exploring institutional field emergence: insights from ... · of the new field. second, prior...
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Exploring institutional field emergence: Insights from social investment
B. Bell
Programme Director
Social Incubator East
Cambridge
H. Haugh
Cambridge Judge Business School
Trumpington Street
Cambridge
CB2 1AG
Tel: 0044(0)1223 766592
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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