Social entrepreneurship in the United States: Impact and resilience in crisis
| Autor | Rebecca Tekula, Phd/Joseph Morreale, Phd/Jordan Jhamb |
| Cargo del Autor | Executive Director of the Wilson Center for Social Entrepreneurship and Assistant Professor of Public Administration, Pace University/Professor of Economics, Pace University/Research Assistant, Wilson Center for Social Entrepreneurship, Pace University |
| Páginas | 247-264 |
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The ‘third sector’ in the United States is unique, including numerous types of organizations ranging from social enterprises, charities, and nonprofits. The history and evolution of the term social entrepreneurship has of course influence the types of enterprises included under this umbrella. In this chapter, we explore the role of social entrepreneurship in the U.S., its related impacts, both social and economic, and gauge its role in U.S. society and as a job creator. Finally, we examine the resiliency associated with the nonprofit sector and its hybrid organizations with close focus on their performance during the Great Recession, a period of time that saw growth in these organizations whilst the for-profit sector suffered.
The concept of social entrepreneurship incorporates the traditional notions of entrepreneurship: risk taking, opportunity-seizing, coupled with
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the adoption of a mission to seek social change. It is important to stress the definition of social entrepreneurship is fluid and that there is no true consensus in academia as to the definition; social entrepreneurship may result in the creation of several types of organizations. For the purposes of this chapter, social entrepreneurship leads to the creation of any organization that generates not only economic value, but also social value (Dees, 2001). Dees’ definition draws upon the traditional concept of entrepreneurship drawn from French economist Jean-Baptiste Say, where an entrepreneur is one who «shifts economic resources…into an area of higher productivity and greater yield» (Gassman et al., 2012).
To that end social entrepreneurship creates organizations that can be classified any number of ways. They can be filtered into a typology refined by Kim Alter of VirtueVentures; a nonprofit with income-generating activities, a social enterprise, a socially responsible business, or a corporation practicing social responsibility (Alter, 2004)1. This framework covers the entire spectrum of businesses between the traditional for-profit and those that are strictly nonprofit. However, measuring the industries in each of the four categories is difficult, because with the exception of nonprofit organizations, there is no agency (private or public) that maintains extensive records on these entities.
Source: Alter, 2004 (as adapted from Reis 1999, Dees 2001, & Etchart et al., 1999)
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Income-generating activity for nonprofits is usually a result of activities related to the organization’s operations such as program service revenue, and not the for-profit operations of separate entity or subsidiary. The concept of a social enterprise is the product of the above-mentioned definition of social entrepreneurship where an individual or firm seeks to sustainably generate social impact or work to solve a social problem or market failure resulting from externalities or spill-over effects. These entities, as their name suggests, take an enterprise-based approach utilizing for-profit business-oriented strategies for their operations (Alter, 2004). Some narrower definitions of social enterprise have existed particularly inside academia, including some that apply the term exclusively to profit organizations with revenue generation (Kerlin, 2006).
Socially responsible businesses are for-profit companies that have a mandate not only to make profit for their shareholders, but also to contribute to a larger social good. These institutions frequently have their social goals listed in their mission statements, and in some instances a business will create a subsidiary to carry out the social aspect of their operations while simultaneously earning income (Alter, 2004).
Lastly, a corporation practicing social responsibility is a for-profit business whose sole purpose is to generate profit, but also engages in philanthropy or sustainability efforts either by setting up a philanthropic entity to disburse grant money, or by donating directly to existing foundations or organizations (Alter et al., 2009). According to the U.S. Department of State, there are strong links «between economic prosperity, respect for human rights and good corporate citizenship»; corporate social responsibility (CSR) synergizes with the goals of social entrepreneurship and the adoption of a social mandate or cause (U.S. Dept. of State, 2013).
There is disagreement regarding the necessity and effectiveness of CSR. There is an inherent disconnect between society’s benefits and interests of a corporation’s stakeholders that no amount of CSR can remedy. Some suggest the best way to deal with society’s most pressing issues and the externalities caused by market failures is through efficient regulation by government, because it is government that is ultimately charged with protecting the public’s welfare (Karnani, 2010).
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In the United States, social entrepreneurship can lead to the creation of organizations such as: B-corporations, 501(c)(3) public charities, 501(c)(3) private foundations and 501(c): (4), (5), (6), and (7) entities classified as social welfare and «other» organizations. The aforementioned 501(c) organizations all fall under the umbrella category of nonprofit organizations. These institutions can range from soup kitchens, to trade organizations, to higher education institutions.
A B-corporation, is a certification given to businesses which seek to channel the power of business to solve social and environmental problems. In order for an institution to become a B-corporation they must complete three objectives. The first of which is to score at least an 80 (out of 200) on the B Impact Assessment. They must then meet the legal requirement: giving legal protection to directors and officers to consider interests of all stakeholders, the creation of additional provisions for shareholders rights. The establishment of the b-corporation accreditation system is important because it offers incentives for businesses to augment their framework to foster progress towards social and environmental goals (B Lab, 2013).
There have been attempts to narrow the information gap regarding the status and activities of entities created through social entrepreneurship. The Urban Institute’s National Center for Charitable Statistics (NCCS) developed the National Taxonomy of Exempt Entities system during the 1980s to classify nonprofit organizations categorically. For example, some of the categories are strictly for entities that can be considered higher education, or hospitals etc. The Internal Revenue Service has also adopted this system to facilitate data collection and tabulation.
B-Lab, the organization that conducts the B-corporation rating process keeps records on the number of institutions carrying the B-corp certification. As of 2013, there are approximately 600 certified B-corporations in the United States, compared with only 80 in 2007. This increase may be attributable to consumers becoming more conscientious regarding what businesses they frequent.
Quantifying the number of social enterprises, socially responsible businesses, and corporations practicing social responsibility is difficult due to the scale of overlap present in organizations (eg., a business with a social mandate or objective still files taxes as a business, and not as a hybrid entity), and the amorphous nature of the industry and its non-standardized definitions.
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Social entrepreneurship is a driver for social change. It is widely agreed that a social entrepreneur must have an agenda or purpose regarding some social, environmental or other goal. According to the Social Enterprise Alliance (SEA) the «traditional institutions are no longer sufficient» to tackle the world’s problems. Furthermore, institutions such as governments or NGOs no longer possess the resources to solve social problems, creating the opening for social entrepreneurs to fill in a market-based, business-like and highly effective method of meeting those needs.
In that sense we can think of social enterprises as the missing middle. As tightening budgets constrain governments, and the pursuit of profits constrain traditional businesses, the burden to provide these goods and services shifts to the missing middle. It is there that some businesses have begun to realize «[they]...
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