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Is all entrepreneurship social?

   /   Jun 22nd, 2010Business, News

The field of social entrepreneurship is still in its infancy, so naturally writers on the subject find plenty to disagree about, right down to basic definitions. Case in point:  Carl Schramm, the CEO of the Ewing Marion Kauffman Foundation, wrote an article this spring for the Stanford Social Innovation Review entitled, “All Entrepreneurship is Social,” in which he suggested that industrialists and tycoons like Cornelius Vanderbilt and Bill Gates should be considered “model social entrepreneurs.” After all, didn’t they create jobs, provide goods and services, and raise the standard of living for large numbers? He also worried about the “danger” of using the modifier “social” because it might diminish “the contributions of regular entrepreneurs.” (Emphasis his.)

To be sure, successful entrepreneurs bring social benefits. (Many also create new problems.) The real question is: Is it useful to distinguish one version from the other? And, if so, how? Take the example of Stanley Kaplan, founder of Kaplan, Inc., who made a fortune marketing test preparation to college aspirants. Kaplan built a great business helping middle-class youths attend better colleges. He also created lots of jobs. Is he a social entrepreneur, though? Or would a social entrepreneur in his shoes have looked for ways to expand college opportunities for low-income students who are under-represented in college?

In our book, Social Entrepreneurship: What Everyone Needs to Know, Susan Davis and I argue that there is a very real distinction between these two forms of entrepreneurship, and that the distinction boils down to a matter of priorities.

Here’s an excerpt:

The  difference between business and social entrepreneurship has to do with purpose, or what the enterprise is trying to maximize. For social entrepreneurs, the bottom line is to maximize some form of social impact, usually by addressing an urgent need that is being mishandled, overlooked or ignored by other institutions. For business entrepreneurs, the bottom line may be to maximize profits or shareholder wealth, or to build an ongoing, respected entity that provides value to customers and meaningful work to employees.

The world needs both kinds of entrepreneurship; one should not be deemed superior to the other, although social entrepreneurship is often more challenging because it tackles problems that have defied governmental approaches and for which market solutions have not yet been demonstrated. And, of course, there are overlaps: social entrepreneurs often earn profits through social enterprises, and businesspeople are frequently concerned with social responsibility. Both types of entrepreneurship require vision, initiative, organization building and “marketing.” In terms of skill and temperament, social and business entrepreneurs are strikingly similar. But their primary objectives are different.

Photo: cfagbata.com

5 Responses

  1. Stefany Cohen says:

    I agree that it boils down to priorities. Regular businesses even though they might offer services that contribute to the standard of living of large quantities of people, rather than doing it for their impact start businesses as they see an opportunity to generate profit for distributing goods people need to buy.
    The distinction between regular entrepreneurship and social entrepreneurship is fundamental to clarify the definition of social entrepreneurship until there is no doubt around that social entrepreneurship is not only for profit but primarily for a deeper and greater social purpose which uses the vehicle of the market (in the form of a business) to fulfill its purpose.

    • Stefany, I agree with your point about social entrepreneurship being about the primacy of social impact. However, I don’t think SE’s necessarily have to work through businesses to enjoy that designation. The legal format of an organization — i.e. for- or not-for-profit, or governmental — is not the determinant. Many businesses are decidedly non-entrepreneurial. More important to me is the level of creativity and dynamism, the ability to leverage resources you don’t control, and ultimately the ability to foster meaningful change.

  2. Nick Temple says:

    Spot on, as ever, David. In a way, I’m amazed that this conversation still needs to be had: it is all about the primary purpose / mission, and social entrepreneurs choose a wide variety of legal vehicles and business models to achieve that mission or set of social objectives.

    Of course, all entrepreneurship (indeed, all organisations) have social impacts, but it is about what they set out to do, not what they end up doing a side-benefit or by-product. I’m surprised that Carl Schramm and others can’t distinguish between someone who is seeking to have positive social impact through an organisation’s activities from the outset, rather than someone who makes money…and then gives it away to have positive social impact later on (i.e. Gates, Buffett et al).

  3. Chris Williams says:

    I’m glad to see your response to the initial argument posed. There is certainly a massive distinction between entrepreneurship and its socially oriented cousin; it may not appear to be a great divide as they both use a nearly identical set of tools but for drastically different ends.