Demonstrating Value: How Entrepreneurs Design New Accounting Methods to Justify Innovations

Abstract

An important activity of entrepreneurs is to justify the value of an innovation to gain support from stakeholders. We examine how entrepreneurs can develop an accounting methodology to demonstrate the value of a proposed innovation, focusing on the case of a charitable foundation’s promotion of social enterprise and its efforts to develop the accounting methodology of Social Return on Investment (SROI). We show how the process for designing new accounting methods that helps in demonstrating the value of innovations involves entrepreneurs (1) imagining the expectations of their stakeholders (2) putting in place the necessary infrastructure through which numbers can be generated and (3) iteratively reconfiguring the accounting methodology and the espoused value the innovation is expected to generate. Our study furthers understanding of the role of accounting numbers in the entrepreneurial process, particularly in situations where entrepreneurs seek to generate new accounting methodologies to develop persuasive stories about the benefits of their innovations.

Keywords:

• Innovation
• Entrepreneurial storytelling
• Social enterprise
• Social return on investment

Acknowledgements

We thank the Associate Editor, Teemu Malmi, the two anonymous reviewers, and seminar participants at ESSEC Business School, Kings College London and University of Glasgow for very helpful comments.

Notes

1 Given our focus on the specific case of REDF and SROI, we do not elaborate the broader history and events related to the emergence of the category of social enterprise. For further information, see, for example, Battilana and Lee (2014) and Barman (2016).