SOCIAL ENTREPRENEURSHIP

An Entrepreneurial Revolution

• 1 million new ventures a year in U.S.• 85% of the new jobs in small and start-up

firms• Product/service introduction rate higher than

ever before• Rate of wealth creation exploding• And it’s a global revolution

What Is Social Entrepreneurship?

Nonprofits making money

The only big difference between commercial and social entrepreneurship:

Denomination of the returns

Social and commercial entrepreneurship have most of the same characteristics

The Process of Social Entrepreneurship

1. Find an opportunity2. Develop a business concept3. Figure out what success means and how to

measure it4. Acquire the right resources5. Launch and grow6. Attain goals

The Main Difficulty: Measurement

• What is profit?• How do we count it?• What is “social return o n investment” for

venture philanthropists?• Can we compare investments?

Three characteristics

• Social entrepreneurship meets needs unmet by commercial markets and (usually) the government

• Social entrepreneurship is motivated by social benefit

• Successful social entrepreneurship usually works with, not against, markets

Case 1: Housing Opportunities Made Equal (H.O.M.E.)

• Services– Core services in housing disputes and fair housing

advocacy in Virginia– Special projects and lawsuits

• Opportunity: Educate people on fair housing before-the-fact, instead of fixing situations after-the-fact

• Enterprise: Start fair housing training Institute• Returns: More housing for the disadvantaged,

fewer complaints

Case 2: Boaz & Ruth

• Opportunity: Underused human capital• Endeavor: New businesses using former inmates

in an aggressively faith-based setting• Social returns: Young people not returning to jail,

peaceful neighborhood

Social Entrepreneurs “Look” Like Any Other Kind of Entrepreneur

Innovativeness

Education and experience

Achievement orientation

Independence

Sense of control over destiny

Low risk aversion

Tolerance for ambiguity

Entrepreneurialorientation

Community awarenessAnd social concern

Socially-entrepreneurialorientation

Innate characteristics

Innovativeness

Education and experience

Achievement orientation

Independence

Sense of control over destiny

Low risk aversion

Tolerance for ambiguity

Entrepreneurialorientation

Community awarenessAnd social concern

Socially-entrepreneurialorientation

Innate characteristics

Risk + Innovation

High risk aversion

Low risk aversion

Highly-innovative

Dreamer Entrepreneur

Not innovative

Stuck Gambler

Opportunities vs. Threats

Opportunities for social entrepreneurs look like threats and tragedies to others

Myths about Social Entrepreneurship

• Social entrepreneurs are anti-business• The difference between commercial and social

entrepreneurship is greed• Social entrepreneurs are nonprofit managers• Social entrepreneurs are born, not made• Social entrepreneurs are misfits• Social enterprises usually fail• Social entrepreneurs love risk

Why does social entrepreneurship matter?

A Nation of Social Entrepreneurs

Immigrant stock with a high entrepreneurial orientation

+ Faith in own abilities+ Vast ungovernable frontier

= Citizens willing to meet their own social needs, without an

excessive reliance on the state

What Is a Nonprofit?

• Tax & regulatory definition: an organization that– Enjoys special tax status– Faces a nondistribution constraint (profit=0)

• Functional definition: an organization that forms to– perform “public tasks”

• environmental protection, social service provision– perform tasks for which there is demand but no supply from for-profits

or governments• religious activity, art museum

– influence the direction of public policy• political party, issue organization

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International Facts

• U.S. is very large– represents more than ½ of all nonprofit activity worldwide

($600b)– has 45% of all world’s nonprofit employees

• Rich nations tend to have more developed nonprofit sectors than poor nations– Government social spending is positively correlated with

nonprofit sector size

Main Challenges at Present

• Money• Competition• Demonstrating effectiveness• Technology• Trust• Human resources• Public-sector relations

Ref. Salamon 2002

Main Opportunities at Present

• Demographic shifts• New philanthropy• Heightened awareness of sector• Increased social welfare spending through

sector– Entitlement expansion– Welfare reform

Ref. Salamon 2002

Main Trends at Present

• Explosive growth• Attention to marketing and management movements• Commercial ventures• Development of umbrella organizations and formal

education• Effectiveness in competing economically and

politically

Ref. Salamon 2002

Main Risks at Present

• Identity loss, “mission creep”• Industry concentration• Pressure on managers for results• Loss of public trust

Ref. Salamon 2002