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Understanding social entrepreneurship

One of the buzzwords that has been going around in the business community in recent years is social entrepreneurship. From empowering women to earn a living in India, harnessing the pedal power to light up villages in Africa, to reviving artisanal knowledge in Latin America,  social entrepreneurs have attracted as much debate as acclaim from the public. What exactly is social entrepreneurship? How is it different from traditional entrepreneurship and charity? What principles is it based on and is it really a viable, self-sustainable modus operandi of entrepreneurship in the modern age? I will attempt to shed some lights on these issues. Some of the ideas presented here are discussed by INSEAD MBA professor Filipe Santos in his paper “A Positive Theory of Social Entrepreneurship” so go and read up on it if you want to know more.

 What is social entrepreneurship? One could define it as “entrepreneurial activities with an embedded social purpose” (Austin, Stevenson, & Wei-Skillern. Social and Commercial Entrepreneurship: Same, Different, or Both? Entrepreneurship. 2006). Like commercial entrepreneurs, social entrepreneurs find solutions to problems by innovating, disrupting industries and bringing together resources in ingenious ways to achieve their goals.  Unlike commercial entrepreneurs (and their VC partners), social entrepreneurs are less concerned with creating a proprietary technology upon which value could be appropriated, and more with sharing technologies and business models onto which communities and networks could grow and thrive on their own.

 “How on earth does this behavior make sense?” you may ask. After all, we have been well trained in economics to know that by Adam Smith’s “Invisible Hand,” individuals who are naturally selfish will interact with each other such a way as to best advance the interest of society and the well-being of all of its participants. Consequently, any commercial systems in which individuals are forced to act against their natural self-interestedness are not sustainable in the long run. However, Adam Smith in the same famous “Wealth of Nations” went on to state that: “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it.” In other words, Adam Smith himself admits that altruism exists. If that’s the case, is it possible to build a new business model based the principle of altruism?

Social entrepreneurship

This logic tree resembles that of other forms of non-corporation organizations we have seen, such as governments and charity organizations. The difference between social enterprises and governments is clear: governmental policies are not driven by altruistic motives and may be slow to promote or react due to the conflicting interests of its constituencies (i.e. the people). The difference between social enterprises and charity organizations is less clear however. Both stem from altruism and target areas and demographics often neglected by the private and public sector alike. However, while charity is a general term for disbursement of fund without expectation of return, social enterprises are concerned with creating a self-sustaining ecosystem by empowering the participants therein. In other words, social entrepreneurs are not simply alleviating pain and saving lives; they are creating systems that work and maximizing value for stakeholders. To achieve this goal, empowerment must be emphasized. According to the World Bank (2009), empowerment is the “process of increasing the assets and capabilities of individuals or groups to make purposive choices and to transform those choices into desired actions and outcomes.” As a social entrepreneur, it would be a thousand times easier to build many bases of houses on which inhabitants would build the rest, than to build one complete house on your own and let this task occupy all of your time.

In conclusion, if you are entrepreneurial and want to make a difference in the world, choose the path of social entrepreneurship. For the sake of efficient resource allocation, there are areas and segments that would be better served by private firms or public authorities (Filipe’s paper would explain more), but once the rules of games have been established, the ball is in your court to choose where your efforts will make the most impact. Remember, just like in the corporate world where managers must be wary of buzzwords such as sales and market share and focus on appropriating true value for the firm, a social entrepreneur must take care to not fall for the sensational course of action (the one that would look really good on TV) and focus on creating measurable, long-lasting impact for the community he or she is serving.


Image source: Flickr

Danny Pham
Co-Founder, Freelensia
Reserve language interpreters for meetings, exhibitions, and seminars
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32 Lives in Ho Chi Minh City, Vietnam FIELD Interpretation - Strategy - Finance - Data BACKGROUND Co-Founder & Interpreter at Freelensia EDUCATION CFA Charterholder (2012-present) MBA at INSEAD LANGUAGES: English - native Japanese - JLPT level N1 French - CEFR level C1 Korean

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