Social entrepreneurship

Impact of socio economic conditions on Social entrepreneurship

Introduction

Instead of focusing solely on financial value creation, social entrepreneurship centers on the creation of social value for disenfranchised members of society

To date, little attention has focused on understanding the macro-level factors that influence the occurrence of social entrepreneurship firms

Introduction

Social entrepreneurs are one species of the genus entrepreneur (Dees et al., 2011, p. 2) and social entrepreneurship founders are utilizing both for-profit and non-profit organizational forms (Townsend and Hart, 2012).

Both social and commercial entrepreneurship address similar questions about the discovery, evaluation and exploitation of opportunities and the set of individuals who engage in these actions (Shane and Venkataraman, 2012), and both offer products and services to gain financial sustainability (Di Domenico et al., 2011).

Introduction

little research has examined the impact of Socio economic factors has on social venture creation

Much of the research has not fully explained the causes of differences in nations and none, to our knowledge, addresses the impact of social and economic variables on social entrepreneurship.

Introduction

The impact of these variables is crucial to our understanding, since there are significant challenges to producing and marketing products and services at the base of the economic pyramid, such as imperfect and incomplete markets, fluctuating prices and costs, unreliable or absent infrastructure, and weak or absent formal governance (Thompson and MacMillan, 2013).

Introduction

The purpose of this research is to incorporate the demand- and supply-side theories of entrepreneurship that analyze how Socio economic variables influence social entrepreneurship activity.

Research Question.

Do certain macro-level and micro-level influences including specific social and economic factors Stimulate the emergence of social entrepreneurship?

Literature Review

Thornton (2010) has extended this perspective by integrating the supply-side perspective (where the focus is primarily on the individual) to complement and enhance our understanding of firm creation. She argues for a sociological framework, where institutional and ecological theories and multilevel models can be used to integrate the two schools of thought

Literature Review

Other researchers have similarly proposed the integration of social and ecological economy objectives, including a framework for green community entrepreneurship development (Gliedt and Parker, 2013).

Companys and McMullen (2013) reviewed many of the theories that incorporate both the demand- and supply-side perspectives and argued that there are two distinct and emerging schools of thought regarding the development of any entrepreneurial activity, including social venture creation.

(1) The economic school;

(2) The social school.

Social influences

The social school emphasizes the role of social structures in defining the attractiveness of participating in entrepreneurial activities.

Meek et al. (2010) proposed that social norms have a significant role in new firm creation, and that decentralized institutions that are socially determined, as well as more centralized ones developed by government, are critical to venture development

Sullivan (2014) reported that governmental support offered by cities promoted such social entrepreneurship within communities

Social influences

Social legitimacy refers to the process by which key stakeholders, the general public, key opinion leaders, or government officials accept a venture as appropriate and right, given existing norms and laws (Aldrich and Fiol, 1994),

based on a reframing of ecological and institutional theories, emerging firms can develop legitimacy by employing strategies such as organizing collective marketing and lobbying efforts (Aldrich and Fiol, 1994).

Social influences

Various formal and informal influences on corruption have also been investigated, and closed social networks, particularly within transitional economies, tend to be associated with greater corruption, while higher GDP is linked to lower corruption (Tonoyan et al., 2010).

Economic influences

The economic school contends that the attractiveness of social entrepreneurship exists as a result of the information about material resources in society (Companys and McMullen, 2013, p. 301) and the economic context of entrepreneurial opportunities.

In a study of the formal and informal factors that promote social entrepreneurial activity, Ferri and Urbano (2010) asserted that governments have a role to play in fostering the entrepreneurial dynamism of the economy

Economic influences

Their results showed that public spending including the payments of subsidies, grants, social benefits and the like has a negative impact on social entrepreneurship, indicating that lower levels of public expense may discourage individuals from even considering social entrepreneurial activity and reduce the economys entrepreneurial potential (Ferri and Urbano, 2010).

In a study by Gliedt and Parker (2013), green community entrepreneurship was driven by a loss of government funding and a related market collapse for residential energy audits, while it was facilitated by external social capital network flows, human capital stocks and strategic partnerships.

Economic influences

Van Putten and Green (2010) found that during a recession such as the one experienced beginning in 2007, factors including low cost of skilled labor, cheaper supplies, tax incentives, technology and social networks increase the ease of entry into social entrepreneurship.

Recent work has suggested that partnerships are critical to the emergence and success of nonprofit and for-profit social ventures, and that they are more important for social ventures operating in developing regions characterized by greater institutional constraints, such as Africa, Asia and Latin America (Meyskens and Carsrud, 2011).

Economic influences

Social entrepreneurs can more effectively address social ills in some contexts by partnering with governments and other institutions (Sud, 2009).

Researchers have also proposed that hybrid structures in international new ventures enable properties of social capital embedded in the new firm to form effective international market channels and deliver high long-term performance (Berg et al., 2008).

Research model

Discussion of variables

We utilize the method employed by Griffiths et al. (2009a), where this measure is operationalized using the index developed by Transparency International, who rank the level of government corruption

(Broadman and Recanatini) find the same broad social and economic causalities in a study of transition economies, as do most global cross-country studies (e.g. Djankov et al., ), i.e. that corruption tends to decline with economic development, strengthening of democratic processes and, to some extent, greater openness of trade.

Discussion of variables

Gender equality is introduced for two principal reasons. First, one would rationally expect that increases in the labor force would result in additional (social) entrepreneurial activity.

Second, Wilson and Kickul (2006) found that females interested in entrepreneurial careers are more likely than males to be motivated by social aspects than by economic motives

Males interested in entrepreneurship are more likely to be motivated by the lure of financial success than by the social aspects of entrepreneurship.

Discussion of variables

Economic and social motives are not, however, mutually exclusive; Wilson and Kickul (2006) contend that young women want to succeed financially, but appear unwilling to do this at the expense of also making a positive difference, making them a powerful source of future entrepreneurship that will have both social and economic value creation at its core.

In a study of per capita incomes and levels of corruption, Treisman states: Rich countries are perceived to be less corrupt than poor ones Hence, we employ GDP per capita to control for wealth levels, competitiveness and the allocative efficiency of the nation

Discussion of variables

Sullivan and Shkolnikov (2014) contend that, among other things, corruption leads to misallocation of resources, a lack of competitiveness and efficiency, lower public revenues for essential goods and services, lower productivity and lower levels of innovation, lower growth and private sector employment rates.

Ovaska and Sobel (2012) find no significant impact on the number of new ventures per 1000 inhabitants, while both Parker and Robson (2011), and Fisman and Sarria-Allende (2012) find that entrepreneurship increases with increasing levels of GDP

Discussion of variables

Finally, to proxy for the availability of crucial start-up funding for potential social entrepreneurial ventures, we employ the national savings rate as a measure of the availability of capital in the country. Given the crucial need for such funds, it is not surprising that most developed countries have small business financing programs

Citing the benefits of a more entrepreneurial labor market, governments and other macro-economic actors around the world have instituted programs to foster entrepreneurship

Discussion of variables

Despite evidence to the contrary (Davis et al., 2011), it is often argued that small entrepreneurial ventures create a disproportionate share of jobs in the economy

Long (2012) generally conclude that higher federal tax rates cause higher rates of self-employment.

The explanation for this result usually rests on the assumption that high tax rates drive workers out of paid employment, or wage jobs, into entrepreneurial ventures where they can more easily avoid or evade taxes

Conclusion

The future for social entrepreneurship abounds with many possibilities and innovations to effectively address, and potentially solve, some of societys most intractable problems resulting from market and/or government inadequacies or failures