Enmanuel , is an important and complex question. First the social entrepreneur must ensure their livelihood, for as long as no sufficient income in the project or new company. Second you have to raise revenues or subsidies for the operation; because you can not distribute losses. Third market strategy is critical in the production and services to be sold . Fourth include a financing strategy that combines equity with external ; should gradually wean the latter.

Dear Salvador, thank you for those four points. They are about the administration view, but you know the poorest suffer with entrepreneurial activities, like the Coyotes in the rural Mexico. It´s a good point to receive services at home but at the end the who win more? We often talk about NECESSARY EVIL. 

One of the recent innovation is microfinance. Entrepreneurs may have the willingness to help the poor but they offer the service at high cost in order to protect the venture and wealth. 

Hello Enmanuel, the question you raised is very important specifically if we talked about developing countries. Social entrepreneurship is new phenomena.Even if we look into the definitions  given by various researchers they all talked about "solving societal problems", "enterprise with a social purpose" and "working in the sector neglected by commercial enterprises" . By doing so they may generate  profit or they may not. But no definition talked about profit generation process of the social enterprise. As we know that social enterprises are broadly classified into three categories i.e. For-profit, cooperatives and Not-for-profits. Therefore , in order to measure the financial stability we can look into the structure and it's area of operations. For example cooperatives (social enterprises) are doing very well in solving various problems in India. Besides the structure, it's the commitment on the part of founders or management  that  decide the working pattern of social enterprise. Therefore, this area required further examination.   

Thank you Dear Tiwari. Cooperatives must retain our attention when we have to talk about social entrepreneurship, rural people know the problems, they face them everyday and innovate to solve some, but they don´t have the required skills or money. Research must come for those points (compare NGO, SE and CBO or cooperatives). 

Hi Remilien,

Your question highlights the nexus of the major issue of contemporary discourse in political economy - in its broadest possible connotations.  That discourse sadly is not yet a dialogue of any substance and will probably remain that way until the one 'party' to the debate, the 'incumbent' one might say, seriously engages with it.  The debate centres around the philosophical and methodological bankruptcy of the neoclassical framework and hence of nearly all policy recommendations and political moves, from global to local level, which are based upon evidence compiled and analysed within tools built upon that philosophical foundation.

The concept of the entrepreneurial 'free-agent', driven by the 'rational' need for personal profit in asset terms whose value can be expressed by a quantum of money normalised to the units by which a single dominant nation enumerates its own currency, and who operates internationally is an institution which an artefact of that belief system.  Granted, no other has been accepted in its place but that is not for want of trying to learn from the lessons of the past 250 years.  It is difficult for people and their societies to abandon the institutions derived from that position which have become embedded over that period of time into all levels of local, national and international human behaviour and thought.  They need to know where they are heading before they can start adapting their behaviour and developing or adapting the institutions which will support them along the path that a conceptual framework based upon a more accurate and appropriate philosophical foundation.

Your question has raised some comments already and these highlight the truth of what I am saying. 

One the one hand Salvador cautions against any social entrepreneurial project which may result in its investor risking personal loss which he clearly expresses in a manner which is entirely consistent within the mainstream view of economics.  To the extent that the investor cannot be assured of acceptably low risk in working with those who need the help, then they will get none.

On the other, we have Preeti.  She is fully aware of the need for, and the existence of, developing alternative models through which social entrepreneurship can take place.  She uses the term entrepreneurship broadly to encompass the concept that it is primarily describing the processes of conceiving, initiating, implementing, nurturing and embedding an act of economic development within the geo-location of a community and embedding it and its benefits from the present and continuing into its far future.  Thus generating well-being for many individuals, in a process which is equally shared, cooperatively laboured at and whose risks are mutually recognised and accepted. 

What they need is not investment but credit.  Credit accorded to them, as a part of a wider community that accepts and recognises itself to be made up of many small communities each one of which is much like the local one imagined here.  each one of which, from time to time, will identify a development opportunity or need and may come forward with an entrepreneurial proposal,  The risk is shared here.  The wider community risks the credit which enables the community to live, and call upon pertinent external resources as inputs, while they divert some of their own energies into the creation and embedding of the development and its benefits into their community.  The credits have to be just that.  Not somebody's cash, but 'new money' limited in its applicability to the project induced needs.  How that credit on the books of the wider community's credit institution is redeemed can be idiosyncratic, determined by the nature of the benefit flows and the recipients of those flows.  Some may come back in cash, some in the increased volume of existing taxes on product, infrastructure usage and production, or in the form of reduced usage of infrastructure.  The credit might in the the latter cases be partly redeemed over the very long term and only a small repayment in cash in the short-term may be required.

These scenarios are not speculative in the modern context.  They are already happening, everyday, within the projects which are well grounded in community-oriented principles of development theory, as opposed - perhaps-  to those of international aid with tied in trade or resource sourcing commitments.  Developmental theory is well known for representing, in much of its precepts, a divergence from those of the neoclassical belief system.  A system in which international aid 'theory' is still firmly entrenched... much of it at a political level on a global scale.

So.  The question is revealed to be one which can only be regraded as cogent from with the neoclassical paradigm, and amongst agents operating according to it.  The need to include a  'poverty penalty' in project costs, as a reward for taking on project risks, arises because of the privatisation, and internationalisation of the provision of social credit.  It highlights the fact that a short-term financially homogeneous return that is required, in general, by an external provider of credit is philosophically, and hence conceptually, incompatible with community development which is undertaken for the long-term well-being and strengthening of a local community and its regional contexts. Such a source of credit is, in neoclassical terms, only seen as and is only admissible as an exercise in taking 'a stake', in taking equity, in the efforts, labours and resources of that community so long as it and the project remain viable.  It as an opportunity to obtain rentier benefits from the labours of others, in perpetuity..  Benefits which will grow purely from that community's labours and success in overcoming the flow of risks it encounters.

To the extent that the equity holder abrogates to himself executive rights, and to the extent that the project represents a substantial activity within the community, that equity holder also gains executive de facto governance functions or influence over the community. The goal of retaining those rights is for the purpose of the preservation of the equity holder's short-term equity value and returns, rather than any short- or long-term considerations of well-being for the community as a whole and for each individual of which is comprised.  This is made easier, emotionally for the equity holder, by the lack of social bonding and interdependency which will always pertain in the personal relationship of the equity holder and each individual into 'eternity'.

On this analysis, one might suspect that no socially important development should be allowed on the basis of equity sharing outside the community concerned, where the 'community' is defined by the scope of the location in which those regularly working at the project are expected to live.  All external flows should perhaps be limited to credits, taxes, fees and revenues.

As you, Remilien, have identified, it is the in the cooperation of people that we will identify ways to develop.  In a world that accepts as its 'Prime Imperative' the universal assurance of well-being in and throughout the lives of each and every individual there is no mainstream philosophical foundation to its political philosophy.  That does not mean that one is not 'nascent'.

 It is.  But it will only be able to coalesce and be formed for birth when currently powerful institutions, whose interests are aligned with those of their creators and their obsolete and antiquated system of beliefs, are prepared to abdicate.  Abdicate and to pro-actively cease supporting the continual division of what is now the Heterodoxy into an ever increasing cloud of myriad sub-disciplines.  Each one viewed by them as supposedly competing with one another, when in fact they are each considering in the relative safety of  artificial isolation aspects of the same big issue - How can we conceive of and build a world that is consistent with our Prime Imperative?  And - How can we do this from within an institutional landscape which is antagonistic towards its appearance?

I think that the focus of Development Economics upon 'doing' and 'learning', developing rules and norms and institutions at a largely practical level in the process, is a very practical way of ultimately outflanking, and flowing past the inertia of the Orthodoxy.  It will be left behind,  'An Island in the Stream'.  Irrelevant to all but those embedded in the 'Ancien Regime' it represents.  A regime which will necessarily lose its present power to influence and control.  Mostly through a lack of interest.  From a new generation, with new ways of communicating and working together and with new conceptions of how people relate to each other and their planet, and how they can and will work together.  Given half a chance to develop freely their own thinking they will develop, through working together, new economic institutions.   They may well find even today's nation-states to be an institution that is an existential artefact of the economic behaviours that are now passing away.   They too will change and become something very different, but appropriate to their new 'time'.  This is Institutional Evolution at work, hand in hand with Social, Economic and Develpmental Evolution.  Each a part of the 'new' whole.

Rob

Poverty Penalty is very complex, one can model it  using institutional voids framework and how institutional voids lead to increased transaction costs. the increase transaction cots is what we understand as penalty ...article by Mair and Marti

Hockerts definition of social entrepreneur is one who use innovation and market forces to address social disequilibrium and get different rents in return.

In that sense, you can actually consider that social entrepreneur leverages on poverty penalty but somehow and creatively reducing the transaction cost of poverty penalty. 

I would use the term innovation and bricolage as how social entreprepeur deals with PP. 

Remilion, As Anirudh has said 'PP is complex'; But perhaps no more so than is the study of International Trade.  Typically SE opportunities are seen as means of 'hooking' underdeveloped communities into international trade.  This comes in two flavours and various combinations of the two.  Historically, before national fiat currencies and the need for foreign exchange markets introduced a third factor cost, international trade was characterised by trade in either luxury 'novelty' goods or in primary commodities that had temporarily become in  short supply locally.  When not facilitated by an exchange of goods transactions were completed by settlement with a locally accepted valuable substance... commonly a precious durable material such as weighed ou gold.   Transaction costs for novelties were not much of an issue as greater end cost gave greater status in the possession of the ultimate buyer.  250 years ago, tea and coffee were in this category. Long before that, and also at that time silk was another.  Supplementation of primary commodities, such as grains and hides and wools, were by necessity and again transaction costs, mostly due to transportation, were secondary to the need for survival.   There was little international trade taking place by comparison with local trading in the local production of goods.

However, technology continued to develop.  technological innovation lead to the application of its fruits towards any opportunity for reward.  Primary amongst these avenues was the growing opportunity for lowering transportation costs in a world increasingly dominated by geographically scattered empires... both for military transport and the shipment, initially, of large quantities of valuable novelty goods.

But it soon became apparent that the lower imperial costs of labour in the production of some domestic basic commodities, and their substitutes, when combined with the lowered transportation costs provided by mechanical and military technologies presented the opportunity of substituting cheap foreign labour for expensive domestic labour in the production of local domestic basic commodities.  This opportunity was seized and attracted, inevitably, technological innovation that made those early sources even more productive in their use of cheaper labour.

The global shortage of precious metals for monetary use that resulted from the magnitude of the increase in international trading volumes lead to their substitution by national fiat currencies of no particular 'normalised' values.  These required foreign exchange markets to come into operation as a dominant factor in the conduct of international trade.

Intentionally, or not, their appearance and their facilitation of speculative transaction in currencies themselves.presented the means of inhibiting any significant objective disturbance in the establsihed labour cost disparities between the 'old imperial nations', and their off-shoots, and those client nations which had emerged meanwhile from their former imperial holdings.  A 'relaxation of control that had only been made possible by the development, through 'hard' technology and monetary philosophy, of 'soft imperial handcuffs' to replace the old steel ones. 

This is the world that today's would-be SE operates within.  Their 'successes, in inserting communities into the international trading arena, ' by and large simply emulate the development of the 'novelty' trade of old in products uniquely available from remote places.  Thanks to marketing of status to the lowest levels of 'domestic' nations, enriched by the long imbalances in trade and sustained by the global institutional landscape, the demand for the luxury products has expanded.  To the extent that 'special' and 'fair trade' deals can be marketed up through the supply chain to their consumers then their producer communities, and the SE traders along the way, can benefit from selling at prices which recoup the PP inherent in their 'sub-optimal' conditions of production.  In essence, however, it simply perpetuates the exploitation of what might be regarded as an artificial disparity in labour costs sustained by the institutions of a trading system designed for the purpose.  Long-term sustained 'development in these conditions must always be of the cash-cropping variety, as is all trade in goods currently 'in fashion where the only true differentiating factor in their present commercial success is their relatively cheap labour and low lifestyle expectations, or their degree of resignation to accept what they have and be grateful.

It is in the products of the extractive industries, and in the production of industrial quantities of basic foodstuffs in their clement environmental conditions, are where these disadvantage communities' real wealth lies.  The international supply chains of which delivery to far places of those commodities is their product are sustained by a web of institutions inter-locked across the producing,transporting and consuming nations which allows for no extension into the working, and economically displaced, populations of those nations whose differentiating advantage they are.

If you want to understand what Social Entrepreneurship is, and need a model for the present look no further than medieval Venice.  If on the other hand you would like to consider what an ethical model of social entrepreneurship for the future might look like then you will need to address the vexed aspects of what is after all our behavioural science, and is not a mathematical exercise in fantasy land.   Those vexed areas lie in institutional change and evolution and how the ever evolving 'Zeitgeist' creates new norms and values which exist in tension with the 'ancien regime' until they are institutionalised in its place.  The challenge for the future is how to institutionalise into the global fabric of our societies and their geopolitical arrangement those processes which can perpetually identify, accommodate and integrate shifts in our fundamental norms and values as supportive institutions into ever evolving institutional landscapes, while peacefully easing out those which have become redundant and counter-productive to the purposes embodied in the new.

If no one is willing, and no one can achieve this, then their will be no future in which 'betterment' has any real prospect of being realised, except for the currently decreasing few and their robotic 'cheap labour machines' - self-manufacturing and self-maintaining and self-defending up and down their secure global supply chains  - drone bees running between the 'queens'' nectar supplies at remote plantations and the storehouse and honey factories of the few scattered hives.  No place for economists there I am sorry to say... it is all cut and dried... except for a bit of probabilistic estimation within the production scheduling Gantt charts being manipulated in the databases of the 'hives'.

I would hope that the human rights vision that shapes the Zeitgeist which the masses of the human species currently pin there hopes will be the future that is realised.  There is little prospect of that if we must rely upon the Social Entrepreneurship of quasi-philanthropists whose positions rely upon an institutional landscape that is responsible for what they claim to be working against, despite the evidence that they are actually continuing to work within it and not to be inclined to challenge it or seek to change it.

Is there room in the present reality for the SE model which some claim to be implementing?  The social dimensions which I have illustrated here suggest that SE's are simply neoclassical entrepreneurs with a new niche to be exploited, as you suspect.  The recognition of the structural and institutional contradictions inherent in their position and hence in the long-term  certainty of their inability to deliver the fundamental developmental benefits that they would like to claim for themselves is laid out here.

To the extent that this is publicised across and by the same institutional landscape which benefits from and is created by what SE initiatives claim to be working against while themselves being its product, then and only then will the world be able to talk about SE failure.

Meanwhile, yes, we certainly can.  And we should do so.  And continue until it does become public knowledge and begins to permeate and change the norms and values which will be the basis of the next evolutionary steps in the institutional landscapes that regulate and guide our lives towards our goals.  Locally and globally.

Robin

Hello Robin Thank you. The debate helps me a lot. A special thanks to Anirudh as well. 

Let me comment what´s going in my country. NGOs are the main institution representing social entrepreneurship and recognized by the government officially. There are a lot of people trying to help the poorest one personally with community development initiative, but the most common pass by the churches (a form of NGO), foundation created by institution with commercial purpose (This one can be seen as a form of corporate social responsibility). Studies talk about more than 10000 NGO in Haiti (Pierre Ezer Pélissier, 2013: Université d’Ottawa). Hearing the debates, seeing the country, the situation of the country remain the same or get worse. Haiti looks like a big challenge for NGO, donors, the international community as whole.

Following, Dees (1998): “social entrepreneurs attack the underlying causes of problems, rather than simply treating symptoms”. This is not the case for many non-profits organizations in this country. A clear example is their intervention after the 2010 earthquake. Many people were living in the capital at the given time, when this bad event happened, they return to their communities. But, the international aid arrived at the capital, in order to receive it, they do back to the same city (accepting the bad living condition). Until today, most of the intervention of the NGO is centered in the capital. Yes, we can talk about the failure of this form of social entrepreneurship because it doesn´t care for the root of the social problems.

Social entrepreneurs appear as promising solution to social problems, so claim Sud et al. (2008), “society tends to view ‘‘new’’ solutions as ‘‘the’’ solution”; we are almost all losing in the SE as solution (scholars, practitioners), but less is written or analyzed about its darkside, failure, poverty penalty. I think the solution is in people themselves, in their institution; as this give place to talk about social and solidarity economy. What is needed is to make investigation and action to see the enterprises of this sector (social or voluntary) making what social entrepreneurs pretend to do. Obviously, in the actions, we must give them opportunities, financial resources to execute their projects as we do for the SEs.