What is social entrepreneurship? - Definition - Examples

Social entrepreneurship has gained enormous recognition since Dr. Muhammad Yunus received the Nobel Peace Prize in 2006. The term has become more common in daily discourse, especially when talking about creating innovative solutions to social problems. At the same time, there is a lot of confusion surrounding the term. I aim to clear that confusion here and provide a definition that will distinguish social entrepreneurship from other concepts.

Since social entrepreneurship is an amalgamation of the two words ‘social’ and ‘entrepreneurship’. It is logical to start with what these terms are and what it means to bring them together. We start with entrepreneurship. Arguably, even after a century of use and research on entrepreneurship, there is still no clear definition of entrepreneurship (Jones and Spicer, 2006). Partly, it is because it is a multi-faceted concept and partly because it has been analyzed by various disciplines like economics, sociology, psychology, history, and anthropology highlighting different aspects of the concept.

Entrepreneurship in social entrepreneurship

What are the defining, core characteristics of entrepreneurship? For example, Say (1821/1964), who first used the word, argues that entrepreneurs shift economic resources out of an area of lower productivity into an area of higher productivity and greater yield. That is, in simpler terms, they create economic surplus/profit. At first, that seems obvious. But one can reasonably argue that a gambler also creates an economic surplus, but we don’t call them entrepreneurs! Some argue that they need to create an organization that creates an economic surplus. Every roadside business that survives most likely does that, but we don’t call the mom and pop shop owners entrepreneurs (although we should).

On the contrary, Schumpeter (1911) said starting a business is not the essence of entrepreneurship. He argued that the essential characteristic of an entrepreneur is innovation. Van Gogh was very innovative but he died poor and in debt. Apple computers and its products were considered innovative in its early days but almost filed for bankruptcy in the late 1990s. Almost all frauds are innovative. So just innovation cannot be a defining feature of entrepreneurship.

To refine the term further, some researchers added opportunity recognition as one of the characteristics of entrepreneurship. Thieves possess this characteristic too. So, researchers again scrambled to distinguish the term and added risk-taking behavior. Gamblers, thieves, gangs, mom, and pop shop owners are all risk-takers. Immigrants are risk-takers and undocumented immigrants are even bigger risk-takers. Additionally, what happens when you recognize an opportunity, create an innovative solution, build an organization around it, but fail to generate any profit? How many of us know of an entrepreneur who failed? That title is not given to people who fail. Research has argued that in addition to all of the above characteristics, entrepreneurs need to have leadership. Now it is reasonable to think a drug cartel also possesses all these characteristics. They have an organization, they are money-making, they are innovative, risk-takers, and they possess leadership qualities. So, are they entrepreneurial organizations? How about human traffickers? Would they fall into the same category as entrepreneurs?

To address this issue, researchers added the legality of the business as a criterion. That criterion is problematic as well. Things that were once considered to be illegal might be legal at a different timepoint. Possession and consumption of marijuana usage in the USA is a good example. So researchers went further and identified personal traits such as belief in self, vision, energy, singlemindedness, and perseverance to distinguish entrepreneurship from other activities. But is easy to see how these traits fail to add any distinctive substance to the term. So, we can see that the term entrepreneur and who gets to be called one is anything but simple.

Social in social entrepreneurship

Let’s look at the word social now. The word ‘social’ originates from Latin, meaning companion, ally, or associate. But more generally, social relates to human relations, rank or social status, or welfare of the society. Then it becomes natural to think that social organizations should have the aim of betterment of society and serving the common good and collective interest. In general, we can say social organizations are engaged in generating social value. Or rather, social value creation is at the core of such organizations. Social values encompass social capital as well as the subjective aspects of the citizens’ well-being, such as their ability to participate in making decisions that affect them (http://www.businessdictionary.com/definition/social-value.html). Social organizations are not driven by profit-making motives but are rather driven by creating social value for society.

Social entrepreneurship

So, what is social entrepreneurship? We might be tempted to say; social entrepreneurship is applying entrepreneurial techniques and skills to create social value. But every organization creates some kind of social value. For example, pharmaceutical organizations create huge social value by producing lifesaving drugs. Are they social entrepreneurial? Of course, not! Why? Because those drugs are only available to people who can afford to pay for it. What if they sell the drug for a low cost? That brings us to the second fundamental differentiating feature. Social value creation is not dependent on economic value creation or profit. Several differences go beyond simply stating social entrepreneurship simply combines features of the two terms. Look at the table here to see these defining and differentiating features of SEV.

There are four common themes in social entrepreneurship, which are:

An emphasis on ‘social goals’ as opposed to economic gains
The social activist role played by the social entrepreneur
Elements of entrepreneurship and innovation (at least in most examples) and
Creating and using economic profit as a means to solve a social problem rather than as an end in itself.

These themes result in some common understanding of social entrepreneurship such as: the objective of social entrepreneurship is to provide goods and services that the market or public sector is either unwilling or unable to provide, to develop skills, create employment, and foster pathways for the integration of socially excluded people. Thus social enterprises are oriented toward reversing an imbalance in the social, structural, and political system by producing and sustaining positive social change. They provide a private means to pursue public purposes and aim to enact social change by transforming public policy. (For more detailed information on the defining features of social entrepreneurship, refer to this post.)

Based on these features, we define social entrepreneurial ventures as, high-impact ventures that address long-standing socio-environmental problems, focus on long-term collaborative community capacity building, rely on collective wisdom and experience, foster the creation of knowledge and networks and facilitate sustained positive social change (Trivedi and Stokols, 2011).

Famous social enterprises

Some examples of famous social enterprises are the Grameen Bank, Child Helpline International, Self Employed Women’s Association, in India (SEWA), HealthLeads, All Our Kin, Playworks, BlinkNow, Seventh Generation, Beyond Legal Aid, TimeSlips, ME to WE, Barefoot College, Apathy is Boring, Ecofiltro, Peer Forward, Blue Ventures, Khan Academy, Save the Children, Institute for the Development of Natural Energy and Sustainability (IDEAAS), KickStart International, Inc, etc.

Bibliography

Casson, M. (2003). The entrepreneur: An economic theory. Totowa, NJ, USA.

Cunningham, B. and Lischeron, J. (1991) Defining entrepreneurship, Journal of Small Business Management, 29(January): 45–61.

Drucker, P. (1985). Innovation and entrepreneurship: Practice and principles. New York: Harper & Row.

Jones, C., & Spicer, A. (2010). Unmasking the entrepreneur. Cheltenham: Edward Elgar.

Say, J. B. (1964). A treatise on political economy, or, the production, distribution, and consumption of wealth, (C. R. Prinsep. & C. C. Biddle, Trans.) Boston: Wells and Lilly. (Original work published 1821)

Schumpeter, J. A. (1934). The theory of economic development: An inquiry into profits, capital, credit, interest, and the business cycle. Cambridge, MA: Harvard University Press.

Stevenson, H. (1999) A perspective on entrepreneurship, in Sahlmann, W. A., Stevenson, H. H., Roberts, M. J. and Bhidé, A. (eds), The entrepreneurial venture, Boston, Mass., USA, pp. 7–22.

Trivedi, C., & Stokols, D. (2011). Social enterprises and corporate enterprises: Fundamental differences and defining features Journal of Entrepreneurship, 20(1), 1-32. doi:10.1177/097135571002000101