This article examines institutionalised social entrepreneurship (ISE) in the area of decentralised social welfare provision in Indonesia. The study includes eight ISE initiatives that were studied at different government levels. The research involves 34 interviews with key stakeholders and end-users in order to understand the challenges and diverging commitments to initiatives. We argue that differences in the levels of government hierarchy, community involvement, and political exposure are crucial factors that drive the success of ISE initiatives. As these programs ascend to higher levels of government, such as central and provincial, ISE initiatives often lose their appeal to the targeted communities due to the complicated procedural and bureaucratic nuances involved. However, this experience does not apply to smaller governmental unit contexts, such as districts and villages. Local officers, who envision themselves as both community leaders and state functionaries, have a strong incentive to ensure the success of ISE initiatives in this regard. It also shapes their cognitive references, leading to the adoption of informal mechanisms and cultural approaches within the ISE system. This, in turn, translates into relationship-building between government and society, reflecting more of a leader-and-community dynamic than a hierarchical connection between stakeholders and end-users. This article makes a significant contribution to the literature by highlighting the institutional foundations of ISE in a range of public sector settings by suggesting a better strategy for ISE governance. © 2024 Informa UK Limited, trading as Taylor & Francis Group.