The differences between “entrepreneurship” and “social entrepreneurship”

According to Webster’s dictionary, an entrepreneur is a person who “organizes, manages and assumes the risks of a business enterprise.” In a 1998 column for Inc
magazine, Norm Brodsky expanded on the definition. “Starting with nothing more than an idea or a prototype,” he wrote, “entrepreneurs have the ability to take a business to the point at which it can sustain itself on internally generated cash flow.”

The most commonly quoted definition of “social entrepreneurship” today was formulated by Prof. J. Gregory Dees of Stanford University in 1998, but his essay contained a fundamental oversight. He outlines five factors that define social entrepreneurship:

1. Adopting a mission to create and sustain social value (not just private value);
2. Recognizing and relentlessly pursuing new opportunities to serve that mission;
3. Engaging in a process of continuous innovation, adaptation, and learning;
4. Acting boldly without being limited by resources currently in hand; and
5. Exhibiting a heightened sense of accountability to the constituencies served and for the outcomes created.

He never mentions earned income.

We think that is not only conceptual flawed, but also psychologically crippling. It lets non-profits off the hook. It allows them to congratulate themselves for being “entrepreneurial” without ever seriously pursuing sustainability or self-sufficiency. They still return, year after year, to the same individual donors, foundations and government agencies.

What, then, is social entrepreneurship? And how does it differ from entrepreneurship per se? A social entrepreneur is any person, in any sector, who uses earned income strategies to pursue a social objective, and a social entrepreneur differs from a traditional entrepreneur in two ways:

1. Traditional entrepreneurs frequently act in a socially responsible manner: They donate money to non-profits; they refuse to engage in certain types of businesses; they use environmentally safe materials and practices; they treat their employees with dignity and respect. All of this is admirable, but their efforts are only indirectly attached to social problems. Social entrepreneurs are different because their earned income strategies are tied directly to their mission: They either employ people who are developmentally disabled, chronically mentally ill, physically challenged, poverty stricken or otherwise disadvantaged; or they sell mission-driven products and services that have a direct impact on a specific social problem (e.g. working with potential dropouts to keep them in school, manufacturing assistive devices for people with physical disabilities, providing home care services that help elderly people stay out of nursing homes, developing and selling curricula).

2. Secondly, traditional entrepreneurs are ultimately measured by financial results: The success or failure of their companies is determined by their ability to generate profits for their owners. On the other hand, social entrepreneurs are driven by a double bottom line, a virtual blend of financial and social returns. Profitability is still a goal, but it is not the only goal, and profits are re-invested in the mission rather than being distributed to shareholders.