A Framework for Social Entrepreneurship

A Framework for Social Entrepreneurship
Our analysis reveals that while many commonalities exist between social and commercial
entrepreneurship, some important differences related to our original propositions
January, 2006 15
regarding market failure, mission, resource mobilization, and performance measurement
also exist. The previous section identified specific managerial considerations for negotiating
the unique challenges of applying the PCDO framework to social entrepreneurship.
While the PCDO framework is in many ways applicable to the analysis of social entrepreneurship,
we suggest that some adaptations might make it even more useful to both
practitioners and researchers. To highlight the centrality of the social purpose in social
entrepreneurship, we propose that this factor be the integrating driver of the framework.
It is analogous to the “deal” variable in the PCDO in that it encompasses the terms of
the undertaking, but those terms need to be related to and integrated by the core socialvalue
proposition (SVP). The distinctive nature and central role of mission in social enterprises
and the multifaceted nature of the social value generated give the SVP a logical
centrality in the framework. We also believe that it would be analytically helpful to practitioners
and researchers to separate out the economic and the human resources as distinct
variables. Our analysis revealed that the mobilization of financial and of human
resources for social entrepreneurship are each quite distinct from commercial entrepreneurship
and from each other, and so merit focused attention.2 The opportunity variable
remains, although the nature of what is an opportunity is fundamentally different given
the underlying generative effect of market failure. Contextual forces impinge on all the
other variables and remain relevant to both forms of entrepreneurship, albeit with often
fundamentally differing effects. What might be deemed an unfavorable contextual factor
for market-based commercial entrepreneurship could be seen as an opportunity for a
social entrepreneur aiming to address social needs arising from market failure. To enable
a more disaggregated analysis of contextual forces that seem particularly relevant to
social entrepreneurship, we added demographics, political, and sociocultural factors to
the contextual factors presented in the original PCDO framework.
Figure 2 presents this revised social entrepreneurship framework as a Venn diagram
with the opportunity circle at the top, because this is the initiating point for entrepreneurship.
The two enabling variables—people and capital resources—are the bottom
circles. The three circles intersect, reflecting the overlapping and interdependent nature
of the variables. At the center is the SVP as the integrating variable. Surrounding all three
circles are the contextual forces shaping the other variables and requiring scrutiny by the
Implications for Practice
Centrality of the SVP
The foregoing analysis and framework underscore for practitioners the importance
of a focus first and foremost on the SVP. This fact may seem patently obvious, as it is
what drives most social entrepreneurs to pursue social entrepreneurship in the first place.
However, in practice, it is often the case that the social entrepreneur becomes increasingly
focused on organizational interests as a means to achieve social impact rather than
on social impact itself. This phenomenon is not surprising given that the rationale is often
that a larger, better-resourced organization will be better able to deliver on its social
mission. However, a number of factors limit the practicality of this approach. While
people and resources supporting the venture’s growth are important and necessary, as our
2. The separation of economic resources might even be helpful for the PCDO framework’s use for commercial
analysis has highlighted, mobilizing human and financial resources for social entrepreneurship
is an extremely onerous task. The challenge of procuring resources for the organization
can become so all-consuming for the social entrepreneur that it can become a
primary focus of the organization’s activities. The goal of furthering the organization may
inadvertently become an end itself, sometimes at the cost of social-value creation. That
is, social entrepreneurs may become so internally focused on procuring resources to
support their organization’s growth that the paths to creating social value may become
blurred. The resources are often a means of delivering on the SVP, but a broader perspective
is needed.
Organizational Alignment
To deliver effectively on the SVP, the social entrepreneur must achieve a state of
alignment both externally and internally among the key components of the framework,
the opportunity, people, capital, and context. For external alignment, the dynamic nature
of the context is a complicating fact. Thus, the SVP that made sense at the time of the
venture’s founding may in fact evolve dramatically as perturbations in the operating
context are continuously occurring. Remaining attuned to how contextual changes can
affect the opportunity and the human- and financial-resource environment causing the
January, 2006 17
People Capital
Ta x
Figure 2
Social Entrepreneurship Framework
SVP, social-value proposition
need for realignment is a critical skill for the social entrepreneur. Furthermore, practitioners
should remain cognizant of a unique characteristic of the operating context,
namely, that the societal demand for social-value creation is enormous. This creates a
plethora of opportunities for social entrepreneurs and a concomitant ever-present temptation
to address more and more of them. A social entrepreneur’s task is then to determine
at any given moment how to define the appropriate scope of the opportunity that
can be pursued effectively. This will be dependent on ensuring that the scope is aligned
internally with the available people and resources. Overextending the scope can cause a
misalignment that could erode the core SVP. Seeking to address a very broad set of issues
with very limited human and financial resources, may actually result in low social impact
because the organizations resources are spread too thin. While a social entrepreneur may
devote considerable attention to achieving both external and internal organizational alignment,
it is also important to keep in mind that social impact can often be more effectively
generated from beyond organizational boundaries.
Organizational Boundaries
Although social value is very often created by bringing resources into the organization’s
boundaries and by creating outputs directly, in other cases, the organization may
actually have greater social impact by working in collaboration with complementary organizations,
or even former or potential competitors. Indeed greater social value can often
be created by working collaboratively with other entities. The framework in Figure 2
helps conceptualize this latter approach. By being closely attuned to the context in which
the venture operates, a social entrepreneur can identify how best to mobilize resources
both internally and externally. A social enterprise exists to create social value, regardless
of whether that value is generated from within or outside the organization’s boundaries.
There may be opportunities to leverage resources outside the organization’s boundaries
to create greater social value than could be generated by the organization alone. Although
there are many obstacles to collaboration across organizational boundaries, such as concerns
about organizational self-interest or sharing proprietary knowledge, virtually all
social issues require far more resources than any single organization is capable of mobilizing
independently to solve. Networking across organizational boundaries to create
social value is a powerful strategy for social entrepreneurs because the objectives of creating
social value do not require that value be captured within organizational boundaries.
The social entrepreneurial venture can thus be conceptualized as a vehicle for creating
social value, either directly or through facilitating the creation of social value with and
by others.
Research Implications
For researchers, a multitude of rich avenues merit further exploration. Building
on the theoretical propositions we postulated at the beginning of the article and on our
foregoing modified analytical framework, we offer the following sample of areas for
1. Markets
• What are the effects of market forces on the formation and behavior of social enterprises?
• In mixed markets where nonprofit and for-profit organizations are both operating, what
are the relative competitive advantages, disadvantages, and interactive dynamics?
• To what extent do social enterprises correct market failure?
• Do social enterprises perform the function of early-stage risk assumption and market
• What is the entrepreneurial process of identifying opportunities for social entrepreneurship?
• What affects the extent and form of competition and collaboration among social
2. Mission
• How does the mission affect strategy?
• How does the mission affect resource mobilization?
• How can powerful mission statements be created?
• What gives the mission statement force?
3. Capital
• What are the key drivers of the philanthropic capital markets?
• How efficient are these markets?
• What determines their structure?
• How does a social entrepreneur determine the optimum mix of financing sources for
the social enterprise?
• To what extent are earned-income strategies successful?
• To what extent do these activities create tension with mission or organizational values?
• What have been the effects and effectiveness of applying the venture-capital approach
to social entrepreneurship?
• What new financial instruments could be designed to overcome some of the current
deficiencies in the philanthropic capital markets?
4. People
• What are the motivational constructs of social entrepreneurs and how do they compare
with commercial entrepreneurs?
• What role do nonpecuniary incentives play in the mobilization of people into social
• To what extent can pecuniary incentive systems of businesses be effectively utilized
in social enterprises and, vice versa, to what extent can nonpecuniary incentive
systems in social enterprises be deployed in businesses?
• What are the most effective ways for a social entrepreneur to mobilize and manage
5. Performance
• How can one measure social-value creation?
• How can entrepreneurs best communicate the SVP to different stakeholders?
• How can performance measures be most effectively integrated into management
6. Context
• How do contextual forces shape opportunity creation for social entrepreneurship?
• How do country or community contextual differences change these forces?
• Which contextual forces foster social innovation and entrepreneurship?
It is our hope that this article will stimulate and enable further scholarly exploration of
the exceptionally complex and important issues surrounding social entrepreneurship.
There is much intellectual and social value to be created.
January, 2006 19
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