Social Entrepreneurship

Grade Level: 
6, 7, 8, 9, 10, 11, 12
Keywords: 
Civil Society
Financial Resources
Social Action
Social good
History and methods for a business model that addresses social issues by using innovation and financially sustainable resources to add social value

Authored by Xu Liu

Definition

Social entrepreneurship has long been simplified as using a business model to address social problems, ranging from Kiva Microfunds, a 501 non-profit organization that helps people to lend money via the Internet to low-income entrepreneurs and students in over 80 countries, to We Care Solar which has sent at least 1500 Solar Suitcases including efficient LED lights to more than 27 countries to provide basic electricity and emergency communication in hospitals, in order to increase survival prospects for expectant mothers and their newborns, and to Can You Corporation based in China, a High-Tech company which employs at least 1162 physically disadvantaged people and establishes relevant welfare organizations to serve its employees.

Nicholls (2006) defines social entrepreneurship as “innovative and effective activities that focus strategically on resolving social market failures and creating new opportunities to add social value systematically by using a range of resources and organizational formats to maximize social impacts and bring about changes.”(p. 23) Peredo and Mclean (2006) defines it as “exercised where some person or group:(1) aim(s) at creating social value, either exclusively or at least in some prominent way; (2) show(s) a capacity to recognize and take advantage of opportunities to create that value (‘envision’); (3) employ(s) innovation, ranging from outright invention to adapting someone else’s novelty, in creating and/or distributing social value; (4) is/are willing to accept an above-average degree of risk in creating and disseminating social value; and (5) is/are unusually resourceful in being relatively undaunted by scarce assets in pursuing their social venture.” (p. 64)

Brouard and Larivet (2010) suggest the overlapping characteristics of social entrepreneurship as: (1) emphasizes on creating and sustaining social value; (2) encourages entrepreneurial and innovative approaches; and (3) concentrates on revenue generated by service and sale to attain financial sustainability.

Figure 1. Social Enterprise Spectrum (Dees and Anderson, 2006, p. 6)
 

In the above figure, social entrepreneurship refers to the activities lying between pure philanthropy and pure commerce with mixed motives, methods, goals and characteristics of key stakeholders. On a broader base, social entrepreneurship is always linked to taking advantage of entrepreneurial and innovative approaches to address social problems; however, in a narrow sense, social entrepreneurship is related to establishing innovative social enterprises with financial sustainability and distribution constraint.

 

Historic Roots

The term “Social Entrepreneurship” was first used and spread by Bill Drayton, who established the Ashoka network in 1980. Ashoka became one of the first organizations to support and promote social entrepreneurship, and it is one of the largest networks at present. Charles Leadbeater’s The Rise of the Social Entrepreneur (1997) as well as David Bornstein’s How to Change the World: Social Entrepreneurs and the Power of New Ideas (2002) provide useful insights to the field. In 2006, Muhammad Yunus was awarded the Nobel Peace Prize for founding the Grameen Bank, which means the bank of the poor in Bangladesh, and pioneering the concepts of microcredit and microfinance. The Grameen Bank is the most renowned social enterprise around the world and Yunus became the symbol for social entrepreneurship.

The EMES (Emergence of Social Enterprise in Europe) Network studies social enterprise from several disciplines (economics, sociology, political science and management) and conducted a theoretical and empirical research from 1996 to study social enterprises among the various national traditions and contexts in the European Union. In 2000, Harvard Business School launched Social Enterprise Conference (SECON) and in 2001 formed the Social Enterprise Knowledge Network. The Center for Advancement of Social Entrepreneurship (CASE) at Duke University was founded by Gregory Dees in 2002 to prepare leaders and organizations with the business skills needed to achieve lasting social change. And the Skoll Centre for Social Entrepreneurship was launched in 2003 at Said Business School, University of Oxford to promote the advancement of social entrepreneurship worldwide. Besides, the Centre for Social Innovation at Stanford University also played a pivotal role in shaping the emerging field for practitioners and researchers.

 

Importance

As Yunus (2006) pointed out that “Capitalism is interpreted too narrowly” (p. 39) and “everyday human beings are not one-dimensional entities; they are excitingly multi-dimensional and indeed very colourful,” (p. 39) social entrepreneurship is a neo mindset to respond to the one-dimensional assumption of human beings as rational economic persons only to maximize the benefits, and invigorate other dimensions of human beings to pursue social values as well as financial sustainability. Conscious capitalism as well as creative capitalism put forward by Bill Gates also suggest the potential roles social entrepreneurs can play in balancing the side effects of the market.

Many governments cut the subsidies for non-profit organizations during the 1970s, and after the financial crisis in 2008, the donation base of non-profit organizations have been seriously influenced. Therefore, many non-profit organizations began to take advantage of services and sales to generate revenue to make themselves financially sustainable. As more and more people in the private sector, such as Skoll, the former co-founder of Ebay, began to enter the field of philanthropy, they also introduced several business tools and models to improve the efficiency and transparency of traditional philanthropy, one sub-trend of which is social entrepreneurship. Furthermore, social entrepreneurship can also be viewed as a new collaborative governance in response to the failures of government, market as well as voluntary sector.

 

Ties to the Philanthropic Sector

Philanthropy is “voluntary action for the public good” (Payton, 2008, p. 6) which can take place in different sectors. Social entrepreneurship can have many of the elements of philanthropic actions for the public good. But, social entrepreneurship that is embedded in the market means that social entrepreneurship cannot pursue pure public good.

Social entrepreneurship, can be viewed as two trends moving towards the middle, that is marketization of non-profit organizations and socialization of for-profit organizations. However, more and more entrepreneurs have started up with social entrepreneurship as the goal without a transition from either non-profit organizations or for-profit organizations.

 

Key Related Ideas

Social Enterprise: Defourny and Nyssens (2006) define it as “organizations with an explicit aim to benefit the community, initiated by a group of citizens and in which the material interest of capital investors is subject to limits. Social enterprises also place a high value on the autonomy and on economic risk-taking related to ongoing socio-economic activity”. (p. 5) Furthermore, the Office of the Third Sector UK (2007) defines it as “businesses with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community. Social enterprise is not just ‘business with a conscience’. It is about actively delivering change, often tackling entrenched social and environmental challenges.” (p. 10)

Social Entrepreneur: Dees (2001) put forward that “social entrepreneurs play the role of change agents in the social sector, by: adopting a mission to create and sustain social value (not just private value), recognizing and relentlessly pursuing new opportunities to serve that mission, engaging in a process of continuous innovation, adaptation, and learning, acting boldly without being limited by resources currently in hand, and exhibiting heightened accountability to the constituencies served and for the outcomes created.”(p. 4)

Microfinance and the Grameen Bank: Maanen(2004) defines microfinance as “banking the unbankables, bringing credit, savings and other essential financial services within the reach of millions of people who are too poor to be served by regular banks, in most cases because they are unable to offer sufficient collateral.” (p. 17) The Grameen Bank, founded by 2006 Nobel Peace Prize Laureate Mr. Muhammad Yunus, is the global pioneer in the field of microfinance. According to the official website of Grameen Bank, “As of December, 2015, it has 8.81 million borrowers, 97 percent of whom are women. With 2,568 branches, GB provides services in 81,392 villages, covering more than 97 percent of the total villages in Bangladesh.”

Venture Philanthropy/Social Investment: According to the official website of EVPA (European Venture Philanthropy Association), “venture philanthropy and social investment are about matching the soul of philanthropy with the spirit of investment, resulting in a high-engagement and long-term approach to creating social impact.” Social Investment covers revenue generating social enterprises as well as socially driven business, which is overlapping with social entrepreneurship. In another word, social investment constructs the infrastructure of investment for social entrepreneurship. However, venture philanthropy covers the support for traditional charities besides social investment, which is not in the range of social entrepreneurship.

Impact Investment:According to the official website of GIIN (Global Impact Investing Network), “impact investments are investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return.” Compared to venture philanthropy as well as social investment, impact investment emphasizes on creating a financial return, which is not necessarily the core component of social entrepreneurship.

 

Important People Related to the Topic

Bill Drayton (1943---) is the founder and current chair of Ashoka and two other 501(c) (3) organizations namely Youth Venture and Get America Working!

Hilde Schwab and Klaus Schwab: Klause Martin Schwab (1938---) is the founder and executive chairman of the World Economic Forum. His wife Hilde Schwab is the former secretary of World Economic Forum as well as the co-founder of the Schwab Foundation for Social Entrepreneurship.

Jeffrey Skoll (1965---) was the first president of eBay and the founder of the Skoll Foundation to support social entrepreneurship across the world.

Muhammad Yunus (1940---) was the Nobel Peace Prize Laureate in 2006 for founding Grameen Bank to create economic and social development. He is also the founder of Yunus Centre.

 

Related Nonprofit Organizations

Ashoka is one of the largest network to support social entrepreneurship via versatile programs including Venture and Fellowships, Changemaker Schools, Youth Venture, Ashoka U, Ashoka Support Network, etc. (https://www.ashoka.org)

Kiva is an international nonprofit, founded in 2006 and based in San Francisco, dedicated to connecting people through lending to alleviate poverty.  (https://www.kiva.org/)

The Schwab Foundation for Social Entrepreneurship is a not-for-profit, independent and neutral organization, founded in 1998, with the purpose to advance social entrepreneurship and to foster social entrepreneurs as an important catalyst for societal innovation and progress. (http://www.schwabfound.org/)

The Skoll Foundation drives large-scale change by investing in, connecting, and celebrating social entrepreneurs and the innovators who help them solve the world’s most pressing problems. And it is also the organizer of Skoll World Forum. (http://skoll.org/)

UnLtd is the leading provider of support to social entrepreneurs in the UK and offers the largest such network in the world. (https://unltd.org.uk/)

 

Reflection Question - What social problem do you think is extremely crucial and urgent?  How do you design a social entrepreneurship model to address that issue?

 

Bibliography

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This paper was developed by students taking a Philanthropic Studies course taught at the Lilly Family School of Philanthropy at Indiana University in 2017. It is offered by Learning To Give and the Center on Philanthropy at Indiana University.