Contact
-

entrepreneurship@oikos-stgallen.org
 

University St. Gallen

Dufourstrasse 50

9000 St. Gallen

evolve by oikos

Social Entrepreneurship: An Option becomes a Necessity
Social Entrepreneurship:  A Story of Success?

Edona Zeciri, 17.03.2019

We asked a simple question: “What is Social Entrepreneurship (SE)?”. What we ended up with was a wide range of various definitions. Learn why SE has become more popular during recent times and why social enterprises have a bright future ahead of them.

 

Creating social value has been a long-lasting concept in the history of enterprises. Since almost 20 years the term “Social Entrepreneurs” has become quite popular. As a result, more and more researchers, as well as companies, deal with the topic of social impact. However, with the rise of SE, many companies use the positive association of the term as an image boost. In our survey, many students proved to be skeptical regarding the truthfulness of self-titled sustainable and social entrepreneurs. Taken that into account, people are seeking a clear definition of SE. But even though SE is not a recent phenomenon, it is still poorly defined.

 

What even is Social Entrepreneurship?

The participants of our survey had a hard time defining SE, with the result that everyone came up with a different definition. In this context, Prof. Dr. Wüstenhagen emphasizes the difficulty of clearly distinguishing SE from profit-based companies because various companies have some kind of social value. For Prof. Dr. Grichnik, in contrast, the definition of SE is quite clear. He states that the main difference between a traditional company and a social one lies within the purpose and business model of an enterprise. It is possible to have more than one purpose but as long as the main purpose and the business model based on it is social, the entrepreneurship can be classified as a SE. For instance, a company with the purpose of making a profit through clothes sales, but employs 15% of disabled people, would not fall under the category “social enterprise”. However, if the purpose would be to decrease unemployment rates by giving disabled people a job, then it can be considered as a social enterprise.

 

The self-aware generation

Are we now in a generation-turnover? On the one hand, there are still many old companies with long-lasting business models to maximize their shareholder value without considering social impact. On the other hand, there is a significant trend towards SE apparent, especially among the young generation. Many young entrepreneurs establish innovative ideas to change the world in a positive way. Prof. Dr. Grichnik has also observed an increasing interest in SE among the students of recent generations. They are more self-critical, willing to make an effort and aware of their possible impact. Furthermore, technologies nowadays allow more simplified and scalable solutions for social issues.

 

Thinking ahead

According to Prof. Dr. Wüstenhagen, technological knowledge has brought us to a point, where ecological manufacturing is even more economical than the traditional one. Entrepreneurs who think one step ahead know, that a long-lasting profit is more important than the numbers of a quarterly financial statement. Enterprises that not only focus on their short-term profit are more likely to recognize risks as well as chances. Waiting for the government to outlaw diesel motors before changing business plans leads to a competitive disadvantage in comparison to enterprises that have made this step earlier. Hence, SE is no longer an option but a necessity to be successful in the marketplace over the long term.

 

 

Main sources:

  • Interview with Prof. Dr. Wüstenhagen, Institute for Economy and the Environment

  • Interview with Prof. Dr. Grichnik, Institute of Technology Management with Transfer Center for Technology Management

  • Anonymous online survey among HSG students provided by EVOLVE

 

Further research:

LEPOUTRE, J., JUSTO, R., TERJESEN, S., & BOSMA, N. (2013). Designing a global standardized methodology for measuring social entrepreneurship activity: the Global Entrepreneurship Monitor social entrepreneurship study. Abgerufen 12. März, 2019, von https://www.researchgate.net/publication/246547927_Designing_a_Global_Standardized_ Methodology_for_Measuring_Social_Entrepreneurs

 

MAIR, J., & MARTI, I. (2006, 1. Februar). Social entrepreneurship research: A source of explanation, prediction, and delight. Abgerufen 25. März, 2019, von https://www.sciencedirect.com/science/article/pii/S1090951605000544

Marion Rauch, 17.03.2019

Even though Social Entrepreneurship (SE) is on the rise, there seems to be a big question mark over the whole concept of SE and its success. What are successful companies, how can success be actually measured and what are the risks of successful enterprises? Find out here.

 

As SE becomes more and more popular as a business concept, one crucial question is how to measure whether a social enterprise has been successful. There has not been a general consensus regarding this question in the literature. The reasons for this might be within the nature of the social cause. How can performance be measured which goes beyond tangible and financially determinable factors like revenue? SE is composed of a complex set of qualitative, intangible, multicausality-based factors which aims to solve a certain social problem.

 

Measuring Social Impact

In this context, Prof. Dr. Grichnik outlines the fact that the typical Return on Investment cannot be used as a measurement. He proposes that only an approximation of measurement in SE is possible. There are three different types of measured quantities: input, process, and output. Whereas in a profit-based company output is the central measure variable, output often cannot be quantified in SE. The social impact can be therefore approximated by the input variables. For example, an indicator could be “How many unemployed people, which cannot access to the ordinary labor market, have now been employed by this company?” Furthermore, Prof. Dr. Grichnik emphasizes on the fact that due to the multidimensionality, performance cannot be derived from one single factor. A metrics portfolio which analyses various factors can approximate a key figure. In this context, Prof. Dr. Wüstenhagen includes sustainability ratings such as ESG. However, he highlights the fact that ratings should be treated with caution, especially regarding the time lag. Because of the difficulty of measuring long-term effects of social impact, most ratings only incorporate short-term achievements. However, when it comes to SE the extent of the impact usually takes time. Taking these measures and risks into account what are successful examples of SE?

 

SE – Stories of Success

A classic example of a successful social enterprise is the Grameen Bank founded by the Bangladeshi Professor Muhammad Yunus. The Grameen Bank is a microcredit institution for the poor Bangladesh population, which is unable to access loans in the formal banking system. The bank provides microcredit to poor people without any need for collateral. The idea behind the concept is that with enabled financial resources the rural poor can generate selfemployment and reduce poverty. The concept has been a huge success, covering more than 97% of the villages in Bangladesh with over more than 8.4 million borrowers today. Furthermore, the concept has been applied by other Governments and NGOs in several

countries.

 

Another successful example of SE, mentioned by Prof. Dr. Grichnik, is the social enterprise Dialogue in the Dark founded in Frankfurt (DE). The enterprise provides exhibition tours through settings in darkness guided by blind employees. These invisible tours should raise awareness for what it is like to be blind and to recognize and use other senses. By employing blind people, the enterprise has created thousands of jobs for disabled people.

 

Not losing the social cause due to success

From a critical perspective, Prof. Dr. Wüstenhagen brings up the difficulty of SE success when it comes to the interface between the company and the capital market. When the company is growing, it will eventually open up to external investors, which are focusing on the financial indicators instead of the impact related ones. Hence, it is difficult to keep up the intangible indicators as a company. According to Prof. Dr. Grichnik, this difficulty can be reduced by establishing a precise business model which is well-thought through. As a result, the social purpose will not get lost even if the enterprise opens up to external investors.

 

Main sources:

  • Interview with Prof. Dr. Wüstenhagen, Institute for Economy and the Environment

  • Interview with Prof. Dr. Grichnik, Institute of Technology Management with Transfer Center for Technology Management

  • Anonymous online survey among HSG students provided by EVOLVE

 

Further research:

AROGYASWAMY, B. (2017). Social entrepreneurship performance measurement: A time-based

organizing framework. Abgerufen 13. März, 2019, von

https://www.researchgate.net/publication/317832658_Social_entrepreneurship_performan

ce_measurement_A_time-based_organizing_framework

 

RAWHOUSER, H., CUMMINGS, M., & NEWBERT, S. (2017, 26. September). Social Impact

Measurement: Current Approaches and Future Directions for Social Entrepreneurship

Research. Abgerufen 7. März, 2019, von https://journals.sagepub.com/action/cookieAbsent

 

HOSSAIN, D. (2013, Oktober). Social Capital and Microfinance : The Case of Grameen Bank ,

Bangladesh. Abgerufen 8. März, 2019, von https://www.researchgate.net/publication/271299707_Social_Capital_and_Microfinance_T

he_Case_of_Grameen_Bank_Bangladesh

  • Black Instagram Icon
  • Black Facebook Icon
3_1EVOLVElight blue.png