Big Society Capital

(Report 5: 21).

4. Field networks. To foster connections between field members and assist in the

promotion of a collective identity, various activities are referred to in the reports for

example, networking events and training courses. To reinforce the distinctiveness of

social investment, the SITF recommended that CDFIs also network with other

organizations outside the new field e.g., Regional Development Agencies and Local

Strategic Partnerships.

“CDFIs work in such a specific environment that tailor-made training is essential

if it is going to be worthwhile. As all our recruits are inevitably new to the sector

it is also a good opportunity for them to meet and network with other CDFI

members.” (Report 3: 13)

“The CDFA and the Charity Commission are making efforts to define terms and

disseminate their meaning.” (Report 3: 10)

After a decade, although some concerns relating to field structure and organizational

diversity persisted (Report 4: 9), the new field is reported to have been established:

“Over the last ten years the SITF has succeeded in fostering the creation of a UK

social investment market” (Report 4: 16).

Insert Table 2 about here

Field Level Actors

Fields are composed of actors and analysis of the texts identified the legitimization of actors

as members of the field and the recommendation of and subsequent establishment of new

actors. In Report 2, short biographies of seven key individual actors are presented. These

include individuals from other sectors as well as from new actors created specifically for

social investment.

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Actor Appropriation

5. Appropriation of actors from the commercial finance sector. The advantages for

social investment of learning from the commercial investment market are endorsed

through appropriating actors from mainstream finance in the nascent field. The value

of learning from commercial venture capital market is signified in the appointment of

the chair of the SITF (Sir Ronal Cohen, founder of Apax private equity group and

former chair of the Venture Capital Association). In addition, SITF board members

included two high profile entrepreneurs from the private sector (Philip Hume,

ComputaCenter and Tom Singh, New Look). The inclusion of actors from the

commercial sector might be achieved through direct appropriation or indirectly via

networks.

“It is expected that the managers of the CDV Fund will be experienced business

people and venture capitalists” (Report 1: 19)

“Those whose collaboration is needed: banks, large companies, venture capitalists,

entrepreneurs, institutional investors, the voluntary and community sector and

Government agencies.” (Report 1: 7)

6. Appropriation of actors from public and charitable organizations. In addition to

working with actors from commercial finance and the private sector, leading figures

from government and the charitable sectors are also appropriated to join the new field.

Board members of the SITF included actors from the public sector (Ian Hargreaves,

University of Cardiff) and charities (David Carrington, PPP; Geraldine Peacock,

Guide Dogs for the Blind; and Joan Shapiro, South Shore Bank) The texts identify

actors from the public sector for example the Small Business Service (SBS). The

SBS was located in the Department of Trade and Industry to promote the interests of

small business owners. The National Strategy for Neighbourhood Renewal advocated

for the SBS to promote entrepreneurship among under-represented and disadvantaged

groups. The SBS was also allocated responsibility for distributing £90 million (over

three years) to support CDFIs and other initiatives to promote entrepreneurship

(Fisher & Satter, 2001).

“A key decision will be which organization will evaluate CDFI applications and

allocate the tax credit. One option would be the Small Business Service, [part of HM

Government] to parallel its responsibilities for the Phoenix Fund.” (Report 1: 5)

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Actor Innovation

7. Creation of a new trade association for social investment vehicles. One of the

original recommendations in Report 1 was to create a trade association. Trade

associations play an important role in field creation and maintenance. The SITF

anticipated that the new trade association would play a “crucial role” (Report 1: 24),

be a “critical factor” (Report 2:12), and would aim at “achieving coherence” (Report

1: 13). To support the growth of the sector, the new trade association was established

to advocate the interests of providers of social investment finance as well as investors.

“In order to build on the pioneering work done so far, the aim should be to engage

business leaders and CDFIs in the development of …. an effective trade association

capable of assembling reliable information and representing the needs of CDFIs”

(Report 1: 7)

“A community development finance association would have a crucial role in

promoting new techniques in social impact evaluation models.” (Report 1: 24)

Also, recommendations were made to develop a community development venture

fund to act as a new intermediary between government investors and commercial

banks, to m

anage investments in social ventures. To support the new intermediary institution the

government expressed willingness to match community development venture funding.

8. Appointment of new social investment champion in government. To

disseminate information about social investment across government and

advocate for its inclusion in new policies, a new role of social investment

champion was proposed:

“The Taskforce suggests the appointment within a Government department of a

high ranking “champion” for community development finance with strong links

to both the Treasury and … the Small Business Service” (Report 1: 7).

In Report 4, progress in attracting actors from commercial, public and non-profit

sectors to actively support and participate in social investment is attested to:

“A wide range of new investors has been attracted to social investment since 2000.

Examples include: private equity funds backing venture philanthropy initiatives […]

wealthy individuals and institutional investors investing directly in social enterprises

and through social investment funds […]; and foundations such as Esmée Fairbairn,

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which has created a social investment fund, and the Tudor Trust, which has committed

to invest endowment assets in an increasingly mission-related manner…” (Report 4: 6)

The process of actor innovation is dynamic and continuous. In 2010 Report 4 presented the

case for a new social investment bank. By 2014 the call has been responded to by the

establishment of Big Society Capital; a new wholesale bank created to advocate for the

interests of social investors and to provide direct support to social investment intermediaries.

Field Level Practices

The common meaning system of a field is played out in the practices of the field. Isomorphic

pressures of mimesis were identified in references to the adoption by the new field of

practices from commercial finance and the venture capital industry. In addition, the texts

refer to adopting practices instituted in other countries, specifically the United States. At the

same time as appropriating practices established in other fields and countries, the texts refer

to the creation of new practices to increase the flow of funds into social investment and

ensure high standards of governance.

Practice Mimesis

9. Appropriation of practices from commercial finance sector. Reports 1 and 3 refer

to the enabling environment for venture capital in the UK and the adoption of the

successful principles of venture capital by social investment vehicles.

“The Task Force recommends that the successful practices of venture capital, namely

long term investment, business support to the entrepreneur and rapid growth of

company backed, should be applied to community investment” (Report 1: 5).

“The successful disciplines of venture capital, equity investment combined with

management support, could be used to speed the development of businesses in low-

income neighbourhoods” (Report 3: 6)

10. Appropriation of practices from other countries. To facilitate the

advancement of social investment as a new field, the data outline how practices

from other countries would help the establishment and growth of social

investment. Specific reference is made to the positive impact of legislation to

promote social investment in deprived areas in the United States (US). The

broad approach of the US Community Reinvestment Act (1977) was to tackle

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the redlining of those neighbourhoods where banks, building societies and

insurance companies would not invest. The Act required financial institutions

to have an affirmative duty to meet the credit needs of communities where they

were based (Benjamin, Rubin & Zielenbach, 2002). The impact of the Act had

been to stimulate investment in deprived areas. Further, the SITF recommended

that the skills required of intermediaries in the US be copied in the UK e.g., the

leading US intermediaries National Community Capital Association (NCCA)

and the Detroit Local Initiatives Support Corporation (LISC) advertise their

accredited business expertise.

“Figures from the USA support the view that the determined involvement of the

banking industry is crucial to the process of turning around the UK’s under-

invested communities.” (Report 1: 20)

“The final form of any UK Community Reinvestment Act will benefit from thirty

years of experience in the US as well as from research covering the past several

years.” (Report 3: 12)

Practice Innovation

11. New techniques to increase the flow of funds into social investment vehicles.

Novel proposals were developed to increase the flow of finance to the field of

social investment through for example, the design of a new tax relief for

investors and new social investment intermediaries. The proposed Community

Investment Tax Credit (CITC) was designed to encourage private investment in

deprived communities through investing in CDFIs.

“the task force proposes a tax credit which would provide lenders to, and equity

investors in, CDFIs with a guaranteed minimum rate of return” (Report 1: 4)

“New mechanisms to collect funds at the wholesale level which can be

channelled to CDFIs” (Report 1: 7).

12. New techniques for measuring and monitoring performance in the social

investment sector. Impact evaluation has an important role in building trust

between investors and social ventures (SEU, 2002). New practices were

designed to monitor the performance of social investment funds and benchmark

field members “Demonstrating the social returns of CDVC funds has been

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pioneered by BCV. Working to maintain rigorous social impact evaluation is

key to the development of the sector.” (Report 3: 6)

However, some practice innovation was intended to effect those outside field

membership; specifically to promote transparency in bank lending, the SITF

recommended a programme of bank disclosure of lending and investment in

deprived areas.

“There is a need to request much more detailed, individual disclosure by banks

of their lending activities in under-invested areas” (Report 1: 6)

Practice innovation is strong theme throughout the reports: “social investment

has begun to spread more widely into investments that are diverse in terms of

social mission, structure and risk-reward profile” (Report 4: 6). “The result

today is a rapidly growing marketplace which is providing new and innovative

funding options for social entrepreneurs around the country.” (Report 5: 3).

The continued focus on practice innovation reflects the responsiveness and the

dynamism of field emergence.

DISCUSSION AND CONCLUSION

The aim of the study was to investigate how a new field is substantiated. Previous field level

research has been dominated by studies of the role of social movements in new field creation

(Fligstein & McAdam, 2012). Distinctive to social investment is the active role of

government in stimulating new field creation and the study thus joins a small group of papers

that attribute to the state an important role in institutional entrepreneurship (See Vermeulen,

Büch & Greenwood, 2007). Against a context of increasing demand for finance from social

entrepreneurs, state policies to promote new procurement practices and societal interest in

new forms of capitalism, the establishment of the SITF in 2000 signalled the government’s

commitment to supporting and promoting social change. The new field of social investment

was positioned to be learning lessons from commercial finance but at the same time offering

something new and innovative to investors and investees. The pressure to conform as well as

innovate produced two boundary creating responses. First, to distinguish the new field the

texts specify how social investment differs from commercial, public and non-profit sources of

19

funds. Second, to create a collective identity for the field the texts specify the type of

organizations whose values and practices are aligned to the new field and outline activities to

further consolidate the collective identity of the field. The findings support the view that

changing field level practices involves more than legislative change (Tolbert & Zucker,

1983), and that new fields emerge from the interactions of multiple actors and actions

(Powell et al., 2005).

The study finds that new field creation also involves balancing the pressures of isomorphism

with innovation. The establishment of social investment combined appropriating actors and

practices from fields that were already in existence in the UK and other countries. The

appropriation was based on recruitment of actors that would help establish the legitimacy and

profile of the new field. For example, the chair of the SITF was a successful venture capitalist

and board members included high profile leaders from the charity sector as well as

entrepreneurs. In addition to appropriating actors, the SITF promoted the appropriation of

practices from commercial finance and other countries. The aim was thus to learn from

practices that had been successful in other fields and implement them in the new field. As

with actor appropriation, practices that promoted the interests of the new field were selected.

The isomorphic spread of existing practices was combined with innovation to invent new

actors and new practices which would ensure that the new field was distinguished from

existing fields. The creation of a new trade association was instrumental in building field

capacity and guiding member behaviour, and membership of the new trade association grew

steadily. The important role of trade and professional associations in field creation and

maintenance has been noted (Greenwood et al., 2002) and in the case of social investment the

mandate for the new association is legitimized by the support of the state (McDermott et al.,

2009) through the establishment of the SITF. In contrast, the intention to appoint a champion

to promote awareness of social investment across government departments was proposed

however, not enacted. Thus state support of a field creating action is not a guarantee of

enactment. Some of the new practices of the field were designed to increase awareness and

attractiveness of social investing to investors. The main mechanism was the design of a tax

relief that would reduce the tax to be paid on funds invested in social finance intermediaries.

To ensure the integrity of the new field new methods for measuring social performance were

20

called for. As with the social investment champion, this practice innovation has been slow to

materialize.

The aggregate dimensions of creating field boundaries, membership and practices worked

collectively to establish, and then grow, the field of social investment. The establishment of

new fields is explained as a generic process of institutional entrepreneurship (Phillips,

Lawrence & Hardy, 2000; Lawrence, Hardy & Phillips, 2002). In line with previous

research, the new field is constituted of boundaries, members and practices (Fligstein &

McAdams, 2012). However, the processes of boundary demarcation, defining membership

criteria and specifying acceptable practices is guided by an overt ethical mission to first

provide a flow of funds to organizations with a commercial focus combine with an espoused

social mission; and second to attract investors willing to accept returns on their investment

that may be lower than could be earned on commercial investments and may take longer to

accrue. The overt ethical mission of the field thus constitutes an institutional paradigm that

shapes the creation, and subsequent growth, of the new field which we label ethical

institutional entrepreneurship.

We conclude with three suggestions for future research into field level processes. The

current study investigated the policy recommendations and their implementation in the

creation of a new institutional field in which the boundaries, actors and practices are

supported by legislation and formal guidelines. Institutional scholars remain interested in

how formal policies are implemented in practice and the extent to which practices remain

tightly coupled or become decoupled when adopted by organizations (Meyer & Rowan,

1977). A study that investigated the micro processes of establishing and managing a social

investment intermediary, such as a new organization or new fund, would provide a rich

opportunity to investigate the conditions and extent of deviations between formal structures

and actual processes, practices and impacts.

A second opportunity for further research into field level processes is to explore how and

why organizations respond differently to institutional pressures to change. Responses to

pressures to change by organizations range from resistance to whole hearted adoption. In our

21

study we examined how practices were both borrowed and invented for the new field. The

connections between the new field and extant fields provide routes for new practices to have

a reciprocal influence on organizations in the source field. Thus for example, how did

commercial finance engagement with social investment influence the practices of commercial

finance? How have the donor and investment practices of charities and foundations been

influenced by new actors and practices engaged in social investment? Scholarly investigation

into the reverse flow of influence would shed light on the permeability of boundaries and the

reflexivity of institutional processes.

A third opportunity for research lies in a longitudinal investigation into field divergence over

time. The narrative of the development path of social investment we presented exhibits a

noticeable level of agreement between actors in which overt conflict and resistance to the

new field is either not present, hidden from accounts or takes on a new form for example, not

all of the recommendations were implemented and new, unforeseen, initiatives have been

introduced. Typical of fields though is the presence of different actor positions, interests and

power structures. Institutional fields are not fixed and over time come under pressure to

change (Hoffman, 1999; Scott, 2001). As the social investment field matures we might

expect that different interests will come to the surface and impact on field topography. A

study that investigated how field topography changes over time would provide valuable

insights into how strategies for maintaining field values and practices respond to conflict and

resistance.

22

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27

Table 1 Data Sources

Data Title Source

Report 1

2000

Enterprising communities: Wealth beyond

welfare. A report to the Chancellor of the

Exchequer from the social investment task force

Social Investment Task

Force

2002 Social Enterprise Strategy for Success (2002) Social Enterprise Unit

Report 2

2003

Enterprising communities: Wealth beyond

welfare. A 2003 update on the social investment

task force

Social Investment Task

Force

2003 Social Enterprise Strategy Progress Report Social Enterprise Unit

2004 Annual Review CDFA

Report 3

2005

Enterprising communities: Wealth beyond

welfare: A 2005 update on the social investment

task force

Social Investment Task

Force

2005 Annual Review CDFA

2006 Supporting a thriving community development

finance sector. Annual Review

CDFA

2007 Annual Review CDFA

2008 Annual Review CDFA

2009 Speaking up for Community Finance. Annual

Review.

CDFA

Report 4

2010

Social investment ten years on. Final report of

the social investment task force

Social Investment Task

Force

2010 Making an Impact. Annual Review CDFA

Report 5

2014

Building a social impact investment market: The

UK experience

UK National Advisory

Board to the Social Impact

Investment Taskforce

28

Table 2 Data Categories and Illustrative Quotes

Field Boundaries

Field Differentiation

1. Differences between commercial and social investment

“These CDFIs see their primary purpose as the provision of finance to self-

employed individuals and businesses just outside the margins of conventional

finance.” (Report 1: 11)

“More than simple financing vehicles which do things banks can’t, won’t or

don’t understand” (Report 3: 13)

“Links between the social investment and mainstream financial markets”

(Report 5: 21)

2. Differences between social investment and finance from the public

sector and charities

“To make significant investments in entrepreneurial talent rather than put

money into projects with a limited life.” (Report 1: 11)

“CDFIs look for higher returns than traditional public expenditure and grants.”

(Report 1: 15)

“Social challenges … cannot be addressed by government or the private sector

alone.” (Report 4: 9)

Field Density

3. Field membership

“A thriving community development finance sector comprising Community

Development Banks, Community Loan Funds, Micro-loan Funds and

Community Development Venture Funds.” (Report 1: 6)

“They focused on developing an ecosystem that supported supply, demand and

intermediation. they recognized that these three elements needed to be mutually

supportive and interdependent” (Report 5: 27)

4. Field networks

“CDFIs work in such a specific environment that tailor-made training is

essential if it is going to be worthwhile. As all our recruits are inevitably new to

the sector it is also a good opportunity for them to meet and network with other

CDFI members.” (Report 3: 13)

“The cdfa and the Charity Commission are making efforts to define terms and

disseminate their meaning.” (Report 3: 10)

Field Level Membership

Actor Appropriation

5. Appropriating actors from commercial finance sector

“It is expected that the managers of the CDV Fund will be experienced business

people and venture capitalists” (Report 1: 19)

“Those whose collaboration is needed: banks, large companies, venture

capitalists, entrepreneurs, institutional investors, the voluntary and community

sector and Government agencies.” (Report 1: 7)

6. Appropriating actors from the public and charitable sectors

“A key decision will be which organization will evaluate CDFI applications and

allocate the tax credit. One option would be the Small Business Service, to

parallel its responsibilities for the Phoenix Fund.” (Report 1: 5)

Actor Innovation

7. Creation of a new trade association for social investment vehicles

29

“In order to build on the pioneering work done so far, the aim should be to

engage business leaders and CDFIs in the development of …. an effective trade

association capable of assembling reliable information and representing the

needs of CDFIs” (Report 1: 7)

8. Appointment of a new social investment champion in government

“The Taskforce suggests the appointment within a Government department of a

high ranking “champion” for community development finance with strong links

to both the Treasury and … the Small Business Service” (Report 1: 7)

Field Level Practices

Practice Mimesis

9. Appropriating practices from commercial finance sector

“The Task Force recommends that the successful practices of venture capital,

namely long term investment, business support to the entrepreneur and rapid

growth of company backed, should be applied to community investment”

(Report 1: 5)

“The successful disciplines of venture capital, equity investment combined with

management support, could be used to speed the development of businesses in

low-income neighbourhoods” (Report 3: 6)

10. Appropriating practices from other countries “Our recommendations

are based on innovative approaches that have proved successful in stimulating

community enterprise in under-invested communities in a number of other

countries” (Report 1: 4)

“Figures from the USA support the view that the determined involvement of the

banking industry is crucial to the process of turning around the UK’s under-

invested communities.” (Report 1: 20)

“The final form of any UK Community Reinvestment Act will benefit from

thirty years of experience in the US as well as from research covering the past

several years.” (Report 3: 12)

Practice Innovation

11. New techniques to increase the flow of funds into social investment

vehicles

“The task force proposes a tax credit which would provide lenders to, and equity

investors in, CDFIs with a guaranteed minimum rate of return” (Report 1: 4)

“New mechanisms to collect funds at the wholesale level which can be

channelled to CDFIs” (Report 1: 7)

12. New methods for measuring and monitoring performance in the

social investment sector

“As a new and emerging sector, CDFIs have yet to identify performance

measures and benchmarks. Doing so is challenging as the sector is diverse in its

activities and target markets. This work has begun and is fundamental to the

next stage of the sector’s growth.” (Report 3: 12)

30