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Entrepreneurship and social enterprises

Entrepreneurship and social enterprises

Introduction

While the entrepreneurship model has a history that is extensive in the business sector, it is only in the last couple of decades that it has been embraced in the social sector. Regardless of this, social entrepreneurship and enterprises are the hottest topics for policy makers and practitioners who seek fresh solutions to social problems in almost all parts of the globe. Many people, however do not grasp social entrepreneurship nature and how different it is from entrepreneurship. The purpose of this paper is to assess relationship between entrepreneurship concepts and social enterprises.

Concepts of Entrepreneurship and Social Enterprises: A Relational Analysis

Entrepreneurship, generally is a concept that is associated with economic luminaries like Jean-Baptiste Say, Joseph Schumpeter and Peter Drucker. Enterprendre is a term that has a French origin and it means ‘one who undertakes’ Dees, 1998). An entrepreneur therefore is a venturesome individual who contributes to economic growth through devising improved and creative ways of operation. Entrepreneurship is defined by Schumpeter as the act of bringing new combinations to existing production means. He emphasizes on innovation which leads to new forms of goods and services that are financially visible, new modes of production, discovery of new raw material sources, opening of new markets or establishment of new organizational configurations (Agard, 2011). Drucker, on his part characterizes entrepreneurs as individuals seeking change, reacting to it and exploiting it for new opportunity (Becerra, 2009).

While entrepreneurship and entrepreneurs are terms that are well known in commercial circles because they have existed for centuries, social entrepreneurship is a term that is relatively new. Social enterprises are businesses whose principal aim is promoting the society. Social entrepreneurs use the methods and disciplines of business and the power of the marketplace in order to progress their environmental agendas and social human justice (Dees 1998). Generally, social enterprises are different from other kinds of businesses, government agencies and non-profit organizations in 3 ways. First, social enterprises seek to address obstinate social needs and provide common good, via its services and products. In some instances, it means a high percentage of disadvantaged individuals. Secondly, its basic objective is the common good and acts as the DNA that trumps everything else. Additionally, the commercial activity is the major generator of revenue.

Examining social enterprises definition, an individual might wonder whether they meet entrepreneurship tenets, as discussed originally by Jean-Baptiste, Drucker ad Schumpeter. From their descriptions, social enterprises are the innovators who establish new organizations, execute and set up new programs and processes, systematize or expand some new services or readdress operations of organizations that are failing. Hence, the conclusion can be made that they are entrepreneurs (Young, 2011). For such reasons, entrepreneurship and social resources concepts can be compared. Such concepts include opportunity, the people and deal as well as context.

The PCDO Framework for an Entrepreneurship

In the PCDO model for entrepreneurship, there is the general acceptance that opportunity, deals and people are interconnected. Additionally, they all affect and are as well affected by context. The following figure is an illustration of these 4 concepts as they are related in entrepreneurship.

Opportunity

Opportunity is desired future state, which is different from the present and the belief that attainment of the state is probable. Opportunities in the business and social sectors require outlay of scarce resources with anticipation of getting future returns. In both social enterprises and entrepreneurship, the concern of investors is on customers, suppliers, competition, entry barriers, financial of the venture and the threat of substitutes. At theoretical level, opportunities might appear similar across social enterprises and entrepreneurs. However, this could not be further from the truth in practice because the fundamental differences in their reactions and respective missions to market failure.

Entrepreneurship has the tendency to concentrate on emerging needs and breakthroughs while the focus of social enterprises focuses on provision of long-standing, basic needs more efficiently through use of innovative approaches (Urban, 2010). For the entrepreneurs, opportunity entails an expanding or large market size while the industry must be viable and attractive. For social enterprise, an acknowledged market failure, demand or social need often promises a market size that is more than adequate. These enterprises assume their theory regarding change and the accompanying organizational model has the capability of meeting these needs in a manner that is more effective. To them, the issue is not the prevalence of the need but rather, the essential resources that can be lined up in order to serve that need. Unlike entrepreneurs, the scope of opportunities for social enterprises is quite large as they are in a position to invest in businesses that are self-sustaining financially and those that need donor subsidies.

Context

Context refers to factors affecting the outcome and nature of an opportunity. However, these are not under management control and they have great influence on all sectors. Some of these factors include taxation, government control, technology, politics and macro economy. Though the essential contextual factors can be compared in varying ways, their impact on social enterprises differs that of entrepreneurship due to the mission of the former and the performance measurement mechanisms.

The methods of market selection within the social sector are far less intense than in other sectors for the reason they tend to be far less powerful and they operate over long durations. For example, in most cases, social enterprise still meets some of its objectives when it is faced with inhospitable context. In some instances, they pursue opportunities as the means of addressing social challenges due to unreceptive context. This is a demonstration of how social enterprises respond in varying ways to unfavorable contextual conditions compared to commercial entrepreneurs.

To demonstrate this, during economic times that are tough, demand for social needs is high. This necessitates establishment of bodies that can address these needs for the benefit of the entire society. In other instances, an issue can be so compelling to a smaller number of people. As such, it might have minimal visibility to the general population. A social enterprise might seek to cause a change through raising attention and awareness to the issue. Indeed, a harsh context might often force social enterpriser into looking for ways to change the context itself. An entrepreneur on the other hand can simply avoid a harsh context or look for innovative ways to reduce impact of the context (Prahalad, 2008).

Dramatic changes in the healthcare sector in the 1980s and 1990s exemplify the manner in which social enterprises address contextual factors changes. Mt. Auburn Hospital, a hospital that is community based in Cambridge acknowledges that economic realities at that point necessitated major expansion. It was also apparent that small facilities like theirs risked going out of business, though their financial position was solid. As such, they looked for larger hospital and merged (Epstein & McFarlan, 2011). If Mt. Auburn was an entrepreneurship, chances are it would have sought some additional investors or put operations to a stop altogether.

People and Resources

The human and financial inputs are of great importance for social enterprises and entrepreneurs in several ways. For instance, they must both have funders, employees, managers as well as other non-competing organizations which are essential to their success. Both as well must understand how human talent, key to operations can be captured. Scholars have already established the two most important determinants of entrepreneurial success which are knowledge for their industry and reputation. They should specifically know their key suppliers, customers as well as the kind of competencies and skills their employees must have so as to succeed in the industry. Additionally, they must also recognize their capabilities to gain investor confidence and non-competing partners (Audretsch & Thurik, 2011).

Though social enterprises aim to attract human and financial resources for common good, they depend just as much on a network of broad contacts. This ensures they gain access to management, staff, funding, members of board and other physical resources. To acquire such resources, they should have a robust reputation capable of invoking trust among the contributors and keenness to invest in social enterprise. Reputation for fairness and skill in addressing individual needs of important players is usually the difference between attracting great resources and being an exciting but unfunded idea (Kerlin, 2009).

Deals

Deals are the mutually viable associations between a venture and the resource providers. Entrepreneurs and social enterprises always seek investors who can offer skill and financial resources to aid in generation of social and financial gains on investments. As such, deals are of primary concern for both parties. However, due to differences in performance management and resource mobilization, the terms of deals of entrepreneurs are different from those of social enterprises in terms of timing, consumers, type, measurability and flexibility.

From the discussion above, it is deducible that PCDO framework for a social enterprise is different from that of entrepreneurship. This model looks like the figure below.

Where SVP stands for social value proposition

(Austin et al., 2012)

Conclusion

Social entrepreneurship and social enterprises are the hottest topics for policy makers and practitioners seeking fresh solutions to social problems in virtually all parts of the globe. As opposed to commercial entrepreneurs, these enterprises are motivated to address social problems instead of seeking profits only. As discussed in this paper, concepts of entrepreneurship can be related to social enterprises concepts. However, fundamentally they are not similar.

 

 

 

 

References

Agard, K. A. (2011). Leadership in nonprofit organizations: A reference handbook. Thousand Oaks, Calif: SAGE Publications.

Audretsch, D. B. & Thurik, R. (2001). Linking Entrepreneurship to Growth. OECD Science, Technology and Industry Working Papers, 2001/02, OECD Publishing. Retrieved 28 October from http://dx.doi.org/10.1787/736170038056

Austin, J., Stevenson, H., & Wei-Skillern, J. (2012). Social and commercial entrepreneurship: same, different, or both?. Revista de Administração (São Paulo)47(3), 370-384.

Becerra, M. (2009). Theory of the firm for strategic management: Economic value analysis. Cambridge, UK: Cambridge University Press.

Dees, G.J. (1998). The Meaning of Social Entrepreneurship. Retrieved 29 November 2013 from http://www.caseatduke.org/documents/dees_sedef.pdf

Epstein, M. J., & McFarlan, F. W. (2011). Joining a nonprofit board: What you need to know. San Francisco: Jossey-Bass.

Kerlin, J. A. (2009). Social enterprise: A global comparison. Medford, Mass: Tufts University Press.

Prahalad, C. K. (2008). The fortune at the bottom of the pyramid. Upper Saddle River, NJ: Wharton School Publishers.

Urban, B. (2010). Frontiers in entrepreneurship. Heidelberg: Springer.

Young, D. R., & Grinsfelder, M. C. (2011). Social entrepreneurship and the financing of third sector organizations. Journal of Public Affairs Education, 543-567.

 

 

 

 

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