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The Shared Value Concept in Social Business Model: Promoting Social Enterprise in Malaysia

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International Journal of Academic Research in Business and Social Sciences
Vol. 8 , No. 11, Nov, 2018, E-ISSN: 2222-6990 © 2018 HRMARS
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The Shared Value Concept in Social Business Model:
Promoting Social Enterprise in Malaysia
Nik Fakrulhazri Nik Hassan, Wan Norhayate Wan Daud,
Fakhrul Anwar Zainol, Norfadzilah Rashid, Asyraf Afthanorhan
To Link this Article: http://dx.doi.org/10.6007/IJARBSS/v8-i11/5208 DOI: 10.6007/IJARBSS/v8-i11/5208
Received: 28 Oct 2018, Revised: 30 Nov 2018, Accepted: 02 Dec 2018
Published Online: 11 Dec 2018
In-Text Citation: (Hassan, Daud, Zainol, Rashid, & Afthanorhan, 2018)
To Cite this Article: Hassan, N. F. N., Daud, W. N. W., Zainol, F. A., Rashid, N., & Afthanorhan, A. (2018). The
Shared Value Concept in Social Business Model: Promoting Social Enterprise in Malaysia. International
Journal of Academic Research in Business and Social Sciences, 8(11), 15081520.
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International Journal of Academic Research in Business and Social Sciences
Vol. 8 , No. 11, Nov, 2018, E-ISSN: 2222-6990 © 2018 HRMARS
1509
The Shared Value Concept in Social Business
Model: Promoting Social Enterprise in Malaysia
¹Nik Fakrulhazri Nik Hassan, ²Wan Norhayate Wan Daud,
3Fakhrul Anwar Zainol, 4Norfadzilah Rashid, 5Asyraf Afthanorhan
¹Faculty of Business & Management, Universiti Teknologi Mara Cawangan Terengganu Malaysia
&
2,3,4,5Faculty of Economics and Management Sciences, Universiti Sultan Zainal Abidin (UniSZA)
Malaysia
Corresponding Author Email: nikfa480tganu.uitm.edu.my
ABSTRACT
Nowadays, so many big companies in our country (Malaysia) implementing Corporate Social
Responsibility (CSR) approach and charity activities. Unfortunately, a few reports show that
inefficient CSR impacts to cope the social issues because of the purpose more on promoting to
corporate image compare to solve the social problems overall and unsustainability impact to
communities. These situations also happen to Non-Government Organisation (NGO).
Furthermore, Malaysia government start to reduce the budget for public services and products
delivery every year. By promotion of social enterprise, the government expected it could respond
quickly to the needs of the public in the future. Recently the past study shows that existing
entrepreneur seem do not ready to involve with the social business trend. Refection from this
situation, the researcher has attention to promoting social enterprise by proposing Social Value
Business Model based on the core of business and social missions. To gather information, a
researcher using Semi-structured and focus group interview. The researcher also plans to use
qualitative data management Nvivo12 software for coding and developing the themes.
Keywords: Social enterprise, social entrepreneur, shared value concept, social business model,
social business model canvas
INTRODUCTION AND BACKGROUND OF STUDY
In Malaysia, the company's online business like Elevyn has been certified as a company fighting
for its trade balance and fairness (fair trade) for the craft maker (Social Enterprise Malaysia 2017).
This action was to motivate communities throughout the world on the role of social enterprise.
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Another example two well-known companies like Grameen Bank and Ashoka demonstrate their
strong social impact objectives (social mission) in their business model.
The first element according to previous studies found that shared value concept implementation
made social enterprise difference from the profit-oriented traditional business model. To
develop a suitable social business model in the social enterprise, it should begin with identifying
the role of shared value concept. This concept was introduced by Porter and Kremer (2011) to
overcome the social issue through business orientation, and business should provide social
impacts values rather than profit-oriented (Porter & Kremer 2011; Gillis & James 2015).
According to Kay et al. (2016), a social enterprise must be clear about its values and how it is
implemented in their business operation. This recognition of distinct shared values makes a social
enterprise different from other forms of enterprise. Kay indeed points out that a link between
social, environmental and cultural impacts and the importance of a social enterprise’s value base
and the way social enterprises run the business. Thus, this article proposing to develop suitable
social business model need to combine those values from both economic (profitable) and societal
(social) (Porter and Kramer 2011).
LITERATURE REVIEW
Social Entrepreneurship is one of a direct approach to overcome globally social issues through
business activities. Nowadays, so many big companies in our country (Malaysia) implementing
Corporate Social Responsibility (CSR) approach and charity activities (Ahmad, Sulaiman, &
Siswantoro 2003). Unfortunately, a few reports show that inefficient CSR impacts to cope the
social issues because of the purpose or attention more on promoting to corporate image
compare to solve the social problems overall and unsustainability impact to communities. These
situations also happen to Non-Government Organisation (NGO) in the same orders (Yap 2011).
Based on previous studies argue that social entrepreneurs able to provided sustain social impact
through their business activities and focusing on the field of less giving profit (often involves the
bottom of the pyramid) (Prahalad 2006). The areas are not given priority by the government (the
cost of which is not useful) but have a value (profit and social impact) to the community
(Muhammad Yunus & Weber 2010). At this standpoint, in past study in Malaysia show that
existing entrepreneur seem do not ready to involve in the social business trend (MaGIC Social
Entrepreneurship 2015). Currently, the Malaysian Government shows strong support to social
enterprises development when the Former Malaysia Prime Minister, Datuk Seri Najib Tun Razak
announced the establishment of the Social Business Fund amounting to RM20 million under
Malaysian Global Innovation and Creative Centre (MaGIC) (Ahmed Syahril Zulkeply 2015).
Based on Malaysia Social Enterprise Blue Print (MSEBP) 2015 2018, the primary reasons
government should promote social entrepreneurship is to reducing the cost and increasing
quality of public services and goods delivery in this country. By promotion of social enterprise,
the government expected it could respond quickly to the needs of the public in the future (MaGIC
Social Entrepreneurship 2015).The purpose of existing social enterprise to provide solutions to a
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plethora of social issues through operationalizing a social business model. They create new values
to the society by pursuing new opportunities and fill the gaps in the efforts to tackle social
problems that might have been overlooked by ordinary businesses and government (Elisha
Nasruddin & Nur Aulia Fahada Misaridin 2014). Social enterprise is essential businesses with
social and environmental objectives to provided sustain social impact through their business
activities (offer innovative solutions by providing products and services which are aimed at
solving related social challenges) and still able to generate profit for sustainability. Lately, the
concept of social enterprise started to gain more interest among academics and policymakers in
Malaysia (Kadir & Sarif 2016).
Based on the previous study, focusing is more on changing the role of customer value proposition
to social value proposition in Social Business Model (Muhammad Yunus et al. 2010; Michelini &
Fiorentino 2012). It is begun with Share Value Concept introduced by Porter and Kremer (2011)
and another similar concept was introduced by Emerson was known as blended value concept
(Emerson 2003; Bellostas et al. 2016). The share value concept mention specifically combination
the values come from both areas economic (profitable) and societal (social) in business
operation. By the way, business should not provide product and services to fulfill the demand
only, but it also provides critical public assets and a supportive environment. There are need each
other (business and society) (Porter and Kramer 2011; Gillis & James 2015). The benefit from the
implementation of this shared value concept able to improve the way how their design business
strategies that deliver tangible social benefits and using the role of business to help solve
fundamental global problems. This concept is distributed not only social impacts but also provide
significant opportunities for innovation and company growth (Porter et al. 2011).
Meanwhile, the social entrepreneurs must have the ability to integrate resources, including
people, assets, intellectual properties, equipment, and cash, etc., to create the social value
creation process based on shared value concept (Yung & Cheng 2014). This value proposition
proposes that, as the goal of the joint efforts, the products or services stand out in the service
process structure to achieve profits, including expected profits, and to become a business model
that could effectively solve or alleviate the social problem. According to Byerly (2014), social
entrepreneurs have the ability to creating social value can also create economic value in the
companies (social enterprise). Also, Porter and Kremer (2011) were stated that economic value
could be generating by reconceiving products and markets, redefining productivity in the value
chain, and building supportive industry clusters at the company’s locations.
A study about social value creation done by Jespersen (2011) mention that social value is output
comes from creating value process by new combinations of resources or factors that generate it,
thereby stressing the innovation. Several studies done by Austin et al. (2003), Sud et al. (2009),
Felı’cio et al. (2013) and Bellostas, et al. (2016) found that social value creation is essential
elements to achieve the social mission and social changes. It is also a part of procedure within
social enterprise management structure (organization) and output (product or service) (Bellostas
et al. 2016). On another hand, the social value can be identified by answer the questions what is
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“new” and what is “good” and “valuable” in the concept of positivity (Lautermann 2013). Refer
to Table 1.
Table 1: List of Resources and Social Values Based on Literatures.
Resources
Social Values
Business & Management
Approaches
Clear social enterprise purpose. Suitable business
planning & strategy based on Social Mission.
Targeting to lower the cost as possible & proper
business model. Risk Management.
Leadership
Leadership skills & Flexible Techniques. Keep the
motivation level up every management levels.
Communication &
Information
Clear by using all channels & effective
information channels.
Technology & Innovation
In every aspects & updated (Input, process, &
Output)
Networking
Involve with every levels start with individual,
group, communities, NGO, Private Sector &
Government Agencies (formal & Informal social
network)
Human Resources
High skills
Cultures
Shared norms of behaviour, commitment and
belonging.
Rules and Legislation
Flexible with external forces political & legal or
regulatory environment
Referring to Bellostas, et al. (2016), economic values represent directly financial sustainability by
focusing on keeping and distributing accurate financial records. It is involve with increasing profit
by managing resources to reduce the cost and increase the sale (financial returns) (Urban 2015).
Like already mention early by creating societal value automatically creating economic value
through positioning back again (redesign) the product and service intention based on real needs
(bottom of the pyramid) before this focusing more on the high end users (Muhammad Yunus, et
al. 2010 ; Michelini & Fiorentino 2012). Secondly implementing societal values within social
enterprise management structure (organization) and operating processes (Edgeman 2013). Last
not least, managing network and distribution process by shared knowledge to reduce costs
(Porter & Kremer 2011). In the simple word, everything must work to maintain the growth of
company (Alhaddi 2015). Refer to Table 2 for detail, meanwhile Fig. 1 is an illustration conceptual
framework for this study based on literatures.
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Table 2: List of Resources and Economic Values Based on Literatures
Resources
Economic Values
Business & Management
Approaches
Smooth operation to reduce the costs. Managing
procurement resources.
Leadership
Managing the cost & sale for company.
Communication &
Information
Sharing about business & management
approaches to maximum the profit
Technology & Innovation
Tools to managing the cost
Networking
Managing profits & cost through distribution
social or value networks
Human Resources
Manpower must have strong knowledge in
Financial & Accountancy Field,
Cultures
Focusing to comment needs involve with
individual, group, communities, NGO, Private
Sector & Government Agencies
Rules and Legislation
Clear policies & Social Return on Investment
(SROI)
Fig. 1: Conceptual Framework
Social Business Model today is going to be phenomena interest study recently. Social Business
Model describes how an organization creates and delivers the value including the way how the
business model captures the value. It is also able to explain every single the element and
relationships that plan and how a company or firm create the market value (Smuda & Dorn 2015).
Agafonow et al. (2015) stated that social business operation could be divided into three types of
the social enterprise according to their location in the value chain. First in the procurement phase
of the process of production, like fair-trade organizations that Agafonow categories as a social-
input business;. Next, social enterprises that make a difference in the way these companies
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transform inputs into outputs, like work integration social enterprises or social process business;
and third, social enterprises that create social value producing a distinctive good or service, like
microcredit or low-cost solar lights, also termed social-output business. Meanwhile, Alegre
(2015) has the same idea with Agafonow, and she studies using supply chain management (SCM)
theory to explain the framework that classifies social enterprises into three categories according
to their social mission. Start with social input, follow by social - process, and social output
organizations. Refer to Table 3
Table 3: Types of Social Business Model
Types of Social Business Model
Three type of business based on supply chain
management (SCM) theory
1. 1st categories - Social-input business
2. 2nd categories - Social process business
3. 3rd categories - Social enterprises based on output
Six type of social business model innovation
1. Opportunity creation model
2. Smart distribution model
3. Ecosystem engineering model
4. Cheap sourcing model
5. Smart pricing model
6. Inclusive production model
Four hybrid social enterprise model
1. Market hybrid model
2. Blending hybrid model
3. Bridging hybrid model
4. Coupling hybrid model
Hybrid business model design based on social or ecological
with purely economic
Social Business Model based on Business Operation - B1G1
(Buy One, Give One) business model
Four social business model based on monetisation
approach
1. Model 1: the one sided social mission
2. Model 2: the two sided social mission
3. Model 3: the market oriented social mission
4. Model 4: the commercially utilised social mission
Introduced 3 bigger categories of Social Enterprise Model
based on level of integration between social programmes
& business activities;
1. Embedded Social Enterprise
2. Integrated Social Enterprise
3. External Social Enterprise
Business Model Canvas (BMC) was explained the business to discover their planning in the future.
Introduced by Osterwalder & Pigneur (2010), BMC is an approach to visualize the elements of
the business model and interrelatedness and is used as a tool to replace old business by design a
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new one (Gorissen et al. 2014). The social business model was inspired by BMC to improvise a
value proposition to a social value proposition (Social Innovation Lab 2013). It is was state clear
by Yung and Ching (2014), the primary plan to a valid business model in social enterprise is based
on the social value proposition process for solving or alleviating of a social problem and develop
a social mission. For this proposed study, social value process is a part of the process where the
shared value concept introduced by Porter and Kremer (2011) play the role (combination social
value and economic value). Meantime, Social Business Model Canvas is going to be the medium
to explain the new model proposed by this study.
GAPS AND PURPOSE OF STUDY
Several gaps in this study is a required supplemental social business model categories and
extended the conceptual framework in the business model. Firstly, all the types of the social
business model proposed must be useful for practitioners (Alegre 2015). Secondly, based on
previous studies show that need for a wide variety social business model and expanding the
scope and types of basic needs (Hahn & Spieth 2014, Goyal et al. 2014, Spiess-Knafl et al. 2015 &
Agafonow 2015). Thirdly, the social business model in the future must have a strong value
proposition and a clear connection between mission and program (social impacts) (Jespersen
2011). Lastly, needed for further studies using social business model canvas to transfer to ideas
and theory into practices (Aure et al. 2014). Based on the all limited ideas deliberate by previous
studies, the purpose of this study is to propose Social Value Business Model based on the core of
the business. Next, to design a Social Value Business Model based on social missions.
METHODOLOGY
A study was designed to carry out in the form of overview and descriptively by implement semi-
structured interview with the participants. The rhetorical paradigm for this study is more on an
informal and personal voice. Follow by methodological paradigm, this study also using
combination inductive and deductive approach to answer the research objectives. This study will
focus on the company or firm that has the characteristics of the social enterprise only.
The sampling technique using in this study based on purposive sampling technique and using key
informants (MaGIC and Malaysia SEA) to helping the researcher to identify the potential
participants and gain access. Based on the record in Malaysia Social Enterprise Blue Print 2015
2018 (MSEBP 2015 2018) and Social Enterprise 101, total pool number of SE in our country is
approximately 100 potential companies. Referring to Morse (1994) and Bernard (2000), the total
number of participants from the selecting company for achieving saturation in qualitative
interviews fell within the range of 30 to 50 participants. Meanwhile, Creswell (2009) in Merriam
(2009) is proposed range between 10 to 12 participants at least.
To get clear input from the interview, this study also conducted a focus group involved with
people who are engaged directly with subject matter such as MaGIC and Malaysia SEA to review
the outcome or output from this study. The selected participants come from social entrepreneur,
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CEOs and directors of the company under the Social Enterprise category listed under MaGIC and
winners for MaGIC Amplify Awards from 2014 to 2016. In this proposal, the researcher has a plan
for using qualitative data management Nvivo12 software to coding and developing the theme or
Nodes (Thematic Coding Analysis or Code Based Analysis).
SIGNIFICANCE AND EXPECTATION RESULTS OF STUDY
Researcher expected the addition of a few elements in the shared value concept to improve the
impact of social value creation on the social business model. Furthermore, the researcher hopes
that the findings able to stimulate future empirical research that builds on these qualitative
findings. The researcher expected outcome of this study will able to offer a visual framework to
help practitioners for a better understanding of the social business model. It can be able to be a
tool and devise strategies for their social enterprise to fulfill a social mission and achieve their
target at the end (Triple Bottom Line).
Moreover, the researcher hopes that social value creation will able to help practitioners or
entrepreneurs to develop their new social business model. On the other hand, hopefully, the
outcome of this study can aid practitioners or entrepreneurs to convert or redesign their previous
business model to social business oriented. In the end, based on output researcher expected to
design three (3) Social business model. It based on social value creation according to product,
service, and the combination both core of business (product and service category) and with
another three (3) social business model based on social value creation according to social mission
represent social elements (people and culture), environmental (planet) and economic impacts
(Triple Bottom Line).
This study also can provide and essential inputs and ideas to support Malaysia Social Enterprise
Blue Print 2015 2018 in promoting a “social enterprise” and the same time to improve the social
function under National Key Results Areas (NKRA) based on the Government Transformation
Program 2.0. Lastly, the promoting social entrepreneurship can reduce the cost and increasing
quality of public services and goods delivery in this country.
CONCLUSION
Even though this is only concept idea but hopefully it can help the researcher to design Social
business model based on social value creation and helping practitioners or entrepreneurs to
convert or restructuring their previous business model to social business oriented. Also, those all
positively efforts can spark more inspiration ideas to spur a variety of social business model in
the future.
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... Besides, this study also contributes to the methodological and literature aspects by adopting a quantitative research method to examine the relationships between financial management practices and accountability in Malaysian ISEs. It is a challenge for the researcher because only several studies have been conducted on Malaysian SEs and ISEs (Chan et al., 2021;Farouk and Wing, 2019;Hassan et al., 2018;Kamaruddin and Auzair, 2018;Mohd Ali et al., 2019;Muhamed et al., 2019). In addition, these studies used the qualitative research method to explore Malaysian SEs and ISEs. ...
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Purpose This study aims to examine the role of financial management practices, which consist of financial disclosure, internal control, financial planning and budgeting and financial performance on Islamic social enterprises’ (ISEs) accountability. Design/methodology/approach Questionnaires were administered to financial officers of 102 Malaysian ISEs. Findings were analysed using Smart-PLS to examine the relationships between financial management practices and accountability. Findings Results of this study indicate a direct relationship exists between internal control and accountability. Relationships between other financial management practices and accountability are indirect through internal control. Hence, the data demonstrates that internal control has a mediating role on other financial management practices, which are financial disclosure and financial performance management with the accountability of ISEs. Research limitations/implications This study has implicated the significant role of financial management practices in ISEs in the pursuance of their accountability especially internal control to achieve public trust. Practical implications Appropriate financial management practices, especially internal control, are essential for the ISEs to achieve good accountability. Originality/value This study contributes to the field of management and social accounting by providing empirical evidence on ISE practices specifically on financial management practices and accountability. This framework thus presents among the early attempts in studying accountability issues in ISEs.
... They cannot survive in the capital market to continue their business operations day to day. Soon or later the public/authority may discover their illegal activities, (Fakrulhazri, Norhayate, Zainol, Rashid, & Afthanorhan, 2018). Once uncovered, the investor will run, and the company start being sued by a lot of side such as the banks if they are unable to repay their debt to the public because ruin their trust and money invested, and list go on. ...
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Entrepreneurship has been the engine propelling much of the growth of the business sector as well as a driving force behind the rapid expansion of the social sector. This article offers a comparative analysis of commercial and social entrepreneurship using a prevailing analytical model from commercial entrepreneurship. The analysis highlights key similarities and differences between these two forms of entrepreneurship and presents a framework on how to approach the social entrepreneurial process more systematically and effectively. We explore the implications of this analysis of social entrepreneurship for both practitioners and researchers.
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Purpose This intentionally polemical paper will re-examine what is meant by social enterprise and try to assert its role within the current economic system. It is well over a decade since John Pearce’s Social Enterprise in Anytown was first published. Since then the term ‘social enterprise’ has been used in multiple ways by politicians, practitioners and academics – very often for their own ideological ends. Design/methodology/approach This paper will outline the context and challenges currently facing social enterprise both from outside and from inside the social enterprise movement. Findings This paper re-affirms a paradigm for social enterprises through re-imagining how social enterprise should and could contribute to the creation of a fairer and more just society. Originality/value Finally, this paper will conclude with a reflection on what Pearce argued and how the social enterprise movement has to position itself as a viable alternative way of creating goods and services based on socially responsible values.
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A decade ago the concept of social entrepreneurship was rarely discussed in Malaysia even though the practice of delivering social values to the population has been around for years. Efforts that combined the concept of entrepreneurship and social development were established years before the emergence of the term. Only in recent years the concept of social entrepreneurship is making a significant breakthrough and attaining more interest not only from social entrepreneurs but also academics and policy makers due to globalized economic system that in turn has resulted in the emergence of social entrepreneurship within a complex framework of political, economic and social changes occurring at the global, national and local levels. Nevertheless, the concept and definitions of social entrepreneurship, social entrepreneur and social enterprise need to be comprehended by those who are involved in the sector to further sustain the development of pertinent initiatives. Therefore, this paper reviews current literature pertaining the concepts and definitions of social entrepreneurship, social entrepreneur and social enterprise and recent development of the sector in Malaysia.
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Purpose Business model innovation is a widely discussed research topic which spans all sector boundaries. There is a growing body of literature in the for-profit sector which covers business model innovation. This study analyses what constitutes business model innovation for social enterprises and identifies different types and explains their rationales. The various components which make up a social business model will also be discussed. Design/methodology/approach The study is based on a dataset of awards for social innovations in the years 2011 and 2012. In total, 28 competitions, 30 funding institutions, 11 academic institutions and 3 governmental organisations were identified, and between them they awarded 1020 social organisations. 204 of these social organisations had an innovation based on a business model innovation. Findings Six types of social business model innovation could be identified, which were opportunity creation, smart distribution, ecosystem engineering, cheap sourcing, smart pricing and inclusive production. Contribution This study's main contribution to the body of literature is the identification of different types of social business model innovations and the empirical review of these patterns on a global basis.
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Hybrid organizations pursuing a social mission while relying on a commercial business model have paved the way for a new approach to achieving societal impact. Although they bear strong promise, social enterprises are also fragile organizations that must walk a fine line between achieving a social mission and living up to the requirements of the market. This article moves beyond generic recommendations about managing hybrids in order to highlight a typology of social business hybrids and discuss how each of the four proposed types of hybrid organizations can be managed in order to avoid the danger of mission drift and better achieve financial sustainability.
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Purpose Social enterprises are those organisations that seek to attain a particular social objective through the sale of products or services. Social enterprises, therefore, have two main goals: the social and the economic, which coexist in a single organisation. The literature on social entrepreneurship is divided between those authors that defend that this coexistence creates a tension between the two objectives and that there is a trade-off between the social and the economic goal; and those authors that affirm that precisely the most distinctive characteristic of social enterprises is that they manage to merge harmoniously these two objectives. The purpose of the present research is to shed some light on this discussion by evaluating in which cases the tension between the social and the economic goal is exacerbated and in which cases it is mitigated. Design/methodology/approach Comparative case study approach. Findings The paper presents a framework that classifies social enterprises according to their social mission. Social enterprises whose final product incorporates the social value, experience much less tension between the social and the economic objectives than social companies whose social impact is embedded in the organisational input or organisational process. Limitations The framework proposed classifies social enterprises into three categories that correspond to ideal types but reality is much more complex and many social enterprises will not fall clearly into any one category. Further research is needed to include the wide variety of existing social enterprises. Implications Currently, social entrepreneurship researchers take different standpoints regarding the existence of the social-economic tension in social businesses. This research clarifies the cases in which the tension is more present than others and therefore provides interesting implications for future research in the area. Contribution The differentiation among different social enterprises in social-input, social-process and social-output organisations is a contribution to theory building in the area of social entrepreneurship and, at the same time, useful for practitioners.