Social Enterpreneuship - Research Paper Example

Introduction

The large gap between the rich and poor, environmental degradation and financial crisis has made people question our society prevalent market economy. Individuals, businesses, societies, and government are looking for a sustainable solution to ills our society is facing. Since the adoption of the millennium development goals in 2000 by the United Nations, there has been significant growth of businesses promoting social and environmental values (Hurst, 2014). The primary aim of these businesses is to provide social or environmental value while achieving financial sustainability. Social entrepreneurship is about identifying practical solutions to the society social problem through innovation, resourcefulness, and opportunity. Social enterprise and entrepreneurs are committed to producing social value by identifying new ways of doing things, processes, service or products to solve social issues. They seize problem as an opportunity to transform the society in any sector including education, health, environment, human right among others. This paper provides a history of social entrepreneurship, different challenges they face, a case study of entrepreneurs and future recommendations on entrepreneurship.

Social Entrepreneurship – A history of the concept

Social entrepreneurship is considered to be in its infancy stage. However, William Drayton popularized the term social entrepreneur. Drayton established an organization that has promoted social entrepreneurship, Ashoka. According to Drayton (2002, it aimed at providing finance and other logistics supports to social innovators. During his visit to India in the 1980s by a movement, Vinoda Bhave whose aim was to break the poverty cycle by encouraging the rich to give their land and then it was equally distributed to the poor. The success of the movement proved to Drayton that social entrepreneurship could be effective in making a better change. Since Ashoka was established, it has become a worldwide company aimed at promoting the idea of creating social change through its informative change.

Although the term social entrepreneurship had existed in the earlier days, they were referred to as humanitarians, visionaries or saints (Bornstein, 2007). Some early pioneers include Robert Owen a mill owner who improved working conditions at factories and laid the foundation for cooperative movement, Florence Nightingale started a nursing school saving countless lives and William Booth who started a Christian mission to spread Christian message and was later rebranded to Salvation Army. However, the early social entrepreneurs were non-profit organizations that relied on external funding to implement social good. This concept is still practiced today, but has a less lasting effect, and it is not self-sustainable.

Today, social entrepreneurship finds creative ways of making a social impact, while making a profit to remain sustainable. The emergence of social entrepreneurship can be attributed to market failure, failure in a charitable organization and need for new economic models (Defourny & Nyssens, 2008). Researchers have also indicated that market failure is a key to the emergence of social enterprise, or state failure (Spear, 2001). Today, social enterprises can adopt three strategies. First, the non-profit organization performs commercial activities to earn income as an alternative to funding. Second, social enterprise can gain legitimacy by adopting business practices. Lastly, a non-profit organization can complement the role of the government. In the United States, the term social enterprise refers to non-profit organizations using strategies to earn income thus becoming financially stable. However, the legal basis is being adopted in defining social enterprises. They can also assume legal terms such as benefit-company, low-profit company or social purposes corporation depending on the state.

Social entrepreneurship defined

Although there is no clear definition of the term social entrepreneurship, various authors have come up with different definition. Mort et al. (2003) defines it as a multidimensional concept involving recognition of social-value creating opportunities. It can also be defined as processes that involve innovation and use of resources to exploit the opportunity and achieve social change (Mair & Marti, 2004).

However, there is an agreement on the key characteristics of social entrepreneurship. First, the central focus of social entrepreneurship focuses environmental or social outcomes. Second, innovation is an important feature that can be pursed through adoption of new products and services, new processes and new ideas about social issues. Finally, many scholars agree that market orientation is manifested in various ways in social entrepreneurship that make the profit and invest to make social change.

Key Issues and Challenges

Social entrepreneurship is also faced with various issues as entrepreneurship in growth as well as development. However, social entrepreneurs and enterprises encounter unique challenges in their efforts to meet their financial and social goals.

Funding

The lack of attraction of potential profits makes it very difficult for social entrepreneurs to mobilize funding. When starting a new business, identification of a source of funding is crucial and indicating that they are interested in creating social value rather than financial makes it difficult to attract adequate funding. Due to its weak model and associated risk accessing finance is a major challenge. However, the issue is not lack of funding, but rather lack of proper distribution of funds. Although larger enterprises may have the ability to finance the creation of social value, smaller firms find it difficult to fund their projects. Provision of social investment is not yet mature in many countries, and evidence shows that it still considered unattractive because it is risky and has low returns.

Balancing social and financial goals

All social enterprises have to balance between their commercial values with the social value to meet their aim of providing social value and remain financially sustainable. In some cases, the management encounters difficult trade-offs between financial and social goals. Nevertheless, it is important for them to survive in the difficult market to achieve their goals. A social entrepreneur needs to understand how to integrate both social and business goals (Pearce, 2006). However, to strike a balance between the two is difficult because at times financial or social goals may dominate the disadvantage of others. Research studies have shown that market pressures may make the social goals to be minimized or eliminated and the enterprise may end up becoming like a normal enterprise. The loss of the social value status at times is inevitable, particularly for considerations and it is still a major challenge in this sector. Conversely, emphasizing the social goals means that the enterprise may end up neglecting financial aspect that key for survival.

Lack of skilled staffs

Getting employees with the necessary skills and competencies is important for enterprise effectiveness. Research shows that it is becoming harder to select and hire qualified employees where most of them are volunteers. Although it might be easy to find volunteers, it is difficult to find those who are talented in doing what they are expected to do. Cornforth (2001) found that a large proportion of social enterprise felt that it was becoming more difficult to find qualified employees, especially for small to medium enterprises. Due to these difficulties, many enterprises are now using formal recruitment strategies select and hire new employees.

Governance

Effective governance is another major challenge in social enterprise. There is a mismatch between traditions external stakeholders to. In an ordinary enterprise, shareholders are the main stakeholder in the business, and thus they are expected to run in ways that meet the shareholder's interests. On the contrary, in social enterprise, many stakeholders may have an important stake in the organization including the beneficiaries, donors, and members. Moreover, in social enterprise, all the stakeholders are openly represented on board. Therefore, social enterprise management should strike a balance between different stakeholders' interests, for instance, beneficiaries' interests versus donors' interests. Different stakeholders can bring a different perspective, and this makes it more difficult to reach a mutual agreement.

Strategy and Long-Term Focus

Identify a strategy is crucial in any business. In social enterprise, the management is expected to develop and implement a strategy that will help it to grow in a sustainable manner. Social enterprises may also experience challenges because of their aim to meet social goals, and in some case, there can be multiple social goals. Therefore, they must all be evaluated to determine their ability for value creation. A business strategy should be able to identify its unique value proposition that differentiates it from the others; however, with multiple goals, this becomes very difficult. All the activities of social enterprise should be diffused together for a common goal of providing social value.

Examples of successful social entrepreneurship

Grameen Bank

Muhammad Yunus established Grameen. The bank has reversed conventional bank practices by eliminating the collateral requirements present in the banking system. It aimed to provide poor Bangladeshis' with limited options to secure small amounts of credit. The conventional banking system made it difficult to qualify for loans; they could only borrow by accepting inflated interest rates from the local moneylenders. This stable of equilibrium of the banking system is considered to have perpetuated the country's endemic poverty.

Grameen Bank confronted this banking system and proved that the poorest of the poor are also good credit risks. Yunus started by lending $27 to 42 women from his pocket, who later repaid the entire loan. He discovered that even with small amounts of capital, the women were able to generate income. For instance, women could purchase a sewing machine where they could tailor garment and generate money enough to pay back the loan and cater for other basic needs and educate their children. By charging a small interest on the loans, Grameen was able to sustain itself and re-invest on other women. Greeman Bank has provided the poor with a cost-effective strategy to eliminate poverty, particularly among women as well as facilitated socio-economic development of the poor who have for long been discriminated by the banking system that asks for collateral security. Yunus believed that if they can provide financial resources to the poor by offering reasonable terms and conditions, then since they are the majority can add up to create major development. As a result, Yunus portrayed courage, inspiration, and creativity has proved it is viable and many organizations globally have replicated this model establishing microcredit as a worldwide industry.

Teach For America

Wendy Kopp established it in 1989 after she noticed consistent academic outcomes for low-income children and the long-term effects of racism and poverty. She believed that to address inequality issues in our school system; the leaders need to prioritize making change and handling issues at the classroom level. She came up with an idea to recruit high performing graduates to teach in needy schools in urban and rural areas. Teach For America mission is develop leaders movement whose work is to ensure that the children in a poverty-stricken area get an excellent education. The educators involved in this program can be considered to be a social entrepreneur who accepts less pay for performing rewarding tasks. Teach For America is continuously looking for young professionals whose values align with those of the organization (Bornstein & Davis, 2010). As a result, the organization has attracted many young educators from top universities across the country. Today, Teach For America has over 4,000 teachers working in more than 1000 schools in twenty regions. It took ten years to reach 1,000 members per year, and the movement continues to make social change in the society. By 2011, more than 48,000 students had applied for the 5200 spots available in the organization. This shows a strong desire for young professionals to develop and contribute their skills to impact change. This group of education activists continues to fight for education equality. This shows how successful an organization is entering the consciousness of the young Americans.

Teach For America models follow three-step approach: recruit, train, and foster.

Recruit - they recruit committed young college graduates and professionals from various background to provide training for two years in needy rural and urban public schools.

Train- they train and develop the members to ensure they have a positive impact on the students.

Foster- They foster leadership of their members to address leadership problem in various sectors.

Thus, the organization should be treated as a model for social change. The organization has proven that to be successful since it was established. It has transformed education in New Orleans, increasing the number of students scoring basic or above from 30 percent in 2000 to 53 percent in 2010 (Teach for America, 2015).

Conclusion

It is clear that there has been a shift from non-profit organization to social entrepreneurship to ensure that they remain financially sustainable. Through historical overview, it is clear that social entrepreneurship is not a new concept and was still practiced in the past. However, there is the emergence of new mindsets and practices that are changing ways of doing business. However, there are various challenges faced by social entrepreneur and enterprise such as lack of funding, governance, striking a balance between social and financial goals, and lack of skilled staffs.

Recommendations

• Future research should focus on tracking the outcomes and impacts of social entrepreneurship including mechanism of measuring social impact, governance and accountability implications.
• Future works may also focus on analysing the drivers of social entrepreneurship.
• Another important area of future work financing social enterprise. The study should explore new sources that would help social entrepreneurship projects including the rationale for funding.