Social-tech Ventures in Social-tech Ventures ? Dilemmas for Social Entrepreneurs

Socio-tech startups are new ventures that leverage technology to address social problems. These firms, owing to their potential of replicability and high scalability, are expected to generate more profit than traditional social startups. While this is true for developed markets where institutions are well developed, the underpinnings of leveraging technology for social startups are different in emerging markets owing to weak, often conflicting institutions or presence of institutional voids. Socio-tech startups in these less developed institutional environments have to overcome challenges of accessibility and acceptance of their technology by the local community, particularly those at the bottom of the pyramid, compared to traditional social startups. To improve acceptability meant overcoming challenges of local institutions like social norms and belief systems besides traditional authority that affected their performance. While most studies focus on aggregate transformation of societies under the impact of technology, performance of socio-tech startups versus traditional social startups, is limitedly understood. Using the lens of institutional theory, we test our hypotheses using panel regression on data of 86 social startups over the financial years 2011-2020 in India. Our findings indicate that socio-tech startups are earning less profit than traditional social startups. In addition, we examine how the location of operations and the ownership structure influences the profit of socio-tech start-up ventures. Interestingly, we find that the socio-tech start-ups operating in rural regions of India are earning more profit than those in urban areas but higher involvement of social impact investors is unable to ensure more profit for socio-tech startups as compared to traditional social startups. We discuss the theoretical and practical implications of our study along with its limitations and future research directions.