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Social Entrepreneurship: What's New?

Perhaps appropriately, as a field of enquiry within the historically splintered sphere of entrepreneurship, social entrepreneurship (SE) continues to exist as a broadly untidy concept; a fragmented domain within which academic discourse regularly lacks consensus, with often unsatisfactory and conflicting expositions of fundamental questions and an overwhelming focus on self-perpetuating definitional debates. In the search for self-legitimisation as a valuable field of inquiry, many frameworks have emerged in attempts to identify the unique processes of SE, how social entrepreneurs differ from conventional entrepreneurs and the pertinency of SE’s unique role within society. In this view, without clear articulation of the term, SE faces the distinct possibility of being reduced to mere rhetoric— indeed, perhaps this has already occurred. Accordingly, this essay will explore existing academic discourse in an effort to disambiguate contrasting views of SE and uncover how SE coincides with conventional views of entrepreneurship and innovation in the Schumpeterian style. 

 

Putting the social into entrepreneurship

 

Within the broader field of entrepreneurship, there is a persisting and distinct lack of consensus of what it is that entrepreneurs do when they are being entrepreneurial; with fundamentally contrasting conceptions and interpretations of the concept of the entrepreneur and the entrepreneurial role (Venkataraman, 1997). For some, the fundamental role of entrepreneurship is to create and sustain financial wealth, with limited appreciation towards entrepreneurship’s social role (Zahra and Wright, 2016). The valorisation of the heroic social entrepreneur in recent years has precipitated an extensive focus in academic literature and the popular press, pivoting on the powerful and inspiring narratives of diverse and highly successful social entrepreneurs. 

As Dacin et al (2011) state, this view has arguably resulted in inherent biases in the research: “(1) a bias against learning from failure, (2) a biased focus on the individual level of analysis, and (3) a bias in terms of the motives and mission of social entrepreneurs” (p.1205). Moreover, disproportionate attention has been paid to the clarification of definitions, boundaries and goals, resulting in the unique processes of SE and the shortcomings of virtuous social entrepreneurs remaining largely insulated from critical debate, or lacking empirical grounding. It is therefore possible to argue that achieving consensus with regards to entrepreneurship’s ever-evolving social role is an impossibility, or even consider whether it is indeed necessary.

Through viewing SE through a Schumpeterian lens, entrepreneurship can be viewed innately as an engine of growth, both a social catalyst as well as an economic one, within which “not only with regard to the economy, but also socially the entrepreneur must be on top of the pyramid of society” (Schumpeter, 2002). In this regard, it is salient to recognise that entrepreneurs (social or otherwise) create a significant social impact; “in the course of doing business as usual, these regular entrepreneurs create thousands of jobs, improve the quality of goods and services available to consumers, and ultimately raise standards of living” (Schramm, 2010, p.21). However, of equal pertinence, in the undertaking of entrepreneurial activity, “entrepreneurs may add to (and even create) problems that impair progress in their societies, often without assuming responsibility for addressing these issues” (Zahra and Wright, 2016, p.611).

As Muhammad Yunus (2010) states, for a social enterprise to be defined as social, it requires a strong adherence to the mission of creating a positive social impact. In this regard, the actions of social entrepreneurs diverge from that of the regular entrepreneur through their primary goal of satisfying social needs; they are an entrepreneur that identifies innovative opportunities to solve social disequilibria and works interminably to solve them (Peredo and McLean 2006). As Martin and Osberg (2015) affirm, social entrepreneurs can be viewed as the drivers of transformation in society; a group that targets unjust and unsustainable systems and transform them into entirely new sustainable systems, through prioritisation of social value creation over economic value accumulation (Perrini, 2010). Thus, social innovation can be viewed as inextricably woven into the fabric of SE ventures (Dees, 2001); an innovative, social value creating activity that can occur within or across the nonprofit, business, or government sectors (Austin et al, 2006).

  Social business vs. Profit maximising business and NFP organisations (Yunus et al, 2010, p.310)

Social business vs. Profit maximising business and NFP organisations (Yunus et al, 2010, p.310)

Despite these apparent distinctions, the formation of such ventures— with strong adherence to social missions and the creation of new social value— have forever been a core characteristic of market economies; however, the use of the distinguishing term social entrepreneurship is a relatively recent phenomenon (Dacin et al, 2011). Through application of the social modifier, there is an inclination to view regular, conventional entrepreneurs as dichotomous from the social entrepreneur— creating a false perception that some entrepreneurs are social and others are not. 

A more appropriate view, advanced by Paredo and McLean (2006) and Austin et al (2006), posits that assessing the degree of which a given enterprise is social can be better conceptualised on a continuum; ranging from purely social to purely economic. Additionally, Groot and Dankbaar (2014) affirm that "social" should not be used as an adjective to entrepreneurship, but instead used as a dimension within the analysis of entrepreneurial action. Accordingly, the degree to which an entrepreneurial undertaking is viewed as social should not be solely assessed against the venture’s— or the individual entrepreneur’s— motivations or intentions, but assessed to a greater extent against the impact of the entrepreneurial action; including the level and sustainability of social value creation.

 

A question of value

  Paredo and McLean (2006) ‘The Range of Social Entrepreneurship’ (p.23)

Paredo and McLean (2006) ‘The Range of Social Entrepreneurship’ (p.23)

With an increasing emphasis across the literature on the financial viability of social enterprises (Alter, 2000), there are often conflicting views on how much priority social value creation should take, while simultaneously operating with reference to the financial bottom line. Through viewing the social-orientation of enterprises through a continuum conceptualisation (Paredo and McLean, 2006; Austin et al, 2006), we can challenge the commonly held assumption that those that hold the social entrepreneur distinction are (or equally, are expected to be) solely altruistic in their activities. As Dacin et al (2011) state: “by placing social values above profitability in terms of mission, many scholars of SE tend to overlook those entrepreneurs that seek to maximise both social change and profitability.” However, as the cases cited by Paredo and McLean (2006) suggest, profitability is wholly consistent with SE, but social ends still dominate the goal structure of social ventures.

As social enterprises prioritise the creation of social value— rather than personal and shareholder wealth (Austin et al, 2006) and do not pursue profit as their main objective (Leadbeater, 1997)— for some writers, any emphasis on financial performance often disqualifies ventures from the social distinguisher entirely. Despite this, the sustainability of social ventures depends upon how social value creating resources and activities are financed; with profit therefore— rather than being the main objective— becoming an important metric of social enterprise sustainability. In this sense, a social business model can be characterised by the degree to which it monetises social value creation against the level of market revenues that it generates in excess of expenditures with the underlying social mission (Dohrmann et al, 2015).

In organisational structure, this new form of business is basically the same as profit-maximising businesses: it is not a charity, but a business in every sense.
— Yunus et al, 2010, p.310

Surging interest in SE and the emergence of social value sits within a pronounced growth pattern within Western market economies, that prioritises putting people and ethics back at the heart of business. Triggered by a distinct lack of trust between civil society and business in recent decades, mature organisations are aiming to reinstate trust in companies through the utilisation of social values to drive the development of new economic models (Ménard, 2013). In a sense, the pursuit of social value in the marketplace could be seen as aiming to reconnect the dots within the living, economic system— perhaps representing a broader post-modernist response to the process of decharming of the world; recapturing what was lost through modernist logics towards everyday’s production, accumulation and consumption. Out of this landscape, the concept of blended value (Emerson, 2003) and shared value propositions (Porter and Kramer, 2011) have emerged into the academic lexicon and corporate philosophy.

Consumers increasingly look for more ethically sourced and produced goods (Nicholls and Opal, 2005), expectations are increasing for corporations to behave in socially responsible ways (Friedman and Miles 2001), and politicians are under pressure to develop and implement policies that promote social equality and mitigate the effects of business on the environment (Bernauer and Caduff, 2004).
— Dacin et al, 2011, p.1204

Respectively, the theories of blended value (Emerson, 2003) and shared value (Porter and Kramer, 2011) mark shifts within a broader movement concerning the responsibility ascribed to corporate vision of change and innovation at an organisational level within established businesses; towards a mutually reinforcing combination of social, environmental and economic value creation in building of an engine for long-term survival. Traditional approaches towards CSR, corporate philanthropy, social intrapreneurship and— more broadly— the symbolic management of corporate values to achieve economic objectives (for example, cause-branding) illustrate how many businesses aim to translate social values and socially driven agendas into high-visibility demonstrations of philanthropy. Within this context, the boundaries of SE become even more muddied, wherein significant boundaries are hard to sustain and exclusive distinctions in application of the term should arguably be avoided, to better understand and encompass these broader organisational activities that are driven by social goals.

Arguably, this shift can be viewed as a response to the failing of traditional economics to encompass complex, and drastically subjective, value dimensions in contemporary market economies. Conversely, albeit perhaps cynically, the demonstration of a sense of social responsibility can be framed as companies seeking to stand out in a marketplace of increasingly undifferentiated products and services (Cone et al., 2003). In this fashion, social objectives are often strategically pursued as much for their marketing value— through aligning social missions with customers to produce a significant competitive advantage (especially within commoditised industries)— as they are for their intrinsic merit. Porter and Kramer’s (2011) theory of shared value advanced discussion away from these agendas, towards a more pragmatic view with regards to entrepreneurial activity; wherein social and economic drivers emerge in symbiosis, at the core of the value proposition from the onset. 

 

the social vs the regular entrepreneur

 

At a conceptual level, these factors may be combined to form a lens through which to make better sense of the rapidly increasing attention and affection for SE in recent years. Moreover, although the processes of value creation may appear similar across commercial and social entrepreneurship— as entities that use revenues to pursue a double (financial and social) or triple (financial, social and environmental) bottom line— it is my view that they diverge across two salient dimensions. 

  Positioning social business models according to monetisation and market performance (Dohrmann et al, 2015, p.133)

Positioning social business models according to monetisation and market performance (Dohrmann et al, 2015, p.133)

Firstly, the capture of social value within social enterprises differs from the approaches of commercial, non-governmental and not-for-profit organisations through a shifting of the financing strategy from revenues for the social mission, towards instead generating market revenues through or with the social mission (Dohrmann et al, 2015)— with clear objectives for sustainable, long-term, and self-financed ventures. In assessing the monetisation of social value creation, Dohrmann et al (2015) grouped ventures from a highly diverse set of social missions into into four distinguishable business model classes: Model I, financing through social investments; Model II, market revenues reduce and almost replace required funds for the social mission; Model III, market-oriented social mission; Model IV, commercially utilised social mission.

Google— an arguably ‘superphilanthropic’ organisation (Milbrandt, 2007)— commercially utilises its elementary social mission— free, global access to information— to create highly utilised and market-oriented value propositions; generating substantial revenues through providing users as a resource input for advertising companies as a market target group, then redirecting generated financial resources to pursue various social missions (Dohrmann et al, 2015). Furthermore, an often overlooked aspect of social enterprises operating at a systems level, is the social multiplier effect of the enterprises activity. Whereupon, the new systems and business models the enterprise creates, facilitate and enable society to further address social issues (Mulgan, 2006).

Secondly, with greater focus towards individual and contextual entrepreneurial dimensions, the process by which social entrepreneurial opportunities are identified, evaluated, exploited and scaled up distinctly differ from those of commercial enterprises— most notably with regard to responses to market failure and the capacity to endure risk. Individual motivations and incentives play a central role in understanding the unique responses and processes of social entrepreneurs, most pertinently in their capitalising upon market failure. 

Rather than focussing on breakthroughs and new needs, the social entrepreneur often looks serve long-standing needs through innovative approaches; where a recognised social need exists, market failure will often provide sufficient market size for the social entrepreneur (Austin et al, 2006). In this regard, profit-maximising organisations often utilise SE as a ‘learning laboratory’, to discover how social innovations generate value, achieve their intended impact and aim to learn how to make them scalable (Dees, 2009); “offering an arena where managers can challenge their conventional wisdom and develop dynamic capabilities that could in turn be helpful to an MNC’s main business” (Yunus et al, 2010, p.319). Additionally, hybrid value chains— wherein businesses and social enterprises interact through the provision of complementary competencies to increase transformative impact— have emerged, however this concept has received limited interest (Drayton and Budinich, 2010).

In spite of these observations— and further contributing to the complexity of the concept— Google is also an exemplar case in point to illustrate that not all social entrepreneurs are engaged in (conventionally viewed) social businesses; as some operate within business models based upon conventional dividend payments to profit oriented shareholders (Yunus et al, 2010). Moreover, being engaged in a social enterprise is not necessarily the same as being a social entrepreneur; as one must satisfy the conditions of entrepreneurship to qualify for the latter category (Paredo and McLean, 2006). In this respect, Kuckertz and Wagner (2010) posit whether it is simply that individuals who are concerned with social issues also exhibit stronger entrepreneurial intentions and there are conflicting views over whether significant differences between social and commercial entrepreneurs (except their orientation to social problems) exist at all (Cool and Vermeulen, 2008).

 

motivations, incentives and process

 

Germak and Robinson (2014) postulate that personal fulfilment, helping society, a non-monetary focus, achievement orientation, and closeness to social problems motivate social entrepreneurs to work to solve issues expedited by market failure. In this view, the embedded understanding of the social entrepreneur— their connections to the place and community— become a condition from which new opportunities are identified and entrepreneurial combinations arise (McKeever et al, 2014; Johannisson and Nilsson, 1989). In addition, the implementation of innovative ideas through an entrepreneurial process is determinate upon the spatial context in which it exists (Chell, 2008); with opportunity identification and formulation being largely fostered by the entrepreneur’s commitment and sensitivity to the problem to be addressed and their individual capability to identify and create supportive networks (Perini et al, 2010).

Consensus upon the motivations and incentives of social entrepreneurs— and how they differ from the regular entrepreneur— are often conflicting, however as one must satisfy the conditions of entrepreneurship to qualify for the title of social entrepreneur, the unique processes undertaken by social entrepreneurs have begun to receive greater attention. Dees (2001) affirms that social entrepreneurs are a distinct kind of entrepreneur, wherefrom it is possible to theorise that the core aspects of social entrepreneurial processes include: the recognition and pursuit of new opportunities to create social value; continuous engagement in innovation and modification; and bold action undertaken without acceptance of existing resource limitations (Paredo and McLean, 2006). 

Perini et al (2010) predicate that the social entrepreneur differs from the regular entrepreneur across the identification, formalisation and scaling up of opportunity, notably; “Social opportunity identification reflects the entrepreneurial awareness of the need for challenging mainstream views surrounding a social burden […] The social entrepreneurial opportunity is exploited when its mission and principles are translated into a fitting intervention model and a consistent organisational form” and “The social opportunity scalability depends on the identification of the determinant of success underlying the model, distinguishing them from contextual, difficult to replicate conditions” (Perini et al, 2010, p.521-525). 

 

conclusion

 

As a relatively recent concept, SE is shrouded in conflict, ambivalence and continuous evolution— a term simultaneously viewed the embodiment of corporate benevolence, but also mere rhetoric. Entrepreneurship remains as a social and economic catalyst that rapidly drives change; continually transforming markets, economic systems and social conditions. Despite common misconceptions as a solely altruistic activity, this essay demonstrates that profitability is wholly consistent with SE, however social ends still dominate the goal structure of social ventures. In pursuit of a triple bottom-line, SE is both an economic and social activity, that engages with the activity of interminably solving social disequilibria, capitalising upon the increasing number of opportunities presented from market failure. In this regard, the processes of the social entrepreneur differs from that of the regular entrepreneur through the commitment to the creation and provision of social value, by means of generating fitting intervention models that develop market-orientation and commercial utilisation of the social mission. 

The embeddedness of the social entrepreneur with the problem and their individual capacity to create supportive networks, coupled with their capacity to endure risk, sustain continuous engagement in innovation and modification— to overcome resource constraints— further contribute the the unique nature of the social entrepreneur. The context surrounding recent fervour for SE may be viewed as the authentic delivery of social value becoming the new competitive advantage; through strategic exploitation of new value through an organisational orientation that is consistent with societal values and the moral expectations of post-modern, marketing-savvy, consumers. Nonetheless, SE has emerged as a potent force for scaling up previously intractable opportunities into new contexts and catalysing a multiplier effect that enables new approaches and opportunities to solve social issues, raising the social impact associated with it.


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