UNDERSTANDING SOCIAL...

South Asian Journal of Multidisciplinary Studies (SAJMS) ISSN:2349-7858 :SJIF 2.246:Volume 2 Issue 2

Universal Multidisciplinary Research Institute Pvt Ltd

UNDERSTANDING SOCIAL ENTREPRENEURSHIP

Author: Nidhi Sharma

Department of Commerce, Delhi School Of Economics, University of Delhi New Delhi, India

Co-author: Keshav Sharma Department of Commerce, Delhi School Of Economics, University of Delhi

New Delhi, India



ABSTRACT

In the past few decades, world economy has encountered rapid industrialization, due to which more and more people have moved towards taking entrepreneurship as a career option. Research shows that entrepreneurial ability is something which is an inherent trait and very difficult to be inculcated through education. Entrepreneurship is more about problem solving attitude with a never back down spirit.

One of the side effects of rapid growth of world economy is the ever increasing income disparity among the rich and the poor. The devastating effects of this disparity has led to the emergence of concepts like NGOs, and social welfare services.It has also gained the attention of entrepreneurs worldwide, who want to uplift the poor and deprived ones. Therefore, it has led to the emergence of Social Entrepreneurship, wherein the intention of the entrepreneur is to uplift the targeted section of society rather than just creation of personal wealth. Social enterprise is different from NGOs and social service in terms of its funding, sustainability and profitability with the main motive to serve the society.

Keywords:Social Enterprise, Social Entrepreneurship, Society, Sustainability.



UNDERSTANDING ENTREPRENEURS AND ENTREPRENEURSHIP

The word entrepreneurship can be seen in two ways. On the positive note, it talks about the special quality and ability of the person to grab the opportunity and act upon it, innovative thinking and bringing unique solutions to the most challenging issues of the world. At the same time on the negative side, it is seen as the activities that require a long passage of time in order to bring some benefits on the table and the success rate is very low.

Such qualities make them capable of dealing with inherent risks. According to the views of theorists, it is believed that entrepreneurship can be described as the combination of existence of the opportunity, a set of personal abilities to identify and work on it, and leading it to a desired result.

According to the definition by Schumpeter (1942) an entrepreneur is a person who can convert a new idea or invention into a successful innovation in the economy. As an innovator and industrial leader, an entrepreneur implements changes within markets, identifies market opportunities, and uses innovative approaches to exploit them (Davis, 2008).

Knight (1971) suggests that an entrepreneur assumes the uncertainty and risk associated with unique situations, and therefore must be able to make good decisions about these uncertainties in the economy. According to Knight‘s definition, the function of an entrepreneur includes leadership in innovation, adaptation to change, and risk- bearing in connection with unique situations (Iversen et al., 2005). Knight (1971) links entrepreneurship to businesses, and in his conception, like Schumpeter‘s, entrepreneurship can lead to economic development.

The entrepreneur is motivated to change the troublesome equilibrium and it might be so because either they are frustrated or empathized with frustrated users. The entrepreneur thinks innovatively and creates a new solution that significantly alters the existing system. The entrepreneur are not interested in optimizing the existing system with slight adjustments, rather develops an entirely new approach to the problem. The entrepreneur takes direct action after being inspired by the opportunity and having an innovative solution. He does not wait for someone else to solve the problem, instead he takes direct steps by creating a new product or service and the venture to advance it.

So the concept of entrepreneurship can be concluded with the help of figure 1.



UNDERSTANDING SOCIAL ENTREPRENEURSHIP

In simple words, we can understand social entrepreneurship and social entrepreneurs in following way:

Social Entrepreneurship is the process that creates change, both economic and social, through leadership and the application of business practices.

Social entrepreneurship focuses on creating income opportunities for many people held in the grips of poverty.

A social Entrepreneur is an individual who is passionate abouttackling a social issue and is capable of creating a new solution and a self-sustaining organization to tackle the issue.

A social entrepreneur recognizes a social problem using entrepreneurial principles to create and manage a venture to achieve a social change

BUSINESS ENTREPRENEUR VS. SOCIAL ENTREPRENEUR

A business entrepreneur typically measures performance on profit basis and return, a social entrepreneur focuses on creating social capital (economic benefits).

A social entrepreneur accepts the responsibility and seeks the opportunities to improve the lives of others.

Improvement in: Commercial Market vs. Social Conditions

The truth is that the financial gain is rarely a motive for both entrepreneurs and social entrepreneurs because the odds of making lots of money are not in their favor generally. Instead,



they are motivated by the psychic reward they get in realizing their ideas by identifying the opportunity and pursuing their vision single-mindedly. It can also be seen that most of the entrepreneurs are never fully compensated for the time, risk, effort, and capital that they put into their ventures regardless of the fact whether they operate within a commercial market or a not-for-profit context.We think that it is the value proposition itself which differentiates entrepreneurship and social entrepreneurship and is depicted in the figure 2.

According to Venkataraman (1997), the selection of a not-for-profit or a for-profit model depends on the particular business objectives and the specific social needs to be addressed. In case of business entrepreneurship, main focus is on economic wealth creation whereas in case of social entrepreneurship, the primary objective is social wealth creation. Economic value creation is a necessary by-product of social wealth creation that helps the organization to achieve sustainability and financial self-sufficiency.

Social entrepreneurship is an amalgamation of social cause and entrepreneurship.As discussed by Zahra et al. (2008), there are four key factors that are responsible for the globalization of social entrepreneurship.

Global wealth disparity; Movement of corporate social responsibility;



Market, institutional and state failures; and Technological advances and shared responsibility.

Although social entrepreneurship is often seen as a business with social purpose that can earn income for the non-profit sector, Dees (2003) said he leaned toward another definition of social entrepreneurship, one that emphasized innovation and impact, not income, in dealing with social problems.

As suggested by Mort et al. (2003, p. 76), social entrepreneurship leads to the birth new social enterprises and the sustained innovation in existing enterprises and conceptualize social entrepreneurship as “a multi-dimensional construct involving the expression of entrepreneurially virtuous behavior to achieve the social mission, a coherent unity of purpose and action in the face of moral complexity, the ability to recognize social value-creating opportunities and key decision-making characteristics of innovativeness, pro-activeness and risk-taking.”

According to Roberts and Woods (2005, p. 49), social entrepreneurship is “the construction, evaluation and pursuit of opportunities for transformative social change carried out by visionary, passionately dedicated individuals” whereas Mair and Martı´ (2006) see social entrepreneurship as a process involving “the innovative use and combination of resources to pursue opportunities to catalyze social change and/or address social needs.” Furthermore, Peredo and McLean (2006, p. 64) find that social entrepreneurship:

(1) aims at creating social value, either explicitly or implicitly;

(2) shows a capability to identify and take advantage of opportunities to create that social value;

(3) applies innovation, ranging from pure invention to adapting someone else’s great work, in creating and/or distributing social value;

(4) is about willingness to accept a highdegree of risk in creating and propagating social value; and

(5) is being relatively unbaffled by scarcity of assets in order to pursue their social venture and still being amazingly resourceful.

Roger L. Martin & Sally Osberg (2007) define social entrepreneurship as having following three major components as shown in figure 3:



As suggested by Johanna Mair and Ignasi Martí, there can be three views from which social entrepreneurship is seen:-

as not-for-profit initiatives in search of alternative funding resources, or management arrangements to create social value (Austin, Stevenson, & Wei-Skiller, 2003; Boschee, 1998).

as the socially responsible process of commercial business enterprises engaged in cross-sector partnerships (Sagawa & Segal, 2000; Waddock, 1988).

as a means to resolve social problems and push for social transformation (Alvord et al., 2004; Ashoka Innovators, 2000).

SOCIAL ENTREPRENEURSHIP VS. NGO

For the sustainability of the social cause

Funding- NGO model largely depends upon the donations for its working, whereas social entrepreneurship model is self-reliant and promotes self-generating growth.

Talent- NGOs depend on the support and goodwill of the donors, which is a limiting factor, whereas social entrepreneurship model like any other business, focuses on solving ones’ own problems and creating sustainable solutions.



Scale- NGO is a giver-receiver model of charity, whereas social entrepreneurship is a model involving job creation, social welfare, organizational setup, management of these activities and community goodwill etc.

Financial risk- In the NGO model the donor or funder assumes the financial risk. NGO manages the funds but is not exposed to personal financial risk, whereas in case of social entrepreneurship, the element of personal financial risk of the social entrepreneurs is present.

Working: Social enterprises have strategic decision making and vision whereas NGOs have no such strategy to fulfill their mission.

SOCIAL ENTREPRENEURSHIP CASES

(Taken from www.ipihd.org)

Business entrepreneurs, are for the economy whereas social entrepreneurs are for the social change. Theyare the self-motivated and creative individuals who question the status quo, exploit new opportunities, never give up and remake the world for the better. The entrepreneurial leaders operate in all kinds of organizations: large and small; new and old; religious and secular; non-profit and for-profit, national and international.

Let’s discuss some of the cases about social enterprises, objectives for which they came into existence, the innovation they brought and the impact they had on the social causes. These include Indian as well as international enterprises.

1. AROGYA FINANCING: For‐profit (India)

The Need: Traditional bank loans in India are only accessible to those who can provide periodic salary payments or other assets as collateral. This excludes most Indians, especially the poor and informally employed. If they are unable to borrow from family, they either borrow from moneylenders, often at interest rates of 60% or more, or gowithout care until health conditions become an emergency. This leads to catastrophic healthcare spending, which drives 30 million Indian citizens into poverty each year.

The Innovation: Using a new model for measuring credit worthiness and risk, Arogya Finance provides medical loans to the poor and informally employed population. Lending decisions can be made within three hours, rather than the seven to ten day wait of most traditional banks. This speed is critical in health emergencies. If approved, the Arogya pays the hospital or doctor directly and treatment can begin immediately.

The Impact: Launched in 2011, Arogya Finance has partnered with 50 hospitals and healthcare service providers across India and processed 320 loans. The default rate is 2%. They plan to expand to provide 30,000 loans in the next three years.



2. LV PRASAD EYE INSTITUTE (LVPEI) CARE DELIVERY: Non-profit (India)

The Need: India accounts for 8.1 million of the global blind and 20% of the world’s visually impaired. However, patients in India often lack access to basic high-quality eye -care services and the poor, who are most affected by visual impairment and blindness, are largely prohibited by cost from seeking care.

The Innovation: The LVPEI Pyramid of Eye Care model delivers care at all levels, from community outreach to advanced specialties including cornea transplants. A focus on efficiency in clinical operations and a tiered pricing system through which wealthy patients subsidize lower income patients allow LVPEI to provide high quality care to all, regardless of ability to pay. LVPEI has also integrated research and education directly into their model of care delivery to drive constant clinical and workforce improvements.

The Impact: Since its founding 26 years ago, LVPEI has grown to a large network serving over 15 million people across all levels of care and has performed more than 600,000 surgeries. About 50% of patients receive care free of charge.

3. AYZH PRODUCT/TECHNOLOGY: For-profit (Afghanistan, Haiti, Honduras, India, Laos, Multiple countries in Africa, USA)

The Need : Globally, approximately one million mothers and newborns die each year from infections linked to unhygienic birthing practices . Mothers and newborns are often at risk because low-cost tools and supplies for safe birthing do not exist in resource-poor settings.

The Innovation: Ayzh developed a customizable “$3 Clean Birth kit,” which contains essential tools recommended by WHO that ensure safe and sterile conditions at the time of childbirth at half the cost of key competitors. Ayzh also provides training and education to healthcare workers through a mobile training program to assure proper implementation of birth kits. Ayzh is primarily owned and operated by underemployed women, who serve as advocates of safe birth practices in their local communities.

The Impact : Founded in 2010, Ayzh has sold more than 100,000 clean birth kits, impacting about 500 ,000 people globally, and trained over 400 healthcare workers.

4. BASICNEEDS WORKFORCE TRAINING: Non‐profit (China, Ghana, India, Kenya, Lao PDR, Nepal, Pakistan, South Sudan, Sri Lanka, Tanzania, Uganda, Vietnam)

The Need : Globally, an estimated 13% of all disease is attributable to mental health disorders and mental illness is projected to be the leading burden of disease by 2030. The majority (75%) of those suffering from mental illness live in low or middle



income countries.In developing countries across the world, there is an urgent need for mental health treatment. Lack of understanding of mental illness combined with lack of available resources and solutions contribute to a treatment gap of up to 85%.

The Innovation : Basic Needs partners with over 90 organizations, ranging from farmers’ cooperatives to ministries of health, to implement a proven and scalable community based model for mental health that has been tested in 12 countries around the world. The Basic Needs model works with existing resources in each community to decrease stigma, mobilize providers to coordinate and deliver mental health services, and facilitate opportunities for affected people to work and earn a living. By nurturing local leadership and capacity, Basic Needs ensures long -‐term sustainability of the model in each location.

The Impact : Basic Needs has provided treatment for more than 100,000 people struggling with mental illness or epilepsy, since being founding in 2000. Program data demonstrates that the BasicNeeds model significantly increases access to treatment, reduces symptoms, and increases ability to work and participate in community activities. In the next 3 years, BasicNeeds plans to scale to 20 new locations and reach 1million people.

CRITICAL FACTORS

Social entrepreneurs are always engaged in attracting resources and innovating them to ensure the survival and growth of their venture, for creating sustained social value. That means social enterprises, like any other business firm is affected and constrained by environmental dynamics. In this regard Prabhu (1998) and Sullivan Mort et al. (2003) have identified the three factors of innovativeness, pro-activeness and risk taking (from Covin & Slevin, 1986) as central to social entrepreneurship. Following are the factors or features central to a social enterprise, which forms a part of the dynamic environment faced by them:

1. Innovativeness

Since social enterprises face competition in terms of resource procurement as well as sustainability, they have to constantly engage themselves in the process of innovation. Thus, they have to create the intended social value through innovativeness.

2. Pro-activeness

In today’s dynamic environment, pro-activeness is the need of the hour. Social enterprises, like other business units need to anticipate changes before they exert an impact over the functioning of the organization and prepare to handle them so that their mission remains intact.

3. Risk management



In addition to the general risks associated with operating and managing an organization, social enterprises face the risk in terms of its funding also. Social enterprises are constrained in terms of access to various sources of funds and also for monetary return on investments. Therefore, social enterprises need to forecast their revenue streams and do proper risk management before committing their resources.

4. Sustainability

Social enterprises being constrained by dynamic environment, aims primarily for sustainability rather than growth. They need to face the dynamic environment from the front to sustain their model for social value creation.

5. Social mission

The entire functioning of the social enterprise revolves around its social mission. Fund requirements, operations, strategies, investments and all other commitments of a social enterprise depend upon its mission and vision, which is social welfare. Thus, all the decisions of a social enterprise must me be taken keeping in mind its social mission.

6. Opportunity seeking/recognition

Social enterprises constantly seek opportunity to strengthen their social mission by serving more and more. They also strive to create better social value for their current and potential clients.

DEVELOPMENT OF A MULTIDIMENSIONAL MODEL

We can now conclude the above discussion in the form of a multidimensional model, describing the behaviours and constraints of a social enterprise. A construct is referred to as multi-dimensional when it consists of a number of interrelated attributes and dimensions and exists in multidimensional domains.

The broad dimensions or behaviours displayed by a social enterprise include: Innovativeness, pro-activeness and risk management. Innovativeness is the constant endeavor of a social enterprise to come up with new ideas to fulfill its social mission. Pro-activeness is the art to estimate the changes in the environment and the need of the target population before these changes start exerting pressure on the enterprise. Risk management is the management of the various uncertainties faced by the social enterprise in terms of changes in its environment as well as in terms of the return on its resource application. Prabhu (1998) in his attempt to conceptualize social entrepreneurship suggests that ‘the ability to take the risk may be quite high, given that social experiments are conducted in good faith and both success and failures are rich learning experiences’ (Prabhu, 1998, p 4)

The constraints faced by the social enterprises can be divided into two: static constraints-including sustainability and social mission and dynamic constraints-including the ever changing environment in which the social enterprise has to operate.Since social enterprises have relatively



less resources available for them, they have to first ensure their survival and sustainability amidst so much uncertainty. Achievement of the intended social mission is also to be kept in mind by the social entrepreneur before taking any decision. All the activities and strategies of the social enterprise should act as a means to achieve the vision of the organization. The environment faced by a social enterprise is very turbulent. Changing government policies, scarcity of funds, ever changing social needs, competition faced, maximization of social value etc. makes the environment very dynamic for the social enterprises to operate.

This model attempts to conceptualize social entrepreneurship by showing the inter-relation between the various behavioral dimensions displayed by a social enterprise to cope up with the constraints faced by the organization. Thus, social entrepreneurship can be viewed as a multi-dimensional construct consisting of innovativeness, pro-activeness and risk management as the dimensions and sustainability, social mission and environmental dynamics as the constraints shown in figure 4.

Figure 4 Taken from: Investigating social entrepreneurship:A multidimensional model, Journal of World Business 41 (2006) pp. 21–35 by Weerawardena, Jay and Mort,Gillian Sullivan (2006)



CONCLUSIONS

To conclude, we can say that social entrepreneurship is all about taking up a business proposition with a vision to serve the society. It is the ability of the social entrepreneur to go beyond the urge of personal wealth creation and to work towards solving a social problem with a basic commensurate salary in the return for his services, which distinguishes him from business entrepreneurs. Wealth creation is only a by-product of social entrepreneurship which is required to maintain the sustainability and self-sufficiency rather than wealth enhancement of its owners. This characteristic differentiates them from conventional NGOs and social welfare groups which are primarily dependent on charity and donations unlike social enterprises.

Social entrepreneurs face some additional challenges in terms of procurement of finance and return on investment because of the “social” model of the business which might not successfully gain the commitment of third parties due to their strict financial terms of carrying on business. Social entrepreneurs are therefore continuously engaged in finding out a feasible innovative solution to a social problem, and they seek joy in creating the wealth for the welfare of the society rather than adding on to their own personal wealth.

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