Social Enterprise: Entrepreneurship and Transformation - Literature review Example

Social Enterprise Lecturer: In a world that is characterized by poverty, environmental degradation as well as moral injustice there seems to be a ray of hope provided by social enterprises. Social enterprises aim at attaining social missions through business activities to support the mission; however, social missions conflict with business activities with regard to the goals, norms, values and identities. Considering the different values concurrently creates a tension because of competing demands and ethical dilemmas; therefore, to effectively understand social enterprises relies on insights into the tensions and management of the tensions. Although studies acknowledge the existence of tensions between social goals and business ventures there is inadequate systematic analysis. The paper addresses the issue by considering tensions arising from social mission and commerce ventures by highlighting their prevalence and differences. The paper also explores the way organizational theories provide insight into tensions; and goes ahead to develop schedule for future research by expanding on the phenomenon. Table of Contents Introduction 4 Background in social enterprises 4 Funding and social enterprise implications 6 Role of mission consistency 7 Role of entrepreneurial competence 7 Role of attitude toward social enterprise 7 Methodology 8 Tensions within social enterprises 8 Performing 9 Organizing 10 Belonging 10 Learning 11 Methodology 12 Debate 12 Bridge between co-operatives and non-profit organizations 13 Three key aspects of social enterprises 14 Recommendations 15 Introduction Research in social enterprise has increased because several years ago only a limited number of colleagues recommended scholars to consider social enterprises seriously (Nyssens, Adam & Johnson, 2006). Social enterprises aim at attaining the common good through use of business disciplines and power within the marketplace in advancing social, environmental and human justice (Hines, 2005). Social enterprises are distinguished by the ability to directly address intractable social needs in serving the common good with commercial activity being its strong revenue driver. Although the notion of social enterprises arouse obvious appeal in many, their ultimate influence within the, market place has not yet been established. There are challenges that emerge preventing the concept from attaining its full potential like the bleak economic outlook that decreased availability of investors and credit as well as donors and customers. Although currently there is no comprehensive guidance mechanism for linking social concerns with capitalism in order to enhance social welfare, the paper establishes a framework of duality by analysing social actions within organizations. The paper begins by grounding the concept within social enterprises; however, the emerging complexity in organizational response to social concerns increases marketplace confusion and unpredictability (Massetti, 2012). Background in social enterprises Even though the meaning regarding social enterprise is contested, many explanations point out a market-based strategy that aims at attaining social purpose. Social enterprises are usually but not exclusively associated with non-profit sector, that is often presented as a panacea that results in efficiency of markets in addressing social problems that have not been addressed in state or even traditional sectors. Literature in social enterprise is dictated by functionalist as well as managerial perceptions that inevitably hide normal and narrow agenda behind the illusion of social enterprises. Functionalist and managerial accounts in social enterprises are shaped by the perception that organizations when faced with resource dependency constraints, social enterprise are compelled to engage in commercial revenue strategies in an attempt to survive. The argument for social enterprises bases on the assurance that conventional models of welfare provision from western are approaching their end. Usually, traditional charity is criticized for patronizing recipients and perpetuating poverty because of the failure to tackle the root causes (Yunus, 2007). The functionalist managerial accounts therefore point out that the scarcity in government grants and private donations have increasingly propelled social o5rganizations to adopt market-based funding strategies in order to avoid being resource dependent. Social enterprises are portrayed as desirable in responding to the failure of the state and resources dependency. The adoption of the managerial strategies as well as market-based funding mechanisms is considered to enhance social and economic outcomes for organizations because it makes the organizations more efficient and responsive. Therefore, the market-based practices and values are portrayed as providing more efficient way for tackling social problems beyond the traditional model of grant dependency and bureaucratically wasteful governments (Massetti, 2008). However, the functionalist and managerial accounts are prone to oversimplifying the reality by overestimating the level these organizations are rational and by concealing dilemmas associated with the daily practices (Dey & Teasdale, 2013). According to Smith, Cronley and Barr (2012), the domain of social enterprises is increasingly emerging as an area where organizations look for innovative ways to tackle intractable social problems like hunger, poverty and education often leveraged by business knowledge, strategies and tactics in meeting social objectives (Pomerantz, 2003). Although the scope of social organizations engaging in commercial activities is not new, the study showed that scope and magnitude of social enterprises are increasing as a result of various factors. The factors include increasing competition for economic resources, promotion of successful commercial activities in trade associations and even the potential of having access to unrestricted income. Non-profit organizations are becoming part of social enterprises because of various reasons like the potential to develop sustainable sources of funding through businesses instead of relying on charitable philanthropy prone to economic downturns. Moreover, social enterprises not only increase their funding but also help non-profit organizations to carryout social missions especially when the enterprises are linked to social mission. However, although social enterprises provide potential benefits to non-profit organization, social organizations also lead to two challenges one of which is distraction of non-profit organizations from its core social mission. Such distraction cause external stakeholders to be concerned regarding the identity of the organization and consequently the participation in the organization (Greenwood, 2001). Secondly, non-profit organizations may lack the skills and capabilities and resources necessary in developing successful for-profit social enterprises; therefore, the social organizations may end up generating little income while consuming financial resources of the organization. In their study, Smith, Cronley and Barr various issues were raised; however, there were three significant issues raised and they include perception of mission consistency, entrepreneurial consistency and attitude toward social enterprises. Funding and social enterprise implications There are various explanations for mission consistency, entrepreneurial competence and attitude toward the perceptions of social enterprises. The relation between social enterprises and donations remains an essential issue for many stakeholders in social enterprises and involves financial sustainability and their ability to continue offering the critical social services. However, faced with the increasingly competitive landscape, non-profit organizations are funded through various sources of revenue; however, the increasing dependence on commercial activities arouses important concerns regarding the way non-profit organizations are affected by social enterprises. Role of mission consistency One of the significant themes involves the perception of the engagement of non-profit organizations with social enterprises. Within their study Smith, Cronley and Barr show the issue of mission consistency to be consistently present; although, mission consistency varied substantially because in some organizations, social enterprises were considered as two mutually exclusive domains with non-profit organizations and social enterprises being at odds (Smith, Cronley and Barr, 2012). Role of entrepreneurial competence In their study Smith, Cronley and Barr established the theme through interviews with executive directors as non-profit organizations engaged in social enterprise with many executives highlighting the need for entrepreneurial skills and capabilities. Clearly, the study indicated that that skills possessed by employees in non-profit organizations differed with those in social enterprises. Role of attitude toward social enterprise Beyond the concerns of mission consistency and entrepreneurial competence raised by respondent in the study carried out by Smith, Cronley and Barr another theme is the attitude toward social enterprise. The study shows that the respondents’ attitude toward social enterprises to be of intense feelings that are both positive and negative. Methodology In the study the researchers collected data through two sources that include archival data and semi-structured interviews with executive directors. This use of various methods in collection of data allows for convergence and even triangulation of findings; nevertheless, the study collected archival data from non-profit organizations like annual reports and data in public databases regarding social enterprises. The semi-structured interview allowed the researchers to ask executives regarding social enterprises especially with regard to their engagement in social enterprises. In their study, Smith, Cronley and Barr were guided by tradition of grounded theory in analyzing their data by using a two-step coding process that allows codes to be established inductively from data and acknowledged by researchers (Smith, Cronley & Barr, 2012). The data analysis was outlined by theory techniques that led to iterative moving back and forth between themes in data and even the prevailing literature. The iterative process in the study helped in ensuring that the researchers were deeply engaged in matching themes to the prevailing literature in order to establish gaps in the knowledge (Smith, Cronley & Barr, 2012). The emergent of the coding process renders traditional reliability measures impractical, and the coding process involves multiple perspectives from researchers helping reduce researcher bias (Kreiner, Hollensbe and Sheep, 2006). Tensions within social enterprises Regardless of the various unifying characteristics of social enterprises, the conflict usually arises from demands that surface because of their commitment to both social missions as well as business activities. The commitments juxtapose different identities, goals, logic and practices that create tension both in leaders and the organization. Although many authors explicitly or implicitly address the tensions as core character in social enterprises, they do not provide systematic analysis of the way tension is manifested. In their study, Smith, Gonin and Besharov emphasize prevalence and various tensions within social enterprises while also acknowledging the critical challenges that result from the tensions; moreover, the tensions are categorized as performing, organizing, belonging and learning (Smith, Gonin & Besharov, 2013). Performing Performing tensions arise as organizations seek different and conflicting goals or even strive to tackle inconsistent demands from various stakeholders (Smith & Lewis, 2011). Goals in social mission are concerned with making a difference that is not constrained to beneficiaries, families or even funding partners. Organizations with the task of helping those severely disadvantaged individuals to have better opportunities in employment never measure success by the people employed but also the extent of enhancing self-esteem, social status, health and subjectively the well-being of these individuals. In contrast to goals associated social missions, goals associated with business ventures involve commercial success and profitability and can be measured with specific and standardized metrics and address a narrow group of stakeholders mainly the investors and owners. The divergent goals and metrics create conflicting demands and performing tensions within social enterprises and one critical challenge remains the definition of success across contradictory goals. Moreover, performing tensions arise from concerns regarding the sustainability to the commitment of conflicting goals because research suggests that within a competitive context of metrics one tends to dominate. Particularly, behavioural decision-making theory shows that individuals tend to stress metrics that can be proven clearly compared to orientation toward qualitative, ambiguous, uncertain and long-term activities. Quantifiable metrics provide clarity as well as focus to situations that can otherwise be ambiguous; hence, fostering a collective trust and commitment. Within social enterprises, preference for quantifiable metrics may result in business objectives dominating over other actives associated with social mission. However, social entrepreneurs often develop organizations owing to their deep commitment to social mission that offers the critical inspiration and motivation. Nevertheless, the entrepreneurs may sometimes emphasize the mission’s success to the detriment of the business purpose resulting in demise of the organization (Smith, Gonin & Besharov, 2013). Organizing Organizing anxiety arise from commitment to contradicting organizational arrangements, cultures, procedures and exercises (Smith Lewis & Lewis, 2011). Social mission and business activities frequently engage in different and inconsistent customs and practices requiring different employee profiles. Social enterprises face organizing tensions around concerns of organizational structure and law in creating separated or integrated structures and roe in pursuing social mission and business venture; moreover, social enterprises have to decide on whether to take for-profit or non-profit legal form (Clark and Ucak, 2006). Some organizations to overcome the challenge create two distinct legal entities with a business organization carrying out commercial activities while the non-profit organization pursues the social mission; besides, other organizations establish a hybrid legal form that acknowledges the organization’s double bottom line. Belonging Belonging tension arises from concerns of identity because of attending to social and business activities that raise belonging tensions while leaders struggle in articulating their identity both individually and collectively (Smith & Lewis, 2011; Smith, Gonin & Besharov, 2013). In addition, as leaders or even members develop a sense of belonging in the diverse organizational goals; this has the ability to develop subgroups capable of generating internal conflict. Moreover, belonging tensions arise as social enterprises manage relations with stakeholders because stakeholders aligned with social missions often have different identities from those aligned with business venture. Although the stakeholders in business and social ventures may appreciate the value of combined social and business purposes, they seek to interact with the organization through their specific identities. Therefore, social enterprises have to decide on when to emphasize social mission as well as their business ventures or even both simultaneously. However, emphasizing social and business ventures simultaneously poses challenges; these reveal that belonging tensions arise from social enterprises regardless of whether the tensions are defined in multiple identities or even adopt a hybrid identity. Learning Learning tensions arise from the combination of various time horizons while organizations struggle in growth and being flexible over the long period in trying to establish stability and certainty. In social enterprises, these tensions result in various domains like financial outcomes like profits and costs that can be measures in the short term, while social mission outcomes like eliminating poverty and overcoming economic injustices often necessitate a long term time horizon. The differences in time horizons have the ability to drive conflicting actions; moreover, social enterprises also face learning tensions within growth and scalability. As social enterprises try to expand in order to increase their impact in their mission, they threaten the mission’s impact because factors that facilitate social mission within small organizations seem to decrease with size. Organizational growth decreases the impact of factors such as communal trust-building, introducing the likelihood of drifting from the mission and violating the set values. Moreover, social enterprises often rely on participation forms in governments making it more challenging for the organizations to sustain as the organizations grow. Methodology The main methodology used in the study carried by Smith, Gonin and Besharov is literature review and seems to point out that social enterprises experience persistent tensions between social missions and business ventures. The tensions appear in various domains and seem to remain salient as time goes on; hence, to effectively comprehend social enterprises requires insight to the persistent tensions and management. The study even uses theatrical approaches in understanding social enterprises and the associated tensions and the theories include institutional theory, stakeholder theory, organizational theory and paradox theory. The study uses institutional theory to inform the understanding on societal logic associated with business ventures and social missions. Organizational identity theory is used in distinguishing normative and utilitarian identities associated with social enterprises and the way they influence organizational action. Stakeholder theory in the study illuminated the way distinct needs within external stakeholders create pressure in organizations to follow both social and financial outcomes. Hence, the stakeholder theory in the study offer a justification for managerial insight to tackle the conflicting goals, while the paradox theory suggests that tensions like those in social missions and business activities are inherent in organizations (Smith, Gonin & Besharov, 2013). Debate Debate regarding the influence of business practice remains a salient issue for charity organizations that are changing into social enterprises. Every organization that considers itself a social enterprise continually engages in deliberations regarding policies and practices both internally and externally. Cross sector theories take different positions making social enterprise occupy a space between non-profit and for-profit businesses; hence, considered as developing in all sectors that may take several forms like charity trading and social firms among others (Bennet and Iossa, 2005). The importance of placing social enterprises within the cross-sector models is that it promotes understanding of the ambiguity and origin of social enterprises (Ridley-Duff & Bull, 2011). Bridge between co-operatives and non-profit organizations ` Various concepts have been used in defining and setting organizations and their motives that are neither private nor public profit ones. Theoretically, the concept of social enterprise is considered to be a tool for establishing bridges that link the different components within the sector. When understanding the sector, two sources of tension appear and sometimes seem to difficult to overcome one of which is the gap between enterprise offering complete output intended for the market like many co-operatives. The other tension seems to arise between mutual interest organizations that in principle aim at serving their members and general interest organizations; hence serving the broader community. The initial cause of tension is characterized by availability of two different spheres with one sphere representing co-operative tradition while the other sphere the tradition of associative initiatives. The other source of tension is found within each of the two spheres that show that general interest organizations tend to be at the core while mutual interests are located on the either right of left of the spheres. Unifying concept within social enterprise essentially dwell in the fact that social enterprises generate shared attraction linking the spheres. The concept accomplishes this by attaching itself to certain organizations within every sphere and later the organizations are drawn to a single group of organizations. In comparison with traditional associations, social enterprises value economic risk-taking associated with the prevailing productive activity. However, in contrast to conventional co-operatives, social enterprises are lean toward the entire community by emphasizing the aspect of general interest. Moreover, social enterprises combine different stakeholders, while traditional co-operatives generally are developed as single-stakeholder organization. Nevertheless, the contrasting aspect should never be overestimated since social enterprises are a new dynamic that encompasses newly created organizations and older ones. Three key aspects of social enterprises Initial aspect of social enterprises is that they are usually made up of complex mixture of goals in three different categories that include social goals, economic goals and socio-economic goals (Bosche, 1998). Social goals are linked to the mission of the social enterprise in order to benefit the community while economic goals are associated with the entrepreneurial character of social enterprises. Moreover, the socio-political goals refer to the fact social enterprises are rooted in a sector normally associated with socio-economic action. The other aspect is that social enterprises mobiles different forms of market as well as non-market resources in sustaining public benefit mission like trading goods and services and even relying on volunteer resources. The volunteer resources can be viewed as a consequence of mobilization of social capital; moreover, social capital remains a production factor in social enterprises because it improves the process through reduction of transaction costs (Frogget and Chamberlayne, 2004). The last aspect is that social enterprises are engaged in political context because policies in social enterprises result in interactions between individuals who promote social enterprises and representatives of public organizations (Nyssens, Adam & Johnson, 2006). The concept of social entrepreneurship seems to be untidy because there is blurring of boundaries with regard to what makes up a social enterprise especially the concept social entrepreneurship. This seems to be prevalent in societies with low growth and high degree of poverty as well as large social dislocations where the enterprises seem to have significant influence although is sometimes unclear if the intention is really social or another motive. Some researchers consider social entrepreneurship as initiatives taken by non-profit initiatives aimed at creating value to individuals in areas where traditional markets is unable to reach while others consider the concept to be a business principle for solving social problems (Alvord, Brown, & Letts, 2004; Dees, 1998). Nevertheless, social enterprises like any other enterprises fill a gap by evaluating opportunities available in improving systems, creating solutions; nevertheless, distinction seems to appear when considering the core objectives of the activity (Mair & Marti, 2006; Brooks, 2009). The various studies evaluated argue that social enterprises have the objective of creating social value while economic aspect of the organizations acts as a by-product that aids the enterprises to be sustainable (Bornstein & Davis, 2010; Emanuele and Higgins, 2000). Hence, social enterprises create a fresh model for providing products that directly cater for social needs underlying a better life like catering for the basic needs (Williams & Knife, 2012). Recommendations Although the prevailing definitions and concepts regarding social enterprises shed light on the tasks associated with the enterprises, there is need to provide a strong consensus concerning what really constitutes a social enterprise. Moreover, even though there seems to be consensus that creation of value social value is the objective of social enterprise, there is need for a critical consideration if the organizations should be categorized as social enterprises. In future there is need to evaluate social entrepreneurship, because social enterprise activities need to target persons unable to afford engagement in traditional market activities. As well, at the core of the activities of social organizations should not be entangled with profit motive but rather the willingness to serve those who are less fortunate. Therefore, although social entrepreneurship has different facets and varies in accordance with socio-economic and cultural environment; there is need to critically analyse the nature and characteristics of social enterprises operated in economically depressed regions. References Alvord, S.H., L.D. Brown, & C.W. Letts (2004). Social entrepreneurship and societal transformation. Journal of Applied Business Science. 40(3), pp 260-282. Bennet, J. and Iossa E. (2005), ‘Contracting Out Public Service Provision to Not-For-Profit Firms’, Centre for Market and Public Organisation, University of Bristol, pp. 1–29. Bornstein, D. & Davis S. (2010). Social Entrepreneurship: What everyone needs to know.Oxford, UK: University Press. Bosche, J. (1998). Merging mission and money: A board member’s guide to social entrepreneurship. 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Creating a World without Poverty: Social Business and the Future of Capitalism. New York: Perseus Books. Read More