The Added Complexity of Social Entrepreneurship: A Knowledge-Based Approach

Abstract

Social entrepreneurship evades easy definition and conceptualization. In this paper, we attempt to advance social entrepreneurship theoretically by examining it conceptually, from a ‘theory of the firm’ perspective. If social entrepreneurship entails pursuit of a double bottom line (Dees, Harvard Business Review, 76 (1), 54–67, 1998), the added complexity of the social entrepreneurial venture identified by Tracey and Phillips (Academy of Management Learning & Education, 6, 264–71, 2007) should be discoverable from a ‘theory of the firm’ perspective. Applying the knowledge-based theory of the firm to social entrepreneurship, we aver that social entrepreneurship's added complexity is manifest when social entrepreneurial ventures make decisions about protecting their knowledge. Social entrepreneurial ventures manifest this added complexity in all three ways Tracey and Phillips identify: managing accountability, managing identity, and managing the double bottom line. In contrast to ordinary entrepreneurial ventures, social entrepreneurial ventures have to balance two incommensurable objectives when they make decisions about protection of their knowledge.

Key Words:

• Social entrepreneurship
• knowledge based
• double bottom line
• social mission
• sharing
• theory of the firm

Acknowledgements

The authors wish to thank Steven C. Michael for his helpful and insightful comments on an earlier draft of this paper. An early version of this paper was presented at the 10th International Conference on Corporate Social Responsibility, New Orleans, LA, USA, on June 18, 2011.

Notes

1. There is some disagreement over the conceptual relationship between the resource-based theory and the knowledge-based theory. Although some conceive of the knowledge-based theory as an outgrowth of the resource-based theory (see, e.g., Grant 1996), others see the knowledge-based theory as a derivation from a separate branch of economic thought (for further discussion, see Eisenhardt and Filipe 2002). For example, knowledge-based theorists draw heavily upon concepts developed in evolutionary economics, whereas resource-based theorists do not (see, e.g., Kogut and Zander 1992, 1996; Spender 1996; cf. Barney 1991).

2. The distinction between for-profit and not-for-profit organizations is one of legal form. Following Ridley-Duff (2007), the account of social entrepreneurship advanced in this paper does not depend upon legal form. Social entrepreneurial ventures may and do choose either form. For a discussion of that choice, see Townsend and Hart (2008). Our knowledge-based analysis applies to either form so long as the venture relies on earned income, as opposed to gifts and donations, to sustain the enterprise.

3. Some commentators on social entrepreneurship emphasize the idea that the object of the social mission must be a group that is underprivileged, underserved, powerless, or some combination of these (see, e.g., Parkinson and Howorth 2008; Florin and Schmidt 2011).

4. A related research question is to examine if social ventures differ from ordinary ventures in how they integrate specialized knowledge. In this paper, we focus on the role of knowledge as the source of competitive advantage, and how social and ordinary entrepreneurs make decisions about its protection and sharing.

5. As mentioned above, some social entrepreneurial ventures operate as charities, in the sense that they sustain their activities primarily on gifts and donations. These ventures are outside the scope of our analysis since they are not relevant to our research question: Among firms relying on earned income to sustain themselves, how is social entrepreneurship different than ordinary entrepreneurship?

6. One potentially fruitful research question from the theory of the firm perspective is the examination of the role of identity challenges in the way social ventures integrate specialized knowledge. The boundaries of the knowledge-based theory may be clarified and tested in the case of social ventures as their ability to provide the cognitive background and the incentive mechanisms to share and integrate knowledge efficiently within a firm (Kogut and Zander 1996) is vulnerable to identity challenges (Tracey and Phillips 2007).

7. In passing, Dacin, Dacin, and Matear (2010, 49) voiced a similar intuition in their review.