I began studying and thinking about social entrepreneurship about 3 years ago when I joined OLPC. I have written about 20 posts on the subject for Sophisticated Finance. What I think were two of the best posts are here and here. Teaching and lecturing helped me to advance my thinking. My latest thinking is that social entrepreneurship is not a meaningful distinction within entrepreneurship. In other words, we should just focus on thinking about and teaching entrepreneurship.
In some recent writings the CEO of the Kauffman Foundation, Carl Schramm, has expressed the same view. Some others also share this view, such as this article--"Predicting the Future of Social Entrepreneurship". Despite the hype and increasing popularity, people are coming to realize that social entrepreneurship is not a meaningful distinction in the discussion of entrepreneurship, or perhaps more precisely such a distinction does not contribute to a greater and more meaningful understanding of the subject--entrepreneurship.
I began my study of social entrepreneurship focused on the "social" difference in this form of entrepreneurship. Soon I came to realize that "social" implied some normative judgment. These social entrepreneurs were doing something "better" than typical entrepreneurs. This distinction caused me some concern because I had never thought that for-profit businesses were bad or less admirable than other types of organizations. Curing cancer in Palm Beach seemed as worthwhile as curing malaria in Africa.
Along the way to trying to understand social entrepreneurship I read Michael Porter's new work on "shared value". Porter's thesis seemed obvious to me, but it reminded me that any discussion of a business model needs to be grounded in economics and more precisely in the micro-economic concept of value. This prompted me to look for an economic definition of social entrepreneurship.
This search lead me to the work of Felipe Santos at INSEAD. Santos defined social entrepreneurship as maximizing value creation and satisficing for value capture. In other words, one transfers as much value to a recipient as possible provided that cash flow is sustainable. For the benefit of the recipients, the shareholders or funders foregoe a market rate of return by accepting only sustainable cash flows, cash flows sufficient to stay in business (after some investor return).
I liked this definition because it made no normative judgment, but how did it explain why so many people were "doing good" through social entrepreneurship. Then I realized that the causes of the "do gooders " could be explained as simply product-market decisions. C.K. Prahalad's work on the bottom of the pyramid, the 1 billion people living on $1-2 per day, basically advises one to develop products that poor people can afford to buy as the means to solve their problems.
I feel very comfortable thinking of the bottom of the pyramid as simply another market. Ten years in Indonesia (per capita income $600 at the time) probably made this an easy decision for me. Also, this approach to thinking of the poor as a market is consistent with how Clayton Christensen defines markets in terms of the "underserved".
In summary, "social entrepreneurs" focus on a particular market of needy people and have lower return expectations because they elect to transfer more value to the recipients. These distinctions suggest to me that traditional entrepreneurship can achieve all these ends without the need for a new discipline.
I am co-authoring a book with Chuck Kane for Oxford University Press titled "The Business of Social Entrepreneurship". Chuck is an Instructor at MIT Sloan and he and I have taught courses there for the last two years in January on social entrepreneurship.
