@John_Menezes tweeted an interesting article from the BBC News, "Social entrepreneurship takes off in China". The article discusses several successful projects in China using social entrepreneurship. The article makes clear that social entrepreneurship is a more effective model because of the difficulty in using a donative non-profit approach.
I think that social entrepreneurship is the preferred approach over donative models in all cultures because you have more control over cash flow and better access to capital. However, in China the point is even more clear. In China most donations are given to state run charities and not to private charities. There are two possible reasons for this behavior:
- Donations to state run charities garner favor with the government
- Donors have more confidence in state run charities
In the United States there is a high degree of confidence in organizations, perhaps due to the legal system and reporting requirements for non-profits. In China, for a variety of cultural and historical reasons, trust is based principally on personal relationships and this has not changed for thousands of years. Without a personal relationship, there would be few donations. Government run charities perhaps have a better reputation because of government scrutiny.
Perhaps the conclusion to draw from this article on China is that donative models are likely to be more successful in cultures where organizations are trusted. Otherwise, one is well advised to start with a social entrepreneurship model for a social venture.
In my presentations on social ventures I always make the point that it is the first decision whether to use a donative model or a commercial model for a social venture. I have a strong predjudice in favor of social entrepreneurship and this story from China reinforces that view.