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

ABSTRACT Theorizing embeddedness requires sensitivity to the dynamic and multi-layered contexts of entrepreneurship. Social or network embeddedness influences how social and for-profit entrepreneurs leverage resources within their local environment, and institutional embeddedness explains how the (social) entrepreneurial environment is shaped by societal structures.. To understand social innovation (SI) processes – meeting social needs, transforming social relations, and reconfiguring institutional structures – we need to account for 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. Ethnographic case studies of two UK social enterprises 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. 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. Our multi-layered analytical approach has potential beyond understanding SI, making theorizing sensitive to processes of embeddedness of entrepreneurship in other contexts.