THEORIES OF SOCIAL ENTREPRENEURSHIP: AN EMPIRICAL REVIEW

Nteere, K. K.
 Vol. 8, Iss. 2, pp 459 – 465. June 17, 2021. www.strategicjournals.com, ©Strategic Journals

THEORIES OF SOCIAL ENTREPRENEURSHIP: AN EMPIRICAL REVIEW

Nteere, K. K.

Doctor, School of Business and Economics

The Co-operative University of Kenya

Accepted: June 4, 2021

ABSTRACT

The emerging field of social entrepreneurship is in need of theoretical theories that contribute to the
discipline and help it to grow just like any other disciplines. The majority of the literature on social
entrepreneurship focuses on defining the concept rather than developing a testable theory. In addition, most
of the studies are conceptual with very few empirical studies. This study explored the theories that give social
entrepreneurship theoretical foundation and also establish the domain within the field of entrepreneurship.
The theories are Opportunity–Based Entrepreneurship Theory, Schumpeterian Theory of Innovation, Human
Capital Theory, Social Capital or Social Network Theory and Resource-Based View (RBV). The implication of
the study is that it contributes to the understanding of the body of knowledge in the field of social
entrepreneurship.

Keywords: Human Capital Theory, Opportunity–Based Entrepreneurship Theory, Schumpeterian Theory of

Innovation, Social Capital and Resource-Based View (RBV)

CITATION: Nteere, K. K. (2021). Theories of social entrepreneurship: An empirical review. The

Strategic Journal of Business & Change Management, 8 (2), 459 – 465.

Page: - 459 - The Strategic Journal of Business & Change Management. ISSN 2312-9492 (Online) 2414-8970 (Print). www.strategicjournals.com
 INTRODUCTION category of definitions, which focusing on “what
The definition of the word “entrepreneurship” is entrepreneurs produced”. The outcomes are
not an easy task due to its multi-faceted nature and normally referred to contributions such as “creation
multi-disciplined boundary (Schaper et al., 2011). of new organizations” (Gartner, 1988).
Moreover, there is a lack of consensus on the
Social Entrepreneurship
definition of “entrepreneurship” (Carsrud and
The term social entrepreneurship was first used on
Brännback, 2007; Gartner, 1988; Veciana, 2007).
literature on social change in 1960s and 1970s. It
Throughout the years, numerous definitions of
came into widespread use in the 1980s and 1990s
entrepreneurship have been produced by
promoted by Bill Drayton, the founder of Ashoka i.e
researchers from various disciplines. However, to
innovators for the public. From the 1950s to 1990s,
date, there is a general agreement that no
Michael Young was a leading promoter of social
universally accepted definition of entrepreneurship
enterprise and in the 1980s was described by
has been produced so far (Carsrud and Brännback,
Professor Daniel Bill at Havard University, as the
2007; Gartner, 1988; Veciana, 2007). Though
world’s most successful entrepreneur of social
difficult and challenging, identifying a definition for
enterprises because of his role in creating over 60
entrepreneurship is necessary. The reasons are
new organization’s worldwide including a number
simple so as to be able to identify new emerging
of schools for social entrepreneurship in the United
trends in the field and to develop more theories
Kingdom. Although the terms are relatively new
related to it (Bruyat and Julien, 2000).
social entrepreneurs and social entrepreneurship
The word “entrepreneurship” is derived from the can be found throughout history.
French word “entreprendre”, which means “to
Social Entrepreneurship is a process of recognizing a
undertake” or “to do something”. Some early works
social problem and uses entrepreneurship skills to
on defining “entrepreneurship” could be dated back
organize, create and manage a venture to bring
to 18th century by a group of economists, such as
social change (Nteere, 2012). The main aim of social
Richard Cantilon, Adam Smith, Jean Baptiste Say,
entrepreneurship as well as social enterprise is to
John Stuart Mill, and Carl Menger Hermann
further social as well as environmental goals. Social
(Veciana, 2007).
entrepreneurship is the work of a social
According to them, the different definitions of entrepreneur, who assesses success in terms of the
entrepreneurship focused on (i) Processes; (ii) impact the social enterprise has on society. While
Behaviors and, (iii) Outcomes. The first category of Social entrepreneurs often work through non-profit
definition is focusing on “what entrepreneurs do”. organizations and citizen groups, many
The definitions has centred on activities or entrepreneurs work in private and government
processes of entrepreneurship, such as “creating sectors. Austin et al,. 2006 defines social
something new” (Hisrich and Peters, 2002), entrepreneurship as “entrepreneurial activity with
“pursuing opportunities” (Stevenson and Jarillo, an embedded social purpose”
1990), “discovering, creating and exploiting
Social Business
opportunity for future goods and services”
Is one which aims to be financially self-sufficient, if
(Venkataraman, 1997). Meanwhile, the second
not profitable, in its pursuit of social, ethical or
category is focusing on “who are entrepreneurs”.
environmental goals. A social business seeks to
The definitions highlight the specific behaviors of
profit from acts that generate social improvement
individuals, for examples “competitive and driver of
and solves a broader human development purpose.
market process” (Kirzner, 1973) and “creative and
innovative” (Schumpeter, 1934). Lastly, not to
forget about the outcomes- or results-focused

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  A key attribute of social business is that b) Community ownership- needs to be owned
increased revenue corresponds to an by the poor or disadvantaged for example.
incremental social enhancement. Women, young people or the unemployed.
 Social enterprise are for more than profit, using c) Non- profit distribution: - Investors may not
blended value, business models that combine a after having had their investment paid back
revenue generating business with a social value take profit out of the enterprise as
generating structure or component. dividends.
 In his book creating a world without poverty, Professor Muhammad Yunus a key proponent of
social business and the future of capitalism, the social business model argues that capitalization
Professor Muhammad Yunus defines what a is too narrowly defined i.e. the concept, whereby an
social business is and it must have the individual focuses on profit maximization, and
following requirements:- ignoring other aspects of life e.g. religious,
emotional and political.
a) Social objectives:- It must have positive
social objectives that is the social services Domain of social entrepreneurship
provided by the business to the poor : Within the field of entrepreneurship, have emerged
health, education, poverty and sub-fields that include; Economic, Ecopreneurship/
environment environmental, Social entrepreneurship, and
Entrepreneurship education and training.

Table 1: Sub-Fields of Entrepreneurship

Sub-field Description
Economic The aim is to start ventures to maximize the profit
Ecopreneurship/Environmental The aim is to contribute to preservation of the natural environment
Social The aim is to start ventures to bring social change
Entrepreneurship education and The aim is to enable trainees to gain, knowledge, skills and change their
training attitude towards entrepreneurship/improve performance

LITERATURE REVIEW innovate or be change oriented. Drucker also makes

clear entrepreneurship does not require a profit
Opportunity–Based Entrepreneurship Theory
motive. In his book of innovation and
According to Peter Drucker entrepreneurs does not
entrepreneurship he says that no better test for a
cause change (as claimed by the Schumpeterian or
history of entrepreneurship should be found than
Austrian school) but exploit the opportunities that
the creation of the modern university, and
are brought by change (in technology, consumer
especially the modern American university. He then
preferences, social norms). He defines an
explains what a major innovation this was at that
entrepreneur as someone who searches for
time. He also devotes a chapter of
changes, responds to it and exploits it as an
entrepreneurship in public service institutions
opportunity. For Drucker, starting a business is
(Drucker, 1985).
neither necessary nor sufficient for
entrepreneurship (entrepreneurship must not have Hovard Stevenson- added an element of
a business). Not every new organization would be resourcefulness to the opportunity oriented
entrepreneurial or represents entrepreneurship. definition based on research he conducted to
According to Drucker, an entrepreneurial firm must determine what distinguishes entrepreneurial

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 management from administration management. He and services, 2) new markets, 3) new production
suggests defining the heart of entrepreneurial methods, 4) new sources of supply and 5)
management as “the pursuit of opportunity without developing a new organization. According to
regard to resources currently controlled”. He found Schumpeter, entrepreneurship is the source of
that entrepreneurs not only see and pursue change. Innovation creates new activities and
opportunities that elude administration managers; markets. He proposed that profits are the result of
entrepreneurs do not allow their own initials firm innovation.
resource endowment to limit their options.
The most important part of Schumpeterian theory
Entrepreneurs mobilize resources of others to
of innovation to social entrepreneurship is that a
achieve their entrepreneurial objective.
social entrepreneur should create a social
Administrators allow their existing resources and
enterprise, create new combinations of means of
their job description to constrain their visions and
production, be innovative and cause social change
actions (Nteere, 2012).
by causing disequilibrium in the market.
According to Opportunity–Based Entrepreneurship
Human Capital Theory
Theory, an entrepreneurial firm must not aim to
The term human capital can trace its roots to the
make profit, be innovative or be change oriented;
early 1960s, when Schultz (1961, p140) proposed
this is the essence of a social enterprise firm. Also
that HC consisted of the ‘knowledge, skills and
the social entrepreneurs need not be limited by the
abilities of the people employed in an organisation’.
resources currently held as they can mobilize
While concise, Shultz’s initial definition of HC is
resources from others to achieve their social
somewhat limited in that it does not take into
mission.
consideration the concept of ‘value’ and the
Schumpeterian Theory of Innovation importance of ‘investment’ in HC. In 1981, Schultz
Schumpeterian theory places emphasis on revamped this definition and defined HC as: ‘…all
innovative entrepreneurs who upset and human abilities to be either innate or acquired.
disorganize the existing way of doing things. Attributes … which are valuable and can be
Schumpeter saw an entrepreneur as someone who augmented by appropriate investment will be
creates a firm, implements ‘new combinations of human capital’ (Schultz 1981, p21).
means of production’, and an innovator. In his
More than a decade later, Becker (1993, p3)
theory of economic development, the
defined HC as the ‘knowledge, information, ideas,
entrepreneur’s role is to disturb the status quo (the
skills, and health of individuals’. Becker’s definition,
general equilibrium) through innovation. He
like Schultz’s original classification, is somewhat
claimed that all change that altered the normal
limited. However, Becker’s definition is interesting
circular flow of industry was as a result of
as it adds an extra dimension in terms of the ‘health
entrepreneurship, and he called this force the
of individuals’. Indeed, the health and well-being of
“creative destruction of capital”. Creative
individuals is an important factor in contemporary
destruction is a process of industrial mutation that
research which relates to the contextual
revolutionizes the economic structure from within,
development of HC within organisations. Bontis et,.
destroying the old one, creating a new one.
al (1999, p391) defines HC as ‘the human factor in
Schumpeter (1934) argued that innovation by the
the organisation; the combined intelligence, skills
entrepreneur leads to gales of creative destruction
and expertise that gives the organisation its
as they cause old inventories, ideas, technologies,
distinctive character. The human elements of the
skills and equipment’s to be obsolete. Schumpeter
organisation are those that are capable of learning,
argued that innovation was to be found in
changing, innovating and providing the creative
entrepreneurial efforts to; 1)offer new products
thrust which if properly motivated can ensure the

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 long-term survival of the organisation’. Bontis et al overcome this problem”. In a similar vein, Reynolds
highlight the importance of innovation, change and (1991) mentioned social network in his four stages
creativity and its role in HC. Moreover, the in the sociological theory. The literature on this
definition emphasizes the role of motivation in theory shows that stronger social ties to resource
leveraging these capacities. The definition providers facilitate the acquisition of resources and
acknowledges the importance of ‘distinctive enhance the probability of opportunity exploitation
character’. Finally, it alludes to the outcome of (Aldrich & Zimmers, 1986).Other researchers have
business sustainability, referring to the ‘long-term suggested that it is important for nascent founders
survival of the organisation’ Kwabena, (2011). to have access to entrepreneurs in their social
network, as the competence these people have
The most important part of Human Capital theory
represents a kind of cultural capital that nascent
to social entrepreneurship is that those people who
ventures can draw upon in order to detect
work in social enterprise are supposed to have the
opportunities (Aldrich & Cliff, 2003., Gartner et al,
capacity to learn new things; innovative and
2004., Kim,
providing the creative thrust which if properly
motivated can ensure the long-term survival of the The social entrepreneurs need to use social
social enterprise. Also the theory evaluate how networks to lobby for funds and to ensure that their
skills and knowledge developed over time in a social ideas are supported by the various stakeholders.
enterprises contributes to the enterprise overall
Resource-Based View (RBV)
sustainability.
The resource-based view (RBV) was developed from
Social Capital or Social Network Theory the concept of Penrose, Schumpeter, and Ricardo
The term “Social Capital” originated from the areas (Scherer, 1980) for sustained competitive
of sociology and political science and originally advantage by using strategic resources. The
appeared in Hanifan (1916) study of rural schools resource-based approach concentrates on the
community centers. Burt’s (1992) who defined characteristics of resources and strategies for
social capital as “friends, colleagues, and more organization survival, competitive advantage, and
general contacts through whom you receive long-term performance (Barney, 1991). Resources
opportunities to use your financial and human and capabilities are seen as sources of superior firm
capital”. Nahapiet and Ghoshal (1998) defined performance. The resource-based view assumes
social capital “as the sum of the actual and that resources are heterogeneity distributed among
potential resources embedded within, available the firm and are immobile across the firms (Barney,
through, and derived from the network of 2001a). External variables are the strategic factors
relationships possessed by an individual or social that impact the firm,
unit” Granovetter (1982), used the term social
Including other stakeholders such as buyers,
network theory instead of social capital,
suppliers, intensity of competition, and industry and
highlighting the commonality between the two.
market structure (Porter, 1985). These factors
Entrepreneurs are embedded in a larger social impact how resources are conceived, as well as how
network structure that constitutes a significant they are deployed. According to resource-based
proportion of their opportunity structure (Clausen, view, firms with VRIN (valuable, rare, inimitable,
2006). Shane and Eckhardt (2003) says “an and non-substitutable resources) criteria have the
individual may have the ability to recognize that a competency for achieving high performance
given entrepreneurial opportunity exist, but might (Barney 1991). According to Miller and Shamsie
lack the social connections to transform the (1996), resources are inputs into an organization’s
opportunity into a business startup. It is thought production process that contain tangible and
that access to a larger social network might help intangible resources, either knowledge-based or

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 property-based. Property-based resources are great influence on organizational performance. The
tangible resources while knowledge-based resource-based view will enable social ventures
resources refer to intangible resources. Both of understand how their strategies that they conceive
them are necessary for an organization’s operation. and implement will improve their efficiency and
In the resource-based view, resource acquisition is effectiveness. By maximizing on the profits due to
an important point because resources with value, better utilization of the resources, the social
rareness, inimitableness, and non-substitutability ventures will be able to achieve their social mission,
can generate competitive advantages and have a ensures stakeholders value and be sustainable.

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