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EXECUTIVE DIGEST
Social entrepreneurship: Key issues and concepts
S. Trevis Certo *, Toyah Miller
Mays Business School, Texas A&M University, College Station, TX 77843-4221, U.S.A.
1. A beginning
Entrepreneurship involves the identification, evalu-
ation, and exploitation of opportunities (Shane &
Venkataraman, 2000). In this sense, opportunities
represent occasions to bring new products or serv-
ices into existence such that individuals or organ-
izations are able to sell new outputs at prices higher
than their cost of production. (For an excellent
review of opportunities and entrepreneurship, see
Eckhardt & Shane, 2003.) The implication, of
course, in this definition is that the fundamental
mission of entrepreneurial activities involves profit
generation, and these profits help entrepreneurs to
build personal wealth.
In recent years social entrepreneurship, a sub-
discipline within the field of entrepreneurship, has
gained increasing attention from entrepreneurship
scholars. Social entrepreneurship involves the rec-
ognition, evaluation, and exploitation of opportu-
nities that result in social value — the basic and
long-standing needs of society — as opposed to
personal or shareholder wealth (Austin, Steven-
son, & Wei-Skillern, 2006). Social value has little
to do with profits but instead involves the fulfill-
ment of basic and long-standing needs such as
providing food, water, shelter, education, and
medical services to those members of society
who are in need.
A number of groups and organizations have rec-
ognized socially-oriented ventures. Fast Company,
for example, recently recognized Better World
Books, an organization that addresses the global
literacy problem by helping fund community reading
programs via sales of donated books, for outstanding
social entrepreneurship. As another example, the
Manhattan Institute Award for Social Entrepreneur-
ship honors leaders who develop solutions for press-
ing social problems. Recently, the Manhattan
Institute recognized the Houston-based Prison En-
trepreneurship Program for its work providing pris-
oners with the skills needed to start new ventures
upon their release, along with other worthy organ-
izations.
Even some of the most renowned capitalists have
embraced, and served as champions for, social en-
trepreneurship. Perhaps the most notable example
involves Bill Gates, the founder of Microsoft. In a
recent speech at the World Economic Forum in
Switzerland, Mr. Gates championed a new form of
capitalism: ‘‘Such a system would have a twin mis-
sion: making profits and also improving lives for
those who don’t fully benefit from market forces.’’
(For more information on this speech, see Guth,
2008, p. A1.)
In the remainder of this article, we review re-
search in social entrepreneurship to better under-
stand how this concept has developed over time. In
so doing, we illustrate how social entrepreneurship
differs from the traditional conceptualization of
entrepreneurship. We also provide some ideas for
future research in the domain of social entre-
preneurship.
Business Horizons (2008) 51, 267—271
www.elsevier.com/locate/bushor
* Corresponding author.
E-mail addresses: tcerto@mays.tamu.edu (S.T. Certo),
tmiller@mays.tamu.edu (T. Miller).
0007-6813/$ — see front matter #2008 Kelley School of Business, Indiana University. All rights reserved.
doi:10.1016/j.bushor.2008.02.009
2. Social entrepreneurship: What is it?
Despite the emergence of social entrepreneurship in
both the academic and business worlds, there re-
mains some tension in the academic literature re-
garding its exact definition. This tension, though, is
consistent with similar issues in the broader entre-
preneurship literature (Peredo & McLean, 2006).
As Venkataraman (1997, p. 120) noted, ‘‘there are
fundamentally different conceptions and interpre-
tations of the concept of entrepreneur and the
entrepreneurial role, consensus on a definition of
the field in terms of the entrepreneur is perhaps an
impossibility.’’
To better understand social entrepreneurship,
Austin et al. (2006) distinguished between two types
of entrepreneurship. In their framework, commercial
entrepreneurship represents the identification, eval-
uation, and exploitation of opportunities that result
in profits. In contrast, social entrepreneurship refers
to the identification, evaluation, and exploitation of
opportunities that result in social value. Opportunity
awareness and recognition reflect an entrepreneur’s
ability to detect when either supply or demand for a
value-creating product or service exists (Kirzner,
1973). Social entrepreneurs have an acute under-
standing of social needs, and then fulfill these needs
through creative organization. This focus on social
value is consistent across various definitions of social
entrepreneurship (e.g., Peredo & McLean, 2006;
Shaw & Carter, 2007). Other than this focus on social
value as opposed to private wealth, the definitions
of commercial and social entrepreneurship are quite
similar. These similarities underlie Dees’ (1998, p. 2)
declaration that ‘‘[s]ocial entrepreneurs are one
species in the genus entrepreneur.’’
More formally, Austin et al. (p. 2) define social
entrepreneurship as ‘‘innovative, social value cre-
ating activity that can occur within or across the
nonprofit, business, or government sectors.’’ There
are two important points worth noting about this
definition. First, the definition explicitly notes the
role of innovation. Social entrepreneurship presum-
ably involves applying a new technology or approach
in an effort to create social value. This focus on
innovation is consistent with the Schumpeterian
view of entrepreneurship which emphasizes the role
of innovation in entrepreneurship; social entrepre-
neurs, then, may be viewed as social innovators
(Casson, 2005). Dees (1998, p. 4) confirms the role
of innovation by suggesting that social entrepre-
neurs ‘‘play the role of change agents in the social
sector by...engaging in a process of continuous
innovation, adaptation, and learning.’’ Second,
the definition highlights the various contexts in
which social entrepreneurship may take place. So-
cial entrepreneurship might involve individual en-
trepreneurs, new or existing organizations (both
non-profit or for profit), or governments. In other
words, there is no single type of social entrepreneur.
According to Austin et al. (2006), there are at least
three primary ways to distinguish between commer-
cial and social entrepreneurship. First, new commer-
cial and social ventures differ in terms of overall
mission. (For an overview of mission statements in
the entrepreneurship context, see O’Gorman & Dor-
an, 1999.) While commercial entrepreneurs are pri-
marily concerned with private gains, social
entrepreneurs are more concerned with creating
social value. Of course, commercial entrepreneurs
may produce social value in the process of creating
private gains, and social entrepreneurs may produce
private gains in the process of creating social value
(Emerson & Twersky, 1996). Despite these potential
secondary gains, these two types of organizations are
driven by two very different missions.
Directly related to their differences in missions,
commercial and social entrepreneurship differ dra-
matically in terms of performance measurement
(Austin et al., 2006). In commercial entrepreneur-
ship, performance is typically measured in terms of
financial performance. Examples of such financial
performance measures include profitability (i.e.,
return on assets, return on equity) and sales growth.
(For a more comprehensive review of such perfor-
mance measures, see Murphy, Trailer, & Hill, 1996.)
Because financial performance metrics are stan-
dardized, they can be recognized and appreciated
by entrepreneurs and investors.
In contrast, performance measures for social
entrepreneurship are less standardized and more
idiosyncratic to the particular organization. For
example, take a new venture formed to provide
educational services to children in inner cities.
How would the leaders of this venture assess per-
formance? Using profitability as a performance mea-
sure would most likely not prove useful, as the
mission of the organization does not involve produc-
ing monetary gains. Instead, a survey designed to
assess the influence of the program on students’ test
scores may prove more useful. In addition, growth in
the number of students served might represent
another indicator that the program is well received
by the local community. While it remains difficult to
evaluate the performance of a social venture, de-
veloping mechanisms that help to alleviate this issue
represents an important task in establishing the
legitimacy of social entrepreneurship as an area
of academic inquiry (Mair & Martı´, 2006). Our un-
derstanding of how to measure social value is lack-
ing, yet new metrics exist to quantify value in the
social sector (Young, 2006).
268 EXECUTIVE DIGEST
Third, commercial and social entrepreneurship
differ in terms of resource mobilization (Austin
et al., 2006). Perhaps the importance of this dis-
tinction is most obvious when considering financial
resources. Commercial entrepreneurs have at their
disposal one important factor when attempting to
attract financial resources: the allure of potential
returns. Angel investors and venture capitalists, for
example, provide capital to commercial entrepre-
neurs with the hope that they will one day receive
even more capital in return. (For an excellent over-
view of angel investors and venture capitalists, see
Morrissette, 2007.) In addition to financial resour-
ces, resource mobilization also involves human re-
sources. Commercial entrepreneurs are able to hire
employees based on the same factor: potential
returns. When individuals decide to work for com-
mercial entrepreneurs, they typically do so based on
the premise that their effort will result in financial
rewards such as wages, benefits, future windfalls
(i.e., stock options), or some combination of these
rewards.
Without the allure of potential returns, social en-
trepreneurs may face more difficulties in mobilizing
financial resources. Starting a new social venture
requires identifyingfunding sources that are primari-
ly interested in creating social — as opposed to eco-
nomic — value. Fortunately, a more recent trend
toward venture capital funding of social ventures
has transformed social entrepreneurship. Philan-
thropic venture capital companies, such as Ashoka,
theAcumen Fund, andVenturePhilanthropy Partners,
provide financial resources, consulting, and interor-
ganizational relationships for new social ventures.
Venture capital is being sought by social entrepre-
neurs to fund their operations because social organ-
izations have suffered a decline in operating fund
reserves (Boschee, 1995). For example, the Roberts
Enterprise Development Fund assists social organiza-
tions by providing financing for organizational infra-
structure, strategy, and business development.
This same principle also applies to locating hu-
man resources. Often, social ventures cannot afford
to pay market rates for employees. Consequently,
many social ventures rely on volunteers and employ-
ees who are more concerned with creating social
value than earning and building private economic
wealth. Finding employees with these motives, of
course, remains difficult for social entrepreneurs.
3. Is social entrepreneurship really
different?
Despite the differences between social and com-
mercial entrepreneurship, some scholars claim that
there exists a continuum for which commercial and
social entrepreneurship serve as anchors (Austin
et al., 2006;Peredo & McLean, 2006). In other
words, organizations can pursue commercial entre-
preneurship, social entrepreneurship, or some com-
bination of both. In fact, some scholars even refer to
organizations that pursue both commercial and so-
cial objectives as hybrids (Davis, 1997). In a sense,
then, these hybrids pursue two bottom lines, one of
which deals with profits while the other deals with
social value.
It is important to note, though, that not all agree
with the notion that a person or organization can
pursue two bottom lines and be considered social
entrepreneurs. As Peredo and McLean (2006) sug-
gest, for example, some firms engage in cause-
related marketing as a mechanism to increase sales,
profits, and shareholder wealth. It is difficult to
argue that employing such tactics for a purely prof-
itable objective indicates that one is a social entre-
preneur. Peredo and McLean (2006, p. 62) note, for
example, ‘‘It is tempting to say that only ventures
willing to accept a significant reduction in their
profits as a consequence of their pursuit of social
goals should be considered examples of social en-
trepreneurship.’’ The authors quickly point out,
though, that determining motive is difficult (if not
impossible) and as such, this distinction is perhaps
not important.
4. Future research
As noted earlier, social entrepreneurship has gained
attention in many diverse fields, and this diversity
has resulted in several definitions. An important
agenda for the further development of social entre-
preneurship research involves creating consensus
across these fields as to the definition and key
elements of the construct, as well as resolving some
of the foundational debates. For example, social
entrepreneurship has been characterized both
broadly as an innovative social venture (Cochran,
2007;Dees & Anderson, 2003) and more narrowly as
the use of market-based activities to solve social
needs and generate earned income through innova-
tion (Thompson, 2002). Establishing concrete defi-
nitions will help overcome the vagueness of the
concept of social entrepreneurship, which places
obstacles on research in the area. We can draw
parallels to the development of the field of entre-
preneurship, which began with and expanded be-
yond definitional and attribute-based descriptions.
Therefore, multiple issues remain which, if ad-
dressed, may help social entrepreneurship research
further progress.
EXECUTIVE DIGEST 269
First, having a social mission is a central attribute
of a social venture, yet there are differences in the
degree of its significance to the organization (Per-
edo & McLean, 2006). Social ventures may place
different levels of importance on the social mission.
For example, the social mission may be the major
focus of an organization, or profit may be the major
motive of an organization that happens to provide
some social product or service (Alter, 2006). In fact,
some argue that having a blended value (both social
and profit) is important for social entrepreneurs
(Emerson & Twersky, 1996), while others suggest
economic value should be a limited concern for
social entrepreneurs and the social mission must
be central (Dees, 1998;Seelos & Mair, 2005). While
there is debate over the necessity for social ven-
tures to generate earned income, scholars seem to
agree that social entrepreneurship includes both
for-profit and not-for-profit ventures. Overall, this
calls for more research into understanding how
differences in importance of the social motive influ-
ence strategy and resources (Austin et al., 2006).
Another area for future research involves exam-
ining the characteristics of social entrepreneurs.
Similar to early work in entrepreneurship, which
compared characteristics of managers to those of
entrepreneurs, research is needed to understand
the personal characteristics and cognitive schemas
of social entrepreneurs (Roper & Cheney, 2005).
Because social entrepreneurship is mission-relat-
ed, internal values and motivation largely drive the
venture (Dees, 1998; Hemingway, 2005). For exam-
ple, social entrepreneurs are often driven by their
passion to meet the needs of a population (Born-
stein, 2004), or by their personal values (Drayton,
2002; Hemingway, 2005), charisma (Roper & Che-
ney, 2005),andleadershipskills(Thompson, Alvy, &
Lees, 2000). Future research could also focus on
the actions and behaviors of social entrepreneurs
that help improve the performance of these ven-
tures. As mentioned earlier, however, establishing
consistent measures of social performance repre-
sents a critical development needed to examine
this issue.
Two important actions which may shed light on
social venture success involve social networking and
venture capital fundraising. One research opportu-
nity involves investigating the social networks of
social entrepreneurs. Leadbeater’s (1997) theory
on social entrepreneurship suggests that social ven-
turing begins as an individual mobilizes others to-
ward a social goal using her social network. Thus,
social capital is important to resource acquisition
because human resources are needed to devote
time and money to the organization, alliances are
necessary to maintain operations, and community is
the source of value creation in social ventures
(Thompson, 2002). In addition, the funding of social
ventures is an important activity of social entrepre-
neurs. While a number of public organizations pro-
vide business consulting to social entrepreneurs,
monetary resources are necessary to implement
the ambitious social visions of social entrepreneurs.
The latest trend toward venture capital funding of
social ventures has created a new business model for
social entrepreneurs, whereby the entrepreneur
can trade operational control of the venture for
financial support. While prior research has exam-
ined venture capital assessments for profit-seeking
ventures (MacMillan, Siegel, & Narasimha, 1985;
Shepherd, 1999), little is known about the decision
rules that philanthropic venture capitalists use to
select social ventures or how they actually influence
venture outcomes (Austin et al., 2006; Cochran,
2007).
Finally, the majority of extant research on social
entrepreneurship involves case studies (e.g., Al-
vord,Brown,&Letts,2004;Emerson & Twersky,
1996;Thompson, 2002). Although there exists some
broad, empirical research on social entrepreneur-
ship, the lack of empirical studies has placed limits
on our understanding of the important antecedents
and outcomes of social entrepreneurship. Moving
toward more rigorous empirical studies, and estab-
lishing major theoretical perspectives by which
researchers may explore these questions, should
benefit both practitioners and academics (Mair &
Martı´, 2006;Sharfman, Busenitz, Townsend, &
Harkins, 2006). Roberts and Woods (2005) suggest,
for example, that many social entrepreneurs are
left without strategic patterns to implement due to
lack of education. More research in the area, how-
ever, may help to provide the theory and evidence
needed to educate and advise social entrepre-
neurs.
5. Final thoughts
The most provocative and striking element of
social entrepreneurship has been its ability to
combine elements of the business and volunteer
sectors, yet this combination may also represent
the greatest obstacle to the definition of the field.
With its roots in both entrepreneurship and public
policy, researchers and practitioners must lay out
the important questions and key defining elements
of social entrepreneurship. We believe research-
ers can work across disciplinary barriers to study
this emerging phenomenon, and we provide a
number of potential research ideas for that en-
deavor.
270 EXECUTIVE DIGEST
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