Lecture Notes Chapter 7

ENTREPRENEURSHIP: VALUE ADDED VENTURES
CHAPTER 7
ENTREPRENEURSHIP: VALUE ADDED
VENTURES
INTRODUCTION
This chapter outlines approaches to social entrepreneurship by grounding its argument in Polanyis
three economic systems. As these interact in accordance with prevailing socio-political systems, we
link them to arguments for different schools of social entrepreneurship. By examining their
socio-economic origins, a deeper understanding of internal and external social value creation can
be presented. We identify early developments that frame social entrepreneurship with reference to
social innovation, social purpose, and socialization. As the chapter develops, an argument is made
for a hybridization perspective that more closely reflects practice.
In the remaining sections of the chapter, we explore how responsible management practices can be
grounded in the challenges associated with a given starting point. We examine three journeys: 1)
from Third Sector to Social Economy; 2) from Private to Social Economy, and; 3) from Public
Service to Social Entrepreneurship. Each initiating context requires a responsible manager to identify
bodies of knowledge that inform the development of new skill sets. The journey from Third Sector to
Social Economy requires a shift from the mindset of philanthropy (helping only others) to mutuality
(helping self and others). Outlining a pathway from Private to Social Economy requires a shift from
profit-maximizing for shareholders to wealth-maximizing for stakeholders. Lastly, the transition
from public servant to social entrepreneur requires a new capacity to select and commission nonprofit, public-private, or mutual/co-operative solutions to satisfy public policy.
CHAPTER OBJECTIVES
After reading this chapter, students should be able to
. . . analyze an organizations relationship to the social economy.
. . . select social entrepreneurial strategies.
. . . create value-added ventures.
CHAPTER OUTLINE
Opening Case: Mondragon Co-operatives: This case provides a living example of the way
social innovation, social purposes and socialized ownership and control can give rise to an enduring
value-added venture:
Social innovation: identifying the heroes behind social change in institutions
Social purpose and mission: identifying social objectives and creating social
transformation.
Socialized ownership and control: identifying how mutuality and co-operation can
turn individual initiatives into coordinated collective actions.
I.
Social Entrepreneurship and Responsible Management: In this chapter, we

clarify issues by problematizing three dominant schools of social entrepreneurial thought. We
argue that a more useful perspective is to examine the socioeconomic origins of different schools to
identify the challenges that arise when responsible managers pursue socio-entrepreneurial goals from
different starting points.
II.
Goal: The Value-Added Venture: The goal of social entrepreneurship as we describe

it in this chapter is a value-added venture. A venture is an undertaking that involves uncertainty and
the pursuit of reward or opportunity. The term value-added here refers to social-value added, often
through the solution or mitigation of a social issue. In the case of social entrepreneurship, such social
value can be added either through the socialization of the organization, or through an external social
mission that, when fulfilled, benefits society, often transforming the society and its systems.
III.
B.
follows:
Phase 1: Understanding Social Entrepreneurship and Social Innovation

A.
Elementary Perspectives of Social Entrepreneurship: To understand
social entrepreneurship and the related social innovation process, we illustrate the following
three elementary perspectives of social entrepreneurship:
Social innovation
Social purposes (leading to social impact and transformation)
Socialized ownership and control
Economic Systems: Polanyi offered a critique of economic exchange systems, outlining as
Communal system operates on a large scale, based on mutuality and reciprocity
Redistribution systems pooling produce for reciprocal exchange and to ensure
provision for public events and economic uncertainty
Production for markets the notions of gain, profit, and loss become more
important
C.
Identifying the Starting Point for Social Innovation: Before we examine
the challenges encountered during the pursuit of social entrepreneurship, it is worth setting
out a theoretical framework to guide discussion. We start by linking Polanyis concept of
reciprocity to Pearces model of a third system (see Figure 7.2). Charting a social entrepreneurial path requires a reflexive awareness of the way economic thought orients a managers
decision-making. Three schools of social entrepreneurship reflect interactions between three
economic systems.
First system: Private for-profit oriented micro-businesses, SMEs, large
businesses, multi-national corporations.
Second system: Public planned provision community councils, local authorities,
national/regional governments, European Union, United Nations.
Third system: Social family, voluntary organizations and social enterprises clubs/
community enterprises, social firms, social businesses/charities, mutuals, fair trade
companies, worker co-operatives.
D.
Implications for Social Entrepreneurship: By linking Polanyis work on
economic systems to Pearces theory of social enterprise, we gradually build up the
argument for a hybridization approach to the topic.
Building on acceptance that hybridization of economic systems can occur, it follows that
social entrepreneurship can occur both inside and outside the third sector. We argue that the
areas between the third and public sectors, between the public and private sectors, and
between the third and private sector catalyze social entrepreneurship.
E.
Money, Labor, and Land: Polanyi does not argue against market logic in its
entirety, only against the commoditization of fictitious goods. Money, labor, and land, he
asserts, cannot be treated as commodities. If they are, each will be degraded and their value
destroyed or distorted.
Real and Fictitious Goods: introduces the difference between householding,
production for market and identifies fictitious goods.
Four approaches to social entrepreneurship: identifies non-profit, CSR, more-thanprofit and multi-stakeholder approaches to social entrepreneurship.
Types of Hybridisation: the synthesis of different exchange systems.
A multistakeholder model based on social economy principles is put forward as a socially
rational approach to integrating economic systems. In this model, there are a number of
variants where integration of different systems of exchange is partial rather than complete:
A. Nonprofit: Redistribution and Reciprocity
B. Corporate Social Responsibility: Redistribution and Market
C. More-than-Profit: Reciprocity and Market
D. Multistakeholder (Social Economy): Reciprocity, Redistribution, and Market
III.
Phase 2: Envision Your Pathway

A.
From Third Sector to Social Economy: In the following bullet points,
challenges in the transition to social economy are identified along with macro-economic
considerations.
How do you know you are in the Third Sector: This topic identifies language cues
associated with philanthropy and mutuality.
Cultural Influences on Income Streams: Different cultural attitudes to trading and
government support.
Classifying Activities: Wei-Skillerns matrix for deciding between different project
activities.
Steps to achieve change: Skill sets for non-profit (Type A); more-than-profit (Type
B) and social economy (Type D) enterprise development.
B.
From Private to Social Economy: The mindset of the market and its
limitations. The difference between production for members (householding) and
production for market leads into a series of clarifying examples.
Barcelona FC v Arsenal FC: are you member-led or investor-led?
Challenges and opportunities: differences and tensions between manager and
member power: step changes in the transition to social economy.
From employee to co-operative ownership: how Mondragon co-operatives make the
transition.
Steps to achieve change: Skills sets for Type A, B and D social enterprise development.
C.
From Public Service to Social Entrepreneurship: The influence of New

Public Management (NPM) as a theory of public sector transformation is outlined. By
considering the difference between privatization and localization we contextualise how
NPM might trigger a range of changes in the delivery health and public services.
The loss of public sector distinctiveness: NPM doctrines that erode professional
judgment in favor of accountability of (and to) managers.
From bureaucratic rules to management discretion: NPM doctrines that encourage
top management control of targets and performance management.
Contrasting Cases: the case of Eaga plc v Italian social co-ops.
Steps to achieve change: Skills sets for Type B, C and D social enterprise
development
PRINCIPLES OF MANAGEMENT: ENTREPRENEURSHIP

I.
II.
III.
IV.
V.
VI.
VII.
Social entrepreneurship describes the discovery and sustainable exploitation of opportunities to create social and environmental benefits.
The goal of the social entrepreneurship process is to create a value-added venture that at the
same time socializes the organization internally and creates social value systemically externally.
The market is only one type of economic system. There are alternatives.
The nonprofit model of social entrepreneurship emphasizes reciprocity and redistribution
facilitated by voluntary and political action.
The corporate social responsibility model of social entrepreneurship emphasizes redistribution through new types of market exchange.
The more-than-profit model of social entrepreneurship emphasizes market exchanges that
encourage reciprocity.
The social economy model of social entrepreneurship emphasizes the hybridization of reciprocity, redistribution, and market exchange to maximize human well-being.

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ENTREPRENEURSHIP: VALUE ADDED VENTURES

ENTREPRENEURSHIP: VALUE ADDED VENTURES

Social Entrepreneurship and Responsible Management: In this chapter, we

Goal: The Value-Added Venture: The goal of social entrepreneurship as we describe

Phase 1: Understanding Social Entrepreneurship and Social Innovation

ENTREPRENEURSHIP: VALUE ADDED VENTURES

Phase 2: Envision Your Pathway

From Public Service to Social Entrepreneurship: The influence of New

ENTREPRENEURSHIP: VALUE ADDED VENTURES

PRINCIPLES OF MANAGEMENT: ENTREPRENEURSHIP

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