The Concept of Social Entrepreneurship

In economics terms, social entrepreneurship indicates an opportunity-driven activity with the aim of creating social change. It is a discrete and observable process that spans civil society, government, and commerce consisting of recognizing and acting on an opportunity to produce social change (Dees, 2001; Nicholls, 2006). The process of social entrepreneurship begins with any sort of actor—be it a politician, civil servant, interest group, a citizen activist, or anyone with an interest in producing social change—being alert to an opportunity to influence social welfare for a community, then seizing that opportunity (Shockley & Frank, 2011). The recognized opportunity must be acted on; simply being aware of an opportunity is not by itself sufficient to constitute social entrepreneurship. While there is little empirical evidence that social entrepreneurs comprise a select group with observable personality traits or characteristics (e.g., risk tolerance, creativity, intellectual capacity), there remains a tendency to celebrate or even heroicize individual social entrepreneurs (see Bornstein, 2007). Rather, social entrepreneurship might be more usefully characterized as a universal behavior that can be carried out by anyone, any organization, or any network in a limitless variety of contexts and situations (Light, 2006). The nature of the opportunity to produce social change can be “objective”—for example, becoming aware of new needs of a community or demands from a constituency—or “subjective”—for example, anticipating deficiencies or weaknesses in a community before a crisis erupts.

The modern conception of entrepreneurship in economics principally derives from the work of three economists: Joseph Schumpeter, Ludwig von Mises, and Israel Kirzner. In his two major works The Theory of Economic Development (1934) and Capitalism, Socialism, and Democracy (1950), Schumpeter conceives of “creative destruction” in which entrepreneurship consists of new combinations of existing resources that drive economic development, such as the introduction of a new good or a new method of production, the opening of a new market, the conquest of a new source of supply of raw materials or half-manufactured goods, and the carrying out of the new organization of any industry.

The other two economists—Mises and Kirzner—belong to what is usually referred to as the Austrian school of economics. In his magnum opus Human Action (1949/1996), Mises identifies entrepreneurship as a behavior universal to all activity. Entrepreneurship, he writes, “is not the particular feature of a special group or class of men; it is inherent in every action and burdens every actor.” Consciously expanding on Mises’ conception, Kirzner in his primary works on entrepreneurship theory, such as Competition and Entrepreneurship (1973), locates entrepreneurship as the driver of all market processes in that entrepreneurial market participants acquire “more and more accurate and complete mutual knowledge of potential demand and supply attitudes,” thus “equilibrating” or stabilizing a market by moving it closer to equilibrium between supply and demand. Some contemporary social scientists (for example, Bielefeld, 2008; Shockley & Frank, 2011; Shockley, Frank, Stough, & Haynes, 2008; Swedberg, 2006, 2009) have made efforts to establish a theoretical foundation of social entrepreneurship based on the modern conception of entrepreneurship in economics. Swedberg (2009), for example, adapts Schumpeterian language in defining economic and non-economic (e.g., social) entrepreneurship alike “as the pushing through or successful introduction of a new combination of already existing material and forces” (p. 94). Schumpeterian entrepreneurship thus would embrace the social, environmental, and commercial goals of sustainable development. Similarly, Shockley and Frank (2011) analogize the market effects of Schumpeterian and Kirznerian commercial entrepreneurship to the social and community effects. Rather than invent new theories of social entrepreneurship, these authors and others rest their understanding of social entrepreneurship on the well-developed and established modern conception of entrepreneurship in economics.

Central to all forms of entrepreneurship, including social entrepreneurship, is the role of institutions. In both Kirznerian and Schumpeterian theories of entrepreneurship the importance of institutions is not immediately apparent; rather, it is implied in the operation of Kirznerian equilibration and Schumpeterian creative destruction. Expressed another way, both Kirznerian and Schumpeterian theories of entrepreneurship imply that institutions play a fundamental role in entrepreneurial activity by structuring the opportunities in which profit might be made or in which new combinations might be carried out. If entrepreneurial opportunities are dependent on institutions, then Kirznerian profit opportunities and Schumpeterian opportunities for enterprise that lead to creative destruction will appear in every institutional environment, be it for-profit, public sector, and nonprofit (see Fig. 1).

Social entrepreneurship encompasses the institutional setting of all three sectors. As discussed above, institutions structure profit opportunities. Institutions guide political behavior (March & Olsen, 1984, 1996), including public sector entrepreneurship. For example, Bellone and Goerl’s (2002) “civic-regarding entrepreneurship” suggests that entrepreneurial discovery is involved in facilitating “increased citizen education and involvement” and enabling citizens to “have greater

Fig. 1 Social entrepreneurship and the universe of for-profit, public sector, and nonprofit entrepreneurship [adapted from Frank, Shockley, and Stough (2004)] opportunities to participate in the design and delivery of their public goods and services” (p. 388-389). In the nonprofit sector, certain institutions provide the catalyst for entrepreneurs to act and seek the opportunities in a nonmarket context as well as serving as the source of institutional change. For example, Shleifer (1998) makes the case that nonprofit organizations fulfill a role where neither the state nor the private market has the proper incentive to efficiently produce. Moreover, civil society is a powerful force in sustaining democratic institutions and providing important conditions for economic exchange, thus assisting for-profit entrepreneurs through the institutions created by the many components of the nonprofit sector. Again, entrepreneurial profit opportunities and opportunities for enterprise cannot be restricted to one specific institutional environment: opportunities appear in all three sectors. Consequently, the opportunity-driven activity of social entrepreneurship requires contributions from civil society (nonprofit entrepreneurship), government (public sector entrepreneurship), and commerce (for-profit entrepreneurship). Therefore, the opportunities for social change, which are the aim of social entrepreneurship, are structured by the institutions of all three sectors.