Roosevelt Review, Fall 2012 [ PDF ]
As a history buff, I have studied many of this country’s most famous entrepreneurs. Visionary leaders like Henry Ford, Madame C.J. Walker, Walt Disney and Steve Jobs, all of whom transformed the way we live and think. Through their genius, they helped change the future.
So when I first heard the term “social entrepreneurship” several years ago, I was intrigued. If entrepreneurs create new organizations for growth and profit, what do social entrepreneurs do?
Now, as the Amoco Assistant Professor of Entrepreneurship and Management in Roosevelt University’s Heller College of Business, I hear that question frequently from students and community leaders.
My short answer is that social entrepreneurs develop new ventures whose purpose is centered on a social return rather than merely an economic benefit. Social entrepreneurs are individuals who seek out innovative solutions to pressing social problems. They are usually ambitious and persistent as their goal is enduring social impact woven within the social fabric of the community.
Social entrepreneurship operates outside of the binary world of profit vs. non-profit by extending the accomplishments of social movements, counter-movements and civic engagement. By using economically viable solutions, social entrepreneurs use business acumen to “do well and do good.” The organizations they develop sustain themselves through ongoing revenue, but their impact goes far further.
Once social entrepreneurs successfully develop an organization, some of them create other new ventures (serial social entrepreneurs), while others stay as the founder to manage and expand the initial enterprise.
Often their organizations receive funding from socially conscious investors who want to leverage their resources to make a social impact with their money; plus they want their initial investment returned so they can make future investments in other like enterprises. This is in direct contrast to philanthropy, in which a donation is fully consumed.
During the stock market crash of 2008, many social investments maintained their value. In fact for some stockholders, social investments were the only profitable segments of their portfolio. For this reason, I believe all investors should allocate 5 to 10 percent of their portfolios for social investments (even if only as a hedge). Social investors can be ordinary citizens as is the case with Kiva (kiva.org), or organizations which are incubators/accelerators like Chicago’s Impact Engine (theimpactengine.com) or large investment funds like Acumen Fund (acumenfund.org).
To attract investments, social entrepreneurs must create new ventures that solve specific problems in the “social market” and perform better than other more traditional organizations and institutions. Most socially responsible investors are focused on investing in enterprises that create meaningful solutions to social problems and that can produce significant increases in the social impact per dollar invested.
Social entrepreneurs are predominantly young people who are passionate about developing new ventures that can achieve a bottom-line return while solving social issues. In some instances, they are more established business leaders who are able to formulate and define social issues, while at the same time creating the solution and market. Being able to find the root of a social problem and then creating the solution is a results-oriented, empowering tool.
Academia has long preached that social issues and profit-making are two distinct, conflicting forces. We can look to Joseph Schumpeter’s 1908 book, On the Concept of Social Value, which argues that social value is distinct from economic value and that economic value cannot be captured from social value. This is further developed in literature on social entrepreneurship that examines the “type of value generated” (Smith and Stevens, 2010).
For example, Filipe M. Santos, associate professor of Entrepreneurship at INSEAD, the leading international business school, advocates the use of two concepts for differentiating between social and commercial entrepreneurship: value creation (e.g., creation of a social good) and value appropriation (e.g., realizing a profit). This supports his argument that “social entrepreneurship, in its essence, …is about the creation of value” while commercial entrepreneurship is about value appropriation.
In a recent article Roosevelt University Management Professor Josetta McLaughlin and I published in the Journal of Business Research, we argue that the value in social entrepreneurship occurs when firms operate in harmony within their communities. This suggests that commercial enterprises are “brought” to the community, while social entrepreneurship businesses are “in service” to the community. Social entrepreneurship is about creating community impact through firms that are deeply embedded within the community and have long-term sustainable and multigenerational benefits.
About the Author
Raed Elaydi is the Amoco Assistant Professor of Entrepreneurship and Management in the Heller College of Business at Roosevelt University. He received his PhD from Texas A&M University, Mays Business School, and has been on the faculty of the University of North Carolina at Chapel Hill and Penn State University.
Elaydi’s research most notably examines the unprecedented human migration into urban slums. This seismic change in the size and scope of the world’s population into urban areas creates many challenges and opportunities. His goal is to facilitate entrepreneurs with a sustainability focus to develop viable firms to serve this growing market.
Consistent with this goal, he authored “Cultivating terroir in subsistence markets: Development of terroir strategy through harmonywith- community framework” and “Strategic Motivations and Choice in Subsistence Markets” both in the Journal of Business Research and “Targeting firm social strategy at the community level in subsistence markets” in Journal of Enterprising Communities: People and Places.
His interests include social entrepreneurship in subsistence markets, collaboration platforms for sustainable innovation, entrepreneurial opportunity for poverty alleviation, and innovation and reputation in entrepreneurial ventures.
Elaydi is also working with students to document social entrepreneurs and their enterprises in Chicago. This multi-year project will document and track social entrepreneurs throughout the Chicago area to build awareness, community and knowledge of the social entrepreneurship movement in the area. If you know of social entrepreneurs who would like to participate, please email him at firstname.lastname@example.org.
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