Enterprise as a Reality of Economic Markets

Introduction

Enterprise is a reality of economic markets as a way of gaining financially through the provision of products or services that the various segments of the market economy require. In this environment, the desire for profits is an evident motivator for investments and in response, the transformative power of capital makes itself evident in the way that new or improved products and services become available. As such, the advent of social investing represents a phenomenon that seems to reject the norm and engage in highly altruistic ways with reference to the perceived expectations in the field of venture financing. Social entrepreneurship adopts various models in which the key deliverable is a product or service funded with the intention of producing social rather than primarily financial value. Arguably, this contrasts with the traditional economist notion of investment as purely driven by the profit incentive. This review analyses the social investment arena and determines the intended impact that drives normative social entrepreneurship ventures to enhance understandings of this investment approach and its unique approach to seeking value from such ventures.

The Concept of Social Entrepreneurship

Social entrepreneurship is a concept that entirely diverts from the traditional economic model in which the search for profits supersedes philanthropic enterprise. Zahra and Wright (2016) define social entrepreneurs as those who utilize their proficiencies in the field of business to develop ventures that can achieve commercial viability while also fulfilling a social purpose. Overall, the need for commercial viability remains a constant requirement for these ventures since imbalances between their incomes and expenditures impair the survivability of these ventures. However, the emphasis on social value as a replacement for profit differentiates them from traditional ventures since for the former, the commitment revolves around an expected social benefit rather than personal gain. In this respect, social entrepreneurship and investment utilize the same skills that businesspeople apply in the pursuit of profits (Hlardy-Rispal and Servantie 2018). Nonetheless, the comparative difficulty of quantifying social value compared to financial income makes it essential to analyse the reasons for the continued prevalence of social entrepreneurship ventures in the modern investment environment with reference to the potential financial gains that these entrepreneurs forfeit.

Importance of Social Value

As the literature reveals, social entrepreneurs possess skill levels that allow them to compete in the field of business without profit-seeking intentions. To put this into perspective, one can consider the example of a school that takes care of needy children and educates them at little to no cost. For such a venture, the social gain is evident in the fact that without the existence of such activities in the entrepreneurial realm, the social benefit that these ventures provide would prove unattainable for the communities that they serve (Chandra 2017). However, it is also impossible for the social enterprise to exist without a means for obtaining a financial gain that validates its continued existence. In fact, the financial and social returns have to balance out in a way that one comes before the other as a means of validating the venture to the community as well as the investor involved in dedicating capital to its perpetuation (Carraher, Welsh and Svilokos 2016). Using this approach, the investor can thereby consider the material benefit as a proper recompense for the transformation that such a venture introduces to a community.

Market Potential for Social Investments

Although it may appear that social entrepreneurship exists at odds with the profit-seeking side of the market, the reality differs and shows an increasing market for social ventures even in the competitive market economy of profit-seeking ventures. Zahra and Wright (2016) highlight that the potential gains apparent in the introduction of low-cost solutions to needy communities empower the recipients of such solutions and enhances their potential for increased participation in economic markets. In this regard, the intention of such ventures appears as an improvement in the living conditions and access to opportunities for low-income populations rather than creating low-cost products to disenfranchise these communities further by earning profits from their exploitation. Overall, about 4 billion people on the planet fit into this description and make it apparent that there exists a vast market for social investments by entrepreneurs who can solve the problems that persist among these populations (Rivera-Santos et al. 2015). Therefore, the desire to identify and solve problems for low-income communities represents a lucrative opportunity for business ventures that do not retain the profit incentive that drives their traditional counterparts.

Evolution of Social Investments

Even as social entrepreneurship and investment have a limited history in comparison to businesses adhering to traditional economic principles, the advent of social investment is apparent in some existing business frameworks. The existence of cooperative societies in various countries is a sign of the existence of a form of social entrepreneurship among communities around the world (Zahra and Wright 2016). The transformation of such cooperatives into social ventures in countries such as Nigeria and Vietnam underlies their inherent intentions as preserved from their initial development as a means for state-controlled production to organizations that exist for mutual benefit with their respective communities. The investments that such cooperatives make in their native communities thereby have the necessary benefits ingrained in their mandate as social entrepreneurial ventures while also ensuring the sustainability or growth of the local economy (Daskalaki, Hjorth and Mair 2015). Therefore, while some of the strategies that social entrepreneurs implement result from the realities of operating in modern economic environments, the idea of social investments is one that already has roots in enterprise intended for improved social gain rather than financial returns.

Measurement of Social Value

The lack of a profit incentive brings to question the deliverables that social investors expect when directing their efforts or financial contributions towards individual investments. From the perspective of traditional economics, efficiency and innovation are necessary for keeping costs to a minimum and reducing the limitations that limited funding imposes on business ventures (Phillips et al. 2015). For social investors, prospective investments must not only demonstrate an ability to scale the proposed solutions to increase the coverage of their social benefits but also show a legitimacy through analyses that show the prospective enhancements that the venture makes to people’s lives. As a result, social ventures have both qualitative and quantitative foundations for their motivations to mobilize the resources needed to fulfill their obligations to the investors as well as the communities that serve as targets for their products or services (Carraher, Welsh and Svilokos 2016). The importance of this approach is evident in the fact that scalability and measurable social value allows both communities and other social investors to validate continued investment in and support of social ventures.

Relationship Between Social Entrepreneurship and Government Initiatives

The history of social entrepreneurship intertwines with that of government investments but in this history, a lack of quantifiable returns on the promise of social outcomes reduced the emphasis placed on such activities. The contracting of services that governments offer to the public, such as the welfare-to-work program, provided opportunities for private companies and non-profit organizations to participate by offering these critical services rather than ceding them to profit-seeking ventures (Agafonow 2014). However, the willingness of private investors to dedicate funding to impact-oriented business derives from the intentions that such government initiatives to use less money to achieve social gains since these remain the primary deliverables for these ventures. Moreover, Grohs, Schneiders, and Heinze (2015) add that the maturation of the social entrepreneurship field also bodes well for the prices and quality of products and services available to low-income communities compared to outcomes in a purely profit-seeking market. The result is an adoption of the principles that sought to improve governmental coverage of people’s needs by a talent pool that has the innovative capacity to achieve the desired social outcomes at the lowest costs.

Sustaining Social Enterprises

The need for altruistic intentionality underlies the social enterprise in the same manner that a drive for profits as a measure of economic performance describes the profit-seeking companies and their economic motivations. However, Barki et al. (2015) note that the social entrepreneur has an additional factor to consider in the sense that the sustainability agenda plays a key role in benchmarking the success of social ventures. In this regard, the high costs that social enterprises encounter in the formative stages of their solution development and delivery processes can act as a limitation to the amount of funding that social investors show a willingness to dedicate to their respective ventures (Chandra 2017). The result is a field in which even as the social benefits attract social investors, a lack of sustainability risks reducing their ability to introduce the expected changes to the communities that they target with their activities. Consequently, the field of social entrepreneurship appears as one where investors stand to lose their finances if they invest in unsustainable solutions but have to measure it against the potential social gain to validate such investments.

Innovation and the Social Economy

Arguably, the private sector appears as a better alternative to parastatal and governmental problem solving, which is evident in the level of technological innovation introduced to various markets through profit-seeking ventures. However, Barki et al. (2015) argue that social enterprises historically faced the challenge of having fewer resources to expend on innovation, which imposed further limitations on their ability to attract investor funding. In the modern environment, information sharing is a reality that traverses personal and professional life, making communication technologies more available to social entrepreneurs compared to during and before the 21st century. The result is that entrepreneurs can now create knowledge economies much faster than they could before, which also improves the dialogue between stakeholders such as communities, governments, and social enterprises (Grohs, Schneiders and Heinze 2015). Therefore, rather than perceiving the growth of the social economy as an unprecedented phenomenon, the increased popularity of social entrepreneurship is thereby the direct result of the increased strengthening and flexibility of an ecosystem that supports the development of such enterprises.

Impact and Sustainability of Social Entrepreneurship

The substitution of the hierarchy of profit and social gain defines social enterprises and the realization of ideas of a better society appeals to social entrepreneurs in the same manner that idea realization influences entrepreneurial behaviour in profit-seeking ventures. Chandra (2017) argues that this same desire drives the creativity, courage, actions, and inspiration of social entrepreneurs and this produces highly beneficial results in the presence of a state environment that fosters rather than hampers their activities. With the identification of an inequality existing in a particular community being a part of their motivation, social entrepreneurs thereby benefit from the stabilization of the new equilibrium that they introduce to the societies in which they act. On this, Agafonow (2014) adds that the lack of a financial incentive as well as the support of the communities receiving the products or services of social enterprise can enhance the ability of these enterprises to garner support for the development of an ecosystem with similar mentalities towards community development. This also contributes to the sustainability agenda and with social entrepreneurs receiving such support, it becomes evident that social entrepreneurship is a permanent fixture in the economic landscape.

Conclusion

Social entrepreneurship and investment represent a shift from the traditional economic model by placing social gain above profit as an incentive for business ventures. In this environment, investors show a willingness to make substantial investments in ventures in which the potential for direct economic returns does not warrant the dedication of funding towards the achievement of their goals. However, an analysis of the social economy reveals that social entrepreneurs seek to serve a market segment of low-income communities, which represent more than half of the world’s population. In this case, the ventures revolve around the delivery of low-cost solutions to the problems that persist in these economies and are a strategy that evolved from programs intended to improve the welfare of such communities. The increased popularity of the social enterprise derives not only from the social benefit and the increased sustainability of these projects but also from their improved ability to innovate and develop knowledge economies as part of their ecosystems. Therefore, even with their diversion from the traditional economic model, social investors stand to gain from increased investment in the well-being of marginalized communities around the world.

References

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