The Entrepreneurial Process in Social Entrepreneurship

Theme: Promoting of social entrepreneurship 

 

Title: The Entrepreneurial Process in Social Entrepreneurship

 

Developed by: CARDET, Cyprus

 

Based on:  Barendsen, L. and Gardner, H., 2004. Is the social entrepreneur a new type of leader? Leader to leader, 2004(34), pp.43-50.

 

Bryant, R., 2014. Chapter 4 - Identifying Need. In: Gunn, R. and Durkin, C., Social Entrepreneurship - A Skills Approach. Bristol, UK: Policy Press, pp. 31-44.

 

Kulothungan, G., 2014. Chapter 3 - What do we mean by “social enterprise”? Defining social entrepreneurship. In: Gunn, R. and Durkin, C., Social Entrepreneurship - A Skills Approach. Bristol, UK: Policy Press, pp. 31-44.

 

Monllor, J. 2010. Social Entrepreneurship: A study on the Source and Discovery of Social Opportunities. In: Hockerts, K., Mair, J., Robinson J. Value and Opportunities in Social Entrepreneurship. Hampshire, UK: Palgrave Macmillan, pp. 99-120.

 

Thompson, J.L., 2002. The world of the social entrepreneur. International journal of public sector management, 15(5), pp.412-431.

 

Zahra, S.A., Rawhouser, H.N., Bhawe, N., Neubaum, D.O. and Hayton, J.C., 2008. Globalization of social entrepreneurship opportunities. Strategic entrepreneurship journal, 2(2), pp.117-131.

 

Zastawny D., 2014. Social enterprise must not prioritise social aims over viability. The Guardian.

 

Aim: Understand the entrepreneurial process of recognising, evaluating and exploiting social opportunities.

 

The level of language knowledge: Level B2.

 

Description: 1. The entrepreneurial process

 

The entrepreneurial process provides information about the steps an individual has to follow in an attempt to become a social entrepreneur. Thompson (2002) simplified the process into the following four stages:

  1. Envisioning - Perceiving an opportunity.
  2. Engaging - Engaging the opportunity with a mind to do something about it.
  3. Enabling - Ensuring something happens by acquiring the necessary resources.
  4. Enacting - Championing and leading the project.

 

2. Who is able to become a social entrepreneur?

 

Researchers have suggested that an individual’s personality, characteristics, childhood experiences, family background and professional experiences play a significant role in determining who becomes a social entrepreneur (Barendsen and Gardener 2004).

Furthermore, according to Dees (1998) social entrepreneurs are the people who:

  • Adopt a mission to create and sustain social value.
  • Recognise and relentlessly pursue new opportunities to serve that mission.
  • Engage in a process of continuous innovation, adaptation and learning.
  • Act boldly without being limited by resources currently in hand.
  • Exhibit heightened accountability to the constituents served and for the outcomes created.

 

3. Sources of social opportunities

 

Social entrepreneurs recognise and act on opportunity to improve the social system, create solutions and invent new approaches to tackling social problems. The main sources of social opportunities are market and government failures.

 

3.1 Market Failure

 

According to the welfare economics literature (Monllor, 2010), the five main classes of market failure are:

 

  1. Imperfect Information (Individuals have access to different information thus influencing their decisions and behaviours)
  2. Monopoly Power (Under-provision and over-charging of goods and services)
  3. Public Goods (The use of a public good by an individual diminishes the quality of the good available to others)
  4. Negative Externalities (The side effects of an individual’s actions on the utility of another individual)
  5. Flawed Pricing Mechanisms (When firms sell their products without considering the equilibrium price - where supply meets demand. For example, a lot of firms ignored the demand for their products from developing countries, as people were not able to buy their product at the price sold in developed countries.).

 

3.2 Government Failure

 

Government failure is analogous to market failures in the public sector (Monllor, 2010). Government failure is mainly concerned with the inability of the state to offer sufficient public services in terms of quality and quantity.  The three most common government failures occur due to:

  1. Self-Interests (When politicians and civil servants operate in pursuit of self-interest rather than the common good).
  2. Short-Term Solutions (Due to the relatively short time in office, politicians focus on providing short-term relief to simple social problems and ignore more complex ones).
  3. Imperfect information (Due to time and budget limitations when gathering information, legislators are often misinformed about what they are asked to vote).

 

4. The recognition of social opportunities

 

The opportunity recognition is seen by academics and practitioners as a vital feature of social entrepreneurship.

Social entrepreneur’s prior knowledge influences their discovery of social opportunities. For example, when faced with the same social problem, two individuals with different backgrounds, are likely to approach it differently in terms of recognition and possible solution. There are three major dimensions of prior knowledge that are important to the process of entrepreneurial discovery (Monllor, 2010):

  1. Prior knowledge of markets.
  2. Prior knowledge of ways to serve markets.
  3. Prior knowledge of customer problems.

At this point it is important to acknowledge the importance of social networks in the process of recognising social opportunities. Social networks can greatly increase the alertness of social entrepreneurs in regards to social opportunities. Individuals who interact with their social networks are more likely to receive timely and valuable information about a social opportunity than individuals who are less engaged. Social networks are also considered to be an important source of resources, such as knowledge, finance and human capital.

 

5. The evaluation of social opportunities

 

Social entrepreneurs usually evaluate social opportunities based on the social value that can be created through the exploitation of that opportunity. However it is important for them to take into consideration the financial sustainability of their idea. A social enterprise is first and foremost an enterprise. It is important to ensure that the resources needed are readily available and that the enterprise would be able to maintain a financial autonomy. At this point it is important to mention that some social enterprises, due to their nature, are considered to be “born global” (Zahra et al., 2008). Because of globalisation, people across different countries are facing similar social problems. This is an important aspect to consider when evaluating an opportunity as it offers the possibility of future expansion and scaling. Lastly, when evaluating an opportunity a social entrepreneur should use various tools to better understand the environment in which the opportunity exists in. Such tools are: PESTEL (Assess the Political, Economic, Social, Technological, Environmental and Legal Environment), Hofstede’s Cultural Dimensions, and Porter’s Five Forces (Analyse Competition).

 

6. The exploitation of social opportunities

 

After identifying and evaluating a social opportunity an individual must gather the necessary resources in order to exploit it. The availability of resources will play an important role on the strategy implemented during the exploitation phase. Resources can be mainly acquired though social networks and include, amongst others, financial capital, human capital and knowledge. Resources can also be acquired when forming partnerships with other social organisations, private firms and public organisations. Partnerships are very important for a social enterprise as they are a from of legitimation. A social enterprise should not work in isolation from other organisations!

 

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Conceptual framework of social opportunity recognition and exploitation (Monllor, 2010)

 

 

Learning outcomes: After completing this activity, participants will be able to:

  • Understand how to identify opportunities for social entrepreneurship.
  • Understand the importance of evaluating an opportunity based on its expected social impact and financial feasibility.

 

Expected duration: About 15-20 minutes.

 

Task(s): Read the following statements and mark the True or False.

 

 

Go to the task >>

 

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