Servicios Financieros

The concept of social entrepreneurship represents a multidimensional construct that is highly influenced and shaped by the proximate environmental dynamics (Weerawardena & Mort, 2006). This is even more valid in the case of social enterprises which aim at fostering innovative social solutions at a local level. In this sense, social entrepreneurs are most effective when creating social enterprises that interact with their environment in an innovative way (Ferri & Urbano, 2010).

‘Context’ is defined as those elements outside the control of the social entrepreneur that will influence the success or failure of the social enterprise (Karlsson & Dahlberg, 2003). It comprises a number of closely intertwined micro- and macro-economic as well as socio-political factors (Austin et al., 2006). People have individual values, preferences and make decisions with respect to entrepreneurship (Bosma & Schutjens, 2011). The economic environment at the macro-level is shaped by, among other things, employment levels, purchasing power and the degree of economic development and growth. Changes in social policies, for instance the reduction of welfare entitlements in developed countries, have led to a growing demand for social entrepreneurship. Social enterprises provide alternative or complementary solutions to societal problems and are thus innovative providers of former

28 Lyon & Fernandez (2012) analyse further strategies to scale social impact, for instance, through building networks, sharing concepts and supporting other organisations to replicate, develop and adapt approaches.

welfare services (Leadbeater, 1997)²⁹. In this context, the quality of government, e.g. the effectiveness of delivering its policies in an impartial way and without corruption (Nicholas et al., 2011), plays a significant role, as social entrepreneurial activities are influenced by institutional capacities (Mair & Marti, 2009; Dacin et al., 2010; Estrin et al., 2011). Thus, external contextual factors can function as sources of opportunity for social entrepreneurial activities (Buckingham et al., 2012). Additionally, the influence of internal organisational factors has to be taken equally into consideration (Storey, 1994; Zhou & De Wit, 2009).

Social enterprises need to develop a range of strategies to be able to grow and to maximise their social impact. In this context, firm attributes (age and size), firm strategies (geographical scope of operation and degree of embeddedness), firm resources (social networks and human capital) and organisational structures (management strategy and operational business models) are important growth predictors.

The regional context and the determinants of social enterprise growth may be studied according to the level of analysis. Distinction ought to be made between micro, meso, and macro-level of social entrepreneurship. Standard analytical research approaches to explore entrepreneurship in social sciences (e.g. in economics, sociology and management), examine the objects of study tied to these levels of analysis by distinguishing between the individual entrepreneur or business, sectors of industry and the national economy (Bergmann, 2003).

Analyses at the micro-level focus on the decision-making process by individuals (potential entrepreneurs) and the different motives for launching a venture (Blanchflower, 2000).

Studies at the meso-level of entrepreneurship often analyse market-specific determinants, such as profit opportunities and opportunities for entry and exit (Bosma et al. 1999; Carree &

Thurik, 1996). The macro-level perspective helps to study a range of environmental factors, such as technological, economical and cultural variables as well as government regulations (Noorderhaven at al., 1999; Carree et al., 2002; Verheul et al., 2002).

The present thesis focuses on social entrepreneurship drivers at the micro-, regional and macro-level. Firms’ characteristics exert an influence at the micro-level (or firm level) and external context factors affect social enterprises at the macro-level, e.g. the national and regional level. As it is of interest to examine differences in social entrepreneurial dynamism at a smaller geographical scale than between countries, it appears plausible to define a regional level (sub-national level) as a separate unit of observation. An extensive analysis of

29 See: Part 2, section 2.3.

the different levels of impact with the associated social entrepreneurship drivers will be carried out in sections 3.4 and 3.5 of this present chapter.

3.3.2 Second Distinguishing Mark: Supply and Demand Factors of Social Entrepreneurship

Apart from studying the determinants of social entrepreneurship in a multilevel setting (firm level, regional level, national level), social enterprise growth in a particular region or country can be explained by making a distinction between the supply-side and demand-side factors.

In the body of literature on traditional entrepreneurship, the supply-side is associated with the labour market perspective and the demand-side is related to the product market context and the general carrying capacity of the market³⁰ (Verheul et al., 2002). In some studies this distinction is referred to as the distinction between push and pull factors (Vivarelli, 1991).

Opportunities of entrepreneurship are represented by the demand-side and it can be viewed from a customer and a firm’s perspective (Verheul et al., 2002). The rationale behind the consumer perspective is that a high diversity in terms of consumer demand offers more opportunities for potential entrepreneurs. Moreover, the opportunities are influenced by technological developments and government regulation (Wennekers & Thurik, 1999). The supply-side of entrepreneurship is determined by population characteristics, such as demographics and population growth (Verheul et al., 2002). Key aspects are the resources and abilities of the individuals as well as their attitudes (e.g. risk affinity) towards entrepreneurship. Additionally, the cultural (Reynolds et al., 1999) and institutional environment (Henrekson & Johansson, 1999; Verheul et al., 2002) influence the supply-side of entrepreneurship.

In the body of literature on social entrepreneurship there is much debate over the extent to which social entrepreneurship and associated social entrepreneurial activities should be explored and treated as a separate research field from entrepreneurship and business development in general (Dacin et al., 2010). However, irrespective of all the controversy, a broad consensus prevails regarding the main purpose of social enterprises: Social entrepreneurship is primarily about leveraging resources to deal with persistent social

30 According to Carree & Thurik (1999), the number of firms in the market is said to have attained the equilibrium value when all entrepreneurs earn some critical level of profits. This equilibrium number of firms is called the “carrying capacity”.

problems and often this process involves the creation of new institutional forms with innovative investment logics that combine economic with social and environmental goals (Nicholls, 2010). Even though some social enterprises engage in activities that appeal particularly to ‘elite’ or neo-Bohemian groups, in general, social entrepreneurship can be seen as a response to pressing societal problems affecting the more disadvantaged members of society (Buckingham et al., 2012).

Buckingham, Pinch and Sunley (2012) offer an exploratory theoretical framework for understanding the causes of regional variations of social entrepreneurship. In the context of this eclectic theory, the incidence of social enterprise growth in a certain geographical space will depend on two sets of basic processes: The relationship between ‘demand’, i.e. the need and opportunity for social entrepreneurship activities in a region, and ‘supply’, i.e. the ambition and capability of local actors and institutions to set up social enterprises and to manage them. In the context of this thesis, the theoretical framework by Buckingham, Pinch and Sunley (2012) will be adapted and extended to explain the determinants of social enterprise growth as well as the causes for growth variations across regions and nations. On the demand-side, social enterprises grow in response to unmet social needs, such as poverty, social exclusion, unemployment, education, and care for families, the elderly or sick people.

Social enterprises’ objectives also include the provision of goods and services which the market or the public sector (at regional level or at national level) are either not willing or not able to deliver (Smallbone et al., 2001). In this context, social entrepreneurship addresses unmet social needs associated with an ineffective or lacking provision of social services and bad governance. These failures are perceived as an opportunity and source of demand.

Further opportunities are created by the market demand for goods and services. Hence, the

“regional opportunity structure” (Stuetzer et al., 2011: 917) affects social enterprises’

business success as well as the ability to carry out their social mission. On the supply-side of the equation, the capacity to meet social and environmental needs depends, among other things, on the social enterprises’ ability to develop business skills and to access financial resources. In this context, the entrepreneurial culture (Hoogendoorn & Hartog, 2011;

Elkington, 2008), the availability of financial funding (Estrin et al., 2011) and social capital (Myers & Nelson, 2010) are crucial factors which enable social enterprise growth. Moreover, infrastructural support is vital for social enterprise dynamism (Sharir & Lerner, 2006), as the supply of cooperation and voluntary involvement within a local society determines the ability of social enterprises to function (Peattie & Morley, 2009).

Figure 2 A diagrammatic representation of the interaction of supply and demand factors affecting social enterprise growth at the regional and national level across Europe. Source: Adapted from Buckingham, Pinch and Sunley, 2012.

3.4 Outlining the Drivers of Social Enterprise Development at the Firm Level