The interconnected influences of institutional and social embeddedness on processes of social innovation: A Polanyian perspective

Theorizing embeddedness requires sensitivity to the dynamic and multi-layered contexts that entrepreneurship is situated within. Social or network embeddedness offers explanation for how both social and for-profit entrepreneurs can leverage resources within their local environment. Institutional embeddedness is concerned with how the environment for entrepreneurship is shaped by social structures, often focused upon how legal and policy frameworks create barriers to growth. To understand social innovation (SI) processes—that comprise meeting social needs, transforming social relations and reconfiguring institutional structures—we need to take account of both social and institutional embeddedness. This paper explores how institutional structures shape the environment for SI, influencing social networks and how actors within organizations are able to respond to contextual changes. Drawing on ethnographic case studies of two UK social enterprises, analytical histories uncover different levels and types of embeddedness influencing social organizations. We connect macro and micro interactions using a Polanyian view of embeddedness, placing SI within institutional structures and examining how reciprocal social relationships are critical to SI’s transformative potential. Our findings reveal the interconnectedness of embeddedness, whereby embeddedness in institutional structures led to a breakdown of the social embeddedness necessary for collectivism critical to SI. Moreover, our multi-layered analytical approach has potential beyond understanding SI, making theorizing sensitive to processes of embeddedness of entrepreneurship in other contexts.