SOC617 Official Handouts

Lesson 01 BACKGROUND, NEED, IMPORTANCE AND · PIONEER SOCIAL ENTREPRENEURSHIP · TOPIC 001-005 · Topic 001: Background

In Lecture 2 of this course we will explore in some detail what is meant by the term “social entrepreneurship.” However, for the time being, it is useful to have a working definition of this term as we examine its origins and importance. Put simply, social entreneurship is the application of the mindset, processes, tools, and techniques of business entrepreneurship to the pursuit of a social goals and/or environmental mission.

While social entrepreneurship as a field of study is relatively new, much has already been written on the subject (see Dees, Emerson, & Economy, 2001; Mair & Noboa, 2006; Wei-Skillern, Austin, Leonard, & Stevenson, 2007; Brooks, 2008; Elkington, Hartigan, & Schwab, 2008; Light, 2008; Nicholls, 2008; Welch, 2008; Bornstein & Davis, 2010, to name but a few). This is a direct reflection of the excitement it generates and the promise it is perceived to hold. Social entrepreneurs have captured our collective imagination with remarkable stories of their social innovations. These stories are uplifting and inspiring. However, it is tempting to focus on the outcomes of social entrepreneurship and avoid thinking about why these innovations were needed in the first place and why social entrepreneurs are the logical providers of this service to society. These questions need to be answered and we will do this essential work.

We are a society that is frustrated by an overall lack of progress toward solving our most pressing social and environmental problems. Our governments and our private sector have disappointed us with their seeming inability or unwillingness to effectively address poverty, hunger, illiteracy, child abuse, domestic violence, global climate change, energy conservation, and many other challenges (Bornstein, 2007).We are eager for someone to step into the breach and meet these challenges head-on. Might that someone be the social entrepreneur? Social entrepreneurs have been touted as the real-life superheroes of our society. Why? Why can’t governments solve these problems? Why won’t the private sector address them? Why entrepreneurship? The answers to these initial questions can help us to understand why the study of social entrepreneurship is important and worthwhile .

Topic 002: Need for and Importance of Social Entrepreneurship

Many of the societal problems that we face have been with us for decades, if not centuries. While there has been an ebb and flow in our success in addressing these problems, the effect is that we have made surprisingly little net progress considering the time over which we have been working on them. Over the course of history, we have wavered between relying on private actors and relying on the government to help us to solve these problems. Neither sector has been consistently successful.

Private Actors: A defective system

Despite the claims of neoclassical economists, markets are far from perfect. Adam Smith’s “invisible hand”—the idea that if free markets are allowed to operate without interference, they will self-correct and benefit all member of society—has proven arthritic when it comes to addressing all segments of the economy. Market failures abound. They can be seen in situations where profits are insufficient to cause private developers to generate housing for low-income households; where banks refuse to invest in certain neighborhoods because of perceived risk, called redlining; where people go hungry in some parts of the world, while in other regions surplus food is destroyed or land is kept out of agricultural production; and where one community’s pursuit of economic well-being pollutes the environment, thereby diminishing the ability of another community to provide for its residents. These are but a few examples. They are not isolated incidents. In fact, they are widespread and they are repeated on a regular basis around the world. Private markets help to create these problems and, if left to their own devices, have no incentive to reverse them.

Government: Self-contradictory

Government, which is created to represent the interests of society as a whole and is in a position to address these issues, has not consistently been able to do so. This is due, in part, to inadequate resources; however, there are other factors at play as well. Politics is one of these. There is too often a general lack of political will to sustain efforts to address societal problems. In democracies, short election cycles, term limits, and the propensity of newly elected officials to eschew the programs of their predecessors in favor of leaving their own mark tend to foster disjointed policy.

Warring ideologies cause pendulum swings in attitudes and approaches as one regime replaces another, causing governments to “do and undo” their efforts rather than make steady forward progress. The well-documented breakdown in civil society (Milich, 2001; Putnam, 2001; Weiss & Gilani, 2001) has exacerbated this problem by radicalizing ideology and polarizing society. Because no ideology has a monopoly on truth, opportunities for the cross-pollination of ideas are being lost.

Authoritarian governments are no more successful at solving their society’s problems, but for different reasons. One ideology dominates and eventually, and inevitably, reaches its point of diminishing returns for producing positive change. There are no checks on power, so corruption is common and counterproductive relative to focusing attention and resources on meeting the needs of the populace. Changes in government are often violent and the resulting instability creates still more social problems.

If our institutions are incapable of solving our social and environmental problems, then we must ask who, or what, is. How can we perfect imperfect markets without unintentionally destroying them? How can we circumvent the unproductive aspects of politics? How can we blend the best of the private and public sectors to address societal challenges? One seemingly viable answer to these questions is social

Why the time is ripe for social entrepreneurship?

While dissatisfaction with the relative inability of the public and private sectors to deal with society’s problems helps to explain why social entrepreneurship represents an attractive option, it does not shed light on why this phenomenon is enjoying such a high level of popularity at this particular time in history. Bornstein (2007) makes a compelling case that major transformational changes worldwide over the past several decades have made it both possible and increasingly likely that citizens will take the lead in addressing social and environmental challenges. Bornstein identifies several key changes that have made the social entrepreneurship phenomenon possible.

•  One of these is the global increase in prosperity that brought the rise of the middle class and an increase in wealth that can be used to finance social ventures.
•  Another is an increase in the number of democratic and semi-democratic societies, which has given citizens the freedom to pursue the correction of social and environmental wrongs outside of government and the business sector.
•  A third is the proliferation of new communications technology that has increased people’s level of awareness of global societal problems and their impacts.
•  Fourth is the increased availability of formal education in general and the growth in the number of college-educated individuals in particular, which enhances wealth and heightens awareness as well.
•  The final factor is the removal of many obstacles to the active participation of women and certain subjugated groups in societal affairs.

As Bornstein (2007, p. 7) puts it, “To sum up, more people today have the freedom, time, wealth, health, exposure, social mobility, and confidence to address social problems in bold new ways.

Topic 003: Origin of entrepreneurship – Schumpeter

Richard Swedberg (2006, 2009) suggests that one can use Joseph Schumpeter’s ideas to get a better theoretical handle on social entrepreneurship.

Joseph Schumpeter (1883–1950) was born, raised and educated in the AustroHungarian Empire, and he shared the conservative views of its ruling elite. As an intellectual and economist he early developed a taste for bold and original ideas. He enjoyed playing around with ideas from all perspectives, including those of Marx and the Austro-Marxists. Schumpeter is generally seen as the first major economist who developed a major theory of entrepreneurship through his work ‘The Theory of Economic Development’ from 1911. Schumpeter was naturally not the first economist to write about entrepreneurship, however, he was the first person to write the history of the study of entrepreneurship. He especially emphasized the contribution of various French economists to entrepreneurship, such as Richard Cantillon and Jean-Baptiste Say.

According to Schumpeter, entrepreneurship, can be defined as a new combination of already existing elements in the economy. ‘Development [or entrepreneurship] is then defined by the carrying out of new combinations of productive means or materials and forces’ ( Cross ref; Schumpeter, 1934, 65–6).

Extension of Schumpeter’s work on Non-economic Entrepreneurship

Swedberg (2009) emphasised that the work of the young Schumpeter is especially useful in this context. According to him, it is also only in the first and little known edition of ‘The Theory of Economic Development’ from 1911 that Schumpeter says that one can apply his theory of entrepreneurship to non-economic activities. Social entrepreneurship, Swedberg suggested, can be seen as belonging to the category of