Resilience through social innovation for sustainable development

2.1 Innovation for sustainable development and resilience

Innovation is an organizational phenomenon that goes beyond the creation of new things and encompasses the improvement of production processes or new ways of value creation (Fagerberg, 2004; Dosi, 1988). Both production and consumption must be geared toward sustainability, providing a safe place for society to thrive instead of growth goals that only deplete the planet (Folke et al., 2021; Hossain et al., 2017; Raworth, 2012). To achieve these ethical goals, social problems must be addressed, mainly because they are worsening (Tate & Bals, 2018). If social goals can encompass environmental goals and guide the economic ones, maybe emphasizing it can be a considerable contribution to sustainability (Hossain et al., 2017), taking the opposite way that led the world to today’s hardships (Tate & Bals, 2018; Raworth, 2012; Horgan & Dimitrijević, 2018). Resilience can be achieved through innovation and convergence linked to rigidity that prevents changes (Fougère & Meriläinen, 2021; Linnenluecke, 2017).

In general, resilience can be understood as an inherent characteristic related to the adaptative capacity to respond and recover more quickly. It has been chiefly used as a desirable quality that evolves from endurance, perseverance and strength (Linnenluecke, 2017). However, not all resiliencies are positive (Horgan & Dimitrijević, 2018). Fougère and Meriläinen (2021) alert that innovation and resilience can also be contradictory concepts. Innovative disruption can cause unintended consequences, preventing the stability related to resilience. Not every rupture is beneficial to society. For example, if innovation is adopted to increase productivity, it may also reinforce the structures that caused the social problem, heightening inequality rather than solving it. The locus of the change and the narrative concerning responsibility are crucial. The boundary between benefit and harm is slight (Fougère & Meriläinen, 2021; Horgan & Dimitrijević, 2018).

There are many flops when considering initiatives toward disadvantaged people, mainly when the initiative occurs in a transnational context or deals with diverse ethnicities. The disadvantaged side can be misunderstood through analytical lenses that emphasize hegemonic paradigms. The factors that limit the social benefit can also constrain or bias the innovation course (Koehne, Woodward, & Honig, 2022). They can manifest as cognitive dissonance that denies what needs to be done to correct a problematic situation. The resilience of the status quo prevents evolution (Horgan & Dimitrijević, 2018).

In short, resilience is linked to innovation (Bristow & Healy, 2018), and both depend on path dependence that allows building strengths and weaknesses (Fougère & Meriläinen, 2021; Leonard-Barton, 1992). However, resilience is more of a trait than a process (Linnenluecke, 2017), whereas sustainable development can be a goal (i.e. SDGs) or a dynamic (Seelos & Mair, 2005b; Tate & Bals, 2018). More studies are still needed to deepen the understanding of these three elements (Fougère & Meriläinen, 2021).

Past decisions shape future conditions but neither the past nor the future can be managed in the present (Winter, 2014). The present can be accessed through the features of the process, such as innovation (Clark & Brennan, 2012), primarily through its problem-solving method (Lopes et al., 2017). The search for innovation is shaped by the human needs to increase productivity or improve the supply of goods and services (Fagerberg, 2004; Horgan & Dimitrijević, 2018). Innovation involves problems that are generally ill-structured and without an obvious solution within the available knowledge. Research skills are needed to organize the problem, define a solution and test it (Dosi, 1988). The solution is usually evolutionary, resulting in the refinement of several attempts and the combination with other innovations (Dosi, 1988; Fagerberg, 2004).

Although social innovation is also a market phenomenon, its purpose is society (Mulgan, 2006). This innovation approaches social problems differently (Moulaert, Mehmood, MacCallum, & Leubolt, 2017), perceiving them as endogenous to social relations (Murray, Caulier-Grice, & Mulgan, 2010). It emphasizes the change in relationships, social participation and adoption of new habits, business models, and processes (Moulaert et al., 2017; Lopes et al., 2017; Mulgan, 2006). Therefore, it can be better understood through the paradigm concept.

2.2 Building a sustainable paradigm

Paradigms are complex and essential structures that allow knowledge and innovation (Mackenzie & House, 1978; Dosi, 1988). They are also generic standpoints that constrain perceptions and guide practices (Miller, 1991), establishing what is seen as good or bad (Dosi, 1988). Therefore, paradigms can explain the issue of the benefit of innovation and resilience (Fougère & Meriläinen, 2021; Horgan & Dimitrijević, 2018; Linnenluecke, 2017) because it drives interests, investment, interpretations and research (Dosi, 1988). Therefore, it establishes what is or is not relevant due to the randomness of the observation of phenomena (Mackenzie & House, 1978).

When a paradigm is established around innovation, uncertainties are reduced and a focus is created, allowing the accumulation of knowledge (Dosi, 1988). However, it is difficult to predict the formation of a paradigm. It depends on a selection process based on the governments’ interests and the institutions that make up the economy. It also depends on social acceptance and assimilation in trial-and-error processes (Dosi, 1988; Horgan & Dimitrijević, 2018). A paradigm combines different sources and forms of knowledge to become consensual among group members (Mackenzie & House, 1978; Dosi, 1988). However, there is a risk of building consensus around wrong ideas. They cannot be the most efficient option or be based on false assumptions (Mackenzie & House, 1978). Miller (1991) warns that when the social sciences do not challenge their paradigms, they risk losing critical thinking. Fougère and Meriläinen (2021) share Miller´s concerns, facing the dialectic between theory and practice of initiatives aimed at innovation and resilience.

Establishing a paradigm requires institutional openness and weak inertia, expanding innovation flows. Such requirements explain why there are more innovations involving the participation of society in public decisions than coming from political reforms, for example. There is more innovation around preventive health and wellness strategies than around a reform of the hospital system or the pharmaceutical industry (Murray et al., 2010).

Paradigms vie for dominance. The possible innovation in each ecosystem is limited by the paradigm adopted. This dynamic is multidimensional, behaving like an open system, where new opportunities create and are created by competing innovations that affect the economy and society. Consequently, these innovations alter the paradigm selection process. Finally, the relationship between paradigms and contexts explains the random distribution of innovation worldwide (Dosi, 1988). Many innovations are not disseminated due to the context restrictions and the difficulty in overcoming inertia (Dosi, 1988; Fagerberg, 2004; Horgan & Dimitrijević, 2018; Mulgan, 2006).

Social innovation particularly suffers from inertia, as it often depends on creating new structures and building new behaviors (Moulaert et al., 2017; Murray et al., 2010). The patterns established by the dominant paradigm tend to influence the type of institutions and their relationships in the ecosystem, creating inertia as they mature. Therefore, successful innovations show a pattern of irreversibility. These innovations support and are supported by the dominant paradigm (Dosi, 1988).

In short, to change production and consumption patterns sustainably (Folke et al., 2021; Hossain et al., 2017; Raworth, 2012) innovation with social purpose must be developed and spread (Boons & Lüdeke-Freund, 2013; Horgan & Dimitrijević, 2018; Moulaert et al., 2017) to build a paradigm (Shaw & de Bruin, 2013). This innovation can be a game-changer for resilience (Bristow & Healy, 2018). Many twentieth-century innovations are current standards, but they represented profound societal changes when they emerged. For example, ordinary people can drive cars without posing a social risk (Mulgan, 2006).

The concept of innovation is complex and can generate changes at various levels and unpredictable effects (Fougère & Meriläinen, 2021; Lepak, Smith, & Taylor, 2007). Social innovation can occur through small organizations embedded in their contexts by expanding local capacities. It can also take on a larger scale, becoming a stabilizing factor by improving the supply of services of collective interest or triggering creative destruction by changing the foundations of society (Zahra, Gedajlovic, Neubaum, & Shulman, 2009). However, social innovation still has a philosophical character, lacking consensus and data systematization (Horgan & Dimitrijević, 2018; Lopes et al., 2017), making it difficult to discuss it as a transformation tool (Boons & Lüdeke-Freund, 2013).

2.3 Social innovation features for practice

Social innovation discusses organizational and territorial development (Moulaert et al., 2017). To be a lasting innovation, such an innovation must be the most efficient and effective option among all alternatives (Lopes et al., 2017). To solve social problems, it also must endure resource scarcity (Ciccarino, 2021). Social innovation can be efficient and broad scaled or embedded and creative (Zahra et al., 2009).

The research on the topic follows two directions. A technocratic or functionalist view emphasizes the market and the institutional point of view. This strand studies social organizations, entrepreneurial processes and improvement in public services. Inclusion is market productivism addressed as meeting the needs of the bottom of the pyramid (Pozzebon, Tello-Rozas, & Heck, 2021). These studies emphasize improving efficiency and reducing cost and risk (Lopes et al., 2017). Otherwise, there is a democratic strand geared to transformative purposes and collective movements. This perspective challenges the status quo through bottom-up innovations (Pozzebon et al., 2021). It is based on establishing new relationships, accessing new markets and creating new business models or organizations to change patterns and generate social change (Lopes et al., 2017).

Social innovation is related to latent dimensions of the business model, such as scale, embeddedness and social goals’ achievement. It is a complex concept that must be analyzed according to the type of social issue, the extent of desired change, stakeholders and ethical concerns (Koehne et al., 2022; Zahra et al., 2009). Social innovation happens through the combination of scarce resources to generate practical, accessible and commercially desirable products and services (Kickul, Griffiths, Bacq, & Garud, 2018).

The complexity of the concept of social innovation requires analysis according to the observed context, conditioning the ability to provide an overview of the phenomenon (Zahra et al., 2009). Therefore, it uses elements of conventional innovation that focus on assessing the innovation itself as if this were a generic extension of its effects. The types of innovation are not contingent on the patterns of interest that motivate them and can even be applied to social innovation (Moulaert et al., 2017; Dosi, 1988).

Innovation doesn’t exactly mean newness (Lopes et al., 2017). It can be the refinement of something that already exists (i.e. incremental innovation) or its use in another context (Fagerberg, 2004). It can also be a new way of doing something (i.e. process innovation), a new way of creating and distributing value (e.g. business model innovation), or new resource use (e.g. new resource, new source or new supply) (Schumpeter, 1934).

In this sense, innovation can be radical or incremental. Incremental innovation is built from existing concepts and increases organizations’ overall performance by extending and improving existing value offerings (Christensen, 1997). Radical innovation represents revolutionary changes favored by the circulation of knowledge (Dosi, 1988). For Schumpeter (1934), radical innovation happens through the creative destruction triggered by entrepreneurship, and it is about the destruction or discontinuity of the old paradigm to create a different market.

Only radical innovations generate disruptive innovations, but not all radical innovations are disruptive. Following the current paradigm means adopting its assumptions, interpretations and practices, favoring knowledge accumulation. The change happens within the paradigm. Disruptive innovation arises when some of these elements are replaced (Miller, 1991). Introducing disruptive innovation causes an overall decline in value, causing incumbent organizations to perform worse (Christensen, 1997). Even in disruptive cases, the state of change is transitory, after its dissemination, it becomes the new standard (Mulgan, 2006).

The more radical an innovation is, the more adjustments it generates, requiring investments and structures to be accommodated socioeconomically (Fagerberg, 2004). Incumbent organizations gain advantages such as resources, learning and experience when the ecosystem favors incremental innovation. However, when the ecosystem changes due to radical innovation, these organizations are at a disadvantage because they are less flexible and adaptable (Audretsch, 1995).

Occasionally, radical innovation is an opportunity niche, not noticeable or exciting for large organizations to explore (Mulgan, 2006; Christensen, 1997). Incumbent firms can also be inhibited by the potential of this innovation to cannibalize a profitable business (Christensen, 1997). Therefore, they are conducted by start-ups (Christensen, 1997), commonly smaller (Audretsch, 1995), as Mulgan (2006) describes as social innovation. Because they are carried out by smaller organizations (Audretsch, 1995), disruptive innovations initially affect few people and may or may not evolve into a mass market, making them riskier (Christensen, 1997).

Audretsch (1995) suggests that the survival and growth capacity of a new organization depend on the importance of innovation in the industry. It is also influenced by the type of organization that runs it. A greater dependence on innovation driven by small organizations makes it harder for new ones to survive. However, those that survive have higher growth and a lower risk of discontinuity. The importance of innovation for the industry and the prevalent innovation type determine who will have the advantage of innovating: incremental innovations tend to give an advantage to incumbent organizations and radical innovations to new entrants.

A typical proxy for evaluating the dynamism of an entrepreneurial ecosystem is the analysis of the rate of new initiatives (that is, with less than three years of existence). New innovative entrepreneurial organizations tend to be less vulnerable to external factors and have higher growth rates as they develop the so-called opportunity entrepreneurship. The value created, even at the level of job creation, is often more relevant. These initiatives need supportive structures, sociocultural endorsement and access to funding to develop, but innovation plays a significant role in their qualification and survival (Levie & Autio, 2008). The need for socioeconomic accommodation of innovation (Fagerberg, 2004) makes it difficult for organizations that create disruptive innovations to disseminate them and achieve adequate scale (Mulgan, 2006). This relationship needs to be better understood in the case of social innovation, as it is about solutions to unresolved problems that grow in more considerable progress than they are addressed (Tate & Bals, 2018).

Context-bound variations can favor or deplete the positive social impact of innovation (Koehne et al., 2022). The country delimitation as a case can limit these factors’ variation (Verschuren, 2003), providing insights that link resilience and innovation. This local standpoint for understanding practice is also a way to strengthen social bonds within communities, and it can be a much-needed step back to fit solutions and contexts (Horgan & Dimitrijević, 2018).

3.1 Research design

Portugal was selected as the study’s revealing case (Verschuren, 2003). The country is considered a benchmarking case concerning data production and support for the development of social innovation (Almeida & Santos, 2017). The method is adequate since the aim is context description (Verschuren, 2003), and the available theory is still under development (Bristow & Healy, 2018; Fougère & Meriläinen, 2021; Pozzebon et al., 2021). The research aims to study how social innovation can contribute to sustainable development by presenting a case highlighting this potential relevance in practice.

The study has developed in three areas: First, a systematic literature review identified academic papers and official documents within the scope of Portugal’s cohesion policies with the European Union. Secondary data served as a parameter to assess how Portugal is progressing in its investment strategy for social innovation (Remenyi, Williams, Money, & Swartz, 1998). Second, Portuguese social investors were interviewed to provide insights into what is valued and lacking (Lee, Battilana, & Wang, 2014). Finally, the authors surveyed the entrepreneurs from invested social initiatives.

This research strategy helped to overcome the unidimensional focus on a multilevel relationship that prevents holistic insights into social innovation (Horgan & Dimitrijević, 2018), and resilience (Linnenluecke, 2017). It can also help to address the theoretical but overlooked link between both concepts (Bristow & Healy, 2018; Fougère & Meriläinen, 2021). The data were collected through a semistructured interview. The guideline had three blocks of analysis units with open questions: (1) Demographic data about the interviewee; (2) Social investment; (3) Social Innovation Impact in Portugal – Portugal Inovação Social impact (PIS); (4) Opinion about invested social initiatives; (5) Social investment criteria. The guideline based on the literature review is in the supplementary materials. The guideline provides evidence about how social innovation increases resilience towards sustainability (Horgan & Dimitrijević, 2018; Tate & Bals, 2018).

Qualitative data were analyzed by pattern matching using the Atlas: ti software, version 7.5. A pattern is something routine that appears systematically both in the literature and in the collected data, showing theoretical saturation. Then, the quantitative analysis provided an additional description complementing the case (Remenyi, 1998).

3.2 Sample and data collection

Secondary data published in official documents and academic papers (CASES, 2019; Ciccarino, Rodrigues, Almeida, & da Silva, 2019; European Commission, 2014; MIES, 2015; SEFORIS, 2015) served as an evaluation parameter (Remenyi et al., 1998). The qualitative analyses also combined eight semistructured in-depth interviews that were conducted between June and December 2019, lasting about 1 hour (Denzin & Lincoln, 2011). The informant’s selection considered at least one Portuguese social investor from each country region and tried to balance personal characteristics to limit possible bias, as shown in supplementary materials. The leading Portuguese references in social investment were contacted due to the connections already built by the Portugal Social Innovation Public Policy. The authors used snowballing sampling to complement the interviewee selection (Remenyi et al., 1998) and to increase the acceptance.

The online survey was based on published scales. The questionnaire went through an extensive pretest process carried out in implicit and explicit stages with the collaboration of 56 respondents. The pretest responses were not used as a study sample (Remenyi et al., 1998). The probabilistic sample was collected through an online survey of social entrepreneurs acknowledged by funding or awards from 2015 to 2020 to ensure the social innovation dimension (Lee et al., 2014). The data were collected between November 2019 and February 2020. The resulting database corresponds to 40.45% of the population. The sample was treated to ensure it was suitable, resulting in 89 valid cases (Hair, Anderson, Tatham, & Black, 2010). The sample also represents 43.63% of the response rate, which is higher than what was reported in benchmarking studies (e.g. 21% - Bacq & Eddleston, 2018).

4.1 Context overview before PIS

Although Portuguese initiatives highly depend on government grants (European Commission, 2014), 80% claim to be aligned with economic goals (SEFORIS, 2015). Most of the initiatives are aimed at regional and national impact, pursuing objectives for specific audiences, and influencing strategy, structure, and resource access. Initiatives that operate internationally are leaner and serve a larger target audience by moving fewer resources. They are also intensive in volunteer labor. On the other hand, local organizations maintain a reduced target audience due to their structure and resources (Bernardino and Santos, 2017). The initiatives take few risks, and there is low competitiveness (SEFORIS, 2015). The lack of a results-oriented culture and low productivity represent challenges that can create cash flow problems (MIES, 2015). Furthermore, the low engagement in collaborative networks increases the risks of a lack of resources and difficulty exploring opportunities (CSES - Conta Saté lite da Economia Social, 2013).

4.2 Portuguese investment in social innovation

This session presents an overview that combines official data on Portuguese social innovation, academic publications and interviewed investors’ opinions to contextualize the case. The empirical-based parameters made it possible to update the context under analysis compared to the primary data (Remenyi et al., 1998; Lee et al., 2014). Since 2013, the Portuguese government has invested in actions to boost its social economy as the pioneering investment of €150m for the “Portugal Inovação Social’”(PIS) (Almeida and Santos, 2017; MIES, 2015). The PIS is a public policy whose goal is to promote social innovation.

The social innovation occurs when the process of social entrepreneurship is successful, that is, when a new social problem response is created. It must be different from conventional innovation, by promoting autonomy and positive social impact, with efficient resources use. (Interviewee 6).

PIS is an innovation, as Portugal was the only European State Member that funded the experimentation of new ideas capable of dealing with social problems.

The PSI is a unique experience in the world because it is a public policy to support a social instrument and a social innovation. It is the only one organized in this way, with community funds. (Interviewee 1)

The public incentive sought to reinforce weaknesses identified through the analyses performed under the Portugal 2020 partnership agreement and the austerity policy imposed until 2019. The new social targets were innovation and social inclusion, mainly through qualification and the fight against unemployment (Ciccarino et al., 2019). However, the Portuguese social investment strategy favors what emerges from society. There is no specific topic, guidance or constraint on innovation source or scope. “Social innovation is by definition cross thematic. (…) So social innovation serves as a kind of advanced guard for experimentation with public policy. (…).” (Interviewee 1).

The social investment return is a broader opportunity for government innovations by turning some social innovations into public policies. In addition, there is an indirect benefit with the reduction of social costs due to preventive actions that the government would not be able to carry out, besides the direct benefit with the increased offer of services of collective interest.

This is a big thing because it is somehow stirring organizations in search of more efficient and effective solutions for public services. This is very challenging, being able to work with change or at least contributing to that change is very challenging. (Interviewee 2)

PIS dynamizes a network linking investors and social initiatives. It favors access to investment, supportive relationships and speech alignment. All interviewees acknowledge these benefits.

When I started in 2016, there was still a very evident gap between the former and the more recent social initiatives in speech and structure… there was not still evidence of what social innovation was and what it would allow. Nowadays, they are outdated (…) (Investor 1).

The network favors learning and the dissemination of best practices “which is poorly done in one, will no longer be replicated in another…” (Investor 4), corroborating the innovation literature and favoring the construction of a paradigm through the popularization of the concept of innovation (Murray et al., 2010). The convergence of efforts facilitated by the emerging paradigm provides post-change resilience (Bristow & Healy, 2018; Horgan & Dimitrijević, 2018). It decreases inertia to accommodate the change in a new equilibrium state (Horgan & Dimitrijević, 2018; Murray et al., 2010).

The law for the development of the social networks is from 1998 or 99. Therefore, this should already be happening… but this network was not mobilized to work. I think that the fact that we are in the field managed to change many mentalities, and social networks are now happening. (Investor 8).

4.3 Social initiatives funded

The survey addressed the financed innovative social initiatives. The most common profile found was that of mature initiatives with more than five years of existence, nonprofit, with regional operations, in line with previous studies (CSES - Conta Saté lite da Economia Social, 2013; SEFORIS, 2015), but the sample is proportionally distributed: 26.1% work locally, 35.2% regionally, 25% nationally and 13.6% internationally. The initiatives, on average, corroborate previous studies (CSES - Conta Saté lite da Economia Social, 2013; Bernardino & Santos, 2014, 2017).

However, there is an increase in new initiatives. Previously, only 7.4% were under three years of age (Bernardino & Santos, 2014), and the survey reports 38.7%. It represents an increase of 31.3%. Such a result can reflect entrepreneurial ecosystem development (Levie & Autio, 2008). The maturity of the initiative is not correlated with its size (Pearson’s coefficient, α > 0.05), 73% are micro-organizations with up to 10 employees, 20% are small organizations with between 10 and 50 employees and 7% are medium organizations with more than 50 and less than 250 employees. Micro organizations’ predominance corroborates previous research (CSES - Conta Saté lite da Economia Social, 2013; Bernardino and Santos, 2014, 2017).

Regarding innovation, the initiatives studied promote an ecosystem with a lot of shared information (mode = 4), with frequent innovations (mode = 4) and high investment in innovation (mode = 4). These characteristics are correlated with a 5% margin of error. In this sample, risk, tolerance and competitiveness are moderate (mode = 3). It is an improved risk-taking toward innovation with an increase in collaborative network engagement that can improve productivity. These features differed from previous studies (CSES - Conta Saté lite da Economia Social, 2013; SEFORIS, 2015) and were endorsed in the interviews.

And this is interesting: the problems solved by social innovation are not just for the disadvantaged people, they are for all of us. Either because it now makes sense to benefit from it or because the citizen is part of that community. […] These projects where everyone can benefit greatly increase the quality-of-life levels. (Interviewee 4)

We have many experimental projects, and many of them can fail. And finding truly impactful solutions at the rate which society changes, at the rate which interactions and communication flow, makes the impact issue very relevant. […] So finding solutions that can bring about substantial improvements in people’s quality of life quickly and effectively, is a challenge. (Interviewee 2)

All initiatives have some level of innovation, and all innovate in processes. These characteristics are like opportunity entrepreneurship, which has higher success rates and is less vulnerable to external factors (Levie & Autio, 2008). They can also justify the growth of the Portuguese social economy despite periods of crisis (CSES, 2013; MIES, 2015). There is a good amount of radical (34%) and incremental (66%) innovation (Dosi, 1988; Fagerberg, 2004). Even to a lesser extent, radical innovation is a common component presented in 76.1% of the sample’s initiatives, and it usually happens in services.

Although there is no correlation, 38.6% of the sample’s innovations are carried out by the youngest initiatives (that is less than three years old) and 61.4% by the more mature ones. Initiatives with up to 10 employees are more likely to innovate (72.7%). These numbers can signal the importance of innovation in the Portuguese context and point out some risks. In the long term, the same ecosystem that hinders the survival of new initiatives protects survivors by creating barriers for new entrants. Initiatives that mature show higher growth and less risk of discontinuity. The lack of information about the failure rate and competitive relationships prevents further development of this perspective (Audretsch, 1995).