Society Volume 44 issue 3 2007 [doi 10.1007_bf02819936] J. Gregory Dees -- Taking social...

8/11/2019 Society Volume 44 issue 3 2007 [doi 10.1007_bf02819936] J. Gregory Dees -- Taking social entrepreneurship serio

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ND MODERN

( V o l u m e 44 , N u m b e r 3 )

Taking Soc ial ntrepreneurship Seriou sly

J G r e g o r y D e e s

urs o ry l ook a t wor l d a f fa i rs s hou l d conv i nce

any t h i nk i ng and ca r i ng pe r s on , r ega rd l es s o f

po l i t ica l i deo l ogy , tha t we have co ns i de rab l e

r o o m f o r i m p r o v e m e n t . D e s p i te t h e t r e m e n d o u s s tr id e s

i n t h e q u a l it y o f l i f e th a t h u m a n k i n d h a s m a d e i n t h e

p a s t t w o c e n t u ri e s, m a n y p e r s i st e n t p r o b le m s r e m a i n

a n d n e w o n e s h a v e e m e r g e d . R a p i d e c o n o m i c g r o w t h

and va r i ous e xper i m en t s w i t h ac t i vi s t governm en t s have

no t bee n s u f f i c i en t t o l i f t a huge po r t i on o f t he wor l d

popu l a t i on ou t o f pover t y . C u rab l e and p reven t ab l e d i s -

eas es s t il l caus e t r em end ous s u f f e r i ng and c l a i m m an y

l ives , pa r t icu l a r l y a m o ng t he poo r . Acces s t o edu ca t i on

and the qu al i ty of educat ion vary wide ly across the g lobe,

even w i t h i n s om e deve l oped coun t r i e s. S l ave ry and hu -

m a n t r a f f ick i ng a re m ore s e r i ous and w i des p read t han

m o s t o f u s ca re t o adm i t . V i o l ence and con f l ic t abound

on pe rsonal , t r ibal, na t ional , reg ional , and g lobal l evel s .

Th e ear th is warm ing, polar i cecaps are m el t ing , and b io-

d ivers i ty i s decl in in g a t an unus ual ly h igh ra te , ra i s ing

ser ious ques t ions abou t the impa ct on fu ture generat ions ,

r ega rd les s o f t he caus e . The l i s t cou l d go o n and on . We

m a y no t a l l ag ree on ou r v i s i ons fo r an i dea l wor ld , bu t

we can genera l l y ag ree t ha t t he gap be t wee n r ea l it y an d

ou r no t i ons o f t he i dea l i s s t il l eno rm ous .

O n e p o t e n t i a l l y p r o m i s i n g s t r a t e g y f o r i m p r o v e -

m en t i s t o encou rage and s uppo r t s oc i a l en t r ep reneu r s ,

i n d i v i d u a l s , a n d o r g a n i z a t i o n s t h a t b r i n g t o s o c i a l

p r o b l e m s t h e s a m e k i n d o f d e t e r m i n a t i o n , c r e a t i v -

i ty , and r e s ou rce fu l nes s t ha t we f i nd am on g bus i nes s

e n t r e p re n e u r s . O n e p r i m e e x a m p l e i s t h e 2 0 0 6 N o b e l

P e a c e P r iz e w i n n e r M u h a m m a d Y u n us , w h o f o u n d e d

t h e h i g h l y s u c c e s s f u l G r a m e e n B a n k i n B a n g l a d e s h

t o p r o v i d e c r e d it t o t h e p o o r t o h e l p t h e m m o v e o u t o f

p o v e r ty . T w o o f t h e 2 0 0 6 M a c A r t h u r F e l l o w s h i p w in -

ne r s were a l s o l ead i ng s oc i a l en t r ep reneu r s . V i c t o r i a

H a l e f o u n d e d t h e I n s t it u t e f o r O n e W o r l d H e a l t h , a

n o n p r o f i t p h a r m a c e u t i c a l c o m p a n y t h a t d e v e l o p s s a fe ,

e f f ec t i ve , a f fo rdab l e m ed i c i nes fo r deve l op i ng coun -

t ri e s, and J i m F ruch t e rm an i s a S i l i con Va l ley eng i nee r

wh o c rea t ed B en e t ech t o c ra f t t echno l og i ca l s o l u t ions

t o s oc i a l needs , r ang i ng f rom l i t e r acy t o hum an r i gh t s

and l andm i ne de t ec ti on .

T h e c o n c e p t o f s o c i al e n t r e p r e n e u r s h ip e m e r g e d

i n t h e 1 9 8 0s f r o m t h e w o r k o f B i ll D r a y t o n a t A s h o k a ,

fund i ng s oc i a l i nnova t o r s a round t he wor l d , and Ed

S H oo t a t N ew V en t ures , he l p i ng nonp ro f i t s exp l o re new

s ou rces o f i ncom e . I t has co m e i n t o i t s own i n t he l a s t

d e c a d e , c a p t u r i n g th e i m a g i n a t i o n s o f m a n y t h o u g h t -

fu l obs e rve r s . F o r i n s t ance , Dav i d Gergen , Harva rd

p ro fes s o r and fo rm er adv i s o r t o fou r U .S . p res i den t s ,

has des c r i bed s oc ia l en t r ep reneu r s a s t he new eng i ne s

o f r e fo rm . Nu m e rous un ive r s i t ie s , i nc l ud i ng Harva rd ,

S t a n f o rd , C o l u m b i a , N e w Y o r k U n i v e r s it y , O x f o r d ,

a n d D u k e h a v e l a u n c h e d c e n t e r s o r m a j o r i n i ti a ti v e s

i n th i s a r en a . T h e W o r l d E c o n o m i c F o r u m h a s o p e n l y

e m b r a c e d s o c i a l e n t r e p r e n e u r s h i p , a n d t h e F o r u m ' s

f o u n d e r s , K l a u s a n d H i l d e S c h w a b , h a v e c r e a t e d

t h e i r o w n F o u n d a t i o n f o r S o c i a l E n t r e p r e n e u r s h i p .

J e f f r ey S ko l l , eB ay ' s f i r s t p res i den t , has devo t ed h i s

foun da t i on t o i nves t i ng i n , con nec t i ng , and ce l eb ra t -

i ng s oc i a l en t r ep ren eu r s . Ac t o r and d i r ec t o r R ober t

R ed fo rd hos t ed a P ub l i c B roadcas t i ng s e r ie s i n 2005 on

t he New Heroes , s uppo r t ed by t he S ko l l F ounda t i on ,

to prof il e success fu l socia l en t repreneu rs . M ajor m edia

ou t le t s f rom t he New York Times to the conomist have

run feature art icles on this t rend. The M anh attan Inst i tute,

wi th w hich H usoc k i s aff i l ia ted , g ives an annu al Socia l

En t r ep reneu r s h i p Award . The em brace o f t h is concep t

cuts across pol i t i ca l and nat ional boundar ies , wi th ac-

t i v it i es and i n t e res t c ropp i ng up a round t he w or l d .

I s t h i s a t t en t i on and exc i t em en t war ran t ed? Does

s oc i a l en t r ep reneu r s h i p have t he po t en t i a l t o c r ea t e

sus ta inable and scalable impac t in arenas whe re govern-

m en t e f fo r t s have been i ne f f ec t i ve? Af t e r s t udy i ng t h i s

ac t i v it y fo r ove r a decade , I am conv i nced t ha t s oc i a l

en t r ep reneu r s , ope ra t i ng ou t s i de o f t he cons t r a i n t s o f

24 SOCIETY MARCH APRIL 2007


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governm ent , s ignif icant ly enhan ce our abi l i ty to f ind

and imp leme nt ef fect ive solut ions to social problems.

Of cou rse, the real test of an y thesis of this sort l ies in

action and results . My goal in these pages is to con-

vince readers that we should take social entrepreneur-

ship ser ious ly and make the necessary inves tment of

resources , t ime, and en ergy to g ive th is idea a ser ious

and sustained test.

o v e r n m e n t a s P r o b l e m S o l v e r

To put the current in teres t in social entrepreneurship

in perspect ive, it i s useful to th ink about huma n his tory

as a series of exper iments in social organi zat io n-- f ro m

family, clan, and tribal s tructures to the elaborate govern-

mental, corporate, and social s tructures of today. These

experiments can be seen as a response to the question:

Ho w should we organize ourselves, publicly and privately,

to mov e closer to the ideals of a good society? This article

is not the place to trace the evolution of different forms of

social organization, but it is helpfu l to lo ok ba ck b riefly

at a par ticular turning point in la te e ighteenth-cen tury

Europ e that had r ipple ef fects around the w orld .

The major social problem of the day was pover ty .

Some leading pol i tical th inkers , such as Thomas Paine

and the Marquis de Condorcet , recog nized the ineffec-

t iveness of char i ty and, in the spiri t of the E nl ighten-

ment , proposed m ore scienti f ic and secular s ta te-based

al ternat ives. Char i ty was largely gro unded in the prac-

t ice of a lms giving, typical ly organized by the ch urch.

T he t e rm com es f rom the L a t in caritas refer r ing to

a sent iment , compass ion for o thers , which was not

alway s a reliable or effective platform for action. I t al-

lowed givers to demo nstrate their v ir tue, but char i ty a t

bes t provided tem porary rel ief for the poor . This re l ief

did not a lways reach al l those that could benef i t f rom

it, and ma ny feared i t exacerbated the very problem at

which i t was directed, creat ing depen denc y and under-

mining the indus tr iousness of the poor . Acc ording to

his tor ian Gareth Stedman Jones , in h is book A n E n d

to Poverty Paine, Condorcet , and their fe l low travelers

offered a secular and rat ional a l ternat ive. A repu bl ican

s tate cou ld take a scient if ic approach to a dminis ter a id

to the poor in a mor e rigorous, fair , and effectiv e way.

Thou gh their par t icular schemes were not immediately

imple men ted, these thinkers planted the seeds for social

dem ocra cy and the welfare s ta te .

T he E n l igh tenm en t pos i t ioned governm en t as the

main actor in resolving social problems that were not

addres s ed by econom ic deve lopm en t . Bu i ld ing on the

s even teen th -cen tu ry s c ien t i f i c r evo lu t ion , and w i th

Newton ian m ech an ics as the pa rad igm , i t m ade s ens e

for the s ta te to take on the central ro le in engineer ing

a solut ion to pover ty . Of c ourse, th is shif t away f rom

rel igious , sent imental approaches to pove r ty was taken

to new heights in the la te n ineteenth and twent ie th cen-

tur ies by Kar l Marx and his fo l lowers . Over the cou rse

of the pas t two centur ies , the wor ld has witnessed a

var ie ty o f exper im en ts in governm en t -bas ed e f fo r t s

to tackle pover ty , as wel l as o ther social and environ-

mental problems. O ver th is per iod, a mixed rel ig ious

and secular c iv i l society cont inued to evolve and play

a comple men tary role , but the hope for social proble m

solving has largely been on governm ent .

While th is focus on government as social problem

solver led to som e notable successes , such as increased

acces s to educa t ion and hea l th ca re fo r m any , the

exper ience also revealed the l imits of government as

the vehicle for social problem solving. It has becom e

clear that large-scale , top-down g overn men t programs

have ser ious drawbacks . No clear pr inciples of social

mec hanic s have eme rged to guide central p lanning.

Even phy s ical science has moved be yond the bi l liard-

b a l l w o r l d o f N e w t o n i a n m e c h a n i c s . C o m m u n i s m ,

social ism, and the welfare s ta te have been subjected

to the sam e kind o f cr i t ic ism that was leveled agains t

the char i ty o f o ld . They, too, run the r isk o f creat ing

dependency, perhaps even more so because of the sense

of ent i t lemen t they can create .

Gov ernm ent service del ivery , including in the rela-

t ively successful arenas of educat ion and heal th care ,

has be en cr i t ic ized as bureaucrat ic , ineffect ive, was te-

ful, too political, and antithetical to innovation. Be-

cause of the r isks of f raud, was te , and abuse o f power ,

bu reaucracy becam e the dom inan t o rgan iz ing m ethod

for government agencies . This is not an organizing

mode that is conducive to creat ive problem solving.

In h inds ight , these shor tcomings are not surpr is ing

g iven the incen t ives and dec i s ion m echan is m com m on

to governmental organizat ions . Government a lone is

clearly not the answer. After two ce nturies of aggressive

exper imentat ion with d if ferent forms of government ,

we have learned, a t the very least , that governm ent is a

tool that is ef fect ive for som e kinds of social in terven-

t ions but not as ef fect ive for o thers. We do not nee d to

enter the ideological debates about the appropr iate ro le

and s ize of govern ment to recognize the potent ia l value

of br inging pr ivate in i t ia t ive, ingenui ty , and resources

to the table.

TAKING SOCIAL ENTREPRENEURSHIP SERIOUSLY 5


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Thro ugh var ious go vernme nt ef forts to solve social

problems, we have learned that with all our scientific

knowl edge and rat ional p lanning, we s ti l l do not know

in advance what wil l work ef fect ively . Thus , progress

in the social sphere depends on a process of innova-

t ion and exper imentat ion akin to entrepreneurship in

the bus ines s wor ld . W hen the Aus t r i an econom is t

Joseph Schu mpeter formulated his theory of economic

development , he saw entrepreneurs p laying a central

ro le . They drove devel opmen t by carrying out new

com bina t io ns T hey cou ld m od i fy ex i st ing p roduc t s

or services , develop new ones , improve product ion

and marketing processes, f ind new sources or supply,

take exis t ing products in to new markets , or create new

forms of organization. In so doing, as he later put it ,

they reform or revolutionize the pat tern of produc-

t ion. And they shif t resources in to areas of h igher

yield and productivity, to paraphrase J . B. Say, the

eighteenth-century French econom is t who popular ized

the term entrepren eur. To be sure, large firms enga ge

in incremental innovat ions , but as Car l Schra mm and

Rober t L i tan of the Kauffman Foun dat ion recent ly put

it, Radical breakthro ughs tend to be disproportionately

developed and brought to ma rket by a s ingle individual

or new f i rm. Social entrepreneurs are needed to p lay

the same innovat ing role with regard to social needs

and problems.

Social and bus iness entrepreneurs u ncover or create

new oppor tuni t ies through a process of explorat ion, in-

novat ion, exper imentat ion, and resource m obil izat ion.

This is an act ive, messy, h ighly decentral ized learning

process . Decentral izat ion is cr i t ical because f inding

what works depends on having the r ight knowledge,

being able to envis ion new combinat ions , and having

the f reedo m to tes t ideas through act ion. The necessary

knowl edge can not eas i ly be central ized; mu ch of i t is

local and dispersed amo ng the populat ion. As a resul t ,

some people wil l see oppor tuni t ies and conceive of

promis ing ne w comb inat ions that o thers could not en-

vision. Because of the creative nature of this process,

central iz ing social problem solving makes about as

mu ch sen se as centralizing art production. Finally, s ince

indep enden t entrepreneurs must mobil ize resources to

cont inue to pursue their v is ions , they have to persuade

f inanciers who are put t ing their money be hind the idea

and ta lented employees who are devot ing their t ime

and skills that this venture is worthwhile. This selec-

t ion process provides a d iscipl ine, a lbei t imperfect ,

that helps narrow the funnel to those ideas that have

bet ter chances of working. When i t works wel l , th is

decentral ized process a l lows bad ideas to fa l l by the

wayside, encourage s lessons to be learned, and provides

an incent ive for cont inuous impro veme nt of the more

promis ing ones .

This entrepreneur ial process is s imilar to the path

of natural select ion, involving a cont inuous cycle of

differentiation, selection, and expansion. Just as high

levels of biodiversity (differentiation) characterize a

v ib ran t ecos ys tem , h igh l eve l s o f en t r ep reneur s h ip

characterize a vibrant econo my and hig h levels of social

entrepren eurship should com e to characterize a healthy

society. No solutio n is likely to bring us to an ideal

state and keep us there forever. Society will change

over t ime jus t as ecosys tem s change. New chal lenges

wil l ar ise as we m ake progress on the old ones . Thus ,

the need for th is independent innovat ion process has

no foreseeable end.

W hy can ' t governm en t agenc ies do th i s ? W hen

comp ared to governme nt agencies , independe nt social

entrepreneurs have several d is t inct advantages . They

have greater f reedom of act ion and can usual ly move

more quickly than publ ic off ic ia ls . They can explore

a wider range of alternatives, largely because they are

not as cons trained by bureaucrat ic ru les , legis la t ive

mandates, political considerations, and a fixed budget.

Social entrepr eneurs ca n tailor their efforts to different

comm unit ies or markets in ways that would be dif f icul t

f o r g o v e r n m e n t p r o g r am s . M o r e o v e r , i n d e p e n d e n t

social entrepreneurs have access to private resources,

while private contributions to govern men t are relatively

rare . Thus , social entrepreneurs are able to a t t ract

voluntary gif ts of money, t ime, and in-kind do nat ions ,

leveraging publ ic money dev oted to the same proble m

with philanthropy, social investment, or earned inc ome

from their bus iness ventures .

The rel iance on independent social entrepreneurs

also provides society with greater oppor tuni t ies to

learn with less r isk . Government programs usual ly

represent relatively large bets on fairly standardized

intervent ions with commitm ents to a certa in course of

act ion that can be very hard to mod ify once an nounced.

As econom is t s Doug las Nor th and Rober t T hom as

observed, govern ment solut ions entai l the addi t ional

cos t of being s tuck with the decis ion in the fu ture-- t hat

is , withdrawal costs are higher than those related to

voluntary organizations. With social entrepre neurs we

have more and smaller bets on varied efforts to tackle

the same social problem. When we have high levels

26 SOCIET Y MARCH/APRIL2007


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of uncer ta in ly about the bes t approach, d ivers if icat ion

and exper im en ta t ion inc reas e the oppor tun i t i e s fo r

learning a nd success . Divers if icat ion of act iv i ty has the

added benef i t of reducing the cos ts of fa i lure dur ing

this learning process . I f some of the small bets fa i l , the

impact w il l be far less than the fai lure of a large-scale

gove rnme nt program. To the extent that these exper i-

ments are pr ivately funded, th is learning process do es

not com e at great public expense.

Furthe rmore , som e social innovations are unlikely to

be very ef fect ive i f they are carr ied out by governm ental

organizations. The private nature of social ventures can

be a d is t inct advantage. Cons id er P lanned Parenthood ,

Alcohol ics Anonymous , the Sier ra Club, Habi ta t for

Hum ani ty , o r com m uni ty founda t ions . Cou ld thes e

work as we l l a s b ranches o f governm en t? I t s eem s

unlikely . Boy and Gir l Scouts would cer ta in ly take

on a very dif ferent connotat ion i f the gove rnme nt ran

these programs. A rape cr isis center might be ef fect ive

in large par t because i t is run and s taf fed by vo lunteers

who have been vict im s of rape themselves . Would vic-

t ims of rape t rus t the center as much i f i t were gov ern-

men t run? Addit ional ly , in som e cases , i t is impor tant

to work across governme ntal levels and jur isdict ional

boundar ies . The Nobel Pr ize winning organizat ion,

Medecins Sans ron t ieres (Doctors Without Borders )

captures th is not ion in i ts very name. I t is much hard er

fo r governm en t agenc ies to work e f f ec t ive ly ac ross

boundar ies . S ince many social and environmental is -

sues cut across these boundar ies , i t makes sense for

the organizat ions tackl ing them to be organized ac-

cordingly . Thus , man y innovat ive approaches to social

problems are not only bes t star ted outside governm ent ,

they are bes t kept outs ide government .

Social entrepreneurs have an impor tant ro le to p lay,

whe ther i t i s to co m plem e n t o r s upp lan t governm en t

e f fo r t s . T hey a re be t t e r pos i t ioned to innova te and

e x p e r i m e n t t h a n g o v e r n m e n t a g e n c i e s . T h e y h a v e

f lexibi l i ty in how they serve their miss ions that should

al low them to be more ef f ic ient and ef fect ive. They

increase our chanc es of learning, and they br ing pr ivate

resources to the table . Unfor tunately , unt i l recent ly ,

they were not taken as ser ious ly as they should be as

an impor tant dr iver of social progress. People tended

to focus on governm ent and markets as the main social

forces , t reat ing the th ird sector as marginal , ra ther

than as a potent ia l major engine for progress . Yet ,

independent social entrepreneurs have the potent ia l

to p lay the same role in address ing social needs that

bus iness entrepreneurs p lay in what economic Nobel

Laureate Edm und Phelps cal ls dyna mic capi ta l ism.

Social entrepreneurship engages the problem-solving

ski l ls and local knowledge of many individuals and

organizat ions in search of innovat ive solutions . As a

result, i t has som e powerfu l advantages over centralized

pol icy analys is and planning.

Charity and Problem Solving

The recent r ise of in teres t in social entrepreneurship

is def in i te ly not a case of the pendulu m sw inging aw ay

from government , back to char i ty , as much as some

poli t ical comm entators , such as Marvin Olasky, might

l ike to see. Today 's social entrepreneurs do not see

themse lves as engag ed in char i ty in the t radi tional ,

a lms-giving sense. They recogn ize i ts l imits and weak-

nesses , as d id the Enl ightenment cr i t ics . Muhammad

Yunus m akes the po in t fo rce fu l ly : W he n we wan t

to help the poor , we usual ly offer them char i ty . Most

of ten we use char i ty to avoid recognizin g the problem

and f inding a solut ion for i t . Char i ty becomes a way

to shrug off our responsibility. Charity is no solution

to pover ty . Char i ty on ly perpetuates pover ty by taking

the initiative aw ay fi 'om the poor. Cha rity allows us to

go ahead with our own l ives without worrying about

those of the poor . I t appeases our conscience s .

Other social entrepreneurs may n ot object as s t rong-

ly to char i ty . However , even those wh o ac know ledge a

need for temporary rel ief tend to v iew their own work as

fundam ental ly d if ferent . They aim to create sus tainable

improve ments and are wil l ing to draw on self -in terest ,

as well as compassion to do it .

Social entrepreneurship represents another s tep in

the cont inuing reinvent ion of the th ird sector over the

pas t one hundred and f i f ty years . The Enl ightenment

brought not only a shif t in poli t ical phi losophy i t a lso

chan ged pr ivate char i table ins t itu t ions . Ma ny of them

em braced the new ra t iona l i ty l ead ing to the r i s e o f

what h is tor ian Ger trude Himme lfarb cal ls scient i f ic

char i ty . This shif t generated a re la t ive boom of new

organizat ions in the la ter n ineteen th and ear ly twent i -

e th cen tu ries . T he m ov em en t inc luded new re l ig ious

char i t ies with mor e scient i f ic approaches , the cre-

at ion of secula r char i table ins t i tu t ions , profess ional ly

run phi lanthropic foundat ions , and the es tabl ishment

of new helping profess ions , such as social work. The

Salvat ion Army, YM CA, Boys and G ir ls Clubs , and

man y promine nt th ird-sector organizat ions and major

foundations trace their roots to this era.



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Leading social entrepreneurs today are most apt ly

descr ibed as pragmatis ts. Th ey are focused on achiev-

ing sustainable results and will use whatever tools are

most l ikely to work. The y embrac e innovat ion, value

effect ive management , and are open to a wide range

of operat ional and bus iness models . The y are wil l ing

to adapt ideas and tools f rom bus iness whe n these wil l

help. They are even willing to use for-profit forms of

organizatio n or hybrid structures that include for-profit

and nonprof i t e lements . Whe n i t is poss ible , social en-

t repreneurs wil l happi ly craf t market-based solut ions

that rely only on self-interest, allowing scarce philan-

thropic or govern ment resources to f low to areas that

genuinely ne ed subs idy. I f they can f ind an over looked

market oppor tuni ty that a lso improves social condi-

tions, they will gladly pursue it . Yunus 's G rame en B ank

is legally a for-profit institution ow ned by its borrowers

and is now financially self-sustaining.

Recog nizing that for-prof i t or hybr id organizat ions

may have an impor tant ro le in creat ing bet ter social

condi t ions , some new phi lanthropis ts are d is regarding

old sector boundar ies . When Si l icon Val ley venture

capi ta l ists Broo k Byers and John Doerr s tar ted the New

Schools Venture Fund, they dec ided to use i t to fund

both nonprof i t and for-prof it ventures that have the po-

tential to create major improv eme nts in K-12 education.

Recent ly , the g iant In ternet search company Google

decided that ins tead of creat ing the typical nonprof i t

com pany foundat ion, i t would create its phi lanthropic

arm as a for-profit capable o f investing in nonprofit or

for-profit ventures wit h a social purpos e, such as more

fuel-efficient vehicles. The lines be twee n for-profit and

nonprofit are breaking do wn as social entrepreneurs and

entrepreneur ial phi lanthropis ts look for new ways to

tackle a range of social issues from alternative energy

to improv ements in heal th care .

Today 's social entrepreneurs are bui ld ing on the

t r ad i t ion o f Ben F rank l in . W hen F rank l in s aw op-

por tun i t i e s to im prove l i f e fo r h i s f e l low c i t i zens

in Phi ladelphia , he pursued them in whatever form

seemed most sens ible . He created for-prof i t pr in t ing

and publ ishing bus inesses to keep ci t izens informed, a

voluntary f i ref ight ing associat ion to protect the hom es

of memb ers , a subscr ip t ion-based lending l ibrary, and

a ph i lan th rop ica l ly s uppor ted academ y tha t becam e

the Univers i ty of Pennsylvania , jus t to mention a few

examples . For each entrepreneur ial venture Frankl in

adopted an economic, operat ing, and legal s t ructure

tha t was s u i t ab le g iven the c i r cum s tances . Soc ia l

entrepreneurs operat ing today embrace th is legacy of

pragmatic pr ivate in i t ia tives to improve social condi-

tions. The y do not see themse lves as charities or even

as nonprof its , though they of ten use that legal form

of o rgan iza t ion . T hey a re en t r ep reneur s who m ove

comfor tably across sector boundar ies in search of the

bes t ways to achieve sus tainable impact .

Supportive Infrastructure

The current b oom in social entrepreneurship exists

despi te a re la t ively poor u nders tanding of th is work.

Those who take i t up of ten lack the resources and in-

frastructure they n eed to succ eed at a s ignificant scale.

They are swim ming agains t the current of cul tural as -

sump tions and biases. As a society, we have n ot openly

embraced social entrepreneurship , do not appreciate

the crucial d if ferences between social entrepreneurship

and char i ty , and have not yet cons tructed the kinds of

cul tural and ins t i tu t ional mech anism s social entrepre-

neurs ne ed to be effective. Th oug h today's social entre-

preneurs represent a break from sentimental, alms-giving

charity, their work is s til l inhibited by the old norm s and

assumptions of a lms-giving char ity that permeate the

sector. Even social entrepreneurs who feel they can a dopt

a for-profit legal form do not f ind the kind of support

they need to blen d social and financial objectives. If we

want to capi ta l ize on th is current wave o f in teres t and

test the potential of social entrepreneu rship, we n eed to

create an environ ment conduciv e to success. We need to

suppor t social entrepreneurs with a more ef f ic ient and

robust infrastructure, appropriate public policy, and a

chan ge in the culture o f the social sector.

The relatively efficient and effective markets that

we kno w today evolved over centur ies as appropr iate

institutions, public policies, and cultural values were

developed. On the inf ras tructure s ide, capi ta l ism grew

with the increase in wholesale m arkets an d fairs , bours-

es , banking ins truments , insurance for t rade voyages ,

and the like. Today we h ave very sophistica ted financial

markets , bus iness schools engaged in both educat ion

and research, and many suppor t ive associat ions for

bus iness organizations . The inves tment in developing

this infras tructure has been t remendous . We need s imi-

lar institutions to develop and ma ke available to social

entrepreneurs appropr iate funding, ta lent, know ledge,

and social capital. We also need to modify our current

ins t i tu t ions to a l ign them more with the requirements

of social entrepreneurship , making s ignif icant changes

in phi lanthropy, o ther f inancial services , research,

28 SOCIETY MARCH/APRIL2007


6/8

and educat ional programs. For tunately , a number of

thoughtful p layers in th is sector are working hard to

develop new ins t itu t ions.

On the po l icy s ide , cap i t a l i s m re l i ed upon c lea r

proper ty r ights , sys tems for enforcing contracts , and

a var ie ty of suppor t ive inves tments by governments .

For social entrepreneu rship to f lour ish, we need publ ic

pol ic ies that recognize an d del iberately harness i ts po-

tent ia l . These pol ic ies shou ld f ree social entrepreneurs

to innovate and exper iment , manage the r isk of th is

experim entation, enco urag e private investors to support

this activity, and allow those invo lved to reap appro priate

rewards for their success . Even though G rameen Bank

is a private initiative, it is owned in small part by the

governm ent of Bangladesh, and i t required special leg-

islation so that it could take savings deposits a nd operate

as a formal financial institution. With out these dep osits it

wou ld not have been able to grow n early as rapidly. As

social entrepreneurs experime nt with ne w business mod-

els , we m ay nee d new legal forms of organization, such

as the comm unity in teres t com pany category recent ly

created in the United K ingdom. As phi lanthropis ts and

other f inancial backers exper im ent with the bes t ways

to use their resources to suppor t social entrepreneurs ,

we m ay ne ed changes in the legal s t ructures and rules

for doing that k ind of inves t ing as w el l .

Capi ta l ism required a cul ture that a l lowed for t rus t

and a com for t w i th t r ans ac t ions beyond f am i ly and

tribal boundaries, as well as a culture in which profit

makin g is mo ral ly acceptable . S imilar ly , in the social

sector, we ne ed a culture that honors an d taps into the al-

truistic impu lses that have fu eled charity in the past, but

directs those impulses toward impact and perform ance.

We ne ed a cul ture that accepts fa i lure as essentia l for

learning and that honors ef fect iveness and ef f ic iency

as muc h as the cul ture of char i ty honors sacr if ice . We

also need a cul ture that does not ma ke i t shameful to

earn a dec ent l iv ing serving social purposes . Bui ld ing

the right suppo rts will not be easy, but it is essential if

this approach is to achieve its potential.

hallenges to Moving F orward

By making social entrepreneurs a recognized, s t ra te-

gic e leme nt in the process by whic h we imp rove social

condi t ions , we have the potentia l to make hea dwa y in

arenas that have rema ined vexing. The wo rldwide po-

tential for mobiliz ing socially entrepr eneuria l behavior,

i f we w ere to m ake a del iberate ef for t to promote i t, i s

eno rmo us. H owev er, this idea is relatively new, is s til l

exper imental , and i t may not work as wel l as propo-

nents ( including myself ) expect i t to , jus t as act iv is t

governm en ts d id no t work as we l l a s m any expec ted i t

to . Several is sues cou ld be raised, but three s tand o ut

as especial ly impor tant : social impac t assessment , the

select ion- inves tment processes , and scalabi l ity .

Entrepreneurship works wel l in bus iness because

markets tend to re inforce value creat ion both for cus-

tomers and for inves tors. Bus inesses that do not create

suff ic ient value for these two groups usua l ly whither

and fai l. The tes t is wheth er cus tomers wil l pay enou gh

to cover the cos ts of product ion and to gene rate an at-

tractive return for investors. An attractive return is one

that is comp arable to or bet ter than those gene rated by

alternative investmen ts of s imilar r isk. Businesses with

s trong t rack records and indicat ions o f fu ture potent ia l

can grow relat ively rapidly because of the s ize of the

f inancial markets and the abi l i ty of these markets to

respond quickly . These measures are def in i te ly not

foolproof . Even seaso ned bus iness inves tors make seri -

ous mistakes. However, custo me r and financial markets

wo rk reason ably we ll to identify, select, and scale firms

that are creat ing the mo st cus to mer and inves tor value.

The same cann ot be said of social entrepreneurship .

Social impact is difficult to measure in a reliable,

t imely , and cos t-ef fect ive fashion--especial ly for the

most ambit ious social ventures. How and wh en do we

know that someon e has been moved out of pover ty in

a sustainable way or that a s trategy will s low global

warming? Signs , symptoms, and leading indicators

of ten must be use d to provide clues to whet her an in-

tervent ion is having i ts in tended impact . Ma ny innova-

t ions that sound logical and promis ing fai l in pract ice

or produce u nintended harms that of fset the gains . Even

with micro-f inance, the innovat ion for which Yunus

won the Nobel Peace Pr ize , a t tempts to demo nstrate i ts

impact in a r igorous and sys tematic way have produced

mixed and sometimes confus ing resul ts . The s tor ies

of impact on individuals and their famil ies are p lenty

and powerful , but methods for sys tematic evaluat ion

have been a subject of debate . Even whe n the in tended

impact c an be assessed rel iably , i t may be dif f icult to

at t ribute causat ion w ithout very wel l control led s tudies

that are cos t ly and complicated. Chi ldren who par t ic i -

pate in a voluntary af ter -school tu tor ing program m ay

have bet ter gradua t ion rates than their c lassmates , but

th is could be dr iven by other factors , such as educate d

and motivated parents . Even when causat ion can be

es tabl ished, com par isons across organizat ions can be



7/8

.~ 1o. 7~ ,, .~ ,~ .~ ~

very difficult unless they have a very similar mission,

strategy, operating environ ment, and target population.

Even among domest ic educat ional in tervent ions , how

do we co mpare Teach for America, the Gates Fou nda-

tion's U.S. Libraries initiative, and Edison Schools?

This does not mea n the s i tuat ion is hopeless . Innova-

tors are working on th is chal lenge and making some

headway, but we need to deve lop better ways to identify

the most pro mis ing innovat ions , sor t out the fa i lures ,

and learn f rom these exper iments . In the meant ime, we

must operate with greater uncer ta in ly , making our bes t

judg men ts in l ight of imperfect data .

E ven i f we can f ind m ethods to m eas ure im pac t

more accurately , we need natural select ion processes

that d irect resources an d supp or t to the most promis-

ing innovat ions and away f rom the fai led exper iments .

Current mechanisms in the social sector are h ighly

imperfect, for at least two reasons. First, performance

evaluation is not h ighly v alued in the cul ture of charity.

Char i ty is about com pass ion, sacri f ice , and temporary

relief. I t is easy to see if you get fo od to a hung ry per-

son. Your motivat ions are between you and yo ur God

or conscience. Why inves t in performance assessment?

Bet ter for the money to go for programs. This cul ture

is crumbling, especial ly amo ng major foundat ions and

new phi lanthropis ts , but i t s t il l holds more sway than

we recognize. The second reason select ion is weak is

that investors in the social sector, particularly phi-

lanthropists , are motivated by more than social impact.

They al locate their capi ta l for emotive and express ive

reasons as wel l. So me wa nt to thank the hospice that

cared for their loved one, not reward the bes t hospice

in the country . Others c hoose to suppor t Green Pe ace

ins tead o f the Na tu re Cons ervancy , no t becaus e o f

a d ispass ionate assessment of which organizat ion is

doing a bet ter job, but beca use they ident i fy with the

ideology and confrontat ional tact ics of Green Peace.

Still others wan t to support a need y organization, rather

than one that seems to be doing wel l , even i f the la tter

could create mor e impact dol lar for dol lar . As th ings

s tand, ef fective and ef f ic ient organizations m ay not be

rewarded with addi t ional resources , while ineffect ive

and ineff ic ient ones may thr ive because they have a

movi ng s tory to te ll . Resource f lows st il l depend more

on sent iment , popular causes , personal char isma, and

market ing ski l ls than on social value creation. We need

to mov e toward select ion and inves tment processes that

bet ter a l ign personal sat is fact ion of resource providers

with the potent ia l for impact .

Social entre preneu rs often find it very hard to scale.

When they do scale, the process is usually very slow,

particularly when v iewed relative to the size and growth

of the proble ms being addressed. Even Habitat for Hu-

manity, one of the greatest growth stories of the social

sector, cannot keep up with the ne ed for h ous ing in i ts

target population. This is partly because the infrastruc-

ture, policy, and culture need ed to support the growth has

been lacking. I t is also partly because private resources

devoted to the social sector have been relatively small

compared to the problems being addressed and poor ly

allocated. The oft-touted intergenerational transfer of

wealth that we are experiencing in the United States

may help, but this infusion of capital could represent

a one-time boom, rather than a sustainable solution.

To reduce the need for outs ide funding, many social

entrepreneurs are exper imenting with earned income

strategies. Developing new business models may help,

but even profitable businesses often must tap into outside

markets for growth capital. Social ventures tend to have

smaller pools to tap into. While man y people are at work

on innovations in the private funding markets for social

entrepreneurs, i t is s til l not clear whether the a mou nt of

private capital available w ill be sufficient and appropri-

ately directed to scale the most prom ising innovations,

raising the ques t ion of go vernm ent involvement .

Government-suppor ted programs can scale ra ther

rapidly, whe n the political will and fundin g are present.

This is because government has the power to coerce

complian ce and mo bil ize resources through taxat ion.

But how do we avoid the problems associated with

government programs? We need to learn f rom pr ior

effor ts to combine social entrepreneurship with gov-

ernment suppor t to see how this might be done most

effect ively . What can we learn f rom char ter school

legisla t ion, which opened the doo r to more educat ion

entrepreneurs by providing access to publ ic funding?

What can we learn f rom the rapid spread of hospices

through out the United States af ter Medicare agreed to

reimburse for hospice care? Even some of the para-

digms of indepen dent social entrepreneurship , such as

Teach for Ameri ca and Habi ta t for Humanity , re ly on

some governm ent funding. In h is essay on The Age

of Social Transformation, Peter Drucker envis ioned

a society in which Many social sector organizat ions

w i l l b e c o m e p a r t n e rs w i th g o v e r n m e n t t h r o u g h

voucher programs. He noted that these organizat ions

would also be competi tors with government , conclud-

ing, The relat ionship betwee n the two has yet to be

30 SOCIETY MARCH/APRIL 2007


8/8

worked ou t- -and there i s p rac t ica l ly no precedent fo r

it . Working this out ma y be essential to assure the

scalabil i ty of effective social innovations.

Socia l en t repreneursh ip i s a p romising develop-

ment tha t may lead in to a new era in which we more

effec tively harness private init iative, ingenuity,

nd

resources to improve social and environmental condi-

t ions. We need to provide the r ight suppo rt and we nee d

to address fundamenta l quest ions.

F U R T H E R R E A D I N G S

Bornstein, David. 2004.

How to Change the World: Social

Entrepreneurship and the Power of New Ideas.

New York:

Oxford University Press.

Dees, J. Gregory, and Beth Battle Anderson. Sector Bending:

Blurring the Lines between Nonpro fit and For-Profit,

Soci-

ety 40, 4, May/June 2003. Reprinted in Peter Frumkin and

Jonathan B. Imber (eds.),

In Search o f the Nonprofit Sector.

New Brunswick, NJ: Transaction Publishers, 2004.

Mosher-Williams, Rachel, ed. 2006. Research on Social En-

trepreneurship: Understanding a nd Contributing to an

Emerging Field,

ARNOV A Occasional Paper Series, vol.

1, no. 3.

Nichols, Alex. 2006. Socia l Entrepreneurship : Ne w Paradigms

of Sustainable Soc ial Change.

New York: Oxford U niver-

sity Press.

Yunus, Muhammad. 1999. Banker to the Poor: Micro-Lend-

ing and the Battle Against World Poverty.

New York:

PublicAffairs.

J. Gre gou Dees is adjunct professor and faculty director of

the Center Jbr the Advanc ement of Social Entrepreneurship

at Duke University s Fuqua School of Business. He is co-

au thor o f

Enterprising Nonprofits and Strategic Tools for

Socia l Entrepreneurs.

Transaction and Soc ie ty take this occasion to sadly acknowledge the

loss of a great Am erica n statesman, l i felong friend an d passionate

collaborator.

l EANE I KIRKP ATR ICK

B OR N: NOVEMB ER 1 9 TH, 1 9 2 6 I N NOR M AN, OKLAHOMA

DIED: DE CEMBER 7TH, 200 6 IN BETHESDA, MARYLAN D

It may be said that no comparable period in human history has seen as

much violence, mayhem and murder, or heard as much talk of morality and human rights. The

relationship between hostile violent deeds and sweeping moral claims is as close in our times as

the relationship between the fact of tyranny and the rhetoric of freedom or the fact of war and the

discourse of peace.

- j EAN E J. Kl RKPAT RIC K,

Human Rights and

Foreign Policy, in

L egit imacy and F orce Pol i t ical an d M oral Dim ensions

Volume On e, page

145 .

Author o f

L egitimacy and orce

Volurae One : Politicaland Moral Dimensions VolumeTwo: National and International Dimensions

(ISBN: 978 -0-88 738- 099- 0) (ISBN: 978-0-8 8738-1 00-3)

' ~ TR ANSA C TI ON PUB LISHER S

RUTGER S--THE STATE UNIVERSITYOF NEW JERSEY

.. .. . ~ NEW BRUNSWICK, NEW JERSEY08903

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