Social entrepreneurship

Social entrepreneurship

With ESSEC Knowledge Editor-in-chief

Improving society requires a collective effort, and social entrepreneurship aims to do its part: it refers to individuals and organizations that use business to tackle a societal issue. The concept has been around since the 1950s, but has only begun to garner significant research attention in the last decade. The rapid growth and emerging nature of social entrepreneurship research, coupled with the fact that social entrepreneurship builds on different disciplines and fields (entrepreneurship, sociology, economics, ethics) have led to a disjointed literature without dominant frameworks. 

Professors Tina Saebi (Norwegian School of Economics), Nicolai Foss (Copenhagen Business School) and Stefan Linder (ESSEC Business School) analyzed existing research to develop a framework and outline future directions, highlighting the need for a holistic approach.

What makes social entrepreneurship unique?

What sets social entrepreneurship apart from other related phenomena like CSR, philanthropy, and sustainability? Saebi, Foss, and Linder focused on identifying commonalities among the existing definitions.

They found that social entrepreneurship’s hybrid nature sets it apart. Commercial entrepreneurship focuses on the economic side of creating value: opportunity identification, resource mobilization, etc. In social entrepreneurship, profitability goes hand-in-hand with solving a social problem.

Similarly, social entrepreneurship differs from CSR in that the latter is an extension of a firm’s traditional business activity to reach out to its stakeholders and increase profit. Charitable and not-for-profit organizations are also different, because their funding is usually from external sources. Consequently, their social initiatives do not compete for resources with profit-seeking ones.

As such, the researchers explored the idea that “the dual mission of social and economic value creation reflects the core characteristic of social entrepreneurship” (Saebi et al., 2019, p.22).

Classifying social entrepreneurship 

Social entrepreneurship can be classified according to its social and economic missions. 

The social dimension is whether or not the beneficiaries are active participants in the social entrepreneurship’s model. Aravind, which offers free vision care in rural India, is an example where social value is created for the beneficiaries. In the other model, value is created with beneficiaries, such as Unicus, a Norwegian consultancy that employs people diagnosed with Asperger’s syndrome. 

The economic dimension is the extent of integration of social and commercial activities. For example, commercial activities may subsidise social ones. Alternatively, social activity captures economic value, as in the case of award-winning Grameen Bank, which provides collateral-free small loans to the rural population in Bangladesh.

Combining these two dimensions creates a four-quadrant matrix, illustrated in Figure 1.

Figure 1. A typology of social entrepreneurship. 

In Quadrant A are social enterprises with a ‘two-sided value model’, such as TOMS shoes, which gives one pair of shoes to a child in need for every pair purchased. In Quadrant B, enterprises employ beneficiaries to produce goods or services sold in the commercial marketplace. For example, British restaurateur Jamie Oliver trained and employed disadvantaged youths in his restaurant and funded the training program with the revenue. In Quadrant C, the beneficiaries are paying customers.  Last, in Quadrant D, is when the beneficiaries are both internal and external customers—VisionSpring sells quality eyewear at affordable prices and also employs them in sales and distribution.

To shed light on the multi-faceted nature of social entrepreneurship, the researchers examined 395 articles, focusing exclusively on social entrepreneurship and excluding articles on sustainable, developmental, institutional entrepreneurship, or entrepreneurship in general. The researchers identified the factors that affected social entrepreneurship at three distinct levels—individual, organizational, and institutional—and gaps in the research.

As management phenomena are often multidimensional, the researchers developed a multistage and multilevel framework to integrate the various levels of analysis. Drawing on theory, this is divided into 2 stages—before and after the venture is formed.

With this framework, the research team linked the effect of the macro-environment and the individual’s goals and beliefs (situational mechanisms), the effect of these goals on individual behavior (action-formation mechanisms), and the effect of these in bringing about broader changes (transformational mechanisms).

These describe the relationships that affect the three levels of analysis. Pursuing these mechanisms further, both before and after the venture’s creation, is necessary to fill existing research gaps and to find out what makes social enterprises tick.

Breaking down the levels of analysis

At the individual level, theory suggests that a key trait of social entrepreneurs is a prosocial personality (the inclination to empathize with others), coupled with qualities that promote an entrepreneurial spirit, like self-efficacy and work history with social organizations.

The difference is between action and intent. Social entrepreneurs need to seek resources, gain support, and act to form their ventures. It is also of interest to study how the entrepreneur creates value after getting the go-ahead by examining organizational-level factors at the venture formation phase.

Organizational-level analyses have focused on the ability to finance a venture, the importance of networking, and marketing capability. Given the case-based nature of this research, little is known about the common features that can make or break a social venture, and whether these factors are different for commercial ones.

The hybrid nature leads to rifts that need to be addressed for the venture to thrive. This can be done in various ways, such as hiring managers who embrace this hybridity. Social entrepreneurship’s mandate requires examining existing kinds of social ventures and potential problems.

Other questions include the link between the type of venture model and the legal and organizational structure, venture management, the choice of a particular model, and the impact of model choice on venture success.

Research shows that when the private sector does not meet societal demands, social enterprises are formed. These tackle a wide range of problems, including reducing poverty, empowering women, and inclusive growth.

Measuring the impact of different kinds of social ventures varies between ventures, but all social ventures share the same broad goal: addressing a social problem while remaining profitable. To this end, it is imperative to develop a common framework to gauge and assess the effectiveness of such enterprises. This void can be filled by institutions, which social enterprises can work in and with, and thus establish key metrics accepted by academia and applicable to multiple contexts.

What’s next?

Individuals can have a big impact, and they are influenced by personal experience, which impacts the role they want to play, the problem they want to solve, and their ability to identify an opportunity and take action. More research is needed to understand how exactly an individual impacts a venture and the process they follow. 

Research has largely focused upon individuals rather than entrepreneurial teams. This leaves a gap in research on how team dynamics affect the kind of social mission selected, design of the social venture, motivation, and the ability to secure funding and translate thought into action. It’s also critical to study how different levels, like individual and organizational factors, interact with each other.

The pre-launch process is only the beginning. As such, more research and practical knowledge are needed on the relationships between individual motivations and the social value created, especially given the decision and resource conflicts that can arise from the model’s hybridity. It is also key to analyze how other incentives, such as certifications for ventures that conform to high standards, may affect motivation. 

As these ventures require teamwork, it is important to study social entrepreneurship on the organizational level, for example, using an ethnographic perspective. This means studying issues that shed light on the human side, like organizational hierarchy, communication skills, and task delegation.

The big picture

More work is needed to understand potential negatives to social entrepreneurship, but we must not lose sight of the bigger picture: social ventures exist to improve society, one step at a time.

To this end, research should also look at if and how these ventures change society by creating value rather than redistributing it from one group to the other. The framework outlined here provides a basis for future research and for social enterprises to help build our understanding of social entrepreneurship.

Reference

Saebi, T., Foss, N. J., & Linder, S. (2019). Social entrepreneurship research: Past achievements and future promises. Journal of Management, 45(1), 70-95.

A version of this article was first published in the Council of Business and Society. 

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