Charity vs Social Entrepreneurship – 5 Differences

Acs, Z.J. et al. (2010) The social value of productive entrepreneurship, George Mason University, Washington

This paper compares the social value created by one social enterprise – the Grameen Bank – and one commercial enterprise – Microsoft. They suggest that social entrepreneurship creates both commercial and social value and that if:

“… the entrepreneurship (with all that entails in the entrepreneurship literature) creates social value, then it is social entrepreneurship.”

They have opened up the definition in this case to include commercial enterprises that create social value. Social entrepreneurship even within Microsoft.

Suddenly I feel nervous.

But the main point of this post was to summarise their five points of comparison between charity and social entrepreneurship … something else that I’d love to have a discussion about.

Role of Social Value Creation

  • charities exist to redistribute income from the haves to the have-nots
  • social entrepreneurship’s role in social value creation is to be a change agent through innovation and mutually benefit exchanges

Social Structure

  • charity works within give structures in society
  • social entrepreneurship creates opportunities for social structural change

Purpose

  • the purpose of charity is to alleviate immediate suffering rather than deep social change
  • social entrepreneurship’s purpose is to improve social conditions

Financing

  • charity is primarily financed through donations
  • social entrepreneurship is funded through a business model

Sustainability

  • charity is not sustainable as it is reliant on donor funding and is a vehicle for income redistribution
  • by definition social entrepreneurship is sustainable as it uses a business model

Time Frame

  • charity is designed to alleviate immediate suffering, the response is quick and the impact is short lived
  • social entrepreneurship can be short-lived or run for decades just like any enterprise

I look at the picture of charities Acs et al. have drawn and see one of charities being a conduit between the haves and have-nots, of being stuck within the structures of society rather than challenging and forcing them to change, of not creating deep social change and only having a short lived impact.

At first glance it’s not a picture that I have heard Charity CEO describing of themselves, but maybe this needs a closer look as to just how true it is?

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3 responses to “Charity vs Social Entrepreneurship – 5 Differences

  • James Thomas

    For me the distinction is more subtle. To compare those “hoary old regulars,” Grameen and Microsoft is simplistic! To me it is the simple notion of the difference between “doing well” and “doing good”. Business sets out to do well. “Social entrepreneurship” is the new buzz that everyone is trying to add to their “doing well” piece. If you can find a bit of “doing good” to trumpet about… suddenly you are a social enterprise and can pat yourself on the back along with the politically correct “new greens”. For me it is far more radical. True Social entrepreneurship is when the emphasis is all “not about the money”. It is when the “doing well” bit is all about enabling the “doing good”. The true social entrepreneur is the one who, if the business fails, will continue trying to find some other way to keep the “doing good” going. The true entrepreneur emerges in finding the way to continue.

    • Bev Meldrum

      Absolutely. We always talked about how social entrepreneurs being motivated by creating social change and using business to achieve that, as opposed to being driven by profit, with some level of social change as an after thought.

      Sustainable social change is always a good thing (discuss?) so I am encouraged that we are beginning to talk about comparing corporates with social entrepreneurs in terms of the social change created. I don’t think we should rule them out purely because they are making a profit and keeping it – which has maybe been the approach in the past. If a corporate comes up with an approach to create greater sustainable social change than any social entrepreneur has done we should be championing that, learning from it and working together to improve it.

      From a measurement point of view, if we can find a way of measuring that social change that is flexible enough to be used in businesses as well as social enterprises, with social entrepreneurs and community organisations then we can have a better idea of where our investments and donations will have the greatest sustainable impact. That would be a good thing.

  • shanleyknox

    Thank you for this! I’m going to be re-posting it on my blog – I feel like there is a huge need for education for people, so that they don’t feel like it’s a negative thing when you say, “no. I am not a nonprofit. I am a social enterprise.”

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