Defining Social Entrepreneurship

One of the greatest challenges in promoting social entrepreneurship as a new direction in sustainable economic and social development is the difficulty associated with defining the term. There have been many definitions proposed during the past two decades or more. Despite this, a broad consensus on a standard definition of social entrepreneurship has yet to emerge. Given this lack of definitional clarity, it seems appropriate to offer our own working definition of the practice.

To begin, we draw a distinction between social entrepreneurs, social innovators, and social benefactors. In our view, social entrepreneurs develop and promote innovations that have an underlying market basis and increase social welfare. For example, a grocery chain that develops a system of simplified nutritional labeling that helps shoppers make better informed nutritional choices while also increasing sales and profit through the innovation fits this definition. The key defining characteristic is the underlying economic and social sustainability of the venture. The social entrepreneur creates sufficient economic value though her innovation to sustain the venture without outside financial support (with the exception of seed, start up, or equity funding). We do not place any other conditions on the social entrepreneur. The innovation may be purely local or scale globally. The venture may be for profit or not-for-profit. In our view, these conditions are irrelevant from a purely definitional standpoint.

A social innovator sees a social need that is not being filled by the state or community and acts to redress this failing. Clara Barton is an archetypical example of the social innovator. The Red Cross was created by her and others to address significant, unmet social needs (e.g., healthcare for wounded combatants of the Civil War). The Red Cross relies on outside donations and volunteer support to sustain itself financially. The key distinction is the lack of an underlying market basis for the innovation, or what economists refer to as a "public goods" problem. Without outside financial support, the venture cannot sustain itself financially over time.

Finally, a social benefactor is a person or organization with the financial, technical, or other means of addressing  unmet social needs. The Bill and Melinda Gates Foundation is one example among many. Social benefactors may choose to fund others, or act as social innovators themselves. The key distinction is that while their activities lack an underlying market basis, they do not require sources of outside funding to sustain their activities due to a preexisting financial endowment.

Certainly there are blended models that do not fit neatly into these three categories. Despite this, the typology offered is simple to state and relies on largely non-subjective criteria contained in balance sheets. In practical application, it significantly narrows the scope of what can be accurately considered social entrepreneurship. This narrower definitional approach helps sharpen the distinctions among these three types of social venture and we hope that this adds value to the larger discussion about social entrepreneurship itself.

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