On the Frontiers: The Implications of Social Entrepreneurship for International Entrepreneurship

On the Frontiers: TheImplications of SocialEntrepreneurshipfor InternationalEntrepreneurshipShaker A. ZahraLance R. NeweyYong Li

We explore how social entrepreneurship (SE) research extends the field of internationalentrepreneurship (IE) to affect global sustainable well-being. Well-being is a multidimen-sional concept that includes financial, social, and environmental wealth creation. Much of IEresearch thus far has been based primarily on assumptions of economic opportunity rec-ognition, evaluation, and exploitation. We use the SE perspectives of blended value andinternational governance to revise the definition, assumptions, and boundaries of IE at thefirm and international policy levels. We propose a broader vision for the IE field based on anexpanded set of assumptions beyond traditional economic thinking.

Introduction

The field of international entrepreneurship (IE) has made important contributions toour understanding of how new ventures affect our world, particularly in terms of financialwealth creation (Coviello, McDougall, & Oviatt, 2011; McDougall & Oviatt, 2000). Withthe phenomenal growth of research worldwide, questions have arisen about the boundar-ies and the level of analyses of IE research (Zahra, 2005). IE researchers, for instance,have focused on profit-making companies, especially those that operate in developedeconomies, while largely overlooking emerging economies. We believe that emergingresearch on social entrepreneurship (SE) (Austin, Stevenson, & Wei-Skillern, 2006;Drayton, 2002; Emerson, 2003; Nicholls, 2010; Weerawardena & Mort, 2006) andsustainability1 (Esty & Charnovitz, 2012; Kanter, 2012; Larson, 2011; Patzelt &

Please send correspondence to: Yong Li, tel.: (716) 645-2522; e-mail: [email protected], to Shaker A. Zahraat [email protected], and to Lance R. Newey at [email protected]. By sustainability, we mean issues pertaining to the natural environment. For the purposes of this article, weinclude sustainability as part of our SE focus, based on the concept of “blended value,” as discussed next inour article.

PTE &

1042-2587© 2013 Baylor University

137January, 2014DOI: 10.1111/etap.12061

Shepherd, 2011; Shepherd & Patzelt, 2011) can help us rethink the definitions, assump-tions, boundaries, and research foci of the IE field.

A pivotal concept of focus in SE is that of blended value (Bugg-Levine & Emerson,2011; Emerson, 2000, 2003). It suggests that, contrary to the exclusive focus on economicmeasures of success in traditional analyses, organizations pursue blends of financial,social, and environmental values, but the difference lies in how much value is created anddestroyed across the types in different business models. Focusing on the notion of blendedvalue, with its assumption of holistic blending of different value types, offers an oppor-tunity for IE research to flourish and make substantial intellectual as well as societalcontributions.

ObjectiveIn this article, therefore, we ask: How can the field of SE enrich the study of IE? We

address this question by noting the significant opportunities overlooked in current IEresearch because of the limiting assumptions and definitions adopted in the field. Further,we reflect on the monumental changes taking place in the global economies (Narula,2012; Peng, 2012) and the promise they hold for more innovative and impactful IEresearch. These fundamental shifts also necessitate a different set of priorities whereentrepreneurship in general and IE in particular can become major sources of valuecreation, although this value is defined more broadly than commonly used in existingstudies. As a result, intersecting SE and IE can bring greater research focus to the creationand distribution of blends of value.

In particular, we show how intersecting SE and IE can prompt a revision of thedefinition, boundaries, and levels of analyses currently used in IE research. Our articlealso shows how wealth creation in IE could be expanded to reflect the notion of blendedvalue in an increasingly connected, fast changing, and complex global economy. Weunderscore the fast growing role of international social ventures (ISVs) in the globaleconomy, whether these companies are founded by independent entrepreneurs or existingcompanies (Chen, 2012; Munoz, 2010; Zahra, Rawhouser, Bhawe, Neubaum, & Hayton,2008). By proposing changes in the definition, boundaries, and levels of analyses, weidentify key areas worthy of future IE research.

We define IE as “the recognition, formation, evaluation, and exploitation of opportu-nities across national borders to create new businesses, models, and solutions for valuecreation, including financial, social, and environmental,” consistent with the literature(Oviatt & McDougall, 2005; Zahra & George, 2002). If the essence of IE is the discovery,creation, and exploitation of opportunities in a global context (Coviello et al., 2011; Oviatt& McDougall), then our definition goes beyond the age and size of international ventures.These ventures, whether commercial or social, can be small or be part of large enterprises.Our IE definition also applies to born globals and rapidly internationalizing firms, as wellas established companies expanding in pursuit of entrepreneurial opportunities. Ourdefinition also covers multinational as well as mini-national companies.

The remainder of this article progresses as follows. First, we discuss why SE isimportant to IE. With this backdrop, we then elaborate on both IE and SE, defining theirrespective domains and research foci. Completing this, we will more specifically discusshow SE can contribute to IE. Our discussion suggests a revised set of assumptions for theIE field based on insights gained from SE. These revised assumptions suggest a richresearch agenda that explores how IE contributes to the development of “global sustain-able well-being,” a holistic index of quality of life (Stiglitz, Sen, & Fitoussi, 2010). We

138 ENTREPRENEURSHIP THEORY and PRACTICE

conclude by exploring the implications of our discussion for the future study of IE,shifting attention from a purely economic focus to the development of the globallysustainable well-being.

The Value of Intersecting IE and SE Research

When two fields intersect, they retain many of their original foci while generating anew space where new questions are posed, theories are developed, and new territories areintroduced and defined (Zahra & Newey, 2009). We see two levels of analysis as repre-senting priority research areas at the intersection of SE and IE: public policy and the firm.In terms of public policy, SE calls for the consideration of ethical values and equity inIE practices, explicit attention to the social consequences of IE activity, the need forinternational/global2 evaluations of the equitable distribution of economic and socialoutcomes, the consideration of institutional implications for achieving international/global outcomes from IE, and the view of global sustainable well-being as a key depen-dent variable for future IE research. Global institutions (e.g., transnational organizations)are important in the evolving web of relations and exchanges across borders, affectingIE and those social ventures that have international missions and operations; we call theseventures “international social ventures,” consistent with the literature (Chen, 2012;Munoz, 2010; Zahra et al., 2008).

In contrast to the usual international firms that have been the ambit of IE research,ISVs have several distinct features. ISVs pursue social concerns on a global scale(Figure 1). These ventures are also international in scope; are entrepreneurial in theirorientation to financial, social, and environmental opportunities; and exhibit a greaterbalance of earned versus contributed income (Boschee, 2006)—which differentiates themfrom nonprofits. Specifically, in balancing a company’s social mission and profit margin,entrepreneurs would routinely favor its overall mission (Lynch & Walls, 2009). What setsISVs apart as entrepreneurial ventures is that ISVs pursue financial profitability in orderto make a sustainable social impact. As such, ISVs have an explicit emphasis on socialimpact and change capabilities, which further distinguishes them from for-profit enter-prises. For-profit ventures may have a social impact, but do not invest in social impact andsocial system change capabilities as a core business.

At the firm level, SE suggests that IE opportunity recognition, formation, evaluation,and exploitation should also encompass social issues on a global scale, and this wouldentail both economic and social cost/benefit analysis. The concept of blended valuehighlights how the costs can be large for the IE field if it ignores developments in thearena of SE. Emerson (2000, 2003) suggests that the different types of value—financial,social, and environmental—are indivisible, and that part of the reason why the fields of SEand sustainability have arisen is because commercial (i.e., profit making–centered) deci-sions have historically been made with purely financial criteria. In this new milieu, ISVsbecome an important vehicle for pursuing blended value on a global scale. As Figure 1shows, IE activities could center on traditional profit making or social issues, both in thedomestic and international arenas. The intersection of international and social business

2. In this article, we use the term international to refer to cross-national phenomena, while the term globalencompasses the whole planet and the problems encountered on that scale. Thus, the term internationalsuggests problems that are present in multiple countries but are localized (e.g., water pollution), while globalsuggests problems that impact everybody on Earth (e.g., climate change).

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activities promotes international social entrepreneurship (ISE), which is usually carriedout by ISVs that emphasize blended value creation and social change as their goals.

Intersecting SE and IE makes clear the inseparability of different value types. Ignor-ing the intersection among these values has three implications for the study of IE. First, theexternalities resulting from current ways of doing business can no longer be overlooked.The recent global financial crisis has shown how an increase in financial value creation inone narrow sector of a domestic economy (e.g., innovations in housing loans in the financesector) can also cause large international social costs (e.g., economic recession, unem-ployment, bankruptcy, disposition to crime, civil discord, and international power dis-equilibrium). This suggests a broader redefinition of IE’s research boundaries and agenda.

Second, large social and environmental costs can have a reciprocal linear relationshipwith economic costs. For example, increased weather extremes, such as earthquakes,rising tides, excessive rainfall, and flooding because of global warming, can destroy cropyields and raise prices because of undersupply. There can also be significant loss ofmaterial assets and uncertain outcomes regarding insurance, leading to economic andsocial costs, such as reduced taxation revenue, increased need for government support,and exacerbated family stress. These domestic effects in advanced economies can causemajor global disruptions as key export/import markets shrink. Higher social costs canadversely affect commercial IE activity.

Third, as some have argued (e.g., Stiglitz, 2010), the failure to consider the socialand environmental costs of project and asset values in accounting equations can causeworldwide price distortions of environmental resources (e.g., coal, oil, and gas). Thesedistortions in the market mechanism can lead to the excessive and sometimes wastefulconsumption of these resources in an unsustainable way. Without changes in thinking andpractice, the potential long-term consequences can be disastrous.

Figure 1

Intersection of International Entrepreneurship and Social Entrepreneurship

ISE

International Entrepreneurship

(IE)

Social Entrepreneurship

(SE)

Traditional (Commercial) Social International Domestic

Profit Making

International Social

Ventures (ISVs)

• Blended Value • Social Social Causes


Beyond the costs of oversight though, an added incentive to IE scholars is that SEresearch can expand the opportunity recognition scope for IE. Traditionally, social oppor-tunities may have been deemed unsuitable or outside the radar for profitable IE activity.Yet, with emphasis on blended value, the field of SE offers research examples of socialentrepreneurs using their insights and talents to turn social issues into profitable oppor-tunities (Bornstein, 2007). Undertaking IE without regard for social ramifications canencourage short-sighted profit seeking while ignoring the negative effects on social andenvironmental wealth. As a result, the wider community has to assume greater responsi-bilities for these other costs. The interaction among different types of values calls uponscholars to examine the implications of the notion of blended value for the IE field.

Having discussed why SE is important to IE, we now look more closely at eachresearch field, highlighting key concepts that can serve as a locus for intersection. Theseconcepts also have the potential to shape future IE scholarship.

IE and SE: Definitions, Boundaries, and Research

Broadly, entrepreneurship is the scholarly examination of how, by whom, and withwhat consequences opportunities to create future goods and services are recognized,formed, evaluated, and exploited (Shane & Venkataraman, 2000). We, thus, situate IE andSE within an opportunity-centric view of entrepreneurship (Alvarez & Barney, 2007,2010; Alvarez, Barney, & Anderson, 2013; McMullen & Shepherd, 2006). Opportunitiesare those situations where competitive imperfections exist in product or factor markets(Alvarez et al.). These imperfections can be either discovered (Shane, 2003) and/orcreated (Alvarez & Barney, 2007), setting the stage for gains from entrepreneurial alert-ness and proactiveness. Even though both IE and SE are anchored in this broad domain ofentrepreneurship, they indicate different research territories that have the potential forintersection while retaining their own distinct identities.

IE: Definition, Boundaries, and ResearchMonumental changes have occurred in the global economy in recent years. First,

the economy of the 1990s and 2000s, when most of the original contributions to theIE literature were written, is vastly different from today’s and tomorrow’s economy.Business ecosystems have become global, compelling companies to meet increasinglyinternational standards. These worldwide ecosystems, which have become the norm, arethe hotbeds of global opportunities that companies of all size and age seek to exploit.Innovation networks are also now globally dispersed, and the production of knowledgeis a worldwide enterprise (Cantwell & Mudambi, 2005; Zander, 1999). These networksallow companies to build on innovations developed by others around the globe, or join inthe creation and discoveries of new products and technologies. Businesses are alsoincreasingly expected to tackle challenges that face the whole planet, including energyconsumption and climate change. These developments have enabled entrepreneursoperating in countries with varying levels of economic development to seize “global”opportunities that have a worldwide appeal.

Second, value chain activities that once existed domestically in the knowledgeproduction–consumption function (along with other types of resources) have also becomeglobal. The emergence of “global opportunities” may require global distribution andcoordination of value chain activities to tap into such opportunities. This creates an

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abundance of opportunities for new firm creation (serving as suppliers, consultants,consolidators, and intermediaries) and other entrepreneurial activities (e.g., new forms oftransacting and network building) around the globe. Similarly, the supply of capital (e.g.,microfinancing) has become more globalized (Iriyama, Li, & Madhavan, 2010; Kenney,Haemmig, & Goe, 2008).3 With these developments, entrepreneurs, their ideas, discov-eries, and connections routinely cross international boundaries with growing ease. Thesechanges fuel IE activities in pursuit of opportunities.

Third, participants in global markets have also changed, with the growing entryof companies from emerging markets (Li, Li, & Shapiro, 2012; Zahra, Abdel-Gawad, &Tsang, 2011). These companies have developed their own products and brands, businessmodels, systems of organization and coordination, production and distribution systems,and targeted parts of the global markets that have long been neglected by multinationalcompanies. These companies’ entrepreneurial capabilities have made it relatively easier toenter new markets and compete well. In turn, multinationals from advanced economies havelearned to collaborate with, and create room for, mini-nationals from emerging markets.

Finally, there is a growing worldwide recognition of the power of entrepreneurship inaddressing social issues while creating economic wealth (Austin et al., 2006; Zahra et al.,2008). The notion of “blended value” (Emerson, 2003; Nicholls, 2009) offers a holisticapproach toward creating financial, social, and environmental value. It also underscoresthe need to revise our notion of IE and its boundaries as we can no longer accept creatingeconomic wealth as the sole criterion of company performance in global markets.

The study of IE has grown rapidly over the past two decades, generating worldwideinterest in examining how born global firms compete and define their identities (McDougall& Oviatt, 2000; Oviatt & McDougall, 1994). The concept of IE itself has undergone majorchanges over the past two decades (for reviews, Coviello et al., 2011; McDougall & Oviatt;Zahra, 2005), moving away from exclusively covering born global companies to recogniz-ing that IE activities occur also in well-established companies. Another important changehas been the reframing of IE around the notion of opportunity (McDougall & Oviatt).As such, current IE research includes three dimensions (Jones, Coviello, & Tang, 2011):entrepreneurial internationalization, international comparisons of entrepreneurship, andcomparisons of entrepreneurial internationalization across countries.

Our redefinition of IE, stated in the Introduction section, indicates a need to identifymultiple sources of novelty in international ventures. Our attention to novelty in termsof not only new revenue sources but also new business models and solutions is intentionalas we hope to better capture the dynamic and constantly evolving global marketplace.Finally, our definition underscores SE and its growing role, prompting us to rethinkwhat we perceive as entrepreneurial opportunities found across national borders. It alsocompels us to expand our metrics of value creation beyond the financial to include thesocial and environmental as well, as discussed next.

SE: Definition, Boundaries, and ResearchClassical economic theory has long recognized social (societal) outcomes as key

aims of entrepreneurship. Entrepreneurs spot opportunities to move the status quo to a

3. For example, commercial cross-border debt and equity invested in microfinance surpassed U.S.$11 billionin 2009, representing an estimated 20% of the funding base for specialized microfinance providers (CGAP,2010). According to an Ernst & Young (2012) report, about 20% of VC firms in Brazil, India, Israel, and theUK invest outside their home countries, and many more VC firms in Canada (69%), France (82%), Germany(92%), and the United States (49%) invest internationally.


new equilibrium, and thus improve the standard of living for all through new productsand services. Schumpeter (1942) saw entrepreneurial ventures as allocators of socialwealth. The field of SE represents a maturing of how we understand how to create aswell as allocate social wealth and the recognition of the limitations of past approaches.Definitions and expectations regarding social wealth are changing rapidly, along withour understanding of the limitations of markets to achieve social wealth creation anddistribution for all (Stiglitz, 2010). Social wealth creation requires distinct knowledgeand skills in its own right. As a result, definitions of social wealth are shifting from theclassic “social welfare” doctrine espoused by economists for generations to improvingthe quality of human existence and global sustainable well-being. These dynamics spurentrepreneurial energy that induces transformative system change (Martin & Osberg,2007).

The developments just noted have legitimized the emergence and growth of SE as aresearch stream within the broader field of entrepreneurship. Specifically, key theoreticalcontributions of emerging SE research include the concept of blended value, issues to dowith the “social” as a mission priority, recognizing organizations’ balance of social valuecreation and destruction, social impact and system change as distinct organizationalcapabilities, and new dependent variables like global sustainable well-being, as we discussnext.

SE is a young field of study (Austin et al., 2006; Bornstein, 2007; Drayton, 2002;Harding, 2004; Hemingway, 2005). As a result, definitions of SE abound (Dacin, Dacin,& Matear, 2010; Mair & Marti, 2009; Martin & Osberg, 2007; Shaw & Carter, 2007;Short, Moss, & Lumpkin, 2009; Zahra, Gedajlovic, Neubaum, & Shulman, 2009). To us,the term “social” centers on the creation of social wealth as a goal, whereas “entrepre-neurship” emphasizes the creation of new businesses, models, and solutions. We, thus,view SE as the “recognition, formation, evaluation, and exploitation of opportunities tocreate new businesses, models and solutions with a focus on achieving blended value.”This definition parallels that of IE (McDougall & Oviatt, 2000; Zahra & George, 2002).Equally important, this definition means that SE goes beyond the traditional concepts ofcorporate social responsibility (CSR) (Baron, 2007; Harrison & Freeman, 1999) and “baseof the pyramid (BOP)” (Prahalad, 2006). CSR and BOP activities typically start with whatcompanies do and decide how to target it better to their different stakeholders and makea profit. In contrast, SE begins with compelling social needs that also represent profitableopportunities, and then organizes resources and talents to develop creative solutions tothese needs.

As mentioned earlier, SE highlights a blended value approach that asserts thatall organizations create and destroy multiple value types—financial, social, and environ-mental. These values are indivisible. Companies such as Apple, Samsung, Alibaba,Medtronics, 3M, Microsoft, and many others create social value. However, the tippingpoint for why a company would be viewed as a social venture is whether in its totaldecision making it prioritizes social outcomes over financial ones. This would beenshrined in social ventures’ mission statements and constitutions.

Social ventures are dedicated to promoting social wealth, which refers to a commu-nity or society’s overall well-being (Zahra et al., 2009). It is the outcome of managing andcultivating those assets and resources owned and controlled by that community—not onlythose owned by individuals, companies, corporations, or governments. Social wealth,thus, combines gains from independent and corporate social ventures besides thosecreated through community resources, assets, and other endowments. Key endowmentsthat contribute to social wealth include natural (e.g., the environment), human (e.g.,happiness, and growth opportunities), social (e.g., cohesion, harmony, connectedness,

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volunteerism, and security), and cultural (e.g., shared destiny, common values, and iden-tity) resources.

Social ventures also differ from both for-profits and not-for-profits by their deliberateinvestments in social impact and social system change capabilities. Social impact capa-bilities are the bundle of knowledge, skills, and routines necessary for achieving measur-able social impact on a target client. For example, a firm that specializes in homelessnesscan develop social impact capabilities to innovatively transform this social problem andalleviate, if not eradicate, its negative effects. These capabilities are underpinned by atheory of change (Brest, 2010), that is, evidence-based practices for moving someoneor something from a dysfunctional state to a more desired state. As such, social impactcapabilities are heterogeneous across social ventures as some theories of change are moreefficacious than others in creating desired social impact. Just as research and development(R&D) firms come to specialize in the fields of scientific and technological knowledge,social ventures establish capabilities on a foundation of social science knowledge andresearch.

In contrast to a traditional nonprofit outlook, SE is about transformative socialsystem change (Kania & Kramer, 2011). Because of this, social ventures often need todevelop social system change capabilities. Social system change capabilities are under-pinned by particular knowledge, skills, and routines involved in having to change thesocial system built around a social problem/opportunity. The social system includesthe set of actors who are active in addressing a social problem/opportunity, and whogovern the prevailing narrative and behavior around how the social problem is per-ceived, understood, and addressed. Following the earlier example, a social venture’sinnovative approach to homelessness may require cooperation from an ecosystemof government, education institutions, nonprofits, employment agencies, etc. Yet each ofthese may be stuck in a particular paradigm of understanding homelessness, whichserves as a barrier for the social venture to create its social impact. The social ventureneeds social system change capabilities to help persuade, incentivize, and guide theecosystem stakeholders through a process of change. The more transformative and sys-temic the proposed social impact, the more social ventures need to develop accompa-nying social system change capabilities.

Social system change capabilities, thus, entail knowledge, skills, and routinesrelated to changing a social system that forms the institutional and organizational contextaround a social problem/opportunity. Social impact capabilities, on the other hand,embody knowledge, skills, and routines dedicated to achieving a particular social impacton a particular client (e.g., individual, community, region) with a particular socialproblem/opportunity. Social impact capabilities are contingent on the organization’ssocial system change capabilities. Inability to change the ecosystem can impede socialimpact, and therefore social wealth creation.

Social ventures also differ from nonprofits by their deliberate inclusion of an entre-preneurial culture and orientation (Boschee, 2006). This entails a major cultural shift intransitioning from a traditional nonprofit orientation (e.g., bearing all costs of servicesoffered to clients) to thinking and acting entrepreneurially (i.e., finding ways to develop anew revenue stream). Social ventures usually have an entrepreneurial orientation thatemploys innovative approaches to both social impact and the generation of earned income.

To further delineate the domain of social ventures, Table 1 compares businesses alonga spectrum of their missions: socially oriented public/not-for-profits, primarily profit-oriented, and dual mission (i.e., combining social and economic goals). Socially orientedpublic/not-for-profits focus typically on a niche such as dealing with homelessness ina local community or a broad set of social causes (e.g., addressing teenage pregnancy


in a country). They are constitutionally constrained as to how they can dispense surpluseconomic value. Given their emphasis on pursuing social wealth as the goal, nonprofitorganizations and nongovernment organizations differ significantly from social ventures,which explicitly place a premium on making a profit and experimenting with variousdebt/equity finance structures to leverage a wider access to capital markets (Nicholls,2009).

Equally important, our discussion highlights that SE is not just about helping thedisadvantaged, as emphasized in some definitions (see Dacin, Dacin & Tracey, 2011, fora review). This emphasis restricts the scope of SE and fails to appropriately perceive theopportunities for social wealth creation across the world.4 Economically advanced soci-eties also benefit from SE, which seeks to commercialize social innovations that enhancethe psychological well-being and/or community development of their citizens. Socialwealth creation opportunities, thus, involve lower and higher order human needs for theunderprivileged and privileged.

Despite the growth of research on SE, the lack of theoretical development continuesto handicap the literature and theory building efforts (Short et al., 2009). The dearth ofempirical research further limits the progress of SE research, especially in a globalbusiness environment (Short et al.). Still, as stated earlier, the SE research stream hasdeveloped a niche set of concepts and perspectives that have implications for how we viewIE, which we discuss next.

How SE Can Inform IE ResearchA vital part of SE is community development, the process by which different members

of the community organize their activities to address issues of common interest and enrichthe common good. From a business perspective, community development skills can be

4. The European Commission (2013) defines social innovations as those that are “social in both their ends andtheir means—new ideas (products, services and models) that simultaneously meet social needs (more effec-tively than alternatives) and create new social relationships or collaborations. They are innovations that are notonly good for society but also enhance society’s capacity to act.”

Table 1

Organization Mission and Types

Type

Organizational mission

Socially orientedpublic/not-for-profit

Primarilyprofit-oriented Dual: social and economic

Independent Niche causes via charity and volunteerism Traditional new ventures Social venturesCorporate Charitable foundations (Chen, 2012) Traditional business firms Bottom of the pyramid (Bruton, 2010; London &

Hart, 2004; Prahalad, 2006; Webb et al., 2010);corporate social responsibility (Baron, 2007);social ventures (Chen, 2012; Munoz, 2010;Zahra et al., 2008), for example, those with afocus on sustainability

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effective in building a market and improving product sales. Social capital is needed to earnthe trust of foreign communities that may be anxious about the intentions of newcomersand the ways they do business. Social capital is present in the networks, norms, and trustinherent in associations whose members work together in concerted collaborative action(Mathie & Cunningham, 2003). Community development recognizes these social rela-tionships as aspects as well as a means to potentially leverage other community assets.

Some models of community development offer a warning to a new entrant going intoa foreign market with the intention of “selling” or even imposing a technical solution ona community (Mathie & Cunningham, 2003). Imposing solutions can strain relationshipswith locals, potentially harming sales and limiting the success of social impact strategies.In contrast, asset-based community development models emphasize the need for build-ing social capital while allowing the community itself to lead change (Kretzmann &McKnight, 1993; Mathie & Cunningham). These skills facilitate market penetration aswell as enhance trustworthy transactional norms for the establishment of commercialrelationships. These social and community development skills complement the commer-cial focus of IE activities. Further, as commercial objectives are achieved, attention shouldbe given also to empowering the community to achieve the desired social change. Theseskills and empowered problem solving enable the community to overcome social pro-blems while creating value.

SE also underscores the importance of intentions and ethics in gaining an influence,particularly in the face of perceptions that rich Western developed countries impose theirvalues on others (Grenier, 2006). Moreover, resentment that the West has engineered theworld in its favor can create barriers to trade. SE can effuse particular moral sentimentsthat are genuinely concerned with addressing inequality while encouraging social ven-tures to behave above pure self-interest. This is replaced by a spirit of mutual benefit,equity, and honesty. This reveals that continuation of inequitable distribution of wealthand benefits can be eschewed in deal negotiations, where relationships are defined inbroader terms than profit. Indeed, the rise of what is known as anti-systemic movements(e.g., “Take Wall Street”) signals a backlash against rising inequality, which could raisethe bar of expectations for IE where blended value becomes more the norm (Smith &Wiest, 2012).

Our discussion makes clear that SE can broaden how IE opportunities are recognizedand evaluated. Traditionally, and particularly in some for-profit contexts, social contribu-tions are often perceived as more of a cost than a profit-making endeavor. Instead, SEresearchers appear to view communities as captive markets. Part of building social capitalcan involve collaborating with communities as participants in R&D and design of tech-nical solutions. Such R&D and design activities are then adapted to local peculiarities,such as weather, custom, and social hierarchies. Thus, SE skills create new entrepreneurialpathways that previously may have been perceived as unattractive, promoting opportunityrecognition and evaluation skills.

SE can also enrich IE research by bringing attention to institutional change throughproactive institutional entrepreneurship (Mair & Marti, 2009). Institutional entrepreneursare those agents who mobilize resources to influence or change existing rules or evenestablish new ones (Dacin et al., 2010). Similar skills are necessary in SE to effect socialchange. Indeed, social ventures can spur the emergence of new ecosystems that involvethe creation of new institutions with new institutional logics consistent with the desiredsocial change. The link between institutional entrepreneurship and the notion of eco-systems accentuates the complex and multi-agent nature of social change and how socialventures need to collaborate with institutions in different countries that regulate, incen-tivize, and coordinate new socially desirable practices.


The intersection of SE and IE also has implications at the international policy level ofanalysis. To some, the existing structure of the global economic system means that somecountries are poised to benefit more from IE than others (Ocampo, 2011; Stiglitz, 2007).This leads to economic and social inequities that fuel the landscape of internationalfor-profit and SE activity. For example, Held (2004) reports that the 900 million peoplewho live in the Western world enjoy 86% of the world consumption expenditures, 79% ofworld income, 58% of world energy consumption, and 74% of all telephone lines. Incontrast, the poorest 1.2 billion of the world’s population share only 1.3% of the worldconsumption, 4% of world energy consumption, 5% of world fish and meat consumption,and 1.5% of all telephone lines. Also striking is that 70% of the 1.2 billion people livingon less than a dollar a day are women. These disparities reveal patterns of inclusion andexclusion in today’s world economy, and the size of the gap between the empowered andthe disempowered. Studying these patterns can expose the morality and equity of existinginternational economic systems (Dunning, 2003), and whether IE activity is efficient (i.e.,making the best use of resources) or whether more ISE activity can address economicsystem inequities. SE brings focus on these issues in the international arena.

ISE can become a catalyst for economic and social change. Stiglitz (2007) advancesthat a more equitable global economic system would be more pro-development, favoringdeveloping countries instead of holding them in a disadvantaged status. This can beachieved by changing global economic policies and governance (Held & McGrew, 2007).Without this, much ISE activity focuses on assisting disadvantaged countries. The oppor-tunity cost of ISE activity is that resources could have been deployed elsewhere, if changeswere made to the global economic and political system. Current transnational regimes arestructurally limited in their ability to balance global efficiency and equity. Past develop-ment strategies have also been dominated by classical economic theory without regard toinstitutional and cultural contexts (Stiglitz). From this perspective, ISE can promote abalanced perspective on economic and social changes (Figure 1).

In summary, at the firm level of analysis, IE does not occur in a social or ethicalvacuum. The success of IE is affected also by how well for-profit entrepreneurship isconducted with the benefit of social capital and community development efforts thatespouse values of mutual benefit rather than self-interest. Successful SE and IE depend oninstitutional entrepreneurship that fosters socially desirable behaviors. At the internationalpolicy level, SE has implications for the design of the global economic system, decidingwho benefits from IE, determining ISE activity needed in different parts of the world,designing efficient economic systems (Dunning, 2003), and introducing institutionalreforms that promote global economic, political, and social equity.

Research Implications From the Intersection of IE and SE

In this article, we have sought to connect SE and IE and identify the implications oftheir intersection for wealth creation. An important implication of this intersection is thatSE prompts a redrawing of the boundaries of IE. The IE field will be better placed tounderstand how entrepreneurship contributes to international economic and social out-comes by adopting a broader, yet focused, set of additional assumptions within its domain.These assumptions emerge from considering potential areas of mutual enrichment madepossible by intersecting SE and IE. In Tables 2 and 3, we distill key assumptions at thefirm and international policy levels of analysis, with an eye on defining the boundariesof IE.

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Table 2

Firm-Level Revised Assumptions for International Entrepreneurship (IE)

Prevailing assumptions Revised assumption Implications

Viable IE opportunity recognition,evaluation, and exploitation aredetermined by the potential financialwealth to be created.

Besides financial wealth, IE opportunityrecognition, evaluation, andexploitation should also encompasssocial and environmental wealth.

Opportunity-based definitions ofentrepreneurship, especially IE, shouldbe extended to include the “social.”

Conventional accounting and financialmeasures determine the potentialviability of IE opportunities.

IE opportunity analysis should includeboth economic and social cost/benefitanalysis.

Pursuit of blended value (financial, socialand environmental wealth) is key todetermining the viability and successof IE activities.

Some profitable IE opportunities may beapproved because of economic valuecreation but later be discountedbecause of social costs and vice versa.

Because of differing foci, some IEactivities will remain purely domesticwhile others will be international.

Pursuing social issues represents a majorcost item.

Pursuing social missions can also be aprofitable endeavor.

Social not just a cost but also an area thatcalls for and promotes IE activities.

Market selection, competitive positioning,and aggressive marketing are key toprofitable IE activities.

In addition to market selection,competitive positioning, and aggressivemarketing, community developmentand social capital as key capabilitiesfor business/profit generation.

Trust can precede international businesstransactions.

Financial returns are the key dependentvariable when measuring thevalue-added of IE activities.

“Sustainable global well-being” is theprimary measure of value createdby IE.

Composite measures are needed tocapture different types of values andwealth being created when evaluatingthe contributions of IE activities.

Table 3

Policy-Level Revised Assumptions for International Entrepreneurship (IE)

Prevailing assumption Revised assumption Implications

IE activities are concentrated in certain(i.e., rich and advanced) parts of theglobe.

Distributional equity of IE practice. Uneven bargaining power/distribution ofwealth between nations in internationaleconomic system.

International entrepreneurs enrich theircountries by creating wealth (financial).

Explicit consideration of socialconsequences of IE activities.

Does IE also keep some countries lockedinto underdeveloped status? Does IEallow all nations to develop?

National endowments and powerpositions determine the distribution ofwealth created by IE activities.

The need for international/globalevaluations of the equitable distributionof economic and social outcomes of IEactivities.

Need to adopt a view of internationalinterest not just national.

National institutions of the home market(and company’s strategy) determinerelative gains from IE activities.

Consideration of institutional implicationsfor achieving international/globaloutcomes from IE not just firm ornational benefit.

Need for international governancemechanisms to ensure social andeconomic system efficiency and equityat international level.


Figure 2 presents a theoretical framework of key relationships at the intersection of IEand SE, reinforcing the assumptions outlined in Tables 2 and 3. As we reflect on Figure 2,it would appear that research opportunities at the intersection of IE and SE and at the firmlevel would include how opportunities are recognized and evaluated, and what types ofcapabilities are needed to recognize, evaluate, and exploit those opportunities. In Figure 2,the boxes “opportunities” and “capabilities” capture the inputs that contribute to potentialfirm-level IE. The box labeled “firm-level IE activity” represents the actual realized IEactivities from those inputs. Table 3 then identifies key variables at the policy level. Here,we propose that firm-level IE interventions are constrained or enabled to the extent thatthey affect global sustainable well-being based on existing international institutional andgovernance systems.

Our discussion throughout this article also reinforces the merits of considering finan-cial and social metrics when evaluating the implications of IE. This would improve futureresearch but still fails to connect different types of value. A more promising approach isto emphasize “global sustainable well-being” (Stiglitz et al., 2010), which is a compositeof economic, social, and environmental conditions and indicators of value. It includesfactors such as material living standards, health, education, personal activities like work,political voice and governance, social connections and relationships, and the naturalenvironment (Stiglitz et al.). It also captures the equity and sufficiency of how well theworld is balancing economic, social, and environmental values, an issue that lies atthe intersection of IE and SE.

As Figure 2 indicates, achieving global sustainable well-being requires vigorousfirm-level IE activity as well as international institutional governance systems. For IE

Figure 2

Research Opportunities at the Intersection of International Entrepreneurship andSocial Entrepreneurship

Firm-Level IE Activity = Pure for-Profit + ISE

Firm-Level IE Activity= Independent + Corporate

Global Sustainable Well-Being

International Institutional System of Governance

Covering: social, economic, and political institutions Opportunities

- Commercial and social

-Emerging and advanced economies

Capabilities -Social impact and

social change -Community development

-Cultural -International

-Measurement of economic and social value

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research, global sustainable well-being provides a needed focus as we probe how inter-national entrepreneurial activity leads to a range of outcomes affecting the world. Focus-ing only on profit-making activity can be short-sighted because it ignores how social andenvironmental costs can come to have longer term financial repercussions for internationaleconomic, social, and political systems. Next, we identify major research opportunitiesthat arise from our discussion. We begin with firm-level issues and then proceed to discusspolicy questions in today’s economy.

Future Research at the Firm Level

SE Opportunity Formation and Exploitation. Table 2 underscores a need for substantiveresearch into ISVs’ opportunity discovery, creation, evaluation, and exploitation. Amongthe questions to study are the following: How do social ventures internationalize? Whatfactors push social ventures to internationalize? Will a focus on global social and envi-ronmental issues facilitate the internationalization of new ventures? To be sure, theseissues have a major global impact, be it climate change and energy depletion that tend tohave a “public good” nature on a global scale, or localized issues such as air pollution andwater degradation in a community that nonetheless represent challenging issues to othercountries. Accordingly, does the pattern of internationalization vary based on the type ofglobal issues of concern? Under what conditions are such global endeavors undertakenby independent rather than corporate ventures? When and how can social ventures col-laborate across national borders to address these issues?

Other key questions that require attention include the following: how do entrepreneursconceptualize and evaluate potential ISE opportunities? How does the formation andexploitation of ISE opportunities differ based on discovery versus creation processes(Alvarez et al., 2013)? How much do social conditions and personal values affect theseevaluations? How do entrepreneurs learn and develop metrics to identify and measure theattractiveness of ISE opportunities? More research is also needed to create ways ofmeasuring social value creation, as well as the corresponding economic and social costsand benefits (Nicholls, 2009). Further, what are the factors that influence entrepreneurs’choice of the scale of ISE opportunities? Answers to these questions might be groundedin national cultures that imprint entrepreneurial cognition. They might also reflect nationalsystems of innovations and prevalent institutions (Li & Zahra, 2012).

The role of independent ISVs (Figure 1) deserves further research. As we haveproposed earlier (Table 1), ISVs differ from nonprofit organizations that focus primarilyon social missions and social wealth creation. Our discussion identifies several questionsfor future research on ISVs. For example, how do individual entrepreneurs “convert”social issues into opportunities? How do they define their domain in nascent fields? Howdo they combine different strands of knowledge to weave a coherent notion of the ISV?Is the process of resource assembly for ISVs similar to those depicted in the literaturefor traditional for-profit ventures? Should we expect more informal and public investorsto play a greater role in funding ISVs? Finally, how do entrepreneurs cultivate socialinnovations as they develop ISVs? How do they incorporate these innovations into theISVs’ ongoing operations?

Research is also needed on corporate ISVs (Table 1 and Figure 1). Specifically,how do corporations define opportunities for their ISVs? Do these processes differ fromthose followed by independent ISVs? What metrics do corporations use to determinethe need for new ISVs? What are the social and business goals of corporate ISVs?How do corporations connect their ISVs to ongoing CSR and BOP programs? Where do


corporations house their newly created ISVs? How much autonomy do ISVs have? Do thenew ISVs follow the strategies of existing divisions or business units? How do corpora-tions create capabilities to pursue internationalization through ISVs? What metrics docorporations use in evaluating their ISVs’ contributions?

Emerging Economies. Most prior IE research has been done in the context of developedcountries or companies from those countries with little attention to the challenges ofdifferent economies (Kiss, Danis, & Cavusgil, 2012). Yet measuring global sustainablewell-being requires a broader global focus that includes research into the processes andconsequences of IE in different economies—developed/underdeveloped, emerging/advanced. While the need for social ventures is increasingly evident in many developedcountries (Zahra et al., 2008), many of the world’s most intractable problems persist inemerging and underdeveloped economies. Emerging economies house billions who areat the “base of the pyramid” (Bruton, 2010; Bruton, Ahlstrom, & Obloj, 2008; London &Hart, 2004; Prahalad, 2006; Webb, Kistruck, Ireland, & Ketchen, 2010). Concurrently,companies from emerging economies are going international, prospecting for and exploit-ing opportunities outside their national borders (Li et al., 2012; Zahra et al., 2011). Still,we do not know how often social ventures established in these economies enter marketsin other emerging or developed economies. It is also unclear how the process of ISVformation might differ between emerging and advanced economies. Given the dearth ofempirical studies on entrepreneurship in emerging economies, studying ISVs could offeran important setting in which we could test key IE theories and establish their robustness(Kiss et al.).

National Culture and Institutions. Another key issue to examine in future research ishow national cultures and institutions influence SE. Short et al. (2009) observe thatalthough empirical SE studies are diverse in terms of the countries from which data arecollected, most are concerned with finding generalizations of SE independent of nationalculture. Two areas of future research can profitably incorporate national cultures andinstitutions. First, for ISVs, how do these cultures and institutions influence entrepreneur-ial practice and performance? Second, future research may conduct comparative analysesof SE and ISVs across countries.

Social Capital and Community Development. Table 2 also encourages future ISEresearch into social capital and community development. Is social capital an antecedent tosuccessful and profitable ISE? Social capital usually accumulates from a focus on socialrelationships and trusted norms. One hypothesis is that IE firms with SE focus andsocial capabilities will perform better financially than those that have a pure for-profitfocus. This, it can be argued, would hold because an ISE focus exposes the venture tomore markets and opportunities, and helps build the requisite social capital skills thatfoster business relationships and trade.

Another question is whether community development is a critical capability forprofitable ISE. ISE research would benefit from a more explicit connection with thecommunity development literature. Presently, there are competing views of communitydevelopment (Mathie & Cunningham, 2003). One view espouses a technical assistanceapproach where an external entity attempts to implement a technological solution on acommunity. This is a needs-based view of a community. In contrast, the asset-based modelhas a starting assumption not of what a community needs but rather what are the existingassets within a community that can be mobilized to achieve the desired social change(Kretzmann & McKnight, 1993). The needs-based view usually imposes a solution from

151January, 2014

outside, whereas the asset-based model seeks internal problem solving and ownership.How do these competing models affect capability development? What are the perfor-mance consequences for ISEs in terms of both social and financial measures?

There is a need to recognize and capitalize on the social role that new, especiallysocial, ventures play in today’s global environment. Both social ventures and societyat large can win by understanding this role. This role (e.g., pursuing SE) can stimulateIE, creating different types of value. Future researchers need to better conceptualizeand define this social role, which is likely to be multidimensional. Once researchers havesucceeded in clarifying these dimensions, the mechanisms by which they inspire newbusiness creation, with an international mission, could be better articulated. This role willhave informal (e.g., counseling nascent entrepreneurs) as well as formal (e.g., participat-ing in setting industry standards) dimensions, and both dimensions require recognitionand careful study.

The future study of IE is likely to thrive if we recognize and examine the social roleof entrepreneurship. Different countries place different values on social, economic, andenvironmental wealth. Consequently, comparative studies conducted across differentlevels of economic development can clarify how these differences might influence finan-cial and social wealth creation. We can also better understand how entrepreneurs indifferent societies weigh these values differently as they develop their companies’ goalsand missions. These fine-grained analyses can help in understanding the internationalnuances of entrepreneurial opportunity exploitation, and thus contribute to global sustain-able well-being.

Future Research at the International Level

Benefit Distribution of IE Activity. In Table 3, we propose that the IE field would beenriched by considering the distributional equity of for-profit IE activity. A question topose, therefore, is: Do some countries benefit more than others from for-profit IE? If so,what are the social consequences? Is there a social cost to some for-profit IE activities,and if so where? A hypothesis that is worth exploring concerns whether countries thatbenefit more from for-profit IE would also conduct more ISE activity. The assumption isthat economic wealth generates generosity and/or moral compunction. Also, the typeof ISE activity may vary depending on the wealth of a country. ISE activity in wealthycountries may be more about the spread of self-actualizing innovations, whereas thisactivity in poor countries involves more lower order needs. Such cross-country compari-sons are underscored by a perspective that can help guide and assess the efficiency ofoverall IE activity, and how it might contribute to global sustainable well-being.

Institutional Governance. Several researchers propose that an unrestrained globaleconomy of market liberalization often creates inequities (e.g., Ocampo, 2011; Stiglitz,2007). They also observe that existing institutional mechanisms (e.g., United Nations,World Bank) are not engineered to act in the interests of global sustainable well-being.Instead, voting systems render these international institutions captive to the interests ofsuperpowers, leading to issues of how the world is being constructed and whose interests itserves (Held & McGrew, 2007). By marrying the study of institutions and IE, we are betterequipped to probe the entrepreneurial processes that lead to the evolution of these institu-tions in the first place. Many of these activities are international in their focus and scope.

Table 3 also shows a need for research into the institutional governance mecha-nisms that oversee the global economic system. These mechanisms may moderate the


relationship between firm-level IE and global sustainable well-being, as we suggestin Figure 2. Achieving equitable and sustainable global economic and social outcomesrequires not just firm-level activity but also international governance and institutionalmechanisms. Developing and sustaining these institutions and mechanisms require carefulnegotiations among multiple parties, with different goals and capabilities. As these goalsand capabilities change, international governance institutions and mechanisms should berevisited and synchronized.

The research issues we have just presented (Figure 2) infuse the IE field with explicitconsideration of the mission of ISVs and their role in creating social wealth. This shouldencourage researchers to examine the equity of current IE activity: Why do some countriesbenefit more than others? Is there a case for more equitable IE opportunities acrossnations? The framework also draws attention to the global social costs of IE activity: Howdoes IE activity harm/enable global social improvement? Who bears the costs associatedwith IE activities?

Conclusion

The intersection of SE and IE offers an important, rich, and timely but often over-looked opportunity to creatively revisit our conceptions of the broader field of entrepre-neurship, and IE in particular. This intersection highlights the fruitful dialogue that canoccur between the social and financial goals of entrepreneurship, while recognizing thegrowing globalization of entrepreneurial activities that individuals and firms alike under-take. For decades, researchers have equated charitable contributions, financial success,and business creation with the social role of entrepreneurship. As our discussion makesclear, this role is much larger, more profound, and more impactful than traditional viewswould suggest (Shepherd & Patzelt, 2011). This expanded role does not change whatentrepreneurs actually do as they pursue IE; it more accurately captures their contributionsto social, environmental, and economic wealth creation. Recognition of these varied,profound, and impactful contributions can also connect future IE research with practiceand public policy globally, with a focus on “blended value” creation and global sustain-able well-being. These valuable contributions make international entrepreneurs trulycatalysts and agents of social change that uplifts the quality of the human existenceworldwide.

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Shaker A. Zahra is Robert E. Buuck Chair of Entrepreneurship at the Department of Strategic Management& Organization, and Academic Director of the Gary S. Holmes Entrepreneurship Center, Carlson School ofManagement, University of Minnesota, 321 19th Ave. South, Minneapolis, MN 55455, USA.

Lance R. Newey is Senior Lecturer in Entrepreneurship & Innovation at UQ Business School, Level 4 ColinClark Building, University of Queensland, St Lucia, Brisbane, Qld 4072, Australia.

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We dedicate this article to Les Boby, Salouha El Sayed El-Khalifa, and Judy Sena, in remembrance andundying gratitude. We have benefited from discussions on the social role of entrepreneurs at the Universityof Twente (Netherlands); EGEPE Conference in Brazil; the Gary S. Holmes Center for Entrepreneur-ship (University of Minnesota); Tsinghua University (China); and RENT Conference in Bodo, Norway.We appreciate the suggestions of the participants of the Glasgow Workshop on High Potential Concepts,Phenomena and Theories in International Entrepreneurship Research, especially those by Patricia McDougall,Marian Jones, and Manuel Serapio, as well as the help of the anonymous reviewers. We are also grateful forthe special help of Rod B. McNaughton in guiding our thinking through the issues we cover in this article.


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On the Frontiers: The Implications of Social Entrepreneurship for International Entrepreneurship

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research zahra

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