Page 245 - Social Enterprise A New Business Paradigm for Thailand

8.1.3 Factors Influencing Financial Performance
A review of the literature on factors influencing financial performance identifies four key

categories: (1) the age of the social enterprise, (2) the organizational life cycle, (3) subgroups of
social enterprises, and (4) industry classification. Each category is briefly described below.

(1) Age of the Social Enterprise

The age of a social enterprise is widely recognized as a factor that supports financial
performance, as enterprises with longer operational histories tend to generate greater
economic and social value (Arhinful & Radmehr, 2023; Bae, 2015). Age is typically measured
from the year of establishment to the present, or calculated as the logarithm of the enterprise’s
age plus one. In most studies, it is used as a control variable (Arhinful & Radmehr, 2023; Fu &
Li, 2023; Barman & Mahakud, 2024).

(2) Organizational Life Cycle

The typical organizational life cycle includes four stages: start-up, growth, maturity, and revival
or decline. However, social enterprises tend to follow a life cycle that differs from that of
conventional organizations. These distinctions are outlined as follows:

• Start-up Stage: Social enterprises at this stage often encounter resource limitations, survival
challenges, and a narrow set of strategic options. Common issues include difficulty entering

the market, an unstable customer base, intense competition, and limited capacity to
forecast actual revenues and costs (Ashta, 2020; Gamal, Wahba, & Correia, 2022).
Additionally, social enterprises often develop unique value propositions or introduce social
innovations tailored to customer needs or aimed at reducing operational burdens and costs
(Ashta, 2020).
• Growth Stage: During this stage, social enterprises see rising sales and must incur ongoing
operational expenses to support expansion. Despite this growth, concerns about
sustainability and economic uncertainty persist, leading these enterprises to seek support
from stakeholders in order to access external resources (Ashta, 2020; Gamal, Wahba, &

Correia, 2022). They also pursue additional funding, grants, and donations while working to
reduce operational costs. Engagement with various stakeholder groups deepens at this
stage, including customers (through enhanced product value), communities, employees,
investors, donors, and government agencies (Ashta, 2020).
• Maturity Stage: In this stage, social enterprises generally achieve stable sales and require
less capital investment. They enjoy steady cash inflows, and both profitability and liquidity
indicators tend to reach their peak, for example, higher returns on total assets, greater

returns on equity, and improved investment performance. This sets them apart from newer
social enterprises, which are still in the process of building and optimizing their operational
capabilities (Ashta, 2020; Gamal, Wahba, & Correia, 2022). Mature social enterprises also

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