In this article, Sagnik Chakraborty pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses Hybrid structuring in India for social entrepreneurship.
Introduction
Social Entrepreneurship juxtaposes two seemingly incompatible concepts. ‘Entrepreneurship’ carries with it the image of a completely profit-driven enterprise, using the latest technology, attracting investors with prospects of quick returns and large gains for shareholders. A Social venture on the other hand is associated largely with NGO’s or government organisations, providing support and relief for the underprivileged, with no motivation of financial gain at all. There seems to be a clear divide between the two sets of organisations, one makes money and the other gives it away. However, the field of social entrepreneurship seeks to establish that it is possible to have an integrated approach, bringing to bear the strengths and characteristics of the business world on areas of need, in order to achieve lasting social outcomes.
Although social entrepreneurship in some form or the other is not new, it became established as a field of graduate study in the early 2000s, and gathered impetus as the work of some eminent social entrepreneurs gained visibility. The conferring of the Nobel Peace Prize to Muhammad Yunus and the Grameen bank in 2006 is one such example. There are many public sector organisations that provide support to such ventures including the Ashoka, Schwab and Skoll foundations as well as a whole range of impact investors.
Prominent Social Entrepreneurs in India
Some of the prominent social entrepreneurs in India include Dr. G. Venkataswamy of Aravind Eye Hospital, Dr. Verghese Kurien of Amul, Dr. Devi Shetty of Narayana Hrudayalaya, Ela Bhatt of SEWA, Jeroo Billimoria of Childline, Harish Hande of SELCO, Hanumappa Sudarshan of Karuna Trust, Akanksha Hazari of m.Paani, Bunker Roy of Barefoot College, Chetna Vijay Sinha of the Mann Deshi Mahila Sahakari Bank and many more. As social entrepreneurship attracts attention in the media as well as from impact investors, it becomes imperative to understand more precisely what comprises social entrepreneurship and to distinguish it from other ventures in a similar space. Social workers and activists, not-for-profit organisations, for-profit companies with a social motive, companies that are socially responsible – the question is whether all efforts that lead to social benefit can be included in this category or if there are some clearly distinguishing features.
“A good way to begin to define the concept is by defining each of the terms ‘entrepreneur’ and ‘social’. An enterprise must necessarily fit both of these criteria in order to qualify.”
Defining ‘Entrepreneurship’
The word entrepreneur is derived from the French and literally means ‘one who undertakes’ and referred to a person who found new and better ways of doing things resulting in economic progress.
French economist, Jean Baptiste Say[1], in the early 19th Century stated “The entrepreneur shifts economic resources out of an area of lower and into an area of higher productivity and greater yield.” Joseph Schumpeter[2], a 20th Century economist also wrote extensively about entrepreneurship, emphasizing the aspect of ‘exploiting an invention’, where the entrepreneur uses a hitherto untried technology to produce a new commodity or produce an old one in a new way, moving the economy forward. He believed that a truly entrepreneurial venture would set off a chain reaction, encouraging other entrepreneurs to further develop and promote the innovation until all earlier products, services and business models become obsolete.
Contemporary business and management experts expand on the same concept. In the opinion of Peter Drucker, entrepreneurs need not directly cause change but could exploit the opportunities caused by change in technology, preferences, social norms and so on. In his words ‘the entrepreneur always searches for change, responds to it, and exploits it as an opportunity’[3]. When an entrepreneur sees change, he is neither threatened by it nor sees it as a problem, but rather as a challenge and thinks of the possibilities created by it.Howard Stevenson[4]added to this the idea of resourcefulness. Entrepreneurs are not constrained by lack of resources, but look beyond the current situation, and are willing to reach for things that are beyond their grasp. They are able to mobilise the resources required to meet their objectives.
Suboptimal Equilibrium
Martin and Osberg[5]believe that entrepreneurship comprises a combination of a specific context, a set of characteristics and an outcome. The entrepreneurial context is a ‘suboptimal equilibrium’. There is a need,which is only being partially met, but consumers have learnt to accept the less than ideal situation. For example they may want to have access to convenient affordable public transport but learn to manage with buses despite their inconvenience or taxis, which are expensive. The entrepreneur sees in this unsatisfactory equilibrium, an opportunity to provide a new solution. In order to be able to do this, the entrepreneur must have certain characteristics – inspiration, creativity, initiative to take direct action, courage and fortitude to persist despite obstacles. The outcome is a new equilibrium, one that provides a higher level of satisfaction and one that is widely adopted. In the above example, the use of cab aggregators, results in taxis that are much more affordable and easily and quickly accessible, and several companies have now adopted the concept, creating a ‘new normal’ form of transport.
Defining ‘Social’
Social entrepreneurship then is a subset of entrepreneurship. So what sets it apart from any other form of business entrepreneurship? On the other hand how would one distinguish Social Entrepreneurship from other forms of social activities?
Not all experts and practitioners in the field are fully agreed on what qualifies a social enterprise as ‘social’. There is however broad agreement that social entrepreneurs and their ventures are driven by social goals, they have the desire to benefit society in some way, to increase social value and to contribute to the welfare of society. Outcomes could be in different areas – economic, political, cultural, or environmental. The Schwab Foundation [6] defines it as “market-based approaches to solving social and environmental challenges, with an emphasis on low-income or underserved populations.”
Disagreement arises in the relative importance given to social goals in the overall purpose of the organization. At one extreme are the proponents of the theory that a social enterprise must pursue purely social goals with no commercial activity at all and a purely not-for-profit status. A survey of the use of the term social entrepreneurship in the press over a 15 year period showed that 83% referred to examples from the not-for-profit sector. (Taylor, Hobbs, Nilsson, O’Halloran, Preisser)[7]Further along the continuum are those who accept some commercial activity, provided that any profits are directed back into the venture. Others accept that profit-making could be a goal, but subordinate to the social goals. According to Dees[8], “the social mission is explicit and central…mission-related impact becomes the central criterion, not wealth creation. Wealth is just a means to an end”.Yet others see profit-making as a legitimate goal, but subordinate to the social goal. In some, profitability ranks closely if not equal to social goals. The Northland Institute[9] refers to the ‘double bottom line’ where financial and social returns on investment are simultaneously pursued. At the other extreme, social benefits may even be the means to profitability, when they are engaged in as much for their marketing value as for their own merit, and would perhaps no longer be pursued if they lowered profits.
Distinction from other Social Activities
It is also important to our understanding of social entrepreneurship to be able to distinguish it from other forms of social activities, without in any way undermining the value of those activities. Social service initiatives which are locally focused, serve an immediate need, remain dependent on resources that they are able to muster and do not attempt to achieve a larger scale, would not be considered entrepreneurial. Social activists may also operate in the same space, and they too may be motivated by the same unsatisfactory equilibrium. However activists attempt at influencing others, NGOs, Governments, the public – rather than taking direct action.
Keeping all these concepts in mind, we could conclude that a social entrepreneur identifies an unjust equilibrium that results in neglect, suffering or lack of well being in a population that is unable to achieve a change on its own. The entrepreneur recognizes this as an opportunity and makes use of unique talents, drive, initiative, innovation, persistence and organizational abilities, mobilizes resources, and works to bring about a large-scale transformation in the targeted group and even to society at large.
Why Social Entrepreneurship
If social entrepreneurship is something undertaken only to create a feel good factor, it will not have a lasting impact. Social entrepreneurship is certainly not for everyone, but for those who are inclined to undertake such a venture, it is important to look at the long-term benefits. There is a tremendous need around the world, and very specifically in India, with large numbers of people experiencing economic need, poor physical and mental health, illiteracy, lack of basic necessities, environmental issues and so on. The well-being of the entire nation and for that matter the world cannot be independent of the well-being of large segments of the population. Good social outcomes benefit the society as a whole. Consider the impact if these large-scale issues are tackled with the same enterprise, innovation and determination that business entrepreneurs normally devote to wealth creation.
The other benefit is the satisfaction that is obtained from achieving sustained social outcomes. Increasingly, people wish to achieve both meaning and financial gain through work. Over 50% of millennial surveyed by Deloitte (2011) [10] considered the primary purpose of business to be innovation and societal development, and similar results were replicated in the following years. The desire to achieve meaning is by no means restricted to the younger generation. Psychologist Erik Erikson theorised that the developmental task of middle age is achieving generativity, which means making one’s mark by contributing to the family and community and accomplishing things that make the world a better place. Failure to achieve this results in a sense of stagnation and of being unproductive.Many of the world’s most successful business people have turned to philanthropy following in the footsteps of Bill and Melinda Gates, Warren Buffet, and Jeff Skoll, Ratan Tata, and others.
Social entrepreneurship is not for everyone. It requires a special combination of personal characteristics and motivation. To those who choose to take this path, it can deliver financial returns, personal satisfaction and lasting social outcomes with the power to transform society.
Endnotes
[1]Jean-Baptiste Say, quoted in J. Gregory Dees, The Meaning of ‘Social Entrepreneurship,’ reformatted and revised, May 30, 2001. http://www.fuqua.duke.edu/centers/case/documents/Dees_SEdef.pdf.
[2]Joseph A. Schumpeter, quoted in Roger Martin, Sally Osberg, Social Entrepreneurship: The Case for Definition, Stanford Social Innovation Review, https://ssir.org/articles/entry/social_entrepreneurship_the_case_for_definition
[3]Peter F. Drucker, quoted in Dees, The Meaning of ‘Social Entrepreneurship,’
[4]Howard Stevenson, quoted in Dees, The Meaning of ‘Social Entrepreneurship,’
[5]Roger Martin, Sally Osberg, Social Entrepreneurship: The Case for Definition
[6]Schwab Foundation for Social Entrepreneurship Annual Report 2014-2015http://www3.weforum.org/docs/WEF_Schwab_Foundation_Annual_Report_2015.pdf
[7]Taylor, Hobbs, Nilsson, O’Halloran, Preisser (2004) quoted in Ana Maria Peredo, Murdith McLean, Social entrepreneurship: A critical review of the concept, Journal of World Business 41 (2006) 56-65. http://s3.amazonaws.com/academia.edu.documents/33892808/articulo_ing_1.pdf
[8]J. Gregory Dees, The Meaning of ‘Social Entrepreneurship,
[9]Northland Institute (2001) quoted in Peredo, McLean, Social entrepreneurship: A critical review of the concept
[10]Deloitte (2014 Jan) quoted in Cathy Clark, Jed Emerson, Ben Thornley, (2015) The Impact Investor; John Wiley & Sons Inc
