Compare and contrast social entrepreneurship and business entrepreneurship

University Degree Business and Administrative studies

Entrepreneurship 207

According to Gibb (1996) the term entrepreneurship is often equated with new venture creation, and small business management and the concepts of owner-manager and self-employment. This definition is widely accepted, however many researchers such as Kirby (2003) and Carland et al (1984) have identified vital points which contest the definition such as that not all owner-managers can be defined as entrepreneurs and that not all small businesses are entrepreneurial.

Social entrepreneurship is not a new term even though the entire concept of it was established relatively recently; the individuals and groups that have been addressing social issues have been doing so for many centuries. According to David Bornstein (2004) "Social entrepreneurs identify resources where people only see problems. They view the villagers as the solution, not the passive beneficiary. They begin with the assumption of competence and unleash resources in the communities they're serving." As stated in Bornstein’s book “How to Change the World: Social Entrepreneurs and the Power of New Ideas” social entrepreneurs have been around for hundreds of years in historical figures such as Florence Nightingale and Mahatma Gandhi, however it is only recently that these figures have developed a more entrepreneurial edge to their line of work. Generally social entrepreneurs are identified through non-profit organisations and are associated with a ‘hero’ concept. The ‘hero’ concept which has been identified by researchers such as Leadbitter (1997) and Drayton (2002) mainly established social entrepreneurs as heroes due to their biographical accounts. In the example of Mahatma Gandhi who used his peaceful civil disobedience as a way to gain civil rights, he is know considered as a true hero to many Indians and all over the world because of his peaceful ways, however such work still occurs today, an example of this would be by Aung San Suu Kyi. She is currently under long-term house arrest in the city of Yangon. She received the Nobel Peace Prize in 1991 for her non-violent efforts to bring down the oppressive military regime that rules over the Southeast Asian country. Aung San Suu Kyi’s work is similar to that of Gandhi yet she is rarely referred to as a ‘hero’ and many people across the world are not even aware of her efforts.

Catford (1998) identified a strong commitment to social justice as being a defining characteristic of a social entrepreneur. The characteristics of a social entrprepreneur are very similar to those of a business entrepreneur, for example the creativity and innovation in their ideas is a fundamental part of any success of an entrepreneur along with hard work and dedication. These characteristics only partially help to define a social entrepreneur as it seems evident that this form of entrepreneurship is more based on grouped social movement i.e. one social entrepreneur persuading others who have similar social ethics in order to address social issues in a entrepreneurial or business like manner.

A business entrepreneur is very much the opposite of a social entrepreneur in many ways as they are predominantly aiming to make substantial profit and personal gain. When discussing social entrepreneurs before it seemed clear that many social entrepreneurs are established due to a specific situation where they are able to thrive, the opposite seems to occur with business entrepreneurs. Business entrepreneurs are seen as exceptional individuals who can attribute their success if any to their personal abilities and personal characteristics as opposed to finding themselves in a favourable situation, this is widely known as the ‘fundamental attribution error’, which states that are entrepreneurs are alike however they are different from other people. Many psychologists have aimed their research at discovering certain personality traits which would allow a person to be a successful business entrepreneur; at this point in time they are very much unable to offer such an answer, however I do not believe psychologists will ever be able to identify single aspects of a person’s personality which would make them have certain skills as this debate will continue to reign as the nature versus nurture debate. A business entrepreneur will create their company for some of the same reasons as a social entrepreneur, for example, to make extra income or to support their families. Any entrepreneur creating and starting a business needs to find the initial start-up costs and finances for day-to-day running of the business which means they will need to make enough money to cover these costs before they can then progress and use the money in order to complete their personal and company goals. The differences between a social entrepreneur and a business entrepreneur then begin to show after these costs have been covered. This is highlighted in a quote from

Dr Yunus who founded Grameen Bank, which helps the people of rural Bangladesh to lift themselves out of poverty, Dr Yunus said, "Grameen's central focus is to help poor borrowers move out of poverty, not making money. Making profit is always recognised as a necessary condition of success to show that we are covering costs. Volume of profit is not important in Grameen in a money-making sense, but important as an indicator of efficiency."

The way in which social entrepreneurs are funded is identified as social enterprise which Alter (2002) defined as “a generic term for a non-profit ...

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The way in which social entrepreneurs are funded is identified as social enterprise which Alter (2002) defined as “a generic term for a non-profit business venture or revenue generating activity founded to create positive social impact while operating with reference to a financial bottom line”. Many social entrepreneurs will spend the additional money that they make primarily on the people that they are trying to help and change the social situation and address its issues; secondly they will spend the additional money on advertising to raise public awareness of these social issues. Business entrepreneurs will also spend money on advertising; however this is usually to raise their brand awareness with the public with the ultimate aim to increase sales and to achieve high levels of profit.

A similarity between social entrepreneurs and business entrepreneurs would be that they are both commonly accused of being more concerned with the impact and outcomes of their actions rather than the processes involved in making those changes. The pressures of quick results can force social entrepreneurs to look primarily at fixing problems in the short-term which can cause more problems long-term. This can cause social entrepreneurs to overlook any underlying causes of the problem. One example of this can be seen in the work by Mimi Silbert. Mimi started the Delancey Street Foundation, which created a place for substance abusers to be rehabilitated, educated and gave them a place to live. She started this cause in 1971 with a one thousand dollar loan which the aim of helping drug abusers, criminals and the homeless in her local area to make it a better and safer place. This organisation has withstood the test of time and after 36 years it is more successful than ever, receiving more than 10 million dollars in private donations every year. The success of this company is without question, however it makes no attempt to help stop drug abuse and crime problems before they occur, a way in which this could be done would be through campaigning and educating the younger population about the dangers of drugs. These are seen as the underlying causes which lead to problems such as drug abuse, crime and homelessness, Mimi Silbert’s work helps all individuals after they have already developed these problems.

Many entrepreneurs, both business and social often have results which they did not intend, these results can sometimes make it very difficult to define whether and entrepreneur is business or social, for example, a business entrepreneur can start their business with the aim of making profits but their work causes a beneficial change in society. This person intended to become a business entrepreneur but unintentionally converged into a social entrepreneur. The same can be said for social entrepreneurs who have an original aim to address social issues, if they then become highly successful in their efforts it is very likely that they will start to make a profit linking them with business entrepreneurs. Another similarity between business entrepreneurs and social entrepreneurs are the way that they are perceived by the general public. Entrepreneurs of all types are usually associated with high levels of success; this is generally because the individuals behind companies are not heard of unless their business or social movement has become successful. This links in with the idea of entrepreneurs being all the same but different from normal people. As most entrepreneurs are only known publicly when they are successful they are related with certain personality types and characteristic traits, which make them successful when really anybody can become and entrepreneur in theory.

A key difference between business and social entrepreneurs would be their different views on the concept of wealth. To a business entrepreneur wealth and profits would generally be classed as the same thing, this is because their main aim is to make money therefore they consider themselves to be wealthy is their business is successful and profit margins are high. Social entrepreneurs on the other hand classify wealth in a completely different manner. Social entrepreneurs class wealth in their work as creating a substantial and beneficial change to society which can be sustained over a long period of time. Social entrepreneurs class their wealth as an indicator of how much they of their work has been beneficial to the society. This also includes that any profits a social entrepreneur does manage to make has a positive Social and/or Environmental return on investment (ROI), this means that the profits are re-invested into the economy and to help more people, this is done because social entrepreneurs usually decide to help people due to an ethical imperative.

Another difference between business and social entrepreneurship is the ability to assess how well the organisation is actually performing. For a profit business ran by a business entrepreneur it is very easy to analyse how well a company is actually performing as they are able to look at sales figures and balance sheets, these figured can then be directly compared with other companies who are in the same market. For non-profit organisations run by social entrepreneurs it is much more difficult. As social entrepreneurs usually start their cause due to an unresolved social issue which needs addressing, there is little likelihood that any other organisations are also performing the same actions therefore it is not possible to directly compare results, secondly as profits and balance sheets are irrelevant, success is usually measured on results and impact made upon the society. This links back to the point that social entrepreneurs can sometimes be too concerned with quick results and miss underlying features which originally cause social problems. A more reliable way in which non-profit organisations can assess their own performance would be to set their company objectives and goals which are specific, measurable, agreed, realistic and time-scaled (SMART). This is a business technique in order to set company goals, it would allow non-profit organisations to measure their success against their own aims and objectives as opposed to resolving a social problem and quickly as possible which may not be the most beneficial way.

To Conclude, In terms of individual characteristics such as their personal abilities, social and business entrepreneurs are very much the same; also the way in which the entrepreneurs become successful is also very similar i.e. they both identify a gap which needs filling in the market and society respectively. Additionally more and more social entrepreneurs are using business methods in order to complete their social aims. It seems logical to assume that the way entrepreneurs are established is very similar the main difference then comes, in what the entrepreneur is aiming to achieve? Or more importantly what did they originally set out to achieve? A good example of this is how Bornstein (2002) explains why social entrepreneurs begin as “Social entrepreneurs are primarily motivated by an ethical imperative. They seek to respond to urgent needs. The question of why is paramount”.

As I have previously stated within the essay the idea of business entrepreneurship and social entrepreneurship being separate is not always correct, this is because the work business entrepreneurs complete can directly effect society in both a good and bad way the same applies to social entrepreneurs and the business market. The terms social and business entrepreneur are just parts of the wider concept of entrepreneurship. It can be difficult to differentiate between the two terms as many of their identifying points overlap; however it is very clear that the beginning intention of the entrepreneur is the vital point which separates them. One the main difference remains the perception of wealth between the two forms of entrepreneurship as previously stated within the essay and what their aims are for their wealth, for example, a social entrepreneur class wealth as a substantial and beneficial change to society which can be sustained over a long period of time, their aim is to create as many beneficial changes and to address as many social issues as possible and use the fame that they have gained (if any) to raise public awareness of certain issues. A business entrepreneur views wealth as profits and their main aim is to maximise profits, reduce costs and sustain a high level of profit over a long period of time, in order to increase their own personal wealth and net value.

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