Wednesday, April 29, 2015

Social Entrepreneurship leads the way to Evolution of Capitalism

Over the past 30 years social entrepreneurship has become more prevalent among private citizens initiating change.  They used to be called humanitarians and are now considered entrepreneurs. When people typically think of social entrepreneurs it seems like they are entrepreneurs who build businesses to deliver products and services to fix social issues.  However, others like Sally Osberg, president and CEO of Skoll Foundation, say "Social entrepreneurs excel at togetherness." Meaning they are very good at connecting and helping people work together more effectively. This creates shared value and could be a reason why social entrepreneurship is growing in popularity and may pave the way to an evolution in capitalism.

Michael Porter and Mark Kramer define shared value as expanding the total pool of economic and social value.  Now consider the top 3 social enterprises Genesys Works, Ignia and KIPP Foundation.
Genesys Works teaches low-income high school juniors IT skills, increasing the skilled labor work force and providing an opportunity for kids who previously had none.  Ignia invests in social entrepreneurship that provide housing, healthcare and clean water to millions of Mexicans.  And KIPP Foundation provides kids with more opportunity to learn.  These three entrepreneurships are creating and expanding the pool of economic and social value by creating new markets and saving lives. How do the actions of the social entrepreneurship affect the actions of larger corporations?

In the paper Creating Shared Value by Porter and Kramer, they describe the inverse relationship that business and society share.  This nurtured mindset of managers in business school has created barriers that influence managers into thinking social ventures as a 'must' instead of a 'want'. In the paper The Economics and Politics of Corporate Social Performance, Baron, Harjoto and Jo identify the negative correlation between social pressure and financial performance.  This implies large companies are failing to create shared value by trading financial performance with social ventures. Porter claims that this happens because the curriculum of business schools is lacking in the social aspect of business, and to alleviate this he recommends something akin to a MBA with a specialization in social change.

Social entrepreneurship provides the vehicle and the viewpoint to change the view that large corporations approach social entrepreneurship.  Currently if mainstream companies cannot provide social solutions to new managers, managers will move into social entrepreneurship.  Hopefully over time with enough social movement, this will allow mainstream companies to see how more value can be generated through social endeavors.

How social entrepreneurship is growing

Bringing shared value through social entrepreneurship

Top 30 social entrepreneurs

The Economics and Politics of Corporate Social Performance

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