A context of crisis favouring social entrepreneurship

5Since the economic and financial crisis of 2008, social innovation has gained interest, in the US as in Europe. Social innovation can be seen as a response to the dissatisfaction generated by other forms of innovations (such as technological ones), by their processes, which lack community participation and by their effects, in terms of sharing the fruits of innovation (Moulaert et al., 2013).

6In the US, Barack Obama created the Office of Social Innovation and Civic Participation at the White House with the aim to do business differently, by fostering innovative community solutions and partnership [1]. In Europe, the European Commission launched a package of actions to encourage a growth process that is more inclusive, emphasising the role of social innovation and social entrepreneurship. For instance, the Social Business Initiative falls within this set of actions (COM (2011) 682 final). It defines a social enterprise as follows: “a social enterprise is an operator in the social economy whose main objective is to have a social impact rather than make a profit for its owners or shareholders. It operates by providing goods and services for the market in an entrepreneurial and innovative fashion and uses its profits primarily to achieve social objectives. It is managed in an open and responsible manner and, in particular, involves employees, consumers and stakeholders affected by its commercial activities”. It is interesting to note that the governance structure reflects, in one way or another, the general interest objective. Within this initiative, an action plan to support social entrepreneurship has been elaborated with the identification of key actions aimed at improving the access to funding, increasing the visibility of social entrepreneurship and improving the legal environment.

7Nevertheless, social innovation dynamics are conditioned by the type and scale of redistribution policies and social security systems in different countries as well as by the weight of the third sector in the economy. As mentioned by Lévesque (2013, p. 25), public administration is a fertile ground for social innovations as they have been developed within different types of models, from New Public Management (Hood, 1991) in the US and the United Kingdom – characterised by a market and client orientation, by competitive processes and by the adoption of management tools imported from the private sector – to Public Value Management (Moore, 2005; Benington, Moore, 2011), which builds upon multiple stakeholders and collaborative tools to redesign public services’ provision in other countries, some of them in Europe.

Rooted in entrepreneurship

8These three notions share the same roots in the term “entrepreneur”, which is associated with creating value and change in the economy. As explained by Dees (1998, p. 1), the origins of the word entrepreneur have to be found in the 17^th and 18^th century. According to Say, in the early 19^th century, the entrepreneur “shifts economic resources out of an area of lower and into an area of higher productivity and greater yield” (Dees, 1998, p. 1). A century later, Schumpeter considers that entrepreneurs are the “change agents in the economy” and create value in the sense that, “by serving new markets or creating new ways of doing things, they move the economy forward” (Dees, 1998, p. 1). More recently, as cited by Dees (1998), Drucker added a dimension of “opportunity”: “an entrepreneur always searches for change, responds to it, and exploits it as an opportunity”. A last dimension can be added to the definition of the “entrepreneur”. According to Stevenson, cited by Dees (1998), entrepreneurs pursue “the opportunity without regard to resources currently controlled”. In other words, the entrepreneur is able to mobilise new resources or to find new combinations of resources to achieve his objective.

9Putting together all these dimensions of the notion of entrepreneur, Dees (1998) proposes to consider social entrepreneurs as entrepreneurs with a social mission. However, the value created by the pursuit of this social mission, which is designated as a social value, cannot be easily measured by the market mechanism (which measures the private value created). Based on these dimensions, Dees (1998, p. 4), proposes the following definition:

10Social entrepreneurs are “playing the role of change agents in the social sector by adopting a mission to create and sustain social value, recognizing and relentlessly pursuing new opportunities to serve that mission, engaging in a process of continuous innovation, adaptation and learning, acting boldly without being limited by resources currently in hand, and finally exhibiting a heightened sense of accountability to the constituencies served and for the outcomes created”.

11For Martin and Osberg (2007, p. 34), the difference between entrepreneurship and social entrepreneurship lies “in the value proposition itself”. The entrepreneur anticipates and organises his value proposition to serve the markets and to create financial profit while the social entrepreneur anticipates and organises his action in order to create important benefits for society. The value proposition of a social entrepreneur does not need a market to pay for this proposition but targets excluded, marginalised or neglected parts of the population. The notion of opportunity is also a central one. The social entrepreneur identifies an opportunity to improve the situation of the marginalised group of the population. In that sense, the social entrepreneur, through direct action, aims to create and sustain a new equilibrium. Santos (2009) suggests characterizing the value proposition of social entrepreneurship as “addressing problems involving neglected positive externalities for society”. Some positive externalities are indeed not perceived as essential for society by a majority of the population and are not, therefore, taken into account by governments. “For example, the positive externalities involved with renewable enegy production in terms of slowing down climate change were invisible a decade ago” (Santos, 2009, p. 23).

Social entrepreneurship or social entrepreneur?

12The notions of social entrepreneurship and social entrepreneur have gained popularity since the 1990s, in the US as well as in Europe. Today, these terms cover a wide range of organisations, since they qualify non-profit organisations, social purpose business ventures, social businesses or social enterprises (see below).

13Martin and Osberg (2007, p. 30) consider that this increasing popularity leads to the inclusion of various activities that create a social benefit, which can be confusing. As stated by Santos (2009, p. 3), “the concept of social entrepreneurship has thus become a large tent where many different activities are finding a home under a broad umbrella of activities and processes to enhance social wealth”. Martin and Osberg (2007) consider that “the definition of social entrepreneurship today is anything but clear” and argue in favour of a more “rigorous” definition. They propose to distinguish social entrepreneurship from social service provision and from social activism (p. 36). The critical distinction from social service ventures lies in the fact that the latter does not “break out of their limited frame”. They do not change the system and build a new equilibrium, less unfair for the underserved groups of the population. Considering social activism, the main difference comes from the fact that the social entrepreneur implements a direct action while social activists try to bring change through indirect action, by militant missions towards governments for instance.

14Some distinctions are however made in the literature. As suggested by Mair and Marti (2006), the notion of “social entrepreneur” focuses on the individual characteristics of the entrepreneur and his behaviour. As stated by Drayton (2002), social entrepreneurs have special traits and a strong ethical fibre. Social entrepreneurs have a vision of the social change, they want to achieve, do take risks to do so, are creative and have leadership skills. By contrast, the notion of “social entrepreneurship” is a way to put more emphasis on the process, on the organisational and collective dimensions of the entrepreneurship. The notion of “social enterprise” refers to the “tangible outcome of social entrepreneurship”. Let us now present this last notion.

Different schools of social enterprise

15Social enterprise emerged, approximatively, at the same period of time on both sides of the Atlantic, although without any connection between them until the mid-2000s (Defourny, Nyssens, 2010). In the US, the Social Enterprise Initiative was launched in 1993 by the Harvard Business School, followed by large universities and foundations that developed support programmes to social entrepreneurs. Various entrepreneurial initiatives with a social mission emerged in the US in the 1980s, mainly within the nonprofit sector but it was not until the 1990s that they were put together within the concept of “social entrepreneurship”. In Europe, its emergence is associated with the development of social cooperatives in Italy, recognised by a specific law in 1991, and with the work of the EMES (Emergence des Entreprises Sociales) European Research Network during the 1990s.

16Since then, the notion of social entreprise has been developed by different schools that are usually separated into two groups by scholars, although not all works on social entrepreneurship can be fitted exclusively within one of the schools (Borzaga, Defourny, 2001; Dees, Anderson, 2006; Defourny, Nyssens, 2010). We build the following description of these two schools upon the work done by Defourny and Nyssens (2010).

Social enterprise in Europe

21The European model of social enterprise emerged in the 1990s with the work of the EMES European Research Network, in relationship with the development of new forms of enterprises in the third sector, such as social co-operatives in Italy (1995), social purpose companies in Belgium (sociétés à finalité sociale, 1995), social solidarity co-operatives in Portugal (1998) or cooperatives with a collective interest in France (société cooperative d’intérêt collectif, 2001) (Gardin, 2010). The EMES Network proposed a conceptual definition of social enterprises, characterised by a set of nine criteria classified within three groups:

• the first set of criteria deals with the economic dimension of their activity (a continuous activity producing goods and/or selling services, a significant level of economic risk, the presence of at least a minimum of paid work),
• the second set of criteria concerns their social and inclusive dimension (an explicit aim of benefiting the community, an initiative launched by a group of citizens, a limited profit distribution),
• the last criteria characterises their governance structure (a high degree of autonomy, a decision-making power not based on capital ownership, a participatory nature which involves various parties affected by the activity).

22These criteria contribute to build an “ideal-type” in Weber’s terms, i.e. an abstract construction, that enables researchers to position these entities within the “galaxy” of social enterprises and to draw the boundaries of what can be considered as a social enterprise (Defourny, Nyssens 2006). This ideal-type characterises social enterprises by a complex mixture of goals (Evers, 2001), a resource mix that combines market, public and voluntary resources and a multi-stakeholder organisation. Such a definition of social enterprise is not that different from the definition of the Social Economy and builds a bridge between different components of the third sector, such as co-operatives and non-profit organisations (Defourny, Nyssens, 2006, p. 7).

23The two conceptions of social enterprises are summarised in the table below.

Table 1

The two conceptions of social enterprises: main dimensions

US vision: entrepreneurial activity with a search for social value creation, strong link with social innovation, use of market resources, promotion of managerial practices, emphasis on the individual characteristics of the entrepreneur, whatever the statute of the organisation nonprofit or for-profit, public or private).

The two conceptions of social enterprises: main dimensions

24EU vision: entrepreneurial activity with a search for social value creation, use of a mix of resources (market, public and voluntary), importance of the governance structure and of the existence of a democratic decision process.

Controversy over social value creation

26The first element of controversy lies in the definition of the “social value” created. Social value is created once an innovative solution is developed in order to address unmet social needs, so that large scale benefits for society are generated. Most authors and the European ones in particular, agree that the contribution to social value creation has to be direct and central to the aim of the firm in order to consider it as a social enterprise. The fact that social value creation has to be the main purpose of the organisation draws a demarcation line with corporate social responsibility. Nevertheless, in some cases, the boundaries with corporate social responsibility are permeable. Social enterprises indeed use earned income strategies to pursue a double or triple bottom line. Salmon (2011) therefore proposes to debate on the emergence of the “welfare enterprise”.

27Another view concerning social value has been put forward by Santos (2009). He argues that the opposition between economic and social values is not very promising for building a theory of social entrepreneurship. The two values are interdependent and connected in the sense that “actions that create economic value also improve society’s welfare through a better allocation of resources”. Moreover, as mentioned earlier, social value is difficult to evaluate and measure since it includes intangible benefits. For these reasons, Santos (2009, p. 7) proposes to adopt a generic concept of value, defined in terms of increased utility of society’s members, and to make a difference between value creation and value appropriation. There is “value creation from an activity when the utility of society’s members increases after accounting for the resources used in that activity. Value appropriation from one activity happens when the focal actor is able to capture a portion of the value created by the activity” (p. 8). Santos considers that organisations have to choose their central focus: value creation or value appropriation. Therefore, social enterprises give a central focus on value creation while commercial enterprises place more importance on value appropriation.

28Levesque (2013), building upon Moore (1995), puts forward the public value theory as a means to consider social innovations within the public action field and stresses the importance of deliberative dynamics and the emergence of multi-stakeholder coalitions and arenas. In doing so, Levesque illustrates the tensions arising between processes that are cost efficiency and client oriented and processes aimed at producing value to be shared by the communities.

Controversy over the link between social entrepreneurship and social innovation

29Social entrepreneurship is considered as a social innovation or as an opportunity to create social innovation by many scholars, and by the “social innovation school” in particular. For Phills et al. (2008) however, both notions, social entrepreneurship and social enterprise, are not appropriate to analyse all forms of social change creation, because they have their roots in the non-profit sector. These authors argue that the notion of social innovation is more accurate since it includes all kinds of organisations that produce social change, such as public, for-profit or non-profit organisations. “Innovation can emerge in places and from people outside the scope of social entrepreneurship and social enterprise” (Phills et al., 2008, p. 37). These authors consider social innovation both as a process and as a result and focus on the analysis of the processes that lead to the emergence of social innovation.

30Social innovation does not necessarily emerge within an entrepreneurial process or within an entrepreneurial perspective. Social innovation could emerge from a collective process organised by multiple stakeholders at the territorial level in order to create social value to solve social problems (Klein, Harrison, 2010; Moulaert et al., 2013). From this perspective, social innovation is the result of cooperation processes between local actors that coordinate to meet unsolved social problems. Such processes rely on participative dynamics and on the combination of different types of resources (market, public and voluntary ones). This leads these authors to characterise social innovation as inclusive and participative. Moulaert et al. (2013, p. 18) stress the fact that social innovation is socially and spatially embedded, which departs from a vision of social innovation that is business oriented.

Controversy over the individual versus collective dynamics

31The third element of controversy deals with the individual versus collective dimension of the entrepreneurship process. For the American models, social entrepreneurship relies on the characteristics and on the vision of an individual. As mentioned above, social entrepreneurs have special traits and a strong ethical fibre combined with creative and leadership skills that lead them to take risks in order to achieve social change goals. For the European models, the social enterprise is the result of a collective process, to be found in the origin of the project as well as in the governance structure of the organisation, leading to the constitution of multi-stakeholder ownership organisations (Borzaga, Mittone, 1997; Pestoff, 1998; Petrella, 2008).

Controversy about the governance structure and the resource mix

32The fourth controversial dimension concerns governance issues. As pointed out by many authors, such as Young and Salamon (2002), the European vision gives more emphasis to the governance model adopted by the social entrepreneur. Participation and democratic processes are highlighted in the EMES ideal-type of social enterprise. This contrasts clearly with the American models, in which all types of enterprises can be considered as “social enterprises”, since only the first two sets of the EMES criteria are mentioned in these works. The search for social value creation together with an entrepreneurial model are the prevalent, sometimes the sole criterion put forward, regardless of collective processes and governance issues.

33The OECD has proposed a definition of social enterprise that emphasises the social value creation and the entrepreneurial dimension without any reference to the governance structure: “Social enterprises are organisations that take different legal forms across OECD countries to pursue both social and economic goals with an entrepreneurial spirit. Social enterprises typically engage in delivery of social services and work integration services for disadvantaged groups and communities, whether in urban or rural areas. In addition, social enterprises are also emerging in the provision of community services, including in the educational, cultural and environmental fields. The social enterprise refers to any type of private activity”.

34Note also that the resource mix is larger in the European model since it emphasises the necessity to combine not only market-related resources but also public subsidies and private donations (Nyssens, 2006). Moreover, the European model explicitly allows for a limited redistribution of the surpluses generated by the activity, which is not always the case in the American schools of thought, when they consider, as in the social business model, that it has to be a non dividend company. Within the European perspective, mutual organisations, work integration organisations and cooperatives can be considered as social entreprises.

Controversy about the interaction between social enterprises and public action

35Last but not least, a fifth dimension can be pointed out. It concerns the interaction between social enterprises and public action. Social enterprises, in the European model, develop their activities in a complementary interaction with the public action. The European approach recognises a larger diversity of organisations that interact within a more complex and diversified environment than in the American approach (Ghezali, Sibille, 2011). In the US, there is a tendency to consider social entreprises as substitutes for public action in order to overcome its limits. Social entrepreneurship is often presented as a way to develop entrepreneurial approaches to meet social problems, since governmental and philanthropic initiatives are not able to solve all the social problems (Dees, 1998). Social entrepreneurs will try to develop more efficient ways of solving social problems and are seen as an opportunity to substitute social entrepreneurship for direct public intervention, through the development of markets – or quasi-markets – of Welfare. By contrast, one could consider social entrepreneurship initiatives as an opportunity to redesign public policy, in particular through the adoption of more participative processes of public action (Nyssens, 2006).

36We therefore propose to locate the demarcation line between the American models and the European ones in the recognition – or not – of the existence of a third economic model, at the crossroads of market, public policy and civil society (Nyssens, 2006). For the first, social entrepreneurship relies on the characteristics and vision of an individual within the frame of a “new kind of capitalism that serves humanity’s most pressing needs” (Yunus, 2010). For the second, social enterprises are part of a third sector, separated from the private capitalist and the public sectors and can therefore be seen as building blocks for an alternative model to capitalism. This leads us to the question of the political and ideological significance of social innovation. While Levesque (2013) considers that there is “a new wave of social innovation” (p.28) and a “search for alternatives” (p. 31), Moulaert et al. (2013, p. 18), highlight the tension between the search for an alternative led by social movements looking for well-being improvement and the constitution of a “discount” Welfare system. Social innovation would therefore oscillate between an alternative and a new capitalism.