The Inﬂuence of Marketing Capability in Mexican Social Enterprises

: Social enterprises need to develop processes that create social value to solve social problems. The purpose of this investigation was to examine the e ﬀ ect of marketing capability on social innovation and its e ﬀ ect on social and economic value creation, while controlling for ﬁrm size among social enterprises in Mexico. An explanatory and cross-sectional design was used to test the hypotheses: 118 social business managers were interviewed and structural equation modeling was used to test our research hypotheses. The results supported our proposition that marketing capability inﬂuenced social innovation, which then had a positive inﬂuence on social, though not on economic value creation. An indirect e ﬀ ect from marketing capability to social value was also found. This study validated the relevance of deﬁning and entailing marketing capabilities with social innovation strategies and their e ﬀ ect on the social value of social enterprises. This paper contributes to a better understanding of marketing capability and its e ﬀ ects on social innovation in social enterprises. In addition, it shows social innovation to be a robust predictor of social value, with important implications for social and economic sustainability.


Introduction
Social enterprises have been defined as businesses with mainly social objectives whose surpluses are reinvested to achieve business or community goals [1]. Unlike a commercial company, a social enterprise does not seek financial benefits as its main objective, but rather seeks to fulfil a social purpose. However, in order to achieve this, it needs to obtain positive financial results [2]. Hence, financial results are a means to an end and not an end in itself. Thus, most social enterprises are hybrid companies, taking elements from for-profit and non-profit organizations, thus seeking to create public and private value [3].
Resource-based theory (RBT) provides a framework for explaining the basis of an enterprise's competitive advantage [4]. Capabilities are essential to a social firm´s success and involve organizational processes and activities that are fundamental for value offerings, competitive advantages, and the firm´s growth [5][6][7]. In addition, social enterprises employ bundles of resources and capabilities to develop value, competitive advantage, and improve their organizational performance [8]. Given that marketing capability research has mostly focused on commercial companies, social enterprises researchers have emphasized the need to continue examining dynamic capabilities given their relevance to all firms [9].
Specifically, marketing capability (e.g., product development capability, pricing capability, channel management capability, marketing communication capability, selling capability) plays a critical role in the creation and delivery of customer value [10,11]. However, there is limited knowledge showing the necessary to survive and grow [5,39,40]. Similar to economic oriented enterprises, social enterprises have to combine and manage their base of valuable resources and capabilities, adapt organizational structures, and dynamically react to challenging situations to optimize their performance and achieve a competitive advantage [5,41].
In terms of the conceptualization and operationalization of marketing capabilities, Liu, Eng, and Takeda [42] validated a scale for social enterprises. They considered eight capabilities: pricing, product development, channel management, marketing communication, selling, market information management, marketing planning, and marketing implementation. Pricing capability refers to the enterprise's ability to set prices responding to market changes and competition. Whereas some social enterprises need to establish affordable prices [43], others need to persuade consumers to pay a premium price [44]. Product development capability implies the ability of social enterprises to create and launch new products or services that meet the needs of customers to the market effectively and efficiently [45]. Distribution capability implies the development of relationships with the best suppliers and intermediaries [42]. Many non-profit organizations (NPOs) strive to maintain their existing programs while intensifying their distribution efforts [46]. Marketing communication capability refers to the ability to manage communicational and promotional initiatives according to the required characteristics of social offers, while attending to the needs of stakeholders and marketplaces [47].
For social enterprises, selling capability refers to the skills needed to train vendors, build sales plans, control systems, and develop strong relational embeddedness that motivates the exchange of resources and information among parties of a community [42,48], therefore contributing to the efficiency of shared performance [49]. Marketing planning capability implies the ability to integrate, combine, and reconfigure the firm' resources through the formulation of marketing strategies to pursue firm success in the markets [50]. Similarly, marketing implementation capability in social enterprises refers to the operational execution of marketing strategies including the allocation of resources, which continues to be a challenge for many firms [42]. Finally, marketing information management capability denotes the ability to provide data and information to executives about key stakeholders in the market in response to the needs and directions of the companies [42,51]. We used this conceptualization and operationalization of marketing capabilities for the current investigation.
Social enterprises are expected to deliver social innovation [52]. A definition of social innovation refers to the development and successful implementation of products, services, processes, and models to meet social needs [53,54] and implies a novel, more effective, efficient, and sustainable solution to alleviate a social problem [52]. From RBT, social innovation is developed by applying a combination of resources available, creating new routines, or new ways of doing things [55]. However, it is necessary to creatively combine those resources in new ways to solve communal problems [56], given that social enterprises that lack innovation have a lower probability of surviving in the long term [57].
From research in marketing capability, Calantone et al. [58] found that if a company has enough resources and marketing skills, it is more likely to innovate successfully. In addition, a study conducted in Indonesia found that marketing capability directly affected innovative capability in both small and medium-sized enterprises [59], which coincided with research focused on main manufacturers such as the studies conducted by Lee and Hsieh [60] in Taiwan and by Weerawardena [61] in Australia. Thus, although a commercial enterprise needs to develop these two kinds of capabilities, marketing and innovation [60], based on a competitive strategy and distinctive abilities [61], these principles also apply to social enterprises and non-profit organizations seeking to achieve a greater social impact [62]. Therefore, we put forward the following hypothesis: Hypothesis 1 (H1). Marketing capability positively affects social innovation in social enterprises.
The RBT posits that the interrelationships between the bundle of resources or assets create value [63]. However, social and commercial ventures perceive value creation differently. Whereas commercial firms focus mainly on economic value creation, social enterprises emphasize social value creation, or a combination of both [64]. For social enterprises, it implies efforts to engage in high social impact initiatives [61] that satisfy the basic and long-standing needs of certain members of society and create long-term social transformation of the target markets [65,66]. The creation of social value denotes the execution of the mission of social enterprises [67]. It is expected that social enterprises provide maximum social value creation in order to secure resources [68] and engage in direct actions that challenge the status quo and release trapped potential or alleviate the suffering of a target group, thus generating a better future for this group and even for society [69].
From the RBT perspective, innovation plays a central role in value creation [70] and this takes place when capabilities are combined to generate new applications [71]. Social enterprises create social value through social innovation [72], market orientation, and socially focused activities [65]. Even for non-profit organizations, it has been found that technical and social innovations assume significant roles in the creation of social value [62,73] that promote positive human and environmental change [72]. Given that firm size is usually controlled for in social enterprise research as dependent variables such as value or performance might vary significantly according to the average size of firms in each industry [74], the same was done in this research. Hence, based on the discussion above, the following hypothesis was tested: Hypothesis 2 (H2). Social innovation positively affects social value creation in social enterprises, while controlling for firm size.
Porter and Kramer [75] state that a new form of capitalism permeated with a social purpose requires an understanding of competition, new and better ways of innovating, and economic value creation in productive enterprises. Social value creation does not necessarily mean that social enterprises need to sacrifice some level of financial return in exchange, so social ventures need to be prepared to achieve both [68]. Economic value refers to the creation of value in a market environment. It is considered as an essential aspect in the development of business strategies, and represents a valuable source of cash flow and good financial performance that has positive economic consequences for the organization and its shareholders [76].
RBT and dynamic capabilities approaches consider that firms expect to produce new combinations of resources that lead to innovation and economic value creation, thus generating long-term superior economic revenue [77]. However, companies cannot create economic value just by possessing resources, they need to capitalize on new combinations of resources and capabilities, which implies an effective and innovative management to exploit productive opportunities, create innovations, and achieve a sufficient financial performance [77][78][79]. Value offering is created by certain core value-creating capabilities, particularly based on innovation, marketing, and production, which allow a firm to consistently generate both superior value for its customers [80] and economic value [45]. Some of the basic aspects to enhance a firm's economic value involve the continuous activity of production and the sale of goods and/or services, a certain level of risk chosen by the owners, and an amount of paid work [76].
The innovation of products, services, processes, and technologies supported in innovative business models and focused on profit and customer participation provides greater value to customers [81]. When ecosystems of innovation thrive, they transform value creation into a more open and collaborative process [82]. Thus, the integration of resources and knowledge into innovation capability affects value creation in order to achieve a superior firm performance [22,83,84], thereby displacing some competitors [85]. Consequently, the following hypothesis was proposed: Hypothesis 3 (H3). Social innovation positively affects economic value creation in social enterprises, while controlling for firm size.
In sum, the purpose of our investigation was to examine the effect of marketing capability on social innovation and its effect on social and economic value creation, while controlling for firm size among social enterprises in Mexico. Specifically, we analyzed if marketing capability, understood as an integrative process to achieve social firm success [50], positively affected social innovation and if this had a significant effect on both social value creation to solve social problems and economic value to sustain the company.

Materials and Methods
An explanatory and cross-sectional design was used to test the hypotheses. All companies in the directory of social enterprises in Mexico were contacted, which included 324 companies [86]. First, the marketing manager, the general manager, or the owner of the company was contacted by telephone. We provided a brief description of the purpose of the study and the questionnaire was answered by telephone or electronically. Fieldwork was carried out from October 2017 to March 2018. We contacted companies at intervals of three to four weeks and, in some cases, we called the firms that had agreed to respond to it to remind them to answer the questionnaire. A response rate of 36.4% was obtained with 118 complete questionnaires. We did not find significant differences among the initial and last respondents; consequently, the probability of non-response bias was minimal [87].
Measures. To measure the marketing capabilities for social enterprises, we used the scale developed by Liu et al. [42] with eight dimensions (pricing, product development, channel management, marketing communication, selling, market information management, marketing planning, and marketing implementation). The overall total scores showed acceptable levels of internal consistency (α = 0.969). Similarly, scores from individual scales had coefficients of internal consistency above 0.80. In addition, the social innovation scale was adapted from Keskin [88]. These scores also showed acceptable levels of internal consistency (α = 0.848). The social and economic value creation were measured with scales developed by Liu et al. [42]. Scores from both scales showed an acceptable level of internal consistency (α = 0.791, α = 0.805). Appendix A shows the scales used in this study (Table A1). Participants answered all questions using a seven-point Likert scale ranging from 1 (strongly disagree) to 7 (strongly agree). Finally, we added the size of the social enterprise as a control variable that might affect the social and economic value developed by social enterprises [74]. To measure this, we considered the classification of the employee criteria (Very small = up to ten employees; Small = from 11 to 30; Medium = from 31 to 250; Large = from 251 to 1000, and Very large = more than 1000) used by the Mexican government [89].
Validation and reliability. First, we assessed the possibility of multicollinearity. For marketing capability variables, interdependency among different types of marketing capabilities has been identified by different business scholars [4]. As a result, we would expect the correlation between those variables to be very high. As suggested before, in our sample, there were high correlations between some variables (0.90 or higher). This is the first indication of substantial collinearity [90]. Therefore, we removed highly correlated predictors from the model. Among them, it is worth mentioning that all items of marketing implementation correlated highly with the marketing plan, so marketing implementation was eliminated from the analysis.
Second, given that our data were collected from a single source, the same respondents answered both the dependent and independent variables, so several control actions for common method bias were taken. Hence, participants were informed about the anonymity and confidentiality of their answers. In addition, we emphasized the non-existence of right or wrong answers. Finally, participants first answered the questions assessing the independent variables and then the questions assessing the dependent variables [91].
Third, we evaluated the theoretical structure of the constructs using confirmatory factor analysis (CFA). We first calculated the adequacy of the sample measured by the Kaiser-Meyer-Olkin (KMO) value. The sampling is adequate or sufficient if the value of the Kaiser-Meyer-Olkin (KMO) is larger than 0.50 [92]. We considered the CFA as a crucial part for the measurement model in SEM, because it helped to obtain an acceptable model fit before modeling the structural model. Fourth, we conducted a structural equation modeling analysis to test our hypotheses [93].
Model fit was ascertained using the χ 2 goodness of fit test (non-significant p-value is desired), the comparative fit index, the Tucker-Lewis fit index (CFI/TLI; values greater than 0.90 indicate good fit) [94,95], and the root-mean-square error of approximation. Lagrange multiplier statistics allowed the achievement of the overall model parsimony. Statistical analyses were conducted using R (version 3.1, Lavaan 0.5-17).

Results
The most relevant characteristics of the enterprises showed that 72% produced and traded products/services, while 28% focused only on commercialization. A total of 60.2% sold their products or services via the Internet and 76.2% were between 1 and 10 years old. In terms of size, 36.4% were classified as very small, 38.1% as small, 22.1% as medium size, 1.7% as large, and 1.7% as very large. Finally, 75.4% were located in the central zone of Mexico, 12.8% in the north, and 11.8% in the south ( Table 1). Results for the measurement model of the latent variables social innovation, social value, economic value, and marketing capability showed an acceptable fit (Chi-square = 1273.337, p value < 0.001, CFI = 0.866, TLI = 0.851, RMSEA = 0.05, KMO = 0.93). All standardized factor loadings were significant and in the expected direction (ranging from 0.527 to 0.952, Appendix A Table A2). The latent correlations showed acceptable levels of discriminant validity with the composite reliability index ranging from 0.50 to 0.92 and the average variance extracted (AVE) ranging from 0.57 to 0.73 (Table 2) [93]. For the structural model, the results showed an acceptable model fit (robust chi-square = 824.812 with p value < 0.009, CFI = 0.909, TLI = 0.900, p < 0.001, RMSEA = 0.049). Examination of the parameters revealed that higher levels of marketing capability were positively related to social innovation (β = 0.719, p value < 0.001). Similarly, marketing capability had a significant indirect effect on social value via its influence in social innovation (β = 0.719 × 0.592 = 0.423, p < 0.0001). Conversely, the overall indirect effect of marketing capability on economic value through social innovation was not significant (β = 0.719 × −0.128 = −0.092, p = 0.419). Finally, while social innovation had a significant, positive relationship with social value (β = 0.592, p < 0.0001), the effect on economic value was not significant (β = −0.128, p = 0.430; see Figure 1).

Discussion
The purpose of the present investigation was to examine the effect of marketing capability on social innovation and its effect on social and economic value creation, while controlling for firm size among social enterprises from Mexico. In addition, we examined the indirect effects of marketing capability on social and economic value creation. We found support for two of the three hypotheses tested. Our results contribute to enhancing our understanding of the effect marketing capability on social innovation and its effect on social and economic value creation in social enterprises.
Specifically, we found that marketing capability had a significant effect on social innovation, thus supporting hypothesis one. Hence, our results were consistent with previous research [59,60]. Vigorous marketing capability supports the performance of commercial activities more efficiently because it allows the company to cope with market changes and its complexities [35]. In social enterprises, innovation is necessary to not only be better than their competitors, but to also satisfy social needs differently from profit enterprises [54,56] and with greater social impact [62]. In addition, whereas marketing capability had a significant indirect effect on social value creation through social

Discussion
The purpose of the present investigation was to examine the effect of marketing capability on social innovation and its effect on social and economic value creation, while controlling for firm size among social enterprises from Mexico. In addition, we examined the indirect effects of marketing capability on social and economic value creation. We found support for two of the three hypotheses tested. Our results contribute to enhancing our understanding of the effect marketing capability on social innovation and its effect on social and economic value creation in social enterprises.
Specifically, we found that marketing capability had a significant effect on social innovation, thus supporting hypothesis one. Hence, our results were consistent with previous research [59,60].
Vigorous marketing capability supports the performance of commercial activities more efficiently because it allows the company to cope with market changes and its complexities [35]. In social enterprises, innovation is necessary to not only be better than their competitors, but to also satisfy social needs differently from profit enterprises [54,56] and with greater social impact [62]. In addition, whereas marketing capability had a significant indirect effect on social value creation through social innovation, the effect on economic value creation was not significant.
Social innovation had a positive effect on social value creation, supporting hypothesis two, while controlling for social firm size. Our results provide empirical evidence for what several experts in social enterprises have posited about the impact of social innovation on social value creation [62,72,73]. Consequently, our findings are relevant because one of the main goals of social enterprises is to create social value for their stakeholders.
Contrary to what was expected, social innovation did not have a significant effect on economic value creation, while controlling for social firm size. Hence, hypothesis three was not supported. However, economic value creation is indispensable, not only for the survival of a social enterprise, but also because the economic value created by a company arises from the innovative use of valuable and scarce resources [35]. Given that social enterprises in developing countries face more resource constraints in the economic environment, it is more difficult to attract resources, develop capabilities, and generate innovation [96]. A possible explanation for this result could be related to the tension or conflict that some companies face regarding the social-economic duality [97], thus striving not to sacrifice social value to capture economic value, or not be perceived as users of a social mission as an exploitative opportunity to achieve economic goals [98]. Future investigations should continue exploring the effect of different capabilities of social enterprises on economic value creation.
The results from this study have important applied implications for social enterprise managers. The positive direct effect of marketing capability on social innovation and the indirect effect on social value creation lend credence to the importance of defining and integrating marketing processes, activities, and skills into business strategies. Although marketing capabilities need to respond to the social mission and financial sustainability [99], they previously faced the challenge of being useful for the implementation of novel solutions (with creativity and invention) to social problems. At the same time, many social enterprises need to learn to capitalize their efforts in economic value to obtain returns in a competitive environment and develop future competitive advantages [100].
Our research had several limitations that generate opportunities for future research. First, the research design was cross-sectional, which limited our ability to understand how the effects of marketing capabilities unfold over time. Second, although we used a validated scale to measure marketing capability in social enterprises [42], as suggested in previous marketing capability research [4], we found high levels of interdependence among the items assessing marketing implementation and marketing planning. Consequently, marketing implementation was eliminated from the analysis. Finally, the results were limited to Mexico.
Future research might use longitudinal designs to assess the effects of marketing capability on social innovation in social enterprises across time. In addition, future research could explore the business model of innovation, social value co-creation, and other market capabilities for generating social value and change such as network structure and market practices, and their effects on social enterprise performance. Finally, a future study comparing México with other emerging countries, especially from Latin America, might generate a deeper understanding about the nature of marketing capability and its effect on social impact in the region.
In sum, our results provide evidence of the importance of marketing capability dimensions on social innovation in social enterprises. In addition, social innovation not only offers solutions to social demands, but it is also a robust predictor of social value. However, social enterprises need to develop the ability to capitalize their social innovation in economic value to ensure their survival and long-term performance. Future research should continue examining the role of social innovation on different types of values.