Does co-creation drive the creation and success of social enterprises? Evidence from a quasi-natural experiment

Purpose In developing countries, social enterprise creation is often said to offer a promising solution when public institutions struggle to uplift society from social, economic and environmental challenges. Despite social enterprises’ vital role, they still face challenges such as financial sustainability, market penetration, access to financial resources and maintaining social enterprises’ dual (social and economic) nature. The recent discussion about the positive effects of co-creation processes in institutional creation paves the path for exploring the potential of this approach in creating social enterprise. Therefore, the purpose of this study is to explore an integrative social innovation model based on a co-creation process to help social enterprises address their challenges. Design/methodology/approach This study explores a social innovation model based on co-creation and quantitatively analyzes its impact using the difference-in-differences approach. It used STATA 18 to analyze panel data from the World Bank, Pakistan Bureau of Statistics, Small and Medium Enterprises Development Authority and the United States Agency for International Development-funded PYWD project, covering 2013–2020. Findings This study’s findings indicate a significant positive impact on the creation and growth of social enterprises over time, which is further strengthened in the presence of covariates such as social infrastructure availability, education investment, urbanization and public support institutions. Originality/value This study uniquely emphasizes the ways that can curtail social enterprises to subside potential uncertainties about their sustainability.