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This document discusses social entrepreneurship and provides examples of successful social entrepreneurships. It defines social entrepreneurship as addressing social problems through sustainable solutions rather than profit-seeking. Social entrepreneurship differs from social activism in that it involves direct action to create new organizations rather than indirectly influencing others. Examples of successful social entrepreneurships discussed include microloans through the Grameen Bank, BRAC in Bangladesh, and Aravind Eye Hospitals in India.

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0% found this document useful (0 votes)
48 views8 pages

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This document discusses social entrepreneurship and provides examples of successful social entrepreneurships. It defines social entrepreneurship as addressing social problems through sustainable solutions rather than profit-seeking. Social entrepreneurship differs from social activism in that it involves direct action to create new organizations rather than indirectly influencing others. Examples of successful social entrepreneurships discussed include microloans through the Grameen Bank, BRAC in Bangladesh, and Aravind Eye Hospitals in India.

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International Journal of Management & Information Systems – First Quarter 2011 Volume 15, Number 1

Social Entrepreneurship:
Generating Solutions To Global Challenges
Hany H. Makhlouf, University of the District of Columbia, USA

ABSTRACT

Social entrepreneurship is not new, but has gained greater visibility and recognition in recent
years due to its growing worldwide impact. As in the case of business entrepreneurship, social
entrepreneurship starts with an entrepreneur who has a novel idea, an innovative product or
service, a creative approach to solving a perceived problem, a new business model, and/or a
previously untried approach to product or service delivery. However, social entrepreneurship
differs from business entrepreneurship because it is after sustainable solutions to societal
problems and aims at social change rather than market expansion. It is, therefore, seen more as
an agent of change than a profit-seeking enterprise. This paper explores the characteristics of
social entrepreneurship, and the factors that make a difference in its success or failure. It also
sheds some light on what a social entrepreneurship is and what it is not. Finally, it examines the
missions and contributions of six successful social entrepreneurships: The Grameen Bank of
Bangladesh, ADAPT of Egypt, BRAC of Bangladesh, Instituto de Pesquisas Ecologicas of Brazil,
the Aravind Eye Care Hospitals of India, and Televerde’s Prison Call Centers of the United
States. The impact of the first four has spread beyond their countries of origin, either through the
geographic expansion of their operations or the application of the same concept or business
model by social enterprises in other countries.

Keywords: Social entrepreneurship; business entrepreneurship

CHARACTERISTICS OF SOCIAL ENTREPRENEURSHIPS

D ue to the varying definitions and descriptions of social entrepreneurship, a recent article on the
subject asked: Will the real social entrepreneur please stand up? According to some, the term applies
to any out-of-the-box effort that focuses exclusively on solving societal problems, be they social,
educational, economic, or environmental. Others view social entrepreneurship from the perspective of establishing a
social enterprise that will introduce an innovative approach to deal with a social problem. Based on the all inclusive
first definition, reformers who lead a movement for a social cause would be categorized as social entrepreneurs. This
group would include historic figures like Suzan B. Anthony, who fought for the rights of women; Vinoba Bhave,
who called for the redistribution of land to help poor Indians; Jean Monnet, who led the rebuilding of the French
economy after World War II; and John Woolman, who led U.S. Quakers to free their slaves. (List of Social
Entrepreneurs. 2010, 1)

Martin and Osberg (2007) follow the narrower definition of social entrepreneurship that will be followed in
this study. They see the word “social” simply as a modifier of the term “entrepreneurship”. Accordingly, “social
entrepreneurship” is a form of entrepreneurship that has a great deal in common with “business entrepreneurship”.
What this modifier does is reflect some adjustment in mission, approach, and orientation. As a result, social
entrepreneurship can be distinguished by having three components: (1) an ability to identify “a stable but inherently
unjust equilibrium that causes the exclusion, marginalization, or suffering of a segment of humanity”, (2) an ability
to identify an opportunity in this unjust equilibrium and develop a social value proposition, and (3) willingness to
take action in order to forge “a new, stable equilibrium that releases rapped potential or alleviates the suffering of
the targeted group…and even the society at large.” (p.2)

© 2011 The Clute Institute 1


International Journal of Management & Information Systems – First Quarter 2011 Volume 15, Number 1

SOCIAL ENTREPRENEURSHIP VERSUS SOCIAL ACTIVISM

In an attempt to set the boundaries that separate social entrepreneurship from social activism and social
service, Martin and Osberg further observed that social entrepreneurship involves taking direct action that would
have a transformational impact. From a generic standpoint, its aim is to change an inferior and stable equilibrium to
a new superior equilibrium. This is the concept of “creative destruction” that was advanced by the champion of
entrepreneurship, Joseph Schumpeter, who described it as incessantly destroying the old order and creating a new
one. According to Schumpeter, however, entrepreneurial success in this creative destruction would lead to imitators.
At that point the new way of doing things will become the common and normal way. The entrepreneurship process
and, with it “creative destruction” can, therefore, be seen as a cycle in which entrepreneurs continually lead the way
from one state of equilibrium or order to a new and superior one.

Attracting imitators at some point is, therefore, a part of the entrepreneurial success story as well as a part
of the entrepreneurial cycle. Imitators would, however, change what was once new or radical departure from the old
order into a new normal or a stable equilibrium. For example, Mohamed Yunus who, as will be explained in greater
detail later, is widely regarded as a social entrepreneur, having introduced the microloan system through his
Grameen Bank, has invited imitators from all over the world. The system created became a new order in lending,
and the concept has become more widespread than he originally envisaged. Another example from the 19 th century
is Andrew Carnegie’s library system. Carnegie was both a business entrepreneurs and a social entrepreneur. As a
social entrepreneur, he introduced the concept of having a library system that would have the broadest impact, and
could be imitated by others all over the world for the purpose of providing the broadest access to information. With
this vision, the new superior equilibrium has been re-enforced by imitators.

Like social entrepreneurs, social activists may be motivated by an unfortunate but stable equilibrium.
However, instead of taking direct action, a social activist “attempts to create change through indirect action, by
influencing others…governments, NGOs, consumers, workers, etc. to take action” (Martin and Osberg. 2007, P.2).
Thus, a social entrepreneur would create a social organization to realize his/her dream which brings about a new
superior equilibrium, while the social activist would try to influence others to take action in the hope that that would
lead to the desirable superior equilibrium. As for social service, it would differ from social entrepreneurship and
social activism because its impact is more localized. (Ibid.)

SOCIAL ENTREPRENEURSHIP VERSUS SUSTAINABILITY ENTREPRENEURSHIPS

Social entrepreneurship and sustainability entrepreneurship are different but have a great deal in common.
Both emphasize the importance of conducting their activities in a manner that emphasizes saving and/or preventing
harm to the environment so that the quality of life of future generations would not be harmed by the irresponsible
behavior of today’s businesses and consumers. The two types of enterprises differ, however, in that social
enterprises see themselves and behave as social enterprises primarily pursuing a social mission while sustainability
enterprises are business or economic enterprises that pursue their business and profitability objectives in a socially
and environmentally responsible manner. Sustainability entrepreneurships emphasize the goal of promoting
sustainable living and protecting the environment from further damage due to present and past business practice.
They also view profits as a resource that should be reasonably divided between rewarding investors for the risk
taken and re-investment in sustainability R&D, infrastructure, and responsible use of energy and natural resources.

WHO ARE THE SOCIAL ENTREPRENEURS

As definitions of social entrepreneurship vary widely, so do the definitions of social entrepreneurs.


Ashoka, which is a foundation focusing on developments in social entrepreneurship, provides one of the most
reflective definitions. It describes them as “individuals with innovative solutions to social problems. They are
ambitious and persistent, taking major social issues and offering new ideas for wide-scale change. Rather than
leaving societal needs to the government or business sectors, social entrepreneurs find what is not working and solve
the problem by changing the solution, and persuading entire societies to take new leaps” (Ashoka. 2010, p.1).

2 © 2011 The Clute Institute


International Journal of Management & Information Systems – First Quarter 2011 Volume 15, Number 1

In addition to having a vision, determination, and an ability to identify problems and innovation solutions, a
social entrepreneur has to be a persuasive communicator and a good organizer. He/she is usually driven by the desire
to open new pathways and attain measurable outcomes. Like business entrepreneurs, they also have a higher than
average risk-taking propensity and tolerance to uncertainty.

THE 4 C’S OF ENTREPRENEURIAL SUCCESS

When would a social entrepreneurship have what it takes to succeed? According to Tim Morral (2010, July
30) , there are four prerequisites for success, the 4 Cs: Compatibility, connections, communication, and
commitment.

1. Compatibility: Having a good match between the product/service to be provided and the stated purpose of
the enterprise.
2. Connection: The extent to which the entrepreneur/leader has succeeded in creating a passion for the venture
and its mission among stakeholders, customers, associates, and the community at large.
3. Communication: The ability to convince stakeholders of the capability of the venture to deliver what its
promises and reach measurable outcomes.
4. Commitment: Having the ability and the desire to persevere, and overcome barriers, doubts, and resource
limitations. (pp.1-2)

THE PROFIT FACTOR

It is often said that entrepreneurs are excited mostly by making their vision real. Thus, neither business
entrepreneurs nor social entrepreneurs see profit-making as the sole or primary motive behind what they do. This is
particularly true of social entrepreneurships, which are frequently perceived as non-profit organizations that are after
generating “social value”, not necessarily profits. In the view of some, however, there is nothing wrong with profit-
making if that is not the primary goal. As Andy Horsnell (2010) observed, a “social enterprise is not balancing the
double bottom lines of profit and social impact as though they are equally important. The real bottom line for a
social enterprise, the goal by which its success should ultimately be evaluated, is its social (or environmental)
impact; and being profitable (or at least financially sustainable) is the entirely necessary means to that end. Of
course, there can be no social mission without money, but the first goal is mission” (p. 2).

Therefore, operating as non-profits does not mean that social enterprises would not engage in revenue-
generating activities which may be needed both for sustainability and raising additional capital. As Eikenberry
(2009) observed, unlike philanthropic foundations that often follow the “transactional model” of fund-raising, social
entrepreneurships have to follow the “transformational model which commensurate with their nature as innovative
enterprises. (p. 55)

THE RISK FACTOR

Entrepreneurship is primarily associated with innovation and change. This applies to both of the social and
business entrepreneurships. In the meantime, entrepreneurs are often described as risk-takers because they are
willing to introduce previously untried ideas and approaches, and in so doing accept the possibility of failure. One
dissenting voice has been that of Peter Drucker (1985) who believed that all managers and leaders should be risk-
takers, and well-prepared entrepreneurs do not necessarily assume added risk. In selected quotes from his famous
Innovation and Entrepreneurship book, he stated that “entrepreneurship is risky mainly because so few of the so-
called entrepreneurs know what they are doing. They lack the methodology. They violate elementary and well-
known rules.” This is not to say that he thought that entrepreneurship was risk-free. He just believed that risk could
be reduced or better managed if entrepreneurs were better prepared to become leaders and managers of the ventures
they created.

© 2011 The Clute Institute 3


International Journal of Management & Information Systems – First Quarter 2011 Volume 15, Number 1

ORGANIZATIONAL AND OPERATIONAL NECESSITIES

Social entrepreneurships have to establish external relations as well as the kind of management and
operational systems that would allow them to function as viable enterprises. They also have to build dedicated teams
that believe in the mission, are committed to the cause, and have the skills needed to: (1) build and maintain strong
relations with all external stakeholders, (2) attract the resources required for the financial viability of the
organization, and (3) assist in the development and implementation of strategic and operational plans. The external
stakeholders, upon whom social entrepreneurships depend, and to whom they should give special attention, include:
“constituents intended to benefit from the initiative (e.g. poor and marginalized people); (2) resource providers, who
offer financial, technical, or political resources; (3) allies who help carry out programs; and (4) actors who are
targets of programs or campaigns” (Alvord, Brown, and Letts. n.d., pp.150).

Team building is one of the skills entrepreneurs need to have. They may start their ventures on the basis of
a vision or an identified opportunity, but acting alone at first has to give way to acquiring and working with a team
and other constituents. Quoting social entrepreneur, Mohamed Yunus, Robertson (2009) wrote: “Community helps
to encourage, enable, and value what the entrepreneur starts. If nobody notices, there is no reward for the
entrepreneur, others, or the world…When entrepreneurship lasts, what you create becomes the person rather than the
persons who make it. It is ageless. It is a combined personality, not just one. It is a life unto itself.” (p. 31). What
this means is that the social enterprise that an entrepreneur creates should be organized to have a personality and a
life of its own, and this can’t be done if the founder continues to stand alone. (Ibid.)

The administrative structure, set by Brazil’s Instituto de Pesquisas Ecologicas (IPE), reflects the importance
given both to its organizational structure, and the selection of its team-members. IPE is a community-based
biodiversity protection social entrepreneurship. One of its main objectives is saving what is left of the Atlantic
Rainforest. At its highest echelons, it has been set up to have three separate boards: The first determines the overall
direction and strategy; the second is responsible for fund raising and fund management; and the third focuses on
creativity and is actually called the Creativity Council. Ashoka (2001) described IPE’s personnel selection criteria
indicating that “a person is accepted as a part of IPE’s team first and foremost for…attitude. While the candidate
must certainly demonstrate intelligence, an agreeable personality ranks as high as technical knowledge… right after
a positive attitude comes talent and commitment.” (p. 7)

SOCIAL ENTREPRENEURSHIP SUCCESS STORIES

The following social entrepreneurships, which vary in location, size and objectives, have been selected as
examples of successful models that have exceeded expectations. Two have originated in Bangladesh, and the others
in Egypt, India, Brazil, and the United States.

THE GRAMEEN BANK

After taking some of his students on a field trip to a village in Bangladesh, Professor Mohamed Yunus of
Chittagong University encountered a poor woman who made a living by making bamboo stools in her home. He
learned from her that to make those stools, she had to borrow 15 pennies per stool from a middleman at as high a
rate as 10% per week. At such rate, she ended up with a profit margin of only one penny per stool. Upon hearing
that story he realized that that poor woman and others like her had to depend on those middlemen because they were
shut out of conventional banking institutions’ lending programs. The amounts they needed were too small for those
banks to consider. Therefore, he came up with the microloan concept, and shortly after established the Grameen
Bank (which means village bank) to pioneer in providing microloans for women and men who needed such small
amounts to finance their micro-size businesses. The loans to be provided by Grameen could be as small as $50, and
could be used to buy such things as sewing machines to make clothes to be sold to neighbors, chicken to produce
eggs that can also be marketed, or start any kind of business. Along with this kind of financing, borrowers can get
some technical and business advice from the Bank to help them get started. The loans provided are to be paid pack
in six months, and do not require any collateral.

4 © 2011 The Clute Institute


International Journal of Management & Information Systems – First Quarter 2011 Volume 15, Number 1

Since its establishment in 1976, Grameen has added 1,084 branches and 12,500 employees, and grew to
serve 2 million clients in 37,000 villages. According to its records, “on any working day, Grameen collects an
average of $1.5 million. Of the borrowers, 94% are women, and over 98% of the loans are paid back, a recovery rate
higher than any other banking system. Grameen’s principles and methods have eventually been applied in projects in
58 countries, including the U.S., Canada, France, the Netherlands and Norway.” (Grameen Communication.2010, p.
1) Success magazine (2010, October) described Yunus as the Banker to the Poor who pioneered microlending and
launched a global movement (61).

Since the spread of micro-finance to other countries, adaptations were added and more lives have been
touched by its benefits. India, for example, became one of the biggest countries to adopt it, and microfinance
financial institutions began to provide millions of loans ranging mostly from $108 to $431. The annual micro-
finance growth rate in India was recently reported to have reached 40%, benefiting 25 million borrowers. With such
fast growth, however, there is a potential of an increase in the rate of defaults. According to Business Week (2010,
June 27, p.51), there has been an erosion in lending standards in India due to the lack of a nationwide system to
track borrowers, and the potential impact could be as dangerous as a monsoon or some other natural disaster. But
such a possibility does not discredit the concept and its future potential in India and other countries.

APPROPRIATE DEVELOPMENT ARCHITECTURE AND PLANNING TECHNOLOGIES (ADAPT)

This social entrepreneurship was established by architect/entrepreneur Hany El-Miniawy to introduce low
cost construction technology that would make possible the building of affordable housing for the poor in Egypt and
other countries, using local recycled materials. The concept is to adapt construction technology to local conditions
and resources. In addition to directly using this technology in building thousands of housing units, ADAPT teaches
others to do the same in order to extend the benefit to the largest number of needy families who may otherwise
continue to live in slums for the rest of their lives. About 70% of ADAPT’s clients are poor or marginalized
members of society who live in sub-standard residences. In addition to its activities in Egypt, ADAPT has extended
its activities to Algeria, Saudi Arabia, and other countries. (Knowledge @Wharton. 2010. P.1-2)

THE BANGLADESH RURAL ADVANCEMENT COMMITTEE (BRAC)

Established by Entrepreneur Fazle Hasan Abed al Sulla in 1972, BRAC has a broad mission to help the
poor and landless, particularly women and children. Its aim is to help its clients to transition from being public aid
recipients into productive citizens. In 1979, it started a program to cut down child mortality through immunization
and oral rehydration. Its holistic approach to reduce poverty grew to include disaster relief, microfinance, and
educational and social development projects. After initial success in its home country, BRAC has established offices
in 14 countries, performing activities in 64 countries all over the world. Through its 120,000 employees and
volunteers, it is estimated to have positively touched the lives of 110 million people. To finance its non-profit
programs, it has acquired several commercial enterprises whose revenues finance 80% of its operations. (BRAC.
2010, pp. 11-9)

INSTITUTO DE PESQUISAS ECOLOGICAS (IPE)

As mentioned earlier, IPE was established to run a community-based biodiversity protection system, save
the Pontal forest, and reduce the continued fragmentation of the Atlantic Rainforest by poor settlers. The geographic
area of interest has been settled by thousands of poor people as a part of Brazil’s Landless Movement. Some of the
settlers claimed the land for themselves, and some were placed there by the Government, and since they were not
originally from that area, they had no historic or emotional connection to the land, and were not opposed to
deforestation. Houses, roads, industries, and agriculture replaced the forest trees. As a result, only 2% of indigenous
trees in the Pontal’s forest avoided deforestation. To reverse this trend, and get the cooperation of the settlers who
have no other place to go, IPE came up with the following creative approach:

1. First: gain the settlers’ confidence and cooperation.


2. Second: Develop an environmental protection educational program.
3. Third: Develop a community-based biodiversity protection program.

© 2011 The Clute Institute 5


International Journal of Management & Information Systems – First Quarter 2011 Volume 15, Number 1

4. Fourth: Train professionals and community members.


5. Fifth: Influence public policies toward biodiversity conservation.

The community’s cooperation is manifested in what IPE calls “The Green Hug”, according to which the
settlers would be organized “to plant trees surrounding nature reserves in order to ward off assaults by cattle, fires,
and windstorm. After taking classes in planting trees, these settlers plant a mixture of fast-growing trees from which
they can harvest much needed fruits, firewood, and wood for building, as well as slow-growing indigenous trees that
have more economic value…With this practice, people are less likely to go deep into the forest and disturb habitat of
endangered animals.” (Ashoka. 2001, p. 5) This strategy has helped avert further in depth cutting of indigenous
trees.

ARAVIND EYE CARE HOSPITALS

Founded in India in 1977 by a visionary Ophthalmologist and social entrepreneur, Dr. Govindeppa
Venkataswamy, who also came to be known as Dr. V, these hospitals have saved the vision of 2.4 million poor
Indians over a 30-year period. Dr. V’s vision was to set up a largely free eye care system to help in eradicating
needless blindness in India, a country in which over 2 million people lose their eye sight annually, mostly due to
Cataract. To realize this vision, he: (1) designed an eye care and surgical procedure that resembles an assembly line
in order to maximize the number of patients to be treated, (2) reduced the cost per surgery by keeping the operating
rooms open for performing surgeries 24 hours per day, (3) trained nurses to perform pre-op and post-op care in
order to free doctors to perform the maximum number of surgeries, (4) offered free eye care for the poor who made
up two thirds of his patients, (5) initiated a training program to help other doctors and entrepreneurs to establish and
run similar systems, and (6) instituted a research program for continuous improvement that would benefit the
patients. Referring to his vision and the innovative system that he set up to serve the largest number of patients, Dr.
V once stated that “he wanted to market good eye-sight to the world the way McDonald’s sells hamburgers.”
(Wikipedia. 2010, August 7, p.1)

In fact, the similarities between McDonald’s story and Dr. V’s are striking. Both started with a goal and
both devised systems that enhance efficiency, reliability, value, market expectation, and consistency in the
services/products provided; and both have done well through the years. Peter Drucker’s (1985) description of
McDonald’s story shows such similarities. He wrote that McDonald “first designed the end product; then it
redesigned the entire process of making it; then it redesigned or in many cases invented the tools so that every piece
of meat, every slice of onion, every bun, every piece of fried potato would be identical… Finally, McDonald’s
studied what value meant to the customer, defined it as quality and predictability of service, absolute cleanliness and
friendliness, then set standards for all of these.” (Guzzardi. 1985, p.270)

TELEVERDE’S CALL CENTERS

Recognizing the difficulties prisoners face in re-starting their lives after they serve their sentences,
Televerde, a company that sells expensive software packages, established four Call Centers, staffed by female
prisoners inside the Arizona State Prison complex at Perryville. Through those call centers, Televerde tries to reach
and convince businesses to buy their software. The reward of those prisoners is getting paid at the federal minimum
rate, and more importantly eventually walking out of prison with a job waiting for them and up to $15,000 in
savings. The benefit to society is a reduction in the rate of return to the slammer due to their resort to a life of crime.
Some of those same individuals, not only did well in those jobs, but ended up getting advanced degrees that made it
possible for them to get responsible positions on their own in the United States and Canada. According to Forbes
reporter Victoria Barret (2010, June 28), “of Televerde’s out-of-prison alumni, (only) 11% have gone back to the
slammer over the last 14 years, (while} nationally, 40% of female felons return within just three years.” (p. 55)

CONCLUSION

Social entrepreneurship is catching up with business entrepreneurship as a borderless agent of change. It is


after the kind of transformational change that makes a difference in solving societal and environmental problems
and reversing actual or threatening negative social, economic and environmental trends. Some, social entrepreneurs

6 © 2011 The Clute Institute


International Journal of Management & Information Systems – First Quarter 2011 Volume 15, Number 1

have, therefore, emerged as modern heroes who take up the challenge of changing a stable, but inferior, equilibrium
to a superior and more desirable one. Because they are not for profit maximization or increasing market share, they
don’t discourage competitors and imitators. In many cases, they show others how to follow a similar path to also
make a difference.

Although a social entrepreneurship may take the form of a for- profit enterprise, it is for the most part a
social enterprise that uses the profits realized for sustainability, or for attaining clear social and/or environmentally-
related objectives. India’s social entrepreneurship, the Aravind Eye Hospital system, for example, uses the profits
realized from serving financially able patients to offer free treatment to two- thirds of their patients who can’t
afford to pay; thus, reducing unnecessary blindness among the poor members of society. Social entrepreneurs like
Dr. Venkataswamy, Aravind’s founder, and Mohamed Yunus, who pioneered in microfinance, are likely to continue
to grow in number and impact because they offer the world an effective and credible alternative to complete
reliance on for-profit businesses and governments to address market failures, environmental challenges, and social
ills.

AUTHOR INFORMATION

Dr. Hany H. Makhlouf is a Professor of Management and International Business and Department Chair in the
School of Business and Public Administration at the University of the District of Columbia. He has co-authored two
books, the most recent of which is entitled “Entrepreneurship: Launching and Managing New Ventures”. He has
also published numerous articles and papers reflecting his research interests in general management,
entrepreneurship, international business, and economic development in Africa. He earned his Ph.D. from the
American University in Washington, D.C.

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© 2011 The Clute Institute 7


International Journal of Management & Information Systems – First Quarter 2011 Volume 15, Number 1

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8 © 2011 The Clute Institute

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