Social Entrepreneurship Business Models

Who can imagine people paying a considerable ‘entrance fee’ to spend an hour with a blind person, thus creating hundreds of jobs for blind and disabled people worldwide? Who can imagine homeless people from all over the world gathering in one place for a soccer tournament, thus changing their lives for the better? Who can imagine lending some dollars via the internet to a grocery-shop owner in Ecuador, for expansion, thus enabling the mother of seven to pay for her children’s education? Who can imagine people in Nigeria earning their living by charging fees for the use of toilets they manage, thus creating both jobs and improving hygiene? Anyone?

The international phenomenon of social entrepreneurship has existed in various forms for centuries, but gained global recognition only recently as a result of the increased reach ‘and scale of the social impact generated by social entrepreneurs.’ Since Muhammad Yunus, social entrepreneur and founder of the Grameen Bank for microcredit in Bangladesh, was awarded the Nobel Peace Prize in 2006, public interest in the phenomenon social entrepreneurship has increased:

In the past decade ‘social entrepreneurship’ has made a popular name for itself on the global scene as a ‘new phenomenon’ that is reshaping the way we think about social value creation. Some of these practices are uniquely new; however many have been around for a long time having finally reached critical mass under a widely endorsed label.²

Politicians (for example, Gordon Brown and Tony Blair in the UK³), business people (for example, Jeff Skoll, the founder of eBay), academic institutions (for example, the Harvard Business School), international institutions (for example, the World Economic Forum), and specific support institutions (for example, Ashoka — Innovators for the Public, or The Schwab Foundation for Social Entrepreneurship) increasingly turn to social entrepreneurs for solutions to the most pressing challenges facing the world, supporting them in various ways.⁴

The aim of this chapter is to clarify how social entrepreneurship and its position in society has evolved. In the first section it provides an overview of the origins and development of the phenomenon of social entrepreneurship, and highlights the drivers that have made it so popular in recent years. To place social entrepreneurship within its context, in the second section the three sectors of society are characterized and the phenomenon positioned within them.

While social entrepreneurship as a solution to social problems has been discussed, analysed, and made public by politics, academia, the media and practitioners with rising intensity in recent years, and despite the phenomenon existing long before this focused attention, a clear and unique definition still does not exist. In contrast, as a research field, ‘social entrepreneurship does not suffer from a lack of definitions’.¹

Public goods theory provides insights regarding the economic setting in which social entrepreneurial organizations operate, and permits the identification of social entrepreneurial organizations’ roles in public goods provision at the macroeconomic level. In this chapter, the fundamentals of public goods theory are first described, then, based on these insights, the role of social entrepreneurial organizations and the challenges linked to their roles are identified.

Having become acquainted with the economic setting in which social entrepreneurial organizations operate, and having identified their role as catalyzts in public goods provision, This chapter aims to provide a theoretical background to the organizational behaviour; in other words, the strategies of social entrepreneurial organizations in reaction to the challenges faced when catalyzing the provision of public goods. The resource dependency theory gives indications regarding the behaviour of organizations facing resource restrictions. This represents a useful perspective for organizations whose objective it is to catalyze public good provision: they have to find a way to attract resources to the provision of goods and services where markets normally fail.

The aim of this chapter is to introduce the business model as a unit of analysis. To provide the necessary background to the concept, its current usage and conceptualization in business and the social entrepreneurship literature are detailed, as well as its usefulness as a unit of analysis in the context of social entrepreneurship. Subsequently, the business model dimensions, which constitute the concept, are introduced through the generic dimensions defined in the literature on business models, and are then specified for social entrepreneurial organizations.

Having introduced the business model as unit of analysis in the previous chapter and specified the different dimensions of the concept for social entrepreneurial organizations, this chapter analyses selected strategies used by social entrepreneurial organizations to catalyze public goods provision with the help of incentives. The business model dimensions specified for social entrepreneurial organizations serve as a framework to structure the different strategies according to their thematic area. To identify the strategies analysed, a database has been set up that integrates business model characteristics of thirty-four social entrepreneurial organizations.¹ The database allowed patterns in social entrepreneurial behaviour to be identified, leading to the discovery of specific incentive strategies.² Since the value proposition is relevant for the design of the whole business model, the value proposition strategies occupy an exceptional position among the other strategies. While the other strategies represent options from which social entrepreneurs choose, each social entrepreneurial organization can be related to one of the three value proposition strategies. Some of the incentive strategies analysed in this chapter depend on the value proposition strategy applied. Social entrepreneurial organizations create different strategies regarding their product design and market definition, their internal value creation architecture and their external value creation architecture.

Case study analyses illustrate the implementation of certain incentive strategies in a holistic way. Selected social entrepreneurial organizations are analysed to demonstrate how they integrate different incentive strategies in one business model, and how they activate incentive structures to catalyze the provision of public goods. In this chapter, the methodological approach of case study research is described, and then the case studies selected for this book are analysed.

Social entrepreneurship and its protagonists, the ‘unreasonable’ social entrepreneurs, have been introduced as a phenomenon that provides innovative solutions to the world’s most pressing problems, such as poverty, health, education, unemployment, social integration and environment. This book aspires to contribute to the advancement of the phenomenon through research efforts analysing the role of social entrepreneurial organizations in public goods provision and their strategies to fulfil this role.