Social entrepreneurship and social innovation through the lens of the value co-creation process
2. Conceptual background and research questions
2.1. Literature review on Social Entrepreneurship (SE)
The recent field of social entrepreneurship is growing rapidly and attracting increased attention among both academics and practitioners in different sectors (Dacin et al., 2010; Mair and Marti 2006; Zahra et al., 2008; Defourny and Nyssens 2008; Hulgård, 2010). As emerged from literature review “social entrepreneurship is the engine of positive, systemic change that will alter what we do, how we do it, and why it matters” (Neck et al., 2009, p. 7). This concept was first investigated in the 1990’s (Galaskiewicz, 1985; Waddock and Post, 1991; Selsky and Smith, 1994), and since then, Scholars have proposed more definitions including the creation of non-profits (Dees, 1998), the development of new structures to solve social problems (Fowler, 2000), the definition of innovative behavior for social objectives (Brooks, 2009; Mair and Marti, 2006), and the creation of social value activities (Austin et al., 2006). Alternative theory argues that social entrepreneurship refers to the adoption of environmentally responsible practices and products (Schaper, 2002; Linnanen, 2005; Gerlach, 2000). Besides, it refers to the “creation of viable socioeconomic structures,
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relations, institutions, organizations and practices that yield and sustain social benefits” (Fowler, 2000, p. 649).
Generally, the term social entrepreneurship refers to the ”entrepreneurial activity with an embedded social purpose”
(Austin et al., 2006), and the social entrepreneur is viewed as an entrepreneur with a social mission (Dees 2001; Martin and Osberg 2007). Thus, this phenomenon embrace the simultaneous pursuit of economic, social, and environmental goals by enterprising ventures (Haugh, 2007) in which social entrepreneur is a change agent in the social sector (Dees 2001). In fact, “the primary mission of the social entrepreneur being one of creating social value by providing solutions to social problems” (Dacin et al., 2011, p. 1204). In this field, “social value has little to do with profits but instead involves the fulfillment of basic and long standing needs such as providing food, water, shelter, education and medical services to those members of society who are in need” (Certo and Miller, 2008, p. 267). Social entrepreneurship is, therefore, the process of creating a social enterprise, that is an independent entity created to fulfill a social purpose but financially sustainable because of trading activities (Brooks, 2008) and a social entrepreneur is someone who creates a social enterprise to take advantage of an opportunity (Haugh, 2005). Besides, Scholars have identified four components of social entrepreneurship: 1) entrepreneurs – the people who pursue change; 2) ideas – how change can be achieved; 3) opportunities – for disrupting the equilibrium; and 4) organizations – which seek to bring about change (Light, 2008, p. 17). Thus, SE is “an effort by an individual, group, network, organization or alliance of organizations that seeks sustainable, large scale change through pattern-breaking ideas in what governments, non-profits and business do to address significant social problems” (Light, 2008, p. 12). Current literature recognizes three main steps which become useful in the overall comprehension of the SE process summarized in the table below (table 1). These are: opportunity definition; organizational launch and functioning and, financial resource collection and leveraging.
TABLE 1: THREE STEP IN THE SOCIAL ENTREPRENEURSHIP PROCESS
Opportunity definition “The cognitive process followed by entrepreneurs as they intentionally identify a solution to a specific problem or need because of diverse motivations, including financial rewards” (Dorado and Haettich, 2004: 6).
“Opportunities to bring into existence new goods, services, raw materials, and organizing methods that allow outputs to be sold at more than their cost of production” Mair and Marti (2004: 3)
Organizational launch and functioning
To become concrete, a social innovation needs a social impact theory, a specific business model and a composite social strategy (Guclu, et al., 2002).
Financial resource collection and leveraging
The most quoted source of financing is a particular kind of patient capital (Bank of England, 2003): social venture capital or venture philanthropy (VP).
Source: adapted from Perrini and Vurro, 2006.
Additional studies consider social entrepreneurship as “a process involving the innovative use and combination of resources to pursue opportunities to catalyze social change and/or address social needs (Mair and Marti, 2006, pag. 37). It refers to a general process or overall business culture where social needs are addressed in an innovative manner, as an entrepreneurial activity with a social orientation or intent (Johnson, 2000) addressing a range of social issues in innovative and creative ways (Nicholls, 2006).
“Social entrepreneurship is a concept which represents a variety of activities and processes to create and sustain social value by using more entrepreneurial and innovative approaches and constrained by the external environment” (Brouard and Larivet, 2009 p. 11). In this context, “social enterprises have in common the principles of pursuing business-led solutions to achieve social aims, and the reinvestment of surplus for community benefit”
(Haugh, 2006, p. 5). They are – defined simply – organizations seeking business solutions to social problems (Thompson and Doherty, 2006, p. 362). In this optic, “social entrepreneurs measure success by creating social capital, social change and addressing social needs. In contrast to for-profit organizations, in which profits are often distributed to their owners and shareholders, economic value creation in social enterprises is perceived as a by-product which allows the organizations to achieve sustainability and self-sufficiency (Fowler, 2000; Seelos and Mair, 2005). The
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surplus production of social enterprises is reinvested in the development of organizational activities that ensures viability in tackling social problems or to be used for the benefit of people other than those who control the organizations (Defourny, 2001).
Literature review reveals that social entrepreneurship consists in an innovative process that include the identification of new solutions and opportunities to social problems (Shane, 2003; Mair and Marti 2004). In fact, it implies the ability to resolve social problems and satisfy a variety of stakeholders “needs to attain legitimacy over time” (Mair and Noboa, 2003; Uzzi, 1997). Despite, the increasing academic interest in the field of social entrepreneurship, few studies have investigated the links between social entrepreneurship and social innovation through the lens of the value co-creation process. Drawing from the theories of S-D Logic and Network Theory (Dacin et al., 2010), this paper discusses the functions and contributions of social innovation in the process of creating and disseminating value. The forthcoming conceptual sections of this article attempt to address this limitation through the following research questions:
RQ1. What are the links between social entrepreneurial activity and innovation process?
RQ2. What is the contribution of social innovation in the process of value co-creation?
2.2 Social Innovation as a strategic and dynamic aspect of social entrepreneurship
Starting from the review of the main definitions of social entrepreneurship in literature, it is highlighted that social entrepreneurship is an innovative activity, in which innovation play an important role, as shown in the table below (table 2).
TABLE 2: SOCIAL ENTREPRENEURSHIP VS SOCIAL INNOVATION
Definitions Primary components
Social Entrepreneurship, to “one that emphasises innovation and impact, not income, in dealing with social problems”. The entrepreneur always searches for change, responds to it, and exploits it (Dees, 2003).
- innovation - change
“SE is seen as the innovative use of resource combinations to pursue opportunities aiming at the creation of organisations and/or practices that yield and sustain social benefits” (Mair and Noboa, 2003, p. 5).
-innovative use of resources - opportunities
- social benefits
“Social entrepreneurship can be defined as the development of innovative, mission- supporting, earned income, job creating or licensing ventures undertaken by individual social entrepreneurs, non-profit organisations, or non-profits in association with for- profits”(Pomerantz, 2003, p. 25).
- innovation
Social entrepreneurship, the entrepreneurship leading to the establishment of new social
enterprise, and the continued innovation in existing ones” (Sullivan Mort et al., 2003, p. 76). - innovation Social entrepreneurship that creates innovative solutions to immediate social problems and
mobilizes the ideas, capacities, resources and social arrangements required for sustainable social transformations (Alvord, 2004, p. 262).
- innovative solutions
Social entrepreneurship is the construction, evaluation, and pursuit of opportunities for transformative social change carried out by visionary, passionately dedicated individuals (Roberts and Woods, 2005).
- opportunities - vision
- passionately individuals
“We define social entrepreneurship as innovative, social value creating activity that can occur within or across the non-profit, business, or government sectors” (Austin et al., 2006, p. 2).
- innovative - value creation
“Innovative and effective activities that focus strategically on resolving social market failures and creating new opportunities to add social value systematically by using a range of resources and organisational formats to maximise social impacts and bring about changes”
(Nicholls, 2006, p. 23)
- innovative and effective activities
- new opportunities
“Social entrepreneurship is exercised where some person or group: 1) aim(s) at creating social value, either exclusively or at least in some prominent way; 2) show(s) a capacity to recognise and take advantage of opportunities to create that value (‘envision’); 3) employ(s) innovation, ranging from outright invention to adapting someone else’s novelty, in creating and/or distributing social value; 4) is/are willing to accept an above-average degree of risk in creating and disseminating social value; and 5) is/are unusually resourceful in being
- new opportunities - employ(s) innovation - degree of risk - social value
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relatively undaunted by scarce assets in pursuing their social venture” (Peredo and McLean, 2006, p. 64).
Social entrepreneurship strives to achieve social value creation and this requires the display of innovativeness, proactiveness and risk management behaviour. This behaviour is constrained by the desire to achieve the social mission and to maintain the sustainability of existing organisation. In doing so social entrepreneurs are responsive to and constrained by environmental dynamics. They continuously interact with a turbulent and dynamic environment that forces them to pursue sustainability, often within the context of the relative resource poverty of the organisation” (Weerawardena and Mort, 2006, p. 32)
- innovativeness - proactiveness - risk management - social mission
“We define social entrepreneurship as an innovative, social value creating activity that can occur within or across the non-profit, business, or government sector” (Wei-Skillern, et al., 2007, p. 4).
- innovative and social value creating activity
“We view social entrepreneurship broadly, as a process involving the innovative use and combination of resources and social arrangements required for sustainable social transformations” (Mair and Marti, 2007, p. 37).
- innovative use
-combination of resources
“Innovative approaches to social change” or “using business concepts and tools to solve social problems” (Brock and Ashoka, 2008, p. 3).
- innovative approaches Innovative and resourceful approaches to addressing social problems” (Case, 2008, p. 1). - innovative approaches
“Social entrepreneurship encompasses the activities and processes undertaken to discover, define and exploit opportunities in order to enhance social wealth by creating new ventures or managing existing organisations in an innovative manner” (Zhara et al., 2008, p. 118).
- innovative manner
Social entrepreneurship can be defined as entrepreneurship that aims to provide innovative solutions to unsolved social problems. Therefore it often goes hand in hand with social innovation processes, aimed at improving people’s lives by promoting social changes (OECD 2010, p. 5).
- innovative solutions - social innovation - social changes
“The innovative use of resources to explore and exploit opportunities that meet a social need in a sustainable manner” (Mair and Ganly, 2010).
- innovative use of resources - opportunities
Source: our elaboration.
Generally, social entrepreneurship involves the application of new approach in an effort to create social value (Certo and Miller, 2008) and social entrepreneurs are considered social innovators in a process of continuous adaptation, and learning (Casson, 2005, Dees, 1998). In fact, social enterprises primary objective is to create social value for the community that they serve through innovative business approaches (Kong, 2010, pag. 1). In this optic, social enterprises define innovative approaches in order to pursue social missions, improve their efficiency and effectiveness, and, at the same time, maximize their capability to constantly manage complex social problems in the competitive environment (Borins, 2000; Sullivan-Mort et al., 2003; Waddock and Post, 1991; Weerawardena and Sullivan-Mort, 2006). According with the Schumpeterian thoughts, social entrepreneurship is inextricably linked with social innovation (Schumpeter, 1934; Casson, 2005; Certo and Miller, 2008; Mort et al., 2002; Tan et al., 2005). In fact, it can be defined as a particular form of entrepreneurship that aims to provide innovative solutions to unsolved social problems. Therefore, it often goes hand in hand with social innovation processes, aimed at improving people’s lives by promoting social changes (OECD 2010, p. 5). Social entrepreneurship consists in “the development of innovative, mission-supporting, earned income, job creating or licensing ventures undertaken by individual social entrepreneurs, non-profit organizations, or non-profits in association with for-profits” (Pomerantz, 2003, p. 25). In this optic, “social entrepreneurship strives to achieve social value creation and this requires the display of innovativeness, proactiveness and risk management behavior. This behavior is constrained by the desire to achieve the social mission and to maintain the sustainability of existing organization. In doing so social entrepreneurs are responsive to and constrained by environmental dynamics. They continuously interact with a turbulent and dynamic environment that forces them to pursue sustainability, often within the context of the relative resource poverty of the organization” (Weerawardena and Mort, 2006, p. 32).
Current literature recognizes that social entrepreneurship encompasses the activities and processes undertaken to discover, define and exploit opportunities in order to enhance social wealth by creating new ventures or
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managing existing organizations in an innovative manner” (Zhara et al., 2008, p. 118). Thus, social entrepreneurship is viewed as a process where individuals (social entrepreneurs) identify opportunities, locate resources and create value to serve a mission that sustains social values (Dees, 1998). To create value, social entrepreneurs adopt specific aptitudes and qualities, for example, they look for more innovative sources (McLeod, 1997) and at the same time they present a certain risk-tolerance and a strong desire to control the surrounding environment (Prabhu, 1999).
Literature review reveals some definitions of social entrepreneur in which the links with innovation is evident, as shown in the table below (table 3). Social entrepreneur, in fact, creates innovative solutions, mobilizes the ideas, capacities, resources and social arrangements for sustainable social transformations (Alvord, 2004, p. 262). He
“play the role of change agent in the social sector by: adopting a mission to create and sustain social value (not just private 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;
exhibiting a heightened sense of accountability to the constituencies served for the outcomes created” (Dees, 1998, p.
4). It is recognized that social entrepreneurs are “creative individuals who question the status quo, exploit new opportunities, refuse to give up and remake the world for the better” (Bornstein, 2004, p. 15).
TABLE 3: SOCIAL ENTREPRENEURS VS SOCIAL INNOVATION
Authors Definitions Primary components
Dees, 1998 Social entrepreneurs “play the role of change agents in the social sector by:
adopting a mission to create and sustain social value (not just private 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; exhibiting a heightened sense of accountability to the constituencies served for the outcomes created” (p. 4).
new opportunities continuous innovation
Bornstein, 1998 A social entrepreneur is a path breaker with a powerful new idea who combines visionary and real-world problem-solving creativity, has a strong ethical fiber, and is totally possessed by his or her vision for change.
new ideas
problem solving creativity
Prabhu, 1999 Social entrepreneurs are persons who create and manage innovative organizations or ventures whose primary mission is the social change and the development of their client group.
innovative entrepreneurs La Barre, Fishman
et al., 2001
Social entrepreneurs are dedicated innovators who are determined to tackle some of society’s deepest challenges by embracing new ideas from business.
innovators
Source: our elaboration.
Thus, social enterprises are forced to be innovative in all their social value-creating activities to deliver public services (Dart, 2004; Fowler, 2000) and for the purpose of improving efficiency and tightening control. In this context, innovativeness is considered one of three core behavioral dimensions in the framework of social entrepreneurship along with proactiveness and risk management (Weerawardena and Mort, 2006). Social enterprises have, in fact, the ability to understand social needs, and then fulfill these needs through creative activities and initiatives (Austin et al., 2006, p. 2).
2.3 Service Dominant Logic and Network Theory
In the academic literature, Service-dominant logic (S-D logic) is an alternative perspective to the traditional, goods- dominant (G-D) logic paradigm (Vargo and Lusch 2004, 2008a, 2008b; Vargo 2008). The traditional G-D view is based on the essential assumption that goods are the bases for exchange. According to G-D logic, the purpose of a firm is the production and distribution of products and goods which are embedded with value during the production process. In line with this view, the customer is thus seen as a “consumer,” of the value created by the firm (Normann, 2001). As emerged from literature review, the most important distinction between G-D logic and S-D logic is found in the different conceptualization of service. In the S-D logic view, “service” is the application of competences, for example knowledge
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and skills for the benefit of another party. This perspective signals a shift not only from thinking about value creation in terms of outputs to processes and outcomes but also in thinking about the primacy of resources involved from operand resources usually tangible, that require some action to make them valuable – to operant resources – usually intangible, dynamic that are capable of creating value. In this optic, “all participants in the value-creation process be viewed as dynamic operant resources. Accordingly, they should be viewed as the primary source of firm and national innovation and value creation” (Lusch and Vargo, 2008, pag 2). On the premise that service is the fundamental basis of exchange (Vargo and Lusch, 2004), service systems are “value co-creation configurations of people, technology, value propositions connecting internal and external service systems and shared information” (Maglio and Spohrer, 2008, p. 18). It is essentially “a value co-creation model that sees all actors as resource integrators, tied together in shared systems of exchange – service ecosystems or markets” (Vargo, 2011, p. 220).
It is recognized that value co-creation is one of the core concepts of S-D logic perspective and has been used to convey the customer’s (and others’) collaborative role in value creation. Based on these conceptualizations, the customer’s role in co-creation is fundamental, in fact, value is always co-created. The process of value co-creation derived from an experience created in conjunction with other stakeholders (Prahalad and Ramaswamy, 2004; Vargo and Lusch, 2004, 2008; Vargo, et al., 2008). In contrast with the traditional models of value creation, which suggest that value is created by firms (Normann, 2001), today, customers are always active participants in the value co-creation process. In this dynamic view, value co-creation is mediated by networks of interconnected relationships (Chandler and Vargo, 2011). The importance of network configurations in value co-creation has recently emerged due to the growing contribution in the context through which value is derived (Akaka and Chandler, 2010; Chandler and Vargo, 2011;
Chandler and Wieland, 2010). Networks are, in fact, an excellent means of studying relational phenomena (Iacobucci, 1996, p. 15) and are considered as critical variables in the co-creation of value (Chandler and Vargo, 2011). In this optic,
“when relationships embrace more than two people or organizations, complex patterns will emerge – networks. We, therefore, also talk about networks of relationships. What happens between the parties in a relationship is called interaction” (Gummesson, 2006, p. 342). The nature of networks in service ecosystems contribute in the process of value co-creation and in the formation of social contexts that frame exchange (Chandler and Vargo, 2011).
According to Ford and Hakansson (2005), interactions must be studied under a network paradigm because relationships cannot be understood through the perspective of a single company. In fact, “not only organizations live in networks, but also consumer citizens and employees” (Gummesson, 2006, p. 349). The adoption of network relationships is useful in understanding different viewpoints, processes, actors and relationships of value co-creation. In fact, the study of networks helps to identify different levels of micro and macro interaction in different aspects of exchange. Each individual actor requires a network of resources, in fact “no company alone has the resources, skills or technologies that are necessary to satisfy the requirements or solve the problems of any other and so is dependent on the skills, resources and actions of suppliers, distributors, customers and even competitors to satisfy those requirements” (Ford et al., 2002, p. 2). This means that “the network setting extends without limits through connected relationships, making any business network boundary arbitrary” (Anderson et al., 1994, p. 3). The nature of networks underscores the importance of collaboration in value co- creation. “The consideration of value co-creation through networks of relationships emphasizes the continual need for actors to interact and exchange with others in order to access the resources they need or want”
(Lusch and Vargo, 2006a). In this view, value co-creation is derived through the interaction and exchange of resources, especially knowledge and skills, in a network of firms, customers, and other stakeholders.