Social Entrepreneurship as “Tipping Point” for Economic Change

Brenda L. Massetti, Ph.D.St. John’s University

April 26, 2008

The First International Conference on Social Entrepreneurship, Systems Thinking, and Complexity

Adelphi University

Grounding Perspectives

• Scientific Thinking– In order to meaningfully

study a phenomenon, there needs to be a precise, consistent definition of that phenomenon

• Conceptualizations of social entrepreneurs and the enterprises they create vary greatly

• A more consistent re-conceptualization is needed to further social entrepreneurship research and enhance understanding

Article Definition

Drayton (2002)

Social entrepreneurs see something in society that is stuck, that is not working and envision a systemic change that will allow them to shift society to a new and better way. They have a drive that will not stop until it is done.

Roberts & Woods (2005)

Social entrepreneurship is the construction, evaluation, and pursuit of opportunities for transformative social change carried out by visionary, passionately dedicated individuals.

Korosec & Berman (2006)

Individuals or private organizations that take the initiative to identify and address important social problems in their communities. They exhibit vision, energy, and ability to develop new ways of alleviating social problems.

Social Entrepreneurship Definitions

Definitional Issues

• Social entrepreneurs possess the same traits as traditional entrepreneurs and not-for-profit founders

• The “social” nature of a business mission always has a relativistic, “eye-of-the-beholder” aspect to it

Social Entrepreneurship Re-Conceptualization

• Mission matters, but varies by degree

• Social entrepreneurship exists along a continuum

BalancedMission

Market-drivenMission

•The Red Cross •Grameen Bank •Wal-Mart

Socially-basedMission

•Aurolab •Starbucks

Social Enterprise Definitions

Article Definition

Dart (2004) Differs from the traditional understanding of the nonprofit organization in terms of strategy, structure, norms, values, and represents a radical innovation in the nonprofit sector

(Ligane, & Olsen, 2004)

A seed-stage or early-stage venture that is designed to be profitable and that has an integrated social mission. The social impact of its operations is greater than the industry standard

(Peredo, & Chrisman, 2006)

Entails a community acting corporately as both entrepreneur and enterprise in pursuit of the common good

Definitional Issues

• All businesses exist to benefit society to some extent– The value exchanged

is relative and varies over time

• Profits are a murky means of differentiating success from failure

Social Enterprise Re-Conceptualization

• Profits matter, but vary in how necessary they are for the business to continue

• Social businesses exist along a continuum

SocialBusiness

ProfitRequired

•Aurolab •Grameen Bank •Starbucks

Profit notRequired

Systemic Perspectives• Social entrepreneurs and

the enterprises they create are not mutually exclusive of traditional management and organizational concepts– Combining aspects and

contexts of each broadens perspective

• Exploring the nature of mission and profit orientation together as drivers for enterprise success increases our understanding of business as an agent for social change

The Social Entrepreneurship Matrix

The Social Entrepreneur

Socially-driven Mission

Market-driven Mission

No ProfitRequired

ProfitRequired

II

III IV

I

The Social Entrepreneurship Matrix Defined

• A systemic representation of the core considerations necessary to developing and sustaining a social enterprise– Provides a context for

exploring the many roles for business in society

The Quadrants Considered

• Quadrant IV– The Traditional Business

Quadrant• Firms in this quadrant

have a market-driven mission and must produce profits to sustain themselves

– Social concerns are relevant to the extent that the marketplace desires them to be

» Home Depot

• Profits generated are primarily used to maximize the wealth of stockholders

• Quadrant III– The Transient Organization

Quadrant• Organizations here

respond to a need in the marketplace, but do not seek profits to sustain themselves

– Any proceeds that may be generated go to supporting a social cause

» Live Aid• The organization relies on

public and private donations, grants, and governmental support to achieve variable social causes

• Quadrant I– The Traditional Not-for-

Profit Quadrant• Organizations here are

driven by a social mission and do not need to make a profit to survive

– They perform societal functions the government and traditional businesses let “slip through the cracks”

» MoMA

• They do not pay taxes on surpluses and must only cover expenses to sustain themselves

• Quadrant II– The Tipping Point Quadrant

• Here, organizations are driven by social missions and do need to make profits to survive

– They use profits to expand the social mission of the organization and to ensure a focus on efficiency

» Green-Works UK– Profits are not used to

maximize managers’ or shareholders’ financial wealth

Tipping Point Considerations

• Quadrant IV, traditional approaches to business, are the most common form today– About 95% of all U.S.

businesses in 2006• They have spent the past

few decades externalizing social responsibilities and sharpening their focus on profit maximization– The claim is that profit

maximization is the best way for business to benefit society

– Profit maximization is not a sustainable approach to business and is overwhelming society

• Pollution, corruption and propaganda are increasingly supported while health and human rights are increasingly ignored

• Quadrant II organizations have the potential to tip the scale on profit-only thinking– Their message appeals

to the marketplace • Commitment to

correcting the social problems within our current economic system

– They provide a context for how business, as a value-for-value exchange, has the potential for maximizing more than profits

• They focus on goals that benefit society

• They use profit as an efficiency tool to ensure no resources are wasted

• They apply surpluses to gain independence from the whims of the marketplace, venture capitalists, governments, and bureaucrats

Conclusions

• Reducing confusion over what constitutes social entrepreneurs and the enterprises they create can increase their power to bring about tremendous, positive change

• The Social Entrepreneurship Matrix applies systemic ideas to further understanding of the phenomenon