Social Entrepreneurship

Social entrepreneurship is the application of entrepreneurial approaches to social problems. In commercial entrepreneurship, private wealth creation and profit maximization are often the primary goals.

In contrast, social entrepreneurship directly aims at solving social problems and creating social value. An example of a social entrepreneur ot en mentioned is the Nobel Peace Prize winner Muhammad Yunus who revolutionized micro credits and founded the Grameen Bank in Bangladesh.

Social entrepreneurship is part of the citizen sector, which has increased strongly over the last decades (Bornstein, 2004). Social entrepreneurship has caught the public attention in the United States during the mid 1980s and it is significantly increasing since the mid 1990s. Social entrepreneurs play the role of change agents in the social sector, by:

  • Adopting a mission to create and sustain social value (not just private value)
  • Recognizing and relentlessly pursuing new opportunities to serve that mission
  • Engaging in a process of continuous innovation, adaptation, and learning
  • Acting boldly without being limited by resources currently at hand
  • Exhibiting heightened accountability to the constituencies served and for the outcomes created.

But this is not the only definition; no universal definition has emerged yet. One important issue of debate is the question whether earned income strategies are a prerequisite for being a social entrepreneur. Common across all definitions is the focus on social value creation with an innovative approach.

As long as the entrepreneur is primarily trying to solve a social problem, he might even use a for-profit-organization. Whether a non-profit or for-profit-organization is chosen is solely determined by whichever organizational form is best suited to achieve the social entrepreneur’s goals.

For commercial entrepreneurs, wealth creation is a proxy for value creation because efficient businesses make profits and inefficient businesses are driven out of the market. This mechanism does not work in the social entrepreneurship sector because markets do not do a good job of valuing social improvements, public goods and harms, and benei ts for people who cannot af ord to pay.

As a result, it is much harder to determine whether a social entrepreneur is creating sufficient social value to justify the resources used in creating that value. To overcome this problem the social impact has to be measured, but at least so far this is a difficult, time consuming, and sometimes even impossible task.

The term social entrepreneur was coined by William Drayton, the founder of the organization Ashoka, which identifies and supports social entrepreneurs. Other organizations that support social entrepreneurs have followed, for example, foundations, venture philanthropy funds, and social venture capital funds.

They are intermediaries of ering private investors the possibility to invest money into social entrepreneurship. The financial rates of return these funds try to achieve range from minus 100% (only grants) to almost market rate returns.

Social Entrepreneurship
Social Entrepreneurship