Social Entrepreneurship in China

1. Introduction

During the last decades China has become an important economic nation showing rapid growth. Between the implementation of opening reforms in 1979 and 2011 China’s average annual growth of GDP reached a rate of 9,9%¹. In general, experts give a central role to following factors: a solid level of foreign direct investment, a high rate of domestic savings of about 43.3%² as well as the remarkable productivity growth.³ The effort of the Chinese government concentrated supporting state-owned enterprises (SOEs) by subsides. After a number of successful modernisation measures, a selected number of SOEs could sustain a competitive position in the international market. Another pillar of economic growth is represented by joint venture companies, offering modern technology know-how to Chinese enterprises. Small and medium-sized enterprises (SMEs) are another important driver of sustainable economic growth in China.⁴

However, Chinese labour conditions and low-cost production are criticized by international experts. Workers are often confronted with a system of high exploitation including hazardous working conditions and a lack of social security.⁵ An opposite trend takes place in Europe, where social entrepreneurship is in development attracting a great deal of attention.

The following essay deals with the question if basis conditions for a sustainable development of social entrepreneurship are given in China and if the concept does appeal to the Chinese society at all. After the introduction, the term of social entrepreneurship is analysed to get a better understanding of single business types and their essential characteristics. In the next step, the current situation in China is discussed by using examples of successful enterprises. Then, a critical appraisal is subjected including a discussion on advantages and outstanding challenges of social entrepreneurship, followed by a conclusion.

2. The Concept of Social Entrepreneurship

Social entrepreneurship is a new possibility to solve social problems in a way an entrepreneur would do. The concept establishes a connection between social commitment and entrepreneurial activity, including management by objectives and cost minimisation in reasonable dimensions. Social entrepreneurs are not able to deal with all social challenges on their own due to inefficient division of labour, unnecessary administrative work or inflexible method of operation. Solving these problems, social entrepreneurs accept a partial responsibility striving to find a prudential solution using their entrepreneurial know-how. Beyond the social commitment, social entrepreneurs develop innovative concepts with a great potential to be implemented in the next step.

2.1. Entrepreneurial Types

Although social entrepreneurship is gaining increasingly more popularity, a precise definition still does not exist. For this reason, the term may be interpreted in different ways.⁶ The interpretation has proved particularly different due to the different appreciation of the term ‘social’. As shown in figure 1, there are three types of entrepreneurship. The inner core presents the narrow perspective of the concept including non-profit institutions. The social aspect is characterized as a charitable acting. The next layer consists of income-generating social projects, reflecting the fact that the term ‘social’ is often associated with good deeds. From the sociological point of view such an interpretation is wrong, because acting social does not necessarily mean a non-profit act. The third layer demonstrates the broadest perspective consisting of companies supporting social projects with their business idea.⁷

2.2. The Entrepreneurial Aspect

In consideration of the existing definition differences, it is important to identify suitable factors making the concept distinguishable from the similar ones. Otherwise, there is a risk that the benefits of social entrepreneurship itself would not be recognized.

First of all, the concept contains the entrepreneurial aspects which are modified by the term ‘social’. According to the definition of Jean Baptist Say “[t]he Entrepreneur shifts

economic resources out of an area of lower and into an area of higher productivity and greater yield.” One can say that entrepreneurs, in their origin, create new values by increasing productivity. In addition, Joseph Schumpeter completes the definition by making mention of innovation as an indispensable part of entrepreneurial activity: „Innovations, not inventions are the basic characteristics of entrepreneurs.“ Innovation is classified as a “change agent”, effecting economic development and growth.

Figure 1: The Model of Three Types of Entrepreneurship

Abbildung in dieser Leseprobe nicht enthalten

Source: Own illustration, based on: Hambrecht, A.: Social Entrepreneurship - Gewinn ist Mittel, nicht Zweck. Eine Untersuchung über Entstehung, Erscheinungswesen und Umsetzung, Karlsruhe 2010: KIT Scientific Publishing, p. 28

Another complementation of the definition is penned by Peter Drucker, in whose opinion „[t]he entrepreneur always searches for change, responds to it and exploits it as an opportunity.“ Howard Stevenson, a professor of the Harvard Business School, augments the importance of new opportunities with “[...] pursuit[ing] them without regard to resources currently controlled.” In contrast to business administrators, entrepreneurs are able to access to more than existing resources, mobilising these of other economical actors.

2.3. The Aspect of Social Mission

In the next step, the definition of the term is to be completed by the aspect of social mission, confronting the entrepreneur with a certain number of challenges. These are partly different in comparison to the business administrative tasks. On the contrary to the business entrepreneurs who are striving for generating profits, for social entrepreneurs, fulfilling the mission becomes primarily aimed. Gains themselves are merely a means to achieve the intended mission goals like changing social dynamics or structure.

In this way, a challenge of measuring effectiveness comes into existence. Often, the improvement of social circumstances cannot be measured in an appropriate way, as the reduction of discrimination, for instance. Social entrepreneurs’ intention to create a value is still related to the position of business entrepreneurs.

In conclusion one can say that “[s]ocial entrepreneurs play the role of change agents by adopting a mission, recognizing opportunities, engaging in innovation, acting without being limited by resources currently in hand, exhibiting accountability.”⁸ Trying to solve existing problems with help of innovative concepts, they do not strive for temporary improvements but a totally new problem solving.⁹

3. Current Situation of Social Entrepreneurs in China

In China, the concept of social entrepreneurship came into attention as international known publications like “How to Change the World: Social Entrepreneurs and the Power of New Ideas” by David Bornstein and “The Rise of the Social Entrepreneur” by Charles Leadbeater were released in 2004. During the last decade theoretical studies and conferences have been also promoted in cooperation with international partners including the Oxford University. A number of academic articles concerning the historical development, basic principles and outstanding examples from the United States and UK have been printed. For this reason, especially academics, media and private enterprises became involved while the general public has hardly noticed the development in this sector.

There is a growing number of private entrepreneurs in China supporting the idea that social entrepreneurship does not only offer prudent solutions for existing problems but can also promotes corresponding development within the civil society in China. Even if the concept has not already found general approval in China, it is spreading more or less rapidly in major cities like Beijing, Shanghai and Guangzhou.

In the worldwide comparison, China’s social entrepreneurs still are in their early stages. Nevertheless, there are a number of organisations producing remarkable results.¹⁰

3.1.Pinetree ( 䶂ᶮ㘱ᒤⴻᣔ)

“ The Chinese government has made it very clear that the responsibility of taking care of and providing for the aged will (go) to the private sector. We are now in a great time to develop the grey-haired market. ”

Ninie Wang, Pinetree founder

Ninie Wang is a Chinese founder who recognized the potential of an ageing society and the necessity of home-based care. The approach of her business idea was the expectation of about 248 million people over 65 years living in China in 2020 - a challenge the governance and the Chinese society have to bear.

Motivated by the wish to offer a better quality of life to older people, Nine Wang developed a business model in 2004, which was restructured four years later and approved by business angels, providing capital her start-up enterprise.¹¹ The main idea of the concept was to enable health, home and finance services to older people by cooperating with companies offering health products and services as well as by direct support of governmental institutions like the China National Committee on Ageing or the Chinese Association for the Promotion of Cultural Exchange.¹² Nowadays, the profit orientated enterprise focuses on long termed home-based quality care service, including health monitoring, medical attendance as well as psychological support.

[...]

¹ World dataBank

² World dataBank

³ Morrison, W.M.: CRS Issue Brief for Congress. Foreign China’s Economic Conditions, http://www.fas.org/sgp/crs/row/IB98014.pdf, 07.08.2012, p. 3 ff.

⁴ Klenner 2009: p. 54 ff.

⁵ Scherer 2011: p. 1 f.

⁶ Faltin, G.: Social Entrepreneurship, Definitionen, Inhalte, Perspektiven, http://www.entrepreneurship.de/wp-content/uploads/2011/01/Social_Entrepreneurship_Rostock.pdf, 07.08.2012, p. 3 ff.

⁷ Hambrecht 2010: p. 27 f.

⁸ Faltin: loc. cit. p. 8

⁹ Faltin: loc cit. p. 4 ff.

¹⁰ Cultural and Education Section British Embassy: The general report of social enterprise in China, http://dsi.britishcouncil.org.cn/images/BC_China_Social_Enterprise_Research_Report.pdf, 07.08.2012, p. 1 ff.

¹¹ INSTEAD: The Business School for the World: Helping China’s elderly come to terms with a digital world, http://knowledge.insead.edu/Pinetree090323.cfm, 07.08.2012

¹² 䶂ᶮ㘱ᒤⴻᣔ- [qingsong laonian kanhu] - Kiefer Altenpflege: About Us, http://www.pinetreecare.com/aboutus/en/, 07.08.2012