Business as an instrument for social value. The experience of social entrepreneurs in Catalonia


Master's Thesis, 2013

32 Pages


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Table of Contents

Introduction

Conceptualization of social entrepreneurship

Methodological framework

Sampling strategy and criteria

Data generation and analysis

Research quality and ethics

Literature review
Dual commitments and identities
Motives for becoming a social entrepreneur
Opportunity creation versus opportunity discovery
The “social hero” discourse on social entrepreneurship
Embeddedness of social entrepreneurship

The experience of social entrepreneurs
The profiles of social entrepreneurs: backgrounds and motives
Goals of social ventures: creating social value
Creating social ventures: institutional diversity, opportunity creation and the role of embeddedness
Developing market strategies: business models to serve social needs
Struggling for financial sustainability: the issue of dual commitments revisited
The troubles of measuring social value
The "loneliness of the entrepreneur"
The meaning and future of social entrepreneurship

Conclusion

References

Abstract. The purpose of this paper is to fill in a gap in extant research by engaging empirically the emerging practice of social entrepreneurship in Catalonia. An inductive research design was chosen to generate theoretical insights. Eight in-depth interviews were conducted with social entrepreneurs in a diversity of sectors of the social economy. The outcomes of the empirical fieldwork are a series of theoretical propositions on the experience of social entrepreneurs, which extend our analytical knowledge and provide supporting evidence for existing theories.

Keywords. Social entrepreneurship, social innovation, social value, social economy, grounded theory, entrepreneurship theory

Resum. L’objectiu d’aquest estudi és omplir un buit en la literatura existent amb una aproximació empírica al fenòmen emergent de l’emprenedoria social a Catalunya. Un disseny d’investigació inductiu ha estat emprat per a generar coneixement teòric. S’han dut a terme vuit entrevistes en profunditat amb emprenedors socials en diversos sectors de l’economia social. El resultat del treball de camp ha estat una sèrie de proposicions teòriques sobre l’experiència dels emprenedors socials, que incrementen el saber analític sobre la qüestió i proporcionen evidències empíriques que recolzen teories existents.

Paraules clau. Emprenedoria social, innovació social, valor social, economia social, teoria fonamentada, teoria de l’emprenedoria

Resumen. El objetivo de este estudio es llenar un vacío en la literatura existente con una aproximación empírica al fenómeno emergente de la emprendeduría social en Cataluña. Un diseño de investigación inductivo se ha usado para generar conocimiento teórico. Se han llevado a cabo ocho entrevistas en profundidad con emprendedores sociales en diversos sectores de la economía social. El resultado del trabajo de campo ha sido una serie de proposiciones teóricas sobre la experiencia de los emprendedores sociales, que incrementan el saber analítico sobre la cuestión y proporcionan evidencias empíricas que apoyan teorías existentes.

Palabras clave. Emprendeduría social, innovación social, valor social, economía social, teoría fundamentada, teoría de la emprendeduría

Introduction

The notion of social entrepreneurship is on the rise. In tough times of economic recession and austerity budgets, many governments have found in the promise of social entrepreneurship an appealing way to deliver more with less public resources (Nicholls, 2006; Hoogendoorn, 201: 4). In the United States, the Obama administration has set up a 100M$ fund for social innovation and entrepreneurship. In the United Kingdom, the word has entered the public lexicon, and its fostering is one of the government’s social policy priorities. In the European Union, social entrepreneurship has found its way into four FP7-funded research initiatives, gaining a key position in the supranational body’s common strategy for sustainable growth. Foundations, charities and philanthropic initiatives of all sorts have also embraced this emerging concept, which provides a fresh and energizing refashioning of their traditional activities. It has even been suggested that Pope Benedict XVI’s 2009 encyclical “Caritas in Veritate” can be interpreted as advocating for social entrepreneurship (Simha and Carey, 2012).

This boom of the notion of social entrepreneurship in public discourse has been paralleled by an explosion in academic activity, spawning the nascent field of social entrepreneurship research. However, so far most studies have stayed on the conceptual level, with very few studies developing systematic attempts to go into the field for data collection (Gras et al, 2011; Decin et al, 2011). Among scholars and practitioners alike, it has become commonplace to conclude that, for robust theories of social entrepreneurship to be built, it is essential to develop stronger observational foundations (Certo and Miller, 2008). Therefore, there is a clear case for further empirical research on social entrepreneurship. These studies will be essential to clarify conceptual definitions, shed light on current theoretical issues, and understand the influence of local contexts in practices (Matlay and Fayolle, 2010).

Hence, the purpose of this study is to fill in this gap by engaging empirically the emerging practice of social entrepreneurship. The research aims to develop an understanding of the lived experience of social entrepreneurs, in their own terms, and to contribute inductive theoretical knowledge on social entrepreneurship. The initial research question focused on the elements of the experience of social entrepreneurs. What are the motives for becoming a social entrepreneur? How do events and processes such as starting the social enterprise, getting funding, networking with other entrepreneurs, and others unfold? How do they think about their identity and their mission?

Conceptualization of social entrepreneurship

Since the term has gained widespread acceptance in recent years, it might be striking to notice that there isn’t a single universally accepted definition of what social entrepreneurship actually is. As Nicholls points out, “it has become axiomatic in recent years for scholars to make two observations concerning social entrepreneurship: first, that there is no definitive consensus about what the term actually means […] second, that the research agenda for the field is not yet clearly defined” (Nicholls 2010, 611). Nicholls has argued that this is so because social entrepreneurship is still a discipline in a pre-paradigmatic stage, in which no sole epistemological perspective can claim uncontested legitimacy.

For this reason, it is essential in any social entrepreneurship study to provide an explicit discussion of the conceptualization of the cases of analysis. This requires to clearly articulate the specific definition of social entrepreneurs that will be employed in selecting the cases to be researched. Given the broad scope of the claims that agents on the field may make about social entrepreneurship, a failure to adequately define who is and who is not a social entrepreneur might lead to an unfocused data collection effort, where dissimilar realities are treated as being comparable. It is important to ensure that the particular conceptualization chosen is consistent with the paradigmatical foundations of the study, and with the overall research goals (Lindgren and Packendorff, 2009). Thus, although the main thrust of this study is not conceptual clarification but rather theoretical understanding, a thorough understanding of the several concepts of social entrepreneurship used in extant research is required.[1]

As it can be seen in the literature, social entrepreneurs have been mainly characterized by their psychological traits and/or by their actions. In choosing my definition, I have followed Gartner’s admonition and adopt a behavioral approach, focusing “on what the entrepreneur does, and not on who the entrepreneur is” (Gartner, 1988: 11). Therefore, the following set of action-oriented criteria has been employed as a filter for case sampling. For the purposes of this study, a social entrepreneur is an individual who (1) aims to create social value of some kind, (2) with an innovative solution, (3) that strives to be financially selfsustainable, (4) and endeavors to include all stakeholders.

Methodological framework

Social entrepreneurship as a research field is still young, and methodological diversity abounds. Given the experiential nature of the initial research questions, the Grounded Theory approach was deemed to be the most suited to the goals of this research project. Essentially, Grounded Theory is an attempt to derive theories from an analysis of the patterns, themes, and common categories discovered in observational data (Babbie, 2006: 327). This methodological approach is most adequate with social phenomena where the paucity of previous research requires research that generates new theoretical perspectives (Rowlands, 2005: 84). As Stern has aptly pointed out elsewhere, “the strongest case for the use of grounded theory is in investigations of relatively uncharted water” (Stern, 1995: 30), a description which fits the emerging features of social entrepreneurship as a subfield of study. The outcomes of a grounded theory study can range from a fully articulated theoretical explanation of the social phenomenon, wherein the relationships among several analytical constructs are laid out in detail, to less complex items of theoretical knowledge such as typologies, analytical concepts, and tentative theoretical propositions (Makela and Turcan, 2006: 126).

In the social entrepreneurship field of study, there are several researchers who have used the Grounded Theory methodology (from now on, GT) as a set of guiding principles for their research. For example, Hervieux and Turcotte’s ethnographic study of a fair trade coffee cooperative group in Central America uses a GT approach, to inductively develop theoretical insights on the network structure and relationships of the distributor and producer cooperatives (Hervieux and Turcotte, 2010). Also, Shaw and Carter employ an inductive theory-building approach to identify and understand similarities and differences between the more understood and studied behavior of “profit-seeking” entrepreneurs and that of an emerging group of social entrepreneurs (Shaw and Carter, 2007). Mair and Noboa apply a GT analytical framework in their exploratory study of the decision-making process that involves the creation of a social venture (Mair and Noboa, 2005).

And, last but not least, Corner and Ho’s study of opportunity development in social entrepreneurship falls as well within the GT methodological tradition (Corner and Ho, 2010). In all these cases, the authors' argue for the use of grounded theory methodology to generate insights on social entrepreneurship, on the basis of the relative infancy of the field and lack of existing theory in the research domain (Hervieux and Turcotte, 2010: 185; Shaw and Carter, 2007: 423; Makela and Turcan, 2006: 133). Douglas as well has considered, in a series of methodological papers (Douglas, 2004a; 2004b), the adequacy of GT for researching entrepreneurship, and has found the approach able to meet a set of criteria for acceptability of social science: trustworthiness, generalisability, consistency and reproducibility (Douglas, 2004a: 2).

Grounded Theory has evolved since it was initially proposed by Glaser and Strauss, and several strands within that tradition have emerged (Charmaz, 2006: 10). Although every methodologist shares the basic tenets of GT, each has a different orientation. Whereas Glaser has remained loyal to the initial positivistobjective paradigm, Strauss and Corbin have pushed the methodology towards a more postmodernist-reflexive direction (Mills, 2008: 3). Building from a postpositivist interpretive sensibility, researchers such as Anthony Bryant, Adele Clarke or Kathy Charmaz have developed in the last decade yet another form of GT, which has been labeled “constructivist” GT (Clarke, 2003; Bryant, 2003; Mills, 2008). These researchers follow the basic grounded theory methodological guidelines, while making explicit epistemological concerns with issues of representation and subjectivity that draw them away from GT’s original strong positivist leanings (Charmaz, 2006: 9). In their works, voice of the participants is maintained discernible throughout the process of coding and analysis, and thus a more vivid account of how these participants make sense of their worlds is provided (Mills, 2008: 3). An interpretive research position takes as the proposition that a phenomenon (or research "variable", to use positivist language) cannot be defined objectively, according to a set of absolute criteria, but must be defined from a specified point of view. (Gasson, 2004: 88). Based on these key epistemological differences, the GT approach most consistent with the stated research aims was found to be the constructivist approach championed by Kathy Charmaz. According to Lehner and Kansikas’s typology of social entrepreneurship research paradigms, such a study falls within an interpretivist position (Lehner, 2011). This epistemological perspective lets the researcher to take into account the experience of the social entrepreneurs in the sample, keeping the commitment to rigorous analysis and inductive development of theoretical propositions for which GT is known.

Sampling strategy and criteria

Since sampling procedures in qualitative studies are not as fixed as in quantitative studies, it is essential to be “careful, systematic and explicit about the procedures followed” (Neergaard, 2010: 253). The GT methodology has a well-defined sampling strategy, theoretical sampling, which follows logically from the constant comparative method. In a nutshell, theoretical sampling entails “seeking and collecting pertinent data to elaborate and refine categories in your emerging theory” (Charmaz, 2006: 96). Using Onwuegbuzie and Leech’s terminology, the sampling strategy employed by this study was a nested sampling design, which facilitates credible comparison-making among members of the same group, and is especially pertinent for grounded theory research (Onwuegbuzie and Leech, 2007: 246).

At the fieldwork planning stage, a small contact database of local social entrepreneurs was compiled from Internet resources. This database was used as initial convenience sampling frame, and was extended with additional cases as the study progressed. Cases were selected for maximum variance, to follow leads and to test emerging theoretical propositions (Charmaz, 2006: 102). Ideally, cases should be added until data saturation is reached. Analytical categories are considered to have become 'saturated' when “gathering fresh data no longer sparks new theoretical insights, nor reveals new properties of these core theoretical categories (Charmaz, 2006: 99). In qualitative studies following the Grounded Theory methodology, theoretical sampling for data saturation determines the adequate size and composition of the sample. However, given the relatively short timespan of this study, the possibility that saturation has not been reached for some theoretical propositions has to be taken into consideration, which would warrant some caution regarding the interpretation of these research outcomes (Mason, 2010).

Figure 1. List of sampled cases[2]

illustration not visible in this excerpt

Data generation and analysis

The interview has long been a most favored method in studies using the GT methodology (Charmaz and Liska Belgrave, 2012: 348). In-depth, intensive interviews allow the researcher to elicit the perspective of the respondent in her own terms and in her own words, minimizing the risk of forcing meanings and agendas on the interviewee (Rowley, 2012). In GT research, it is useful to start with a few broad, open-ended questions. By creating open-ended, non-judgmental questions, the researcher encourages unanticipated statements and stories to emerge. (Charmaz, 2006: 26). While conducting the interview, the sensitivity and methodological awareness of the researcher are important, as the “framing, shaping and managing” of the interview questions will have an impact on how rich and illuminating the data are (Wimpenny and Gass, 2002: 1488; Legard et al, 2003).

Unless impractical, the interviews have taken place in the natural settings of the entrepreneur, that is, in his social venture or place of work. Therefore, the notes taken before, during and after the interviews are a form of participant observation. Since not even tape recorders and cameras can capture all the relevant aspects of social processes, these observation notes will be an essential element for the triangulation of evidence, as they will complement, enrich or sometimes contradict interview data. Secondary data are also important sources of information for triangulation (Charmaz, 2006: 15). Extant documentation such as organizational literature, internal communications and documents, email output or industry reports will be sought as sources of evidence, and used with permission when made available by the social entrepreneurs.

The elicited materials have been analyzed qualitatively with the Atlas.ti software and coded at four different levels of abstraction: initial, focused, axial and theoretical. Initial coding proceeds line by line and attempts to describe actions going on in the data in an action-oriented language (i.e. with gerunds). Focused coding synthesizes and categorizes large amounts of data in a directed, selective and conceptual manner. Axial coding tries to develop major categories of analysis, by relating data and codes to each other around the “axis” of a single theoretical construct. Theoretical coding represents the higher level of abstraction from the data, and is where the researcher attempts to relate the categories developed in focused coding as elements in an integrated theory. Theoretical codes are the goal of a grounded theory analysis because, as Charmaz explains, these do “not only conceptualize how your substantive codes are related, but also move your analytic story in a theoretical direction”, giving it a sense of clarity and coherence (Charmaz, 2006: 63). However, it is my belief that methods of qualitative analysis should be a set of guidelines that function as an enabling, not limiting, tool for social research. Therefore, some departures from a strict understanding of constructivist coding procedures (which focus on identifying social processes, not topics) have been warranted, as it was considered that they could shed light to important topics of academic debate in the literature.

It is important to note that, in the Grounded Theory methodology, data collection, data analysis and the literature review are not sequential and temporally separated phases in the research process, as it is often the case in quantitative studies (Babbie, 2006: 419). Instead, data is gathered, analyzed and triangulated with extant literature throughout during the fieldwork period, in micro-cycles that are continuously re-iterated (Dougherty, 2002: 856). This allows for the interplay of theory and data to come into fruition, and results in the emergence of richer theoretical propositions, that are more fitted and, in one word, “grounded” on the empirical data.

Research quality and ethics

It is increasingly demanded that scholars make explicit their research assumptions and state the criteria on which their study should be evaluated (Wigren, 2006; Seale, 2002; Lindgren and Packendorf, 2009). Gasson has argued that the rigour of interpretive grounded theory research is often evaluated with positivist quality criteria such as validity and reliability, resulting in unfounded charges of lack of rigour. Instead, an alternative set of criteria should be used, based on the notion of reflexivity and the transparency of the research process (Gasson, 2004). According to Wigren, there are four quality criteria to be taken into consideration in a qualitative study within a constructivist paradigm: acknowledgement of subjectivity (being able to recognize the voices of participants in the report), trustworthiness (systematic rigour of fieldwork procedures), triangulation (capturing and respecting multiple perspectives), authenticity (reliability of codings and pattern analysis), and reflexivity (interpretation takes into account the role of the researcher) (Wigren, 2006: 386). On the other hand, Charmaz outlines four quality criteria of her own: credibility (enough supportive evidence for the claims made), originality (new analytical insights), resonance (full portrayal of experience that makes sense to people studied), and usefulness (interpretations contribute to social and academic knowledge) (Charmaz, 2006: 178). Last but not least, Seale’s relevant contribution to the debate should be reflected on. Putting sets of criteria aside, he proposes that quality in qualitative inquiry is best ensured with a concern for “methodological awareness”, a quality of the researcher involving the “capacity to anticipate the consequences of methodological decisions while carrying out a research project” (Seale, 2002: 97).

Besides research quality issues, in any qualitative study it is essential to ensure that the actions undertaken by the researcher can stand up to ethical scrutiny. Regarding codes of ethical conduct, a number of philosophers of science have expressed their concerns about the adequacy of these “procedural approaches to research ethics”, that try to universalize and disembed the moral issues involved in every research endeavor (Brinkmann and Kvalle, 2005: 159; Guillemin and Hegen, 2008: 294). Shaw makes the point that, although these ethical codes might provide some guidance, overreliance in codified and decontextualized lists of normative principles can risk missing the nuances of the particular situations in which the researcher might find herself. Rather, she argues that we should focus on the ‘spirit’ of the law, rather than on the ‘letter’ of the law (Shaw, 2008: 402403).

Of particular relevance for qualitative studies is the ethics of informed consent. In randomized experiments, it is clear for all parties involved when are the research activities requiring informed consent happening. This is not the case in qualitative studies, where the boundaries between data collection and taking a break are often blurred. (Shaw, 2008: 404). In my study, informed consent has been obtained in two complementary ways. First, in a contact email, that clearly described the goals and details of the research, and asked for permission to conduct an interview. And second, at the start of the taped interview, where permission was explicitly asked for again.

Developing rapport with the informants is another important issue qualitative research. But this involves a risk of creating a false impression of long-lasting friendship that might prompt informants to open up too much and disclose information that might potentially harm them (Guillemin and Hegen, 2008: 293). As Brinkmann and Kvalle point out, “prevailing forms of empathic, warm interviews” may be inadequate, because they obscure the power asymmetry inherent in the interview situation. The researcher has the scientific competency, manipulates the dialogue to align it with her hidden research agenda, and has a monopoly of interpretation of the results (Brinkmann and Kvalle, 2005: 164-165). An alternative to this is an “active” modality of interview, one which has “a greater transparency of the power relations, and do[es] not commodify or instrumentalize human feeling, friendship, and empathy (Brinkmann and Kvalle, 2005: 174).

Misinterpretation of elicited materials can also lead to a feeling of ‘betrayal’ on the part of informants, if they believe that the information that they gave the researcher in good faith has been used to misrepresent their views or to portray their actions in a negative light (Shaw, 2008: 405, 409). In the present study, draft transcripts of each interview were shared with the informant, and cleared of any quotation deemed too sensitive prior to analysis. As a result, content was withdrawn from the final transcript at the interviewee’s request in two occasions. Last but not least, it is common practice to try to compensate informants for their time and dedication to the research effort (Shaw, 2008: 408). In the present study, a “practitioner’s executive summary” with the main findings of the research effort was sent to every informant, as a token of gratitude for their invaluable contribution.

Literature review

The place and scope of the literature review is a contentious issue in grounded theory. Glaser and Strauss’s stance in The Discovery of Grounded Theory is that the researcher should not delve into the literature before going into the field, but rather afterwards, when the researcher already has his own analysis performed. The rationale is that, if she comes to the field with borrowed concepts, she will impose them to the data, rather than let the concepts arise from the data. Thus, her analysis will be grounded on the literature and not on the data alone, which is the ultimate goal of GT (Glaser and Strauss, 1967).

This somewhat extreme view has evolved, and many methodologists concur that a degree of knowledge about the existing literature on the topic under study is necessary. As Suddaby has pointed out, researchers shouldn’t “use grounded theory as a justification for ignoring prior research in formulating their study”, (Suddaby, 2006: 634). Accordingly, the researcher begins fieldwork with a set of initial constructs that are “points of departure to form interview questions, to look at data, to listen to interviewees, and to think analytically about the data” (Charmaz, 2006: 16). These initial constructs are usually referred to as ‘sensitizing concepts’.

As Herbert Blumer first posed, “whereas definitive concepts provide prescriptions of what to see, sensitizing concepts merely suggest directions along which to look” (Blumer, 1969: 148). Sensitizing concepts may or may not be found in the data. Their guidance might allow us to notice important nuances of the phenomena under scrutiny, but it might also misdirect us from other important aspects of that social situation (Bowen, 2006). The sensibility to be able to gain insights from sensitizing concepts without imposing them on the data is what Dalhberg referred to as “bridling”. This notion is meant to denote a reflexive strategy to handle the preconceptions and assumptions that our socially situated existence and the review of existing literature might bring to our research (Dalhberg, 2006: 16).

These principles of caution find a resonant note in Dey’s admonition, when he warns against swallowing wholemeal the “dominant representations of entrepreneurship [which] mark a clear limit to our understanding of entrepreneurship as social creativity” (Dey, 2006).

Based on a review of the existing literature, several constructs were recognized as potentially useful sensitizing concepts. These were:

Dual commitments and identities

A central theme of research on social entrepreneurship is the issue of dual commitment. Several researchers have identified a double identity in social entrepreneurs, as they are agents of social change and business leaders simultaneously. On the one hand, social ventures have a normative organizational identity, which becomes manifest in a social mission statement and a regard for the well-being of all stakeholders. On the other hand, there is a utilitarian organizational identity, concerned with raising revenues, lowering costs and maximizing profits. These double binds created by the juxtaposition of social objectives and market competition have to be continuously negotiated, as they represent two conflicting logics of decision-making that are often at odds with each other (Austin et al, 2006; Moss et al, 2010; Trivedi and Stokols, 2011). Zahra also discusses the ethical problems encountered by social entrepreneurs when trying to balance the imperative of social value creation with the need for economic efficiency (Zahra et al 2009). Smith goes a step further and advances a set of psychological skills to manage the tensions created by dual commitment: acceptance (embracing the paradox), differentiation (recognizing the distinct value of each domain), and integration (identifying the synergies) (Smith et al 2012).

Motives for becoming a social entrepreneur

In their exploration of the motives behind the decision to start a social venture in the elderly care sector, Wong and Tang identified four common factors. These were having experienced difficulties finding appropriate care for their own aging parents, facing imminent job loss, possessing adequate skills and/or experience in the sector, and perceiving elderly care as an attractive business opportunity to pursue (Wong and Tang, 2006: 634). It might also be important to distinguish between transformational (mission-driven) and subsistence (forced by lack of employment) entrepreneurship, as these might have very different features (Schoar, 2010). Zahra et al offer a three-category typology of social entrepreneurs according to their motivation for starting the social venture. “Social bricoleurs” are willing to combine their resources and capabilities to serve small-scale social needs in a local context. “Social constructionists” (sic) strive to fill in gaps in existing structures to induce progressive social change. And “social engineers” are visionary individuals who want to overthrow obsolete social structures with revolutionary changes (Zahra et al, 2009).

Opportunity creation versus opportunity discovery

A main concern of social entrepreneurship research is the process in which opportunities to create social value are identified and exploited (Berglund, 2007; Mair and Noboa, 2005). Two competing views are prevalent in the literature, which have been labeled the ‘opportunity creation’ theory and the ‘opportunity discovery’ theory. The former embodies a realist philosophy, and states that “entrepreneurial opportunities exist, independent of the perceptions of entrepreneurs, just waiting to be discovered”. The latter hypothesizes that these opportunities are in fact created endogenously by the “actions, reactions and enactments of entrepreneurs exploring ways to produce new products or services (Alvarez and Barney, 2007: 127,130). Research has also suggested that opportunities often emerge from the dynamic interaction of multiple entrepreneurial agents, rather than a single visionary individual working on her own (Corner and Ho, 2010).

The “social hero” discourse on social entrepreneurship

It has been said that, to build legitimacy for their projects of social transformation, social entrepreneurs may engage in rhetorical strategies that cast them as “social heroes”, in a struggle against the old ways (Vasi, 2006). Interestingly enough, “enterprise leaders were not necessarily conscious of the language they employed or the cultural myths they drew on to create support for their organizations” (Ruebottom, 2013: 99). Discoursive strategies for legitimacy building may also attempt to reconceptualize the use of market-based initiatives in pursuit of social goals, so that the use of business tools is not just seen as acceptable, but even as a worthy endeavor to be promoted by governments and funding agencies (Hervieux and Turcotte, 2010).

Embeddedness of social entrepreneurship

Several researchers have pointed out that social entrepreneurship might be a highly embedded activity, in which the structure of the local context matters. It has been suggested that this might account for the high diversity of forms, institutions and features that social entrepreneurial ventures have been shown to exhibit from place to place (Seelos et al, 2011; Smith and Stevens, 2010). The geographical (but also cognitive, network and cultural) embeddedness of social entrepreneurs in their local contexts can play a decisive role in shaping their choices and actions (Kistruck and Beamish, 2010). Given the importance that limiting factors seem to have on the forms and features of social ventures, it can be posited as an analytical hypothesis that path dependent mechanisms might be constraining as well the actions of social entrepreneurs.

The experience of social entrepreneurs

The fieldwork performed has yielded insights in several dimensions of the experience of social entrepreneurs. In some areas, research efforts have resulted in novel theoretical propositions, in an attempt to shed new light on analytically untapped areas of social entrepreneurship. In others, supporting evidence has been generated for existing analytical constructs, strengthening the research findings of previous studies.

The profiles of social entrepreneurs: backgrounds and motives

Theoretical proposition 1: There are two types of social entrepreneurs. Those who go from entrepreneurship to social: commercial entrepreneurs who incorporate social value creation into their goals. And those who go from social to entrepreneurship: socially conscious people who want to help a collective through a market-oriented organization.

“I really didn’t have anybody in my family suffering from mental disability, I didn’t know this reality up close, but this thing of wanting to help somebody with what you do, I always had had inside me. And wow, with what I’m doing now, it’s like a marriage made in heaven, because I’m working with what I’m passionate about, and on top of that I’m helping people” [E-4, 352355] “[…] at a personal level I had grown tired and weary of my job, all day long counting days towards retirement, without any joy for my daily routine. And now it’s a continuous motivation, keep going and going, seeing that things may be tough but that you’re making it. And if you can do so while helping people, even better!” [E-5, 311-314] “To me, design cannot be understood without this, let’s call it “social”, side. It’s not fine for me that a product is just pretty, without any concern for these issues. And with this project I feel that we’re giving this social side of things a dimension that I haven’t found in other professional projects” [E-3, 83-86]

An outcome of the empirical study has been a characterization of the profiles of social entrepreneurs. The first type can be defined as a highly-educated professional with a successful career, who at a certain point of her life decides to opt for a more rewarding professional course in a social entrepreneurial venture. The second type is a dynamic person who starts a social venture with the intention to provide employment for a vulnerable group, among whose members we may find a close family member (brother, son). This latter type can be regarded as similar to that uncovered in research on Chinese entrepreneurs in the elderly care sector (Wong and Tang, 2006).

Previous entrepreneurial experience appears not to be a determinant of social entrepreneurial activity: whereas four interviewees had started a business before, another four had no prior history of venture formation. Regardless of their background, the prime motivation for becoming a social entrepreneur seems to be the search of a more fulfilling area of employment. Every social entrepreneur interviewed reported having experienced a feeling of weariness or burnout with their previous job (“I was empty”). This fundamental dissatisfaction impelled them to move outside of their comfort zone and start a new project in their lives. Although many of them acknowledged that their transformation came with a certain degree of financial insecurity, an increased sense of personal satisfaction amply compensated for it.

Goals of social ventures: creating social value

Theoretical proposition 2: The overarching purpose that unifies all social ventures’ goals is the creation of social value in an economically sustainable way.

“[…] if we would employ other kinds of workers, our bottom line would improve, for sure. But, of course, that would draw us away from our real purpose. Actually, I feel like I started off being a producer of products, and now I’ve become a producer of workplaces for the mentally challenged”. [E4, 271-276]

“To us, being a social venture means that the company has to operate towards a social goal. It is not to operate towards making money –obviously a business has to make money and be sustainable, otherwise there’s no point– but with a social goal: to provide jobs for these kinds of youths” [E-5, 43-46]

The goals of social ventures are very often multiple and complementary (i.e.: recycling furniture, providing jobs and building consciousness; lifting families out of poverty in a way that preserves their environment; provide nutritional support, build skills and create network ties). What unifies all social entrepreneurs is that they acknowledge the need for the creation of social value alongside the creation of economic value (or the other way around). Social and commercial goals are often understood to be intertwined, and in many instances both are considered to be the one and the same. Social entrepreneurs, especially those coming from business backgrounds, tend to see the employment opportunities they provide without paternalisms; that is, as a fair chance given to people who deserve it but that, for reasons out of their doing, might not be able to get it in the labor market.

These results are largely consistent with extant research on the defining features of social entrepreneurial ventures and their differences with commercial ventures (Moss et al, 2011; Santos, 2012). Social entrepreneurship is usually conceptualized as a category in its own, a special kind of that is best understood as opposite of commercial entrepreneurship. But instead of a clear-cut dichotomy, this phenomenon may be better understood as an ideal type, with empirical cases and experiences laying somewhere in the continuum encompassed between the two ideal-type poles of social and commercial entrepreneurship.

Creating social ventures: institutional diversity, opportunity creation and the role of embeddedness

Theoretical proposition 3: Social ventures are formed in a highly embedded opportunity creation process. This results in high levels of institutional diversity, as new ventures are shaped by the local contexts and opportunity structures.

“For me, the company has been totally an instrument. From the moment I started it, the idea was “what can we do for these kids?”. Then we considered several alternatives. For a series of circumstances we decided to start this particular business, the one we thought was most suited to this kind of kids.” [E-5, 57-60]

For a social venture, the business idea has to fit the requisites of the social project behind. Therefore, to “identify” an opportunity is likely not to be enough: it has to be tailored to the existing resources (financial, human, relational) available to the entrepreneur(s) and to the needs of the beneficiaries. This is a process which often takes a lot of time and effort to complete successfully, and has an iterative character, a trial-and-error quality, as in “finding one’s way through a maze”. At this stage, the composition of the founding team is also of paramount importance: different team members may bring new resource mixes into the equation. Therefore, it seems that the data assembled provide more support for the notion that business opportunities are actively created by the social entrepreneur’s actions, rather than passively discovered by an exploration of the options at hand.

Expansion opportunities are also embedded in the particular contexts in which the entrepreneurs operate. Quite often, the best opportunities arise in unexpected occasions and serendipitous encounters. In one of the cases studied, the most profitable part of the business, which helped cover costs for the rest, was started as a result of a chain of unforeseeable events.

These processes may help to explain the high degree of organizational diversity encountered in this study. Of the eight social ventures included, three were limited liability companies with limited or no dividends allowed by founding charter mandate, three were cooperatives, one was a sole proprietorship (“autònom”), and another was a non-profit organization managed by a board of local charities. Of these eight ventures, two of the LLC’s and two of the cooperative companies were also certified special labor companies (“empreses d’inserció laboral”), a special figure in the Spanish social economy legislation with legal and fiscal advantages. The embeddedness of the social entrepreneur in her personal context constrains the choices but also enables the mobilization of a full range of local resources. A social entrepreneur with business education and strong ties to a network of business contacts gained in previous employment may have a preference to create a limited liability company with a strong market orientation. But if the personal syntony with the rest of the founding team is exceptionally good (“… we’re all on the same wavelength, you know?”), she might be willing to create instead a cooperative with an eye on transforming mindsets. A social entrepreneur with a history of long involvement in a charitable foundation may find her natural choice to be a special labor company. However, if the accreditation process to become certified is deemed to be too bureaucratic (or is put on hold because of lack of government funding of the subsidies involved), then the entrepreneur might go ahead and start a limited liability company with a non-profit clause in its statutes.

Developing market strategies: business models to serve social needs

Theoretical proposition 4: Balancing social and commercial logics of operation is more difficult in manufacturing social ventures than in service or retail sectors.

“[…] in many occasions, for the company manufacturing the product, it is really difficult to compete in the market. In our case, since we don’t have our own product, we don’t have this problem. Our products are supplied by our partner brands, and what we really do here is to ensure customer loyalty […] our strong point, in which we train our workers very hard, is customer service.” [E-7, 259-262]

In manufacturing social ventures employing workers with special needs, the labor productivity and oversight costs of producing the merchandise are much higher than in non-social businesses. Mentally challenged workers usually need dedicated coaches and psychologists to perform well, which imposes extra costs on the firm. Depending on institutional form (namely, whether these ventures are special labor centers or not), these higher costs can be partially covered by the government. But, in practice, these subsidies constitute a relatively modest share of those firms’ income and, in fact, many newly formed social ventures have never been able to access them. Therefore, to remain competitive, social entrepreneurs in manufacturing sectors tend to enter highly specialized and high-end market segments, where their differentiation strategy can be most successful, and where customer niches are able and willing to pay the premiums that their social cost structure requires to make a profit.

However, in service or retail ventures, the merchandise is already been produced at competitive market prices, in companies social or otherwise, and the goal is to sell it. In those cases, the lower productivity of labor is not a problem as long as it can be offset by the better customer service that the vulnerable populations can provide. In many instances, instead of a contradiction between social value creation and financial sustainability, there is a virtuous circle, of one goal helping the other.

Some entrepreneurs expressed their inclination to do business preferably with other organizations in the social economy, so that their social impact is amplified through the value chain: “If the price and quality of their product are roughly equal,

I certainly prefer my suppliers to share my mission”. However, there is no willingness to segregate. The idea is rather to fully participate in the market economy, with the intent of changing it from the inside. This preferred growth model is akin to what has been labeled as “interstitial growth” (that is, a strategy of growing in the marginal areas of the economy to slowly replace it), and is a popular one among organizations of the social economy (Olin Wright, 2009).

Struggling for financial sustainability: the issue of dual commitments revisited

Theoretical proposition 5: Financial sustainability is a goal to an end: the imperative of social value creation imposes some red lines that ought not to be trespassed.

“Right now we’re covering our expenses. The problem is that we’re in equilibrium with two employees, and not with the four workers we initially planned for. But I certainly prefer to be in equilibrium with two workers than losing money with four, because otherwise this won’t be sustainable”. [E-5, 373-377]

“This project pursues social impact, and it is to achieve this social impact that it operates. That is, not the other way around: it is not a business activity that became social, but rather a project that sought to have a social impact from the start. This is to say: business is an instrument for social impact. Therefore, this makes our priorities quite clear when it comes to making decisions”. [E-1, 75-80]

Securing adequate funding to pay for the daily expenses of the social venture and expand operations is one of the main concerns of social entrepreneurs. Reaching breakeven is an aspiration not always reached in the expected timeframe. Several strategies have been detected to the financial sustainability of the organization. Social ventures backed by foundations often seek a loan from the foundation. Another strategy to get loans is to join a special support program for social ventures, such as the Catalan government’s Social Entrepreneurship Support

Program or the BBVA bank’s Momentum project. In addition to training and networking activities, some of these programs have specific actions to aid social entrepreneurs in getting funding from private or public investors (i.e. the Momentum project’s Social Investment Day). Some entrepreneurs also look for business angels to believe in the project and finance operations.

It is worth noting that most loans are negotiated at better-than-market conditions, with lower interest rates and/or favorable repayment terms. This fact may provide evidence for the notion that social ventures can successfully mobilize rhetorical and institutional resources to advance their operations (Hervieux and Turcotte, 2010). Prizes and gifts are always welcome, but seldom a central part of a financial sustainability strategy of the social venture. Of all cases sampled, only in one case a substantial charitable donation had been important to set up the initial infrastructure. Even in this case, it was clearly understood as a one-off windfall, and no other gifts were expected to be needed to cover costs.

As important a goal financial sustainability is, it is always subsidiary to the goal of the organization: social value creation. When two social entrepreneurs were asked if they would consider implementing labor-saving equipment in their ventures, they both responded that they would only do so if it resulted in a net increase of workers in another area of the venture, even at the cost of lower profits. In another venture, a striking example of the primacy of social goals over financial ones took place in 2012, when the managerial team decided to slash their salary by 50% rather than being forced to lay off any worker.

This can also be noticed in the way social ventures deal with growth opportunities. Often the goal of creation of social value, not only with the firm’s activities but also in the wider society, is clearly prioritized over profit maximization, which would entail less cooperative growth strategies. In one of the ventures, the expansion plan main goal was to create as many jobs as possible for the target group. Thus, it not only consisted in the scaling up of the social venture’s own operations, but also called for the organization to support the setting up of other social ventures in nearby locations in the region. These were not conceived as potential competitors (which they actually were), but partners in a common goal. Although it is social value creation that takes primacy over profits, it should be noted that extreme situations may force a temporary reversal of priorities. If tough decisions (i.e. laying off workers or relocating operations) are deemed necessary for the survival of the company, financial considerations may impose unsavory choices on the social entrepreneur. As one entrepreneur graphically said, “if I go bankrupt, I can’t help anybody”.

The troubles of measuring social value

Theoretical proposition 6: The lack of a reliable measure of social value hinders the expansion of social entrepreneurship.

“The problem is how to value it. Because we, as a business, when we have three kids working with us, these are three kids that can fend off things for themselves, and are not an expense in terms of medical services and hospital stays, costs that are not imposed on society. This is not stated in our balance sheet, and it is something that has an important value. While this kid is working with us, he’s saving some sizeable social costs. And we should be able to value that one way or another.” [E-5, 481-486]

“When you’re analyzing each store’s figures, and you see losses... what is more important? If we want to be a business, in the end productivity is what matters. So, how do you weight in this social value you’re creating, and how much?” [E-7, 235-238]

In social ventures, the economic value created can be captured through money measurement, as in any other market company. But… what about social value? Of the eight cases included in the study, five entrepreneurs regretted their lack of adequate measurement methods to quantify the social outcome of their activities. In sweet economic times, the lack of a reliable way of measuring the social performance of the company is inconvenient, as it complicates communication efforts and the efficient allocation of resources (Austin, 2006: 3), but it is nevertheless tolerable as long as progress is perceived. The real trouble comes when ends do not meet, and tough decisions about cost-cutting measures have to be made. In these situations, social entrepreneurs risk destroying a great amount of unquantified social value to achieve relatively modest (but nevertheless strictly necessary) cash savings for the firm. Although great strides are being made in the area of social performance measurement[3], it is likely that this will remain a problematic issue in social entrepreneurship in the years to come.

The "loneliness of the entrepreneur"

Theoretical proposition 7: Psychological support structures are very important in social entrepreneurial processes.

“Most of all, when you’re an entrepreneur one of the most difficult things is loneliness. Many times you feel alone, misunderstood, and it is very much like a roller coaster. In these moments, the fact of being recognized helps you tell to yourself “well, more or less I’m doing the right thing” […] and much more so if you’re starting things on your own.” [E-2, 283-285]

“[…] this is a family choice; you can’t take it all by yourself. Obviously, if I can devote myself to this project is because my wife has always backed me, she takes lots of things on her back so I can spend time on this project. Being backed at home is really important. And also at the level of your friends and relatives, that’s also important.” [E-5, 286-289]

The process of creating a social venture can be an exhausting and stressful one. Besides the intrinsic difficulties of starting a business (penetrating a market and reaching breakeven), social entrepreneurs have to deal with the added anxiety of weighting in their social goals. These difficult situations can induce feelings of isolation and loneliness on the social entrepreneur. The language used often highlights this feeling of loneliness. Entrepreneurs often talk about their experience as a “struggle” or a “marathon”, evoking the image of the lone runner. “Being misunderstood” appears to be a feeling that most entrepreneurs have experienced with varying degrees of strength at one point or another. In these moments, the role of a supportive close environment becomes crucial; an “inner circle” who understand and encourage the entrepreneur to go on “in moments when you want to give up”. The cases in which the family-friends support structure was subjectively judged to be insufficient were the ones that reported having stronger feelings of loneliness.

Beyond inner family and friend circles, entrepreneurs were almost unanimous in saying that the best way to feel supported was the contact with the networks of social entrepreneurs they encountered as they developed their social ventures. Interestingly enough, the five cases in the sample that attended either the Catalan government’s Social Entrepreneurship Support Program or the BBVA bank’s Momentum project concurred in that the best they got out of these experiences was “the feeling that we were not alone out there”. Ventures promoted by founding teams instead of lone entrepreneurs also seemed to be more psychologically resilient, to the point that no entrepreneur working in a team reported feeling lonely.

The meaning and future of social entrepreneurship

Theoretical proposition 8: Social entrepreneurs’ perceptions of the impact of their actions can range from very local to very global, in a scale that goes from social bricoleurs to social constructionists to social engineers.

“I believe that it is with projects like this one, giving meaning to their effort – because they’re very talented, but presently most of it is unused– that we can make things change. [...] With clear and concrete projects that create jobs for them”. [E-3, 526-531]

“On the long run, I think the ideal is that social entrepreneurship would disappear. This is to say, that every economic activity becomes social, in a way that is intrinsic to the activity itself.” [E-1, 401-403]

There is diversity in the views that social entrepreneurs hold of the role their social ventures should play in society, and of the wider significance of social entrepreneurship in general. Although Zahra’s typology of social entrepreneurs is more concerned with intent than with self-image, in this study it has nevertheless been found useful to characterize the views of social entrepreneurs on the nature of their mission (Zahra et al, 2009). Of the eight cases sampled, two could be characterized as bricoleurs, four as constructionists, and the remaining two as engineers.

Social bricoleurs perceived their venture as a response to meet the needs of a local group of people. Grand narratives and ambitious visions of change were considered to be unnecessary distractions away from the concrete mission of the organization. As one entrepreneur made explicit, “I’m just trying to make by small parcel of the world work a little bit better […] I’m no visionary in those matters”.

Next, social constructionists perceived their venture as a new structure of social value creation in particular sectors, which supersede the inadequacies of existing institutions. The expansion plans for these ventures highlighted the willingness to scale up their innovation to reach all possible stakeholders in the sector involved. And last but not least, the social engineers perceived the modes of operation of their social ventures as a new logic of integrated value creation, spearheading a new way to organize all economic activity around the idea of social value. The views of “social engineers” are reminiscent of Polanyi’s concept of the “double movement”, the notion that the (re)structuring of the economy based on the ideals of the self-regulating market inevitably leads society to reassert itself against the commodification of land, labor and money (Polanyi, 1944). In this sense, social entrepreneurship could be interpreted as an attempt to re-integrate the economic into the social, using market mechanisms to generate social value.

Conclusion

This paper has attempted to deepen our empirical knowledge on the practice of social entrepreneurship. The inductive theory generating research design has yielded a number of theoretical propositions on several areas of the experience of social entrepreneurs. It has also provided supporting evidence for some existing analytical constructs; most notably, the notion of dual commitments (social and commercial), the embeddedness of social entrepreneurs in their particular contexts, and the typology of social entrepreneurs as social bricoleurs, constructionists and engineers (Zahra et al, 2006).

Since the scope of the fieldwork performed has been concerned with depth rather than width, the study’s limitations in time and space impose some caution on the issue of the saturation of the analytical categories (see Mason, 2010). However, although the need for additional empirical research to support or disprove the insights generated should be acknowledged, one of the main contributions of this paper has been to open up promising avenues for future research efforts. Intriguing research topics for further studies involve the institutional and organizational mechanisms used for the balancing of dual commitments, the notion of social value and its operationalization, and successful business models for social value creation.

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[...]


[1] For a comprehensive review of definitions of social entrepreneurship and an in-depth discussion of issues of conceptualization, see Peredo and MacLean, 2006; Brouard and Larivet, 2010; Mair and Martí, 2006; Brock and Steiner, 2010; Defourny and Nyssens, 2010,;Hill et al, 2010; and Bacq and Janssen, 2011.

[2] Cases are ranked in chronological order of sampling.

[3] For example, see the Young Foundation’s work on measuring social value.

32 of 32 pages

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Title
Business as an instrument for social value. The experience of social entrepreneurs in Catalonia
College
University of Barcelona  (Faculty of Sociology)
Course
Master in Sociology, Research
Author
Year
2013
Pages
32
Catalog Number
V321390
ISBN (eBook)
9783668218321
ISBN (Book)
9783668218338
File size
475 KB
Language
English
Notes
Please cite as: Aguilar, M. (2013). Business as an instrument for social value. The experience of social entrepreneurs in Catalonia. University of Barcelona, MSc Thesis
Tags
Social entrepreneurship, social innovation, social value, social economy, grounded theory, entrepreneurship theory
Quote paper
Marc Aguilar Santiago (Author), 2013, Business as an instrument for social value. The experience of social entrepreneurs in Catalonia, Munich, GRIN Verlag, https://www.grin.com/document/321390

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