Social Entrepreneurship” J

The Meaning of “Social Entrepreneurship” J. Gregory Dees Original Draft: October 31, 1998 Reformatted and revised: May 30, 2001 The idea of “social entrepreneurship” has struck a Origins of the Word “Entrepreneur” responsive chord. It is a phrase well suited to our times. It combines the passion of a social mission In common parlance, being an entrepreneur is with an image of business-like discipline, associated with starting a business, but this is a innovation, and determination commonly very loose application of a term that has a rich associated with, for instance, the high-tech history and a much more significant meaning. pioneers of Silicon Valley. The time is certainly The term “entrepreneur” originated in French ripe for entrepreneurial approaches to social economics as early as the 17th and 18th problems. Many governmental and philanthropic centuries. In French, it means someone who efforts have fallen far short of our expectations. “undertakes,” not an “undertaker” in the sense of Major social sector institutions are often viewed a funeral director, but someone who undertakes a as inefficient, ineffective, and unresponsive. significant project or activity. More specifically, Social entrepreneurs are needed to develop new it came to be used to identify the venturesome models for a new century. individuals who stimulated economic progress by finding new and better ways of doing things. The The language of social entrepreneurship may be French economist most commonly credited with new, but the phenomenon is not. We have always giving the term this particular meaning is Jean had social entrepreneurs, even if we did not call Baptiste Say. Writing around the turn of the 19th them that. They originally built many of the century, Say put it this way, “The entrepreneur institutions we now take for granted. However, shifts economic resources out of an area of lower the new name is important in that it implies a and into an area of higher productivity and blurring of sector boundaries. In addition to greater yield.” Entrepreneurs create value. innovative not-for-profit ventures, social entrepreneurship can include social purpose In the 20th century, the economist most closely business ventures, such as for-profit community associated with the term was Joseph Schumpeter. development banks, and hybrid organizations He described entrepreneurs as the innovators who mixing not-for-profit and for-profit elements, such drive the “creative-destructive” process of as homeless shelters that start businesses to train capitalism. In his words, “the function of and employ their residents. The new language entrepreneurs is to reform or revolutionize the helps to broaden the playing field. Social pattern of production.” They can do this in many entrepreneurs look for the most effective methods ways: “by exploiting an invention or, more of serving their social missions. generally, an untried technological possibility for producing a new commodity or producing an old Though the concept of “social entrepreneurship” one in a new way, by opening up a new source of is gaining popularity, it means different things to supply of materials or a new outlet for products, different people. This can be confusing. Many by reorganizing an industry and so on.” associate social entrepreneurship exclusively with Schumpeter’s entrepreneurs are the change not-for-profit organizations starting for-profit or agents in the economy. By serving new markets earned-income ventures. Others use it to describe or creating new ways of doing things, they move anyone who starts a not-for-profit organization. the economy forward. Still others use it to refer to business owners who integrate social responsibility into their It is true that many of the entrepreneurs that Say operations. What does “social entrepreneurship” and Schumpeter have in mind serve their function really mean? What does it take to be a social by starting new, profit-seeking business ventures, entrepreneur? To answer these questions, we but starting a business is not the essence of should start by looking into the roots of the term entrepreneurship. Though other economists may “entrepreneur.” have used the term with various nuances, the Say-Schumpeter tradition that identifies 1 entrepreneurs as the catalysts and innovators the time. Later in the book, he devotes a chapter to behind economic progress has served as the entrepreneurship in public service institutions. foundation for the contemporary use of this concept. Howard Stevenson, a leading theorist of entrepreneurship at Harvard Business School, Current Theories of Entrepreneurship added an element of resourcefulness to the opportunity-oriented definition based on research Contemporary writers in management and he conducted to determine what distinguishes business have presented a wide range of theories entrepreneurial management from more common of entrepreneurship. Many of the leading thinkers forms of “administrative” management. After remain true to the Say-Schumpeter tradition while identifying several dimensions of difference, he offering variations on the theme. For instance, in suggests defining the heart of entrepreneurial his attempt to get at what is special about management as “the pursuit of opportunity entrepreneurs, Peter Drucker starts with Say’s without regard to resources currently controlled.” definition, but amplifies it to focus on He found that entrepreneurs not only see and opportunity. Drucker does not require pursue opportunities that elude administrative entrepreneurs to cause change, but sees them as managers; entrepreneurs do not allow their own exploiting the opportunities that change (in initial resource endowments to limit their options. technology, consumer preferences, social norms, To borrow a metaphor from Elizabeth Barrett etc.) creates. He says, “this defines entrepreneur Browning, their reach exceeds their grasp. and entrepreneurship—the entrepreneur always Entrepreneurs mobilize the resources of others to searches for change, responds to it, and exploits it achieve their entrepreneurial objectives. as an opportunity.” The notion of “opportunity” Administrators allow their existing resources and has come to be central to many current definitions their job descriptions to constrain their visions and of entrepreneurship. It is the way today’s actions. Once again, we have a definition of management theorists capture Say’s notion of entrepreneurship that is not limited to business shifting resources to areas of higher yield. An start-ups. opportunity, presumably, means an opportunity to create value in this way. Entrepreneurs have a Differences between Business and Social mind-set that sees the possibilities rather than the Entrepreneurs problems created by change. The ideas of Say, Schumpeter, Drucker, and For Drucker, starting a business is neither Stevenson are attractive because they can be as necessary nor sufficient for entrepreneurship. He easily applied in the social sector as the business explicitly comments, “Not every new small sector. They describe a mind-set and a kind of business is entrepreneurial or represents behavior that can be manifest anywhere. In a entrepreneurship.” He cites the example of a world in which sector boundaries are blurring, this “husband and wife who open another delicatessen is an advantage. We should build our store or another Mexican restaurant in the understanding of social entrepreneurship on this American suburb” as a case in point. There is strong tradition of entrepreneurship theory and nothing especially innovative or change-oriented research. Social entrepreneurs are one species in in this. The same would be true of new not-for- the genus entrepreneur. They are entrepreneurs profit organizations. Not every new organization with a social mission. However, because of this would be entrepreneurial. Drucker also makes it mission, they face some distinctive challenges and clear that entrepreneurship does not require a any definition ought to reflect this. profit motive. Early in his book on Innovation and Entrepreneurship, Drucker asserts, “No better text For social entrepreneurs, the social mission is for a History of Entrepreneurship could be found explicit and central. This obviously affects how than the creation of the modern university, and social entrepreneurs perceive and assess especially the modern American university.” He opportunities. Mission-related impact becomes the then explains what a major innovation this was at central criterion, not wealth creation. Wealth is 2 just a means to an end for social entrepreneurs. improving social conditions. It is only a weak With business entrepreneurs, wealth creation is a indicator, at best. way of measuring value creation. This is because business entrepreneurs are subject to market Social entrepreneurs operate in markets, but these discipline, which determines in large part whether markets often do not provide the right discipline. they are creating value. If they do not shift Many social-purpose organizations charge fees for resources to more economically productive uses, some of their services. They also compete for they tend to be driven out of business. donations, volunteers, and other kinds of support. But the discipline of these “markets” is frequently Markets are not perfect, but over the long haul, not closely aligned with the social entrepreneur’s they work reasonably well as a test of private mission. It depends on who is paying the fees or value creation, specifically the creation of value providing the

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