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A Critical Review of Social Entrepreneurship among Profit Organization in Malaysia

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In Malaysia, social entrepreneurship is widely used to describe the effort of certain non-profit organizations or the government agencies to change the economical state of poor communities. However, this limited definition of social entrepreneurship has been argued and literatures have suggested that the definition of social entrepreneurship should be widened to include profit oriented organization as well. Though many large corporations are doing their part in terms of corporate social responsibility (CSR), how about SMEs that constitute 99.2% of establishments in Malaysia? There are many questions that are left unanswered about social entrepreneurship, particularly in Malaysia, due to the fact that social entrepreneurship field is considered very new in the country. Therefore this paper's objectives are to (1) discuss the situation of social entrepreneurship in Malaysia (2) the issue of profit organization'sengagement with social entrepreneurship and (3) the benefits gained by venturing into social entrepreneurship by profit oriented organizations.
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AEJ, 3 (1), 44-55, 2017 (ISSN 2289-2125)
A Critical Review of Social Entrepreneurship among Profit
Organization in Malaysia
Hardy Loh Rahim
Malaysian Academy of SME & Entrepreneurship Development/
Faculty of Business and Management
UniversitiTeknologiMara,Malaysia
Corresponding E-mail : hardy@salam.uitm.edu.my
ABSTRACT
In Malaysia, social entrepreneurship is widely used to describe the effort of certain non-profit organizations
or the government agencies to change the economical state of poor communities. However, this limited
definition of social entrepreneurship has been argued and literatures have suggested that the definition of
social entrepreneurship should be widened to include profit oriented organization as well. Though many
large corporations are doing their part in terms of corporate social responsibility (CSR), how about SMEs
that constitute 99.2% of establishments in Malaysia? There are many questions that are left unanswered
about social entrepreneurship, particularly in Malaysia, due to the fact that social entrepreneurship field is
considered very new in the country. Therefore this paper’s objectives are to (1) discuss the situation of
social entrepreneurship in Malaysia (2) the issue of profit organization’sengagement with social
entrepreneurship and (3) the benefits gained by venturing into social entrepreneurship by profit oriented
organizations.
Keywords: Social entrepreneurship, profit organization, profit sector, Malaysia
1.INTRODUCTION
Social entrepreneurship is picking up its place in Malaysia. The acceptance and awareness is growing
steadily in the country. In 2012, International Youth Social Business Summit was organized by MyHarapan,
a Youth Trust Foundation. The main event was The Global Social Business Summit, which attracted social
business leaders all over the world (Joffres, 2013). This shows the enthusiasm of Malaysia towards social
entrepreneurship as this is the first time the event was held outside Europe. Prior to that, the first Research
Conference on Social Business was held, boasting speakers such as Nobel Peace Prize laureate
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Prof Muhammad Yunus, Hans Reitz, co-founder of The Grameen Creative Lab and Prime Minister of
Malaysia, Datuk Seri Najib Tun Razak (The Star, 2013). At the closing of the event, the Prime Minister
Najib Razak announced that a fund of RM20 million (USD 6 million) for social entrepreneurship is
established. It was a surprisingly huge amount for a sector that is considered relatively small in Malaysia
(Joffres, 2013), proving the government support towards social entrepreneurship in the country. In addition
to that, a social enterprise award was introduced in 2013 by the British Council, in collaboration with the
Arthur Guinness Fund. 32 social enterprises applied and six of them were selected.
In Malaysia, social entrepreneurship is widely used to describe the effort of certain non-profit
organizations or the government agencies to change the economical state of poor communities (Zakaria,
2011). However, does social entrepreneurship really applies in non-profit organizations only? Do profit
organizations only focus on making profit and do not venture into social entrepreneurship at all? Why
should the profit organizations engage in social entrepreneurship? There are many questions that are left
unanswered about social entrepreneurship, particularly in Malaysia, due to the fact that social
entrepreneurship field in considered very new in the country. Therefore this paper’s objectives are to (1)
discuss the situation of social entrepreneurship in Malaysia (2) the issue of profit organization’s engagement
with social entrepreneurship and (3) the benefits of gained by venturing into social entrepreneurship by the
profit sector.
2.SOCIAL ENTREPRENEURSHIP
Entrepreneurship is a well-accepted field, both practically and theoretically. But while entrepreneurship is
a very developed and matured field, it’s subcategory of social entrepreneurship is very much the opposite
(Mohtar and Rahim, 2014). Social entrepreneurship is a very young concept and is very much sought off
in the practical world, however it is still considered in its infancy stage in academic platform.
(Johnson,2002; Roberts and Woods, 2005).
However, in recent times the field of social entrepreneurship research has gained much pace and
attention due to the fact that numerous numbers of scholars are interested and have done research on the
particular topic (Zahra et al., 2009).
The term social entrepreneurship was firstly introduced by William Drayton, a MacArthur Fellow
(Barendsen and Gardner, 2004). It is emerging in the world “given the new strategic environment where
the social half of society’s operations is becoming as entrepreneurial, competitive, productive and powerful
as business” (Ashoka, 2004). In terms of literature, social entrepreneurship is associated with few elements
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such as innovation, pro-activeness and risk-taking (Helm, 2007) as well as leadership (Henton et al., 1997;
Dees, 2009).
Social entrepreneurs have the unique abilities of recognizing the complex social problems and
working through it in a new way that raises public awareness of the problem through their vision, work and
activities. They seek fresh opportunities and produce positive impact by using leadership and management
methods (Dees, 2009). The social entrepreneurs work towards getting profit while creating change by
providing community value (Dees, 1998), towards building a sustainable community (Johnson, 2000).
They believe that by inclusiveness and interdependence of the community (Henton et al., 1997),
changes could be made that would bring the world forward (Henton et al., 1997) They connect sectors,
stakeholders and diverse community networks (Henton et al., 1997) by building a strong, resilient and
productive relationship between the private, public and civil sectors (Henton et al, 1997). The networking
relationship between communities is being used to get even bigger community relationship by creating
bridges in order to pool resources (Henton et al, 1997; Dees, 1998).
Social entrepreneurs are problem solvers with innovative solutions for unsolved community needs
(Dees 1998) by mobilizing and using scarce resources in inventive ways (Dees, 1998; Henton et al.. 1997).
They are considered as leaders in enhancing the community and the world (Henton et al., 1997). They
empower the others by expressing their passion in order to create a better world and creating positive
changes. They are networkers and motivators, conveners and teachers, drivers and integrators, agitators and
mentors (Henton et al., 1997).
“Social Entrepreneurs are the harbingers of change, devising new ways to provide support and
development for those excluded from the opportunities of the new society” (Handy, 1997). It was also
suggested that there is a pressing need to create a huge numbers of social entrepreneurs in the market
(Yunus, 2008).
As the term social entrepreneurship is still in its infancy, there is still a huge debate on an agreed
definition of it (Dorado, 2006). The most common definition of social entrepreneurship is that social
entrepreneurs focuses primarily on its social missions while wealth creation is not a goal as it is deemed as
a mean or tool to accomplish the social missions (Dees, 2007). The organization focuses on social value
creation that differentiated social entrepreneurs from business entrepreneurs (Shane, 2003).
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3.SOCIAL ENTREPRENEURSHIP IN PROFIT SECTOR
Theoretically, Rahim and Mohtar (2015) have come out with a model to better explain the social
entrepreneurship within organization context (Figure 1). They suggested that social entrepreneurship is
categorized into two primary structures, either a not-for-profit or for-profit entity. The profit entity, which
is called the hybrid organization, has both social and financial goals.
The traditional NGO is categorized under non-profit. This is the type of organization that is neither
a part of a government nor a conventional profit oriented business. It is usually being set up by ordinary
citizens and may be funded by various sources including governments, foundations, businesses, or private
individuals. Some has no funding altogether and operated primarily by volunteers.
The second category is for the profit sector. It is further divided into social hybrid and economy
hybrid. Both subcategories are organizations with double bottom line goals which have financial and social
objectives. What differentiates these two is the primary objective, either social or economy oriented. For
social hybrid organization, it focuses more on social missions, while income generation is treated as
secondary objective. Usually the financial gains are being used for sustainability of the organization.
Instead, economy hybrid organization’s central goal is profit. However, the organization is actively
involved in social activities. In other words, socially-responsible business organizations are grouped in this
category.
Figure 1
Social Entrepreneurship Model
Source: Rahim &Mohtar (2015)
Traditional NGO
Social Hybrid
Economy Hybrid
Social
Entrepreneurship
Hybrid
Limited SE
Extended SE
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There are arguments that the most popular assumption of social entrepreneurship would be the first
approach however there are a number of scholars that expressed concerns on the limited view of social
entrepreneurship that is believed to be exclusively for non-profit organizations only. There have been calls
for critical reflections to open social entrepreneurship towards different perspectives have been made in
order to provide some challenge to the dominant view on social entrepreneurship (Bull, 2008).
Categorization of social entrepreneurship as exclusively for non-profit organizations is considered
as limited view while social entrepreneurship as a concept of organizations striving to enhance their
sustainability by generating more revenue is considered as the extended view (Perrini, 2006; Rahim
&Mohtar, 2015).
Nicholls (2005) argued that all organizations can exhibit social entrepreneurship. This is not a
surprise as social entrepreneurship is a mixture of social and entrepreneurship concepts. This hybrid term
combines the entrepreneurship characteristics that have the economic sustainability features of traditional
profit oriented organizations with the social change objectives that characterize many non-profit
organization, government agencies, and social service providers (Perrini, 2006; Mort et. al., 2003; Swanson
& Zhang, 2010).
4.SOCIAL ENTREPRENEURSHIP IN MALAYSIA
Social entrepreneurship is emerging trend in Malaysia. The acceptance and awareness is rising steadily in
the country. In the recent International Conference of Young Leaders in March 2015, the Prime Minister
of Malaysia has stressed the importance of organization leaders to have the social entrepreneurship spirit to
help the country achieving its mission to be a developed country (Razak, 2015) and the Minister of Youth
and Sports concurred by stressing the need to build the DNA of social entrepreneurship among the leaders
of organization (Jamaluddin, 2015).
Terjesen et al. (2011) with Global Entrepreneurship Monitor did a study on social entrepreneurship
with 150,000 adults in 49 countries. Based on their study, it shows that Malaysia’s social entrepreneurship
activities is considered relatively new due to the fact that only 0.2% of the working population were engaged
in social entrepreneurship, compared to the neighboring countries such as Hong Kong (1.0%), Korea (1.4%)
and China (4.0%).
In their report, they describes social activities in those countries manifest themselves in different
ways, from pure non-profit model to hybrid companies that has dual objectives; profit and social
motivations as shown on Figure 2.
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Figure 2
Social Entrepreneurship Categorization
Source: Terjesenet. al (2011)
According to Terjesenet. al. (2011), Malaysia’s social entrepreneurship prevalence rates as the
percentage of the population is traditional NGO (0.1%), not for profit social entrepreneurship organization
(0.1%) and hybrid social entrepreneurship organization (0.2%) as shown in table 1.1.
Table 1.1
Social Entrepreneurship Prevalence Rates As the Percentage of the Population and Type
Country
Traditional NGO
Not for Profit SE
Hybrid SE
Malaysia
0.1
0.1
0.2
Source: Terjesenet. al (2011)
Therefore, the common believe that social entrepreneurship is exclusively for non-governmental
organizations (NGO) and non-profit organizations arguable could be refuted based on this extensive
research as it shows in Malaysia, the most popular type of social entrepreneurship is the hybrid social
entrepreneurship organization that has both financial and social objectives.
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5.ISSUES OF SOCIAL ENTREPRENEURSHIP IN PROFIT SECTOR
It is a well-known fact that most organization’s main concern is to seek profit in order to maximize wealth,
thus their organization’s performance is being evaluated in financial perspectives. Nevertheless, in the midst
of globalization that facilitates businesses without boundaries, poverty and inequality persist (Rahim et al,
2014). It is surprising to see that while a portion of the world is wealthy, there are still people in need and
communities that are living in dire conditions as well as other social ills. This leads to the issue of unmet
social needs that should be addressed. Consequently, it is important for the entrepreneurs to be socially
responsible and giving back to the community to create a better and sustainable world.
It is surprising that many sections believe that social entrepreneurship is only for the welfare or
social benefit organizations that commonly fall into the non-profit organizations. There are many social
benefit organizations and NGOs that are fighting for the social welfare of the society. Does that mean that
the profit sector does not have to share the responsibility in helping ease the social illness and problems? Is
it sufficient to leave the responsibility to the social welfares and NGOs?
One would argue that many profit sectors do their part in terms of corporate social responsibility
(CSR), which is deemed as a part of social entrepreneurship. However, CSR is commonly practiced by
large corporations and multinational companies only (Chapple and Moon, 2005). This leaves a huge
question mark on the role of SMEs in social entrepreneurship and in fact this type of business holds the
largest percentage in countries all over the world. Malaysia has 99.2% of SMEs (SMECorp, 2012; Rahim
et al., 2012), while 99.7% in United States (SBECouncil, 2014) and 99.7 % in Japan (Ministry of Economy
Trade and Industry, 2016) just to name a few.
According to Terjesen et al. (2011), countries that has high pure commercial entrepreneurship
activities, also exhibits high social entrepreneurship activities. In other words, the higher the level of pure
commercial entrepreneurship activities, the higher possibility that social entrepreneurship and commercial
entrepreneurship will overlap creating a social venture hybrid. This supports the notion that commercial
entrepreneurial will create a more favourable setting for undertaking socially innovative initiatives, creating
a diversification form the traditional social entrepreneurship consisting of NGOs and non-profit
organizations.
The question is why would a profit seeking organization would do socially responsible activities
and strive for social causes? Based on the rational choice theory, people would only perform activities that
would bring them benefit. Therefore, it is not surprising that organizations would only deal with activities
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that would bring benefit to the organizations, which is selecting the best actions that would bring desired
outcome to the organization (Williams &Fedorowicz, 2012).
This matter has created an issue to be addressed. It is understandable that organization will seek
profit in their business activities; therefore if one would expect the entrepreneurs as the leaders of the
organization to contribute to the society, they should be convinced on the benefits of doing so.
6.WHY SOCIAL ENTREPRENEURSHIP AMONG PROFIT ORGANIZATIONS?
Saifan (2012) summarized that profit oriented entrepreneurs and social entrepreneurs have different set of
unique characteristics. However, there are a set of common characteristics shared between profit oriented
entrepreneurs with social entrepreneurs which are (1) innovator, (2) dedicated, (3) initiative taker, (4)
leader, (5) alert on opportunities, (6) persistent and (7) committed. This shows that when blending social
and profit-oriented activities, profit oriented entrepreneurs and social entrepreneurs share the same excellent
characteristics that are previously unique to either type of entrepreneurs.
Furthermore, in relation to the urges by the policymakers, interestingly few researchers have
suggested that social entrepreneurship may contribute to organizational performance (Gandy, 2012;
Mohtar& Rahim, 2014; Rahim et al., 2015). Rahim et al., (2015) did a study on 384 SMEs in Malaysia and
it shows that social entrepreneurship behaviour positively affects the performance of the organization. It
proves that by engaging in social entrepreneurship, the performance of the SMEs will increase relatively.
Figure 3
The beneficial cycle of social entrepreneurship
Empowers community withrelevant
skills and provide assistance to
increase their livelihood through
social entrepreneurship
Communities are able to be entrepreneurial
and increase their financial and social well beings
Profit Oriented
Organizations
Target Community in Need
Contribute back to the
economic sector and
increase the income of
SMEs
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Figure 3 explains the beneficial cycle of profit sector engaging in social entrepreneurship. As profit
organizations empowers the targeted community in need with relevant skills as well as providing assistance
to increase their livelihood through social entrepreneurship, the community will benefit and able to be
entrepreneurial and generate their own income. This will increase their financial and social well beings.
Therefore, the community has higher buying power and possibly able to produce products that will increase
the business activities in that area, hence creating more job and business opportunities. These social
entrepreneurship impacts will subsequently benefit the economic sector and increase the income of the
organizations.
7.CONCLUSION
This paper has reviewed the status of social entrepreneurship among profit organizations, its issues as well
as benefit of them engaging in social entrepreneurship. Through the discussion, it can be argued that by
engaging with social entrepreneurship such as helping and assisting the under privileged, the community
will then contribute back to the organization, hence creating a circle of flow. Thus it is not surprising that
many corporates are engaging in social entrepreneurship and many studies have proved that CSR do affect
organizational performance positively. This study could lead to change of practice in organizations in
seeking to improve their performance. Similar to an act of killing two birds with one stone,organizations
could benefit by doing good and becoming socially responsible as well.
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'This ambitious book draws upon a wide variety of literature in developing a comprehensive theory of entrepreneurship, ranging from the discovery of entrepreneurial activities, to industry differences in entrepreneurial activity, to the organizing process. It represents a major contribution to the field.' - Arnold C. Cooper, Purdue University, US. 'Professor Scott Shane provides a deep and comprehensive discussion of the individual-opportunity nexus in entrepreneurship. Eschewing the usual approaches of either focusing exclusively on the individuals and their motivations and actions or focusing exclusively, almost always ex-post, on the economic potential of opportunities, Scott Shane fixes his gaze squarely on the nexus of the individual and the opportunity. It is this nexus that I believe is the building block for a better understanding of the entrepreneurial phenomenon.' - From the foreword by Sankaran Venkataraman. In the first exhaustive treatment of the field in 20 years, Scott Shane extends the analysis of entrepreneurship by offering an overarching conceptual framework that explains the different parts of the entrepreneurial process - the opportunities, the people who pursue them, the skills and strategies used to organize and exploit opportunities, and the environmental conditions favorable to them - in a coherent way.
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Capitalism is interpreted too narrowly Many of the problems in the world remain unresolved because we continue to interpret capitalism too narrowly. In this narrow interpretation, we then create a one-dimensional human being to play the role of entrepreneur. We insulate him from other dimensions of life, such as the religious, the emotional, the political, and the social. He is dedicated to one mission in his business life: maximizing profit. Masses of one-dimensional human beings support him by backing him with their investment money to achieve the same mission. The free-market game, we are told, works out beautifully with one-dimensional investors and entrepreneurs. Have we been so mesmerized by the success of the free market that we don't dare to question it? Have we worked so hard at transforming ourselves absolutely into one-dimensional human beings – as conceptualized in economic theory – to facilitate the smooth functioning of the free-market mechanism? Economic theory postulates that you contribute to society and the world in the best possible manner when you concentrate on squeezing out the maximum for yourself. Once you get your maximum, everybody else will get theirs too. As we follow this policy, we sometimes begin to doubt whether we are doing the right thing by imitating the entrepreneur created by theory. After all, things don't look too good around us.
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This article addresses four hypotheses: (a) that corporate social responsibility (CSR) in Asia is not homogeneous but varies among countries, (b) that the variation is explained by stages of development, (c) that globalization enhances the adoption of CSR in Asia, and (d) that national business systems structure the profile of multinational corporations’ CSR. These hypotheses are investigated through analysis of Web site reporting of 50 companies in seven Asian countries: India, Indonesia, Malaysia, the Philippines, South Korea, Singapore, and Thailand. The article concludes that CSR does vary considerably among Asian countries but that this variation is not explained by development but by factors in the respective national business systems. It also concludes that multinational companies are more likely to adopt CSR than those operating solely in their home country but that the profile of their CSR tends to reflect the profile of the country of operation rather than the country of origin.
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Social entrepreneurship is still in the developmental stage as a field of inquiry. In this article we introduce the concept of the social entrepreneurship zone. This new construct positions social entrepreneurship relative to the ways organizations plan to implement social change and the degrees to which they apply business practices to do so. Two new categories of organizations, social transformation entrepreneurial ventures and social improvement entrepreneurial ventures, reside in the social entrepreneurship zone. This categorization separates social entrepreneurial ventures into 2 distinct groups with their own unique set of characteristics. The social entrepreneurship zone construct should help researchers and other stakeholders better understand this emerging field so it can be further studied and developed.