Social entrepreneurial success factors in Sub-Saharan Africa. Which factors help social enterprises to scale successfully and foster sustainable development?

Bachelor Thesis, 2019

40 Pages, Grade: 1.0



1 Introduction - Relevance, Goal and Approach of this paper

2 Social Entrepreneurship - Theoretical Framework
2.1 Definition of Entrepreneurship
2.2 Definition of Social Entrepreneurship
2.2.1 Organizational model and legal structure
2.2.2 Differentiation from other forms of social engagement
2.3 Social Entrepreneurship and Development

3 Sub-Saharan Africa - Contextual framework
3.1 General context
3.2 Social entrepreneurial context and challenges
3.2.1 Human capital
3.2.2 Financial capital
3.2.3 Social capital
3.2.4 Business environment

4 Research Methodology
4.1 Research Aim
4.2 Research Design & Survey Instrument
4.3 Sample and Sample collection
4.4 Data collection, processing and analysis

5 Qualitative Analysis
5.1 Human Capital
5.2 Financial Capital
5.3 Social Capital
5.4 Business environment

6 Discussion

7 Conclusion

8 Bibliography

1 Introduction - Relevance, Goal and Approach of this paper

According to the World Bank, Sub-Saharan Africa (SSA) is one of the poorest, most unequal and corrupt regions in the world. Yet, it is currently witnessing new developments: young impact-driven businesses are seeing Sub-Saharan Africa as a place of business opportunity and social innovation. They seek to create profitable and innovative products and services, that address social needs and challenges of the region. These entrepreneurs represent a new business phenomenon and approach to development - social entrepreneurship.

The region's interlinked challenges require a sustainable, scalable and inclusive development approach. As current practices have not been able to fully address the entire complexity of the prevalent issues, scholars are rethinking current development methodologies. Policy-maker Paul Martin, co-Chair of the UN Commission on the Private Sector and Development, emphasizes the role of the private sector in promoting sustainable development (Sriram and Mersha 2006, 137). In this regard, scholars such as the economist and Nobel Prize holder Muhammed Yunus highlight the importance of social entrepreneurship: “We use charity to avoid recognizing the problem and finding a solution for it. ... Charity is no solution to poverty. ... Charity appeases our consciences.” (Yunus and Jolis 2010, 3). Yunus says promoting social entrepreneurship as a means to development, for him, represents a proactive and effective solution, which aims to fully resolve existing challenges, instead of purely minimizing their intensity. Through its hybrid design, combining philanthropy and business, social entrepreneurship is seen as a big potential and driver for the socio-economic transformation in emerging markets, such as Sub-Saharan Africa.

This work will analyze the reality of social entrepreneurship in Sub-Saharan Africa, through qualitative interviews in the field. By talking to social entrepreneurs of different countries and sectors in the region, it will possible to give a holistic understanding of what social enterprises need, in order to succeed. The result of this study is overall encouraging: success for social entrepreneurs in Sub-Saharan Africa is possible, though not self-evident. Social enterprises still face different internal and external challenges that need to be overcome: From equal access to talent, finance and social networks. To existing policies, which currently are not creating enough favorable incentives to support social enterprises. And an overall stigma and mindset around Sub-Saharan Africa, dominated by stereotypes of poverty, instability and risk. Based on this multidimensional understanding of the obstacles, which hinder social entrepreneurial success in the region, this paper will elaborate concrete recommendations: both in terms of internal and external factors, such as policy and mindset transformation.

Overall this work highlights that it remains a challenge for social entrepreneurs in Sub-Saharan Africa to pursue their business and create social impact. It identifies success drivers, good case practices, and pitfalls to avoid. Data shows that besides successful internal customs, social entrepreneurial success is founded on a supportive business environment. In this context, governments have to take responsibility and ownership to transform the current regulatory framework and incentives. Internal governance structures and processes can be as good, but social enterprises will only be able to achieve sustainable impact and success, if they are complimented by the supportive policies and an open and unbiased mindset of investors and society.

Social entrepreneurship and its difficulties and success factors in Sub-Saharan Africa are still under-researched. This field especially lacks empirical studies. Literature offers theoretical knowledge about the phenomenon of social entrepreneurship in general and a holistic insight about specific business conditions in Sub-Saharan Africa. A desk review of existing literature in this area will form the theoretical-contextual foundation for the qualitative field-research of this paper. The analysis of the qualitative data will be carried out within four different categories in order to allow a comprehensive understanding of social entrepreneurial success factors: Human capital, financial capital, social capital and business environment. Within the discussion, based on the qualitative results, this paper will be able to formulate recommendations as to how social entrepreneurial success factors could be achieved and leveraged. The results of which will be summarized within the conclusion and form the foundation for answering the core research question of this work: which factors help social enterprises to scale successfully and foster sustainable development? An outlook of possible future research topics will conclude this paper.

2 Social Entrepreneurship - Theoretical Framework

2.1 Definition of Entrepreneurship

As Social Entrepreneurship is a specific form of entrepreneurship, in order to understand and define social entrepreneurship correctly, it is vital to appropriately understand and define entrepreneurship first. In the 19th century the French economist Jean Baptiste Say defined an entrepreneur as someone who shifts economic resources out of an area of lower and into an area of higher productivity and greater yield. Hence finding more efficient and productive ways of producing a product or providing a service are, as well as increasing economic value in terms of profit have been an entrepreneurial characteristic from the start.

Schumpeter emphasized another entrepreneurial characteristic within the 20th century: The innovative character of an entrepreneur. Schumpeter described a process of “creative­destruction” through which the entrepreneur, as change agent within the economy, challenges the status quo by creating new and better products, processes and systems in terms of organizational forms. Schumpeter sees the entrepreneur as the catalyst, founder and driving force of innovation within the economic systems. He cites that what defines entrepreneur and entrepreneurship is the continuous search for and exploitation of an opportunity for change and innovative value-creation.

Besides value-creation, opportunity-orientation and innovation Howard Stevenson, one of the leading scholars of entrepreneurship from Harvard Business School, has introduced a new characteristic feature of entrepreneurship: Resourcefulness. Stevenson differentiates entrepreneurship from general management by highlighting the fact that an entrepreneur does not limit its own options by its currently available resources: Entrepreneurial management therefore would be characterized by the “.. .pursuit of opportunity without regard to resources currently controlled” (Dees 1998, 3).

Based on the current state of research entrepreneurship can therefore be defined as disruptive, value-creating process of seizing opportunities for change and innovation without being restricted by resources at hand.

2.2 Definition of Social Entrepreneurship

Social entrepreneurship is a specific type of entrepreneurship. One of the scholars, who has mostly shaped and influenced the definition of social entrepreneurship and is being referred to as “instrumental in founding and developing social entrepreneurship as an academic field” (Duke University 2013) is Gregory Dees. Dees often being called the “father of social entrepreneurship education” has taught at Duke, Stanford and Harvard. In one of his most prominent works “The Meaning of Social Entrepreneurship” in 1998 Dees differentiated social entrepreneurs from common entrepreneurs by their explicit and central social mission. Incorporating entrepreneurial characteristics discussed in the previous chapter Dees defines social entrepreneurs as change agent in the social sector, who:

“Adopts a mission to create and sustain social value (not just private value), recognizes and relentlessly pursues new opportunities to serve that mission, engages in a process of continuous innovation, adaptation and learning, acts boldly without being limited by resources currently in hand, and exhibits a heightened sense of accountability to the constituencies served and for outcome created.” (Dees 1998, 4)

Dees emphasizes the fact that social entrepreneur’s drive goes beyond the perception of a social challenge and compassion. Rather it is characterized by a proactive vision of a socially- desirable target state (Dees 1998, 5). Even though social entrepreneurs might be acting locally, Dees says that their market-based business concepts have the potential to stimulate substantial changes in the way business is done in the regarding sector (Dees 1998, 5).

Among scholars there is a broad agreement that the central value proposition of social entrepreneurship lies in the creation of social value (Austin, Stevenson and Wei-Skillern 2006, 17, Peredo and McLean 2006, 57, Shaw and Carter 2007, 420). As already mentioned by Dees, the primary social mission differentiates social entrepreneurship from common entrepreneurship. Therefore, in contrast to common entrepreneurs, social entrepreneurs only assess and seize opportunities based on whether they have positive social impact or not (Weerawardena and Mort 2006, 22). Social entrepreneurship prioritizes social over economic value creation (Mair and Marti 2006, 36). Therefore, economic value creation in form of revenue and profits represents a means to an end for the realization of social transformation. Financial sustainability essentially embodies a core requirement for the sustainable, long-term success of social enterprise’s social mission (Mair and Marti 2006, 39).

To better understand social entrepreneurship, one has to apprehend its core feature of social value creation. Despite an ever-increasing interest in social value creation, the current state of research is characterized by a lack of a clear conceptualization of and measurement methodologies for social impact (Salazar, Husted and Biehl 2011, 175). Most scholars understand social impact as a form of positive externalities (Santos 2012, 336). Externalities can be described as positive or negative social, economic and/or environmental outcome from an economic activity that goes beyond its intended primary objective, whom society has limited influence on. Schuler and Cording describe social impact in the entrepreneurial context as “voluntary (i.e. not directly mandated by government regulation) business action that has positive social or third-party effects” (Schuler and Cording 2006, 540). Rawhouser, Cummings and Newbert on the other hand characterize “... Social impact as beneficial outcomes resulting from pro-social behavior that are enjoyed by the intended targets of that behavior and/or by the broader community of individuals, organizations, and/or environments” (Rawhouser, Cummings and Newbert 2017, 83). Positive social impact can therefore be defined as generation of “social goods” (e.g. income increase, improved healthcare coverage) or elimination of “social bads” (e.g. reduction in pollution levels, conflict or illiteracy).

According to different scholars social value can be measured by assessing the enterprise’s target group's perception of well-being (Kroeger and Weber 2014, 520, Tobias, Mair and Barbosa- Leiker 2013, 729, Utting 2008, 129). Across literature well-being is being measured in terms of life satisfaction. The OECD conceptualizes life satisfaction as a multidimensional phenomenon of “individual health, education, income, personal fulfilment and social conditions” (OECD 2011, 4). Therefore, enterprises exclusively qualify as social enterprises, if they have created social value through their product or service, by improving their target groups’ well-being through enhancing health, education and/or income conditions, without

Abbildung in dieser Leseprobe nicht enthalten

Figure 1- Bounded multidimensional model of social entrepreneurship by Weerawardena and Mort. Own representation.

Based on the existing literature on social entrepreneurship and a qualitative empirical study the two Australian professors Weerawardena and Mort have created an empirically-based definition framework. It defines social entrepreneurship as a multidimensional behavioral process characterized by proactiveness, risk management and innovativeness, bounded by environmental factors, sustainability and social mission (Weerawardena and Mort 2006, 32). This work will utilize the following framework as definition for social entrepreneurship, as it combines the existing academic knowledge with empirical insights to formulate a reality- aligned definition.

As identified within the previous literature review also Weerawardena and Mort's empirical study identifies proactivity (in the sense of the identifying and seizing dual (social and economic) value-creating opportunities) and innovation as characteristic features of a social entrepreneur. Contrary to Dees in reality they identify risk management in contrast to resourcefulness as a vital component of a social entrepreneur (Weerawardena and Mort 2006, 29). Results from their empirical study illustrate that it is indeed important for social enterprises to be rational and consider resources, especially financial resources at hand, when seizing opportunities. Taking a healthy portion of risk is a fundamental aspect of entrepreneurship, but empirical results emphasize that social enterprises need to carefully evaluate risks and be cautious not to compromise for example financial sustainability necessary to achieve the social mission.

Within their framework Mort and Weerawardena define bounding aspects for the rational and innovative behavioral process of social entrepreneurship. Their empirical results emphasize, that when seizing opportunities, besides social mission (in terms of socio-economic and ecologic value creation) and financial sustainability, also environmental factors are of core importance (Weerawardena and Mort 2006, 27). A social enterprise can typically only be able to create social value in practice and be financially sustainable when it understands and incorporates environmental dynamics and restrictions within its business model. Hence a social enterprise should only seize opportunities within environmental “boundaries” as for example government regulations or available human capital.

Based on current state of research and empirical results, moving forward this paper will define a social entrepreneur as an individual, who rationally and innovatively seeks market-based opportunities that create social, economic and environmental value while recognizing and incorporating environmental restrictions in its operating model and being financially sustainable.

2.2.1 Organizational model and legal structure

Through its hybrid model of social value and financial (self) sustainability and its prioritization of social over economic value, for long the perception among scholars dominated, that social entrepreneurship could only prevail in the form of a non-profit organization within the social aid charity sector (Mair and Marti 2006, 37). This belief was based on the fact that for-profits mostly aim to maximize shareholder value and distribute returns to investors, which, if prioritized in the wrong way, could lead to conflict with the primary goal of social value creation (Battilana, et al. 2012, 52). For a while within the social entrepreneurship literature the non­profit organizational model is being seen as a key differentiating factor of social enterprises compared to common enterprises. This belief has changed over the past years and now among scholars there is a broad consensus that social enterprises can appear both in a non-profit, for- profit and hybrid organization form (Dees 1998, 1). According to Anderson and Dees the social enterprise’s legal structure and organizational model represents a strategic decision (Dees and Anderson 2006, 55). This strategic decision has to be made according to the environmental context (for example which legal structure favors tax benefits or receiving capital for scaling up) and the complexity of the social need, social enterprises are targeting (Mair and Marti 2006, 41).

As mentioned in the previous chapter, sustainability is a key characteristic of social entrepreneurship. Hence being financially self-sustaining or having a long-term funding strategy and network enabling scalability is un-negotiable for a social enterprise. Many successful social enterprises, as for example Yunus’ microfinance Grameen Bank are for profit. Being profitable can help social enterprises in broadening the possible spectrum of opportunities to achieve their social mission, by for example enabling them to be compatible on the market and get the best talent and technical tools on the market. But this will only work as long as it does not compromise its social mission. Therefore, in case of a for-profit social enterprise, the social value definition and prioritization of the social enterprise has to be aligned with and embraced by its stakeholders. Due to its hybridity social entrepreneurship breaks conventional understandings of sector boundaries and legal structures (Austin, Stevenson and Wei-Skillern 2006, 22). Social entrepreneurship is not defined by its organizational model and legal structure, but rather by the socio-economic and ecologic value it creates, and its prioritization over purely financial value.

2.2.2 Differentiation from other forms of social engagement

Besides defining what social entrepreneurship is and in what forms it appears in in practice, what social entrepreneurship is not, also marks an essential part of the definition. Within this chapter social entrepreneurship will be differentiated from different forms of social engagement. The essential differentiator lies in the way social needs are targeted. Social activism for example uses indirect action to try to solve social challenges: It tries to influence governments, NGOs, consumers, employers and employees to change the status-quo and target a social need. Hereby social activism influences how a social challenge is being approached and might enable a new, higher social equilibrium (Martin and Osberg 2007, 37). Therefore, the outcome of social entrepreneurship and social activism can be the same, but social entrepreneurship chooses a more pro-active, direct approach of targeting a social need.

Social entrepreneurship is different to social service provision in terms of aid and charity work, as already mentioned in this work's introduction. As illustrated in chapter 2.2 Dees labels the possibility to scale a social entrepreneurial idea as a central and defining aspect of social entrepreneurship (Dees 1998, 5). Yunus and his Grameen Bank for example are mainly acting locally in Bangladesh, but Yunus' social entrepreneurial concept of microlending banks, had a global impact on poverty reduction methodologies and development work. Therefore, what differentiates social entrepreneurship from social service provision is its potential for scalable social value and its broader social vision. Social service provisions in comparison are often characterized by singular, short-term and partial solutions for a social need (Martin and Osberg 2007, 36). Within their article in Stanford's Social Innovation Review in 2007 University of Toronto Professor Roger L. Martin and Sally Osberg, President and CEO of the Skoll foundation, named an AIDS orphanage school as example. Such a school could help orphans escape poverty through education and hence create social value for a marginal group of society. Through not being a scalable concept, the orphanage school would not be able to challenge the status-quo and create a new, higher social equilibrium (Martin and Osberg 2007, 37). To conclude both social entrepreneurship and social service provision choose a direct approach to target social needs. The difference lies in the potential scope and scale of social impact.

2.3 Social Entrepreneurship and Development

As seen by the previous chapters, social entrepreneurship creates innovative solutions to social needs. While considering contextual factors, social entrepreneurs develop services and products that enable to overcome existing social challenges. Hereby they create social value and impact through creating positive and diminishing negative externalities. Social entrepreneurship is aligned with the principles of sustainable development, as its products and services meet the needs of the present, without compromising the ability of the future generation to meet theirs (World Commission on Environment and Development 1987, 41). Social entrepreneurship specifically enhances development by representing a scalable solution. Through the right business model and funding strategy, social enterprises will be able to grow, break-even and be financially self-sustainable. By producing their own revenue and not being dependent on external donations, they might be able to place relevant investments and expand their social impact and development at a large and self-sustaining scale (Nissanke 2001, 352).

While some non-profit NGOs, development and governmental organizations have produced noticeable improvements in health and education standards in recent years, especially in Sub­Saharan Africa, some scholars as Yunus criticize that in some cases inefficient and slow processes, susceptibility to corruption and conditionality of external donations, might pose limits to their reach and contribution to development (Yunus 2008, 3). As social enterprises often represent young and dynamic companies with low bureaucracy, an increasing number of scholars is recognizing social entrepreneurship as a, in some cases, more-easily scalable and efficient complementary factor or alternative to current development methodologies (Mulgan (Mulgan, et al. 2007, 7, Scherer and Palazzo 2011, 899). Besides an innovation-driven model, which can enable resource-efficient scalability of socio-economic impact, social entrepreneurship further facilitates development through driving sustainable economic growth and job creation (GIZ 2012, 9).

3 Sub-Saharan Africa - Contextual framework

3.1 General context

In order to identify the drivers and success factors, one has to first understand the environment, social enterprises work in and the nature of challenges they face. Although each Sub-Saharan African country faces individual challenges and stages of development, many countries deal with similar issues as for example poverty and political instability: Sub-Saharan Africa still represents one of the poorest regions in the world, with 9 out of the bottom 10 countries, ranked by the International Monetary Fund (IMF) for GDP for capita in Purchasing Parity Power (International Monetary Fund 2018). For the fourth consecutive year economic growth remains below population growth (World Bank 2019). Many Sub-Saharan African countries are moreover characterized by un-inclusive growth, with a track record of 10 out of the 19 most unequal countries in the world (UNDP 2017). 17 out of the 20 countries with the lowest Education Index worldwide are in SSA (UNDP 2013). Furthermore, many Sub-Saharan African countries rank among the most corrupt countries in the world (Transparency International 2018).


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Social entrepreneurial success factors in Sub-Saharan Africa. Which factors help social enterprises to scale successfully and foster sustainable development?
University of Frankfurt (Main)
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Social entrepreneurship, Sub-Saharan Africa
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Mara Garavini Seisselberg (Author), 2019, Social entrepreneurial success factors in Sub-Saharan Africa. Which factors help social enterprises to scale successfully and foster sustainable development?, Munich, GRIN Verlag,


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