Final Report Summary - SELUSI (Social Entrepreneurs as "Lead Users" for Service Innovation)
Executive Summary:
SELUSI research project has been working to find out whether the special abilities of social entrepreneurs might be utilised by more traditional companies to promote their own innovation-led growth. The project suggests that the intelligence of social entrepreneurs can be leveraged to enhance innovative processes in corporate contexts outside the realm of the purely social enterprise.
In Europe’s mature economies, innovation is the grease that keeps the wheels of commerce turning. Consequently, considerable effort (and money) is being spent on finding out how best to foster innovation, particular in the services sector, since that accounts for the bulk of Europe’s private-sector economic activity. One source of innovative capital, however, appears to have been largely neglected in this quest: social entrepreneurs.
SELUSI was launched in 2008 with an awareness that it was operating in a field that was poorly understood. In order to approach their subject methodically, the SELUSI team developed a basic set of criteria for selecting enterprises to be included in the project panel sample. They focused on “ventures that are primarily in the business of creating significant social value and do so in an entrepreneurial, market-oriented way – that is, through generating own revenues to sustain themselves”.
Working in five EU Member States (Hungary, Romania, Spain, the UK and Sweden), the researchers sought out ventures that were not only regarded as having a special feel for societal trends but also practical experience of thinking up a business model. These types of ventures were considered as offering the most relevant intelligence for mainstream businesses.
Over the course of two years (between 2009 and 2011) the SELUSI team then set about collecting data on over 600 social enterprises, creating a unique panel data set. The researchers analysed the attributes of 500 individual social entrepreneurs, identifying what sets them apart from their non-social-enterprising peers. What they found was that social entrepreneurs appear to be much less conformist and radically more ‘universalist’ (with values transcending the self) than mainstream entrepreneurs.
With their more universalist orientation, social enterprises were found to be more sensitive - and responsive - to social market needs. Indeed, the researchers found that social ventures systematically identify and respond to such needs (e.g. environmental concerns or the specific needs of the elderly) long before the bulk of the marketplace encounters them. SELUSI suggests that in this sense social enterprises are on the cutting edge when it comes to dealing with certain needs, and that obliges them to innovate as a matter of course. In sum, these project’s findings support the hypothesis that social enterprises are indeed ‘lead users’ for social service innovation.
Aside from exploring what motivates social entrepreneurs and how they experience social service needs, SELUSI undertook three action-research experiments in which it tested ways to link the intelligence of social enterprises with the real-world innovation challenges of a mainstream business.
We have built the first systematic, detailed and population representative panel database on social enterprises in Europe. These data afford a unique look into the phenomenon of social enterprise across different country-contexts today and over time. Furthermore, we have evolved and pilot-tested practical methods through which social enterprises can inspire mainstream businesses to effectively and sustainably contribute to the realization of the EU’s Strategy 2020.
In conjunction with the service innovation consultancy, i-propeller, SELUSI developed an open-innovation mechanism based on ‘crowd sourcing’ (outsourcing a task to a large group of people or community). One of the experiments involved the mainstream ICT company, Telenet (Belgium). The aim in this case was to explore how a large telecommunication company in Western Europe can effectively recognise opportunities for social business innovation.
Utilising crowd sourcing techniques, the experiment integrated input from 17 external social entrepreneurs. They were asked to provide ideas on how to build a ‘green’ identity for the company in order to help it sustain its competitive advantage. Crowd-sourced input was also collected for the same purpose from employees within the telecommunications company. The ideas of the two groups were meticulously documented, analysed and scored.
What the researchers found was that “relative to corporate employees, social entrepreneurs delivered more integrative ideas.” Examining the results of the action-experiments, the research team concluded that ideas crowd-sourced from social entrepreneurs do indeed differ from those that a company can access internally.
While much research remains to be done in this exciting field, SELUSI has demonstrated that social entrepreneurialism does have an innovative capacity that can be of benefit to mainstream companies. Importantly, the researchers note that social entrepreneurs are particularly strong with regard to services innovation. If that strength can be systematically leveraged – for example, through collaborative techniques such as crowd sourcing – this could have positive implications for Europe’s economic and social development.
Project Context and Objectives:
Project context:
Companies that don’t innovate lose their competitive edge. This is one certainty companies in an increasingly competitive, complex environment face, and which is further driven home by the 2005 re-launch of the Lisbon Strategy. But how should a Philips, IMEC or say a leading company in high-tech or knowledge-based services innovate their service function? While the key to successful innovation once lay in the controlled environment of the corporate laboratory, today the widespread distribution of useful knowledge makes such control unfeasible. Competitive advantage now often comes from leveraging the discoveries, new processes and strategies of others (see e.g. Chesborough, 2003). Now “social entrepreneurs are one potential wellspring of insight and inspiration,” notes Paul Achleitner, Allianz’s CFO. “[Social entrepreneurs] from Bonn to Bangalore are seizing the chance to turn challenge into opportunity, in the process pioneering new markets.” Microfinance, as an example, is now a nearly 7 billion Euro market that is increasingly empowering citizens to realize their full potential in society. Social entrepreneurs do not have all the answers, but they often do see the world and markets differently, experimenting with new business models that could potentially break out of their niches and help transform key elements of the global economy. And yet, research or praxis has not addressed so far how companies in the services sector could productively engage with social entrepreneurs as they seek to accelerate their service innovation processes. Therefore, a key ambition of this research project has been to develop a new ‘service innovation strategy’ whereby companies convert the intelligence and technologies of emerging social entrepreneurs to innovate their services functions.
This research project has aimed to explore the potential for social entrepreneurs to serve as “lead users” for service innovation. Many starting social entrepreneurs are arguably at the leading edge of the market with respect to market trends: They often create new markets and empower new users to participate in those markets. The fair trade coffee label, as an example, was introduced in Europe by the Max Havelaar Foundation in 1988, but has become increasingly mainstreamed by e.g. major supermarket chains including Marks & Spencer (who today sell exclusively fair trade coffee). They take on business challenges that seem hopeless, ones that both governments and companies have abdicated, such as delivering eye care examinations to the poor in India and selling mobile phone services in the Third World. They observe and act on demographic events, which businesses had often neglected hitherto. Homeshare, for instance, acts on the pressing needs and untapped offerings of the elderly and the younger professionals in the UK. New social ventures like Homeshare change our perception of a fact -a glass from half full to half empty, and exploit the innovation opportunities this opens up.
Together these examples suggest that the “lead user” intelligence of starting-up social entrepreneurs relates to at least four common sources of innovation for pure for-profit companies (see e.g. Drucker, 2002). These are consumer trends (in ethics, social values, health, etc.), the demands of the ‘base of the pyramid (BOP)’ (that is, the needs of the very poor and the market opportunities they open up), community trends (like issues of diversity or social cohesion) and demographics. Processes that engage “lead users” have already proven their success elsewhere. Annual sales of lead user product ideas generated for the average lead user project at 3M are conservatively projected to be $146 million after 5 years - more than eight times higher than sales for the average contemporaneously-conducted “traditional” project (that is to say, using ordinary customer input). However, to further explore the potential for social entrepreneurs as “lead users” for services innovation, we needed to better understand the intelligence of emerging social entrepreneurs - that is, unpack the rising phenomenon of social entrepreneurship in a much more systematic way than has been done so far.
A first, major step in our research project has been the creation of a unique panel dataset on emerging social entrepreneurship in developed and emerging market economies in the EU. The production and analysis of these data thus constitute fundamental research aimed at enhancing our understanding of how emerging social entrepreneurs experiment with organizational design, position themselves in the market, reach out to their clients, finance their activities, and innovate. This knowledge has allowed us to define areas where collaborations with service sector companies appear most promising. We have taken those pointers to inform the design of ‘creative open business models,’ with a particular emphasis on a match-making mechanism – again, as we seek to mobilize the potential of social entrepreneurs as “lead users” in service innovation. We have pilot-tested the match-making model with three different companies using a series of action-orientated workshops with academics, social entrepreneurs and a leading company. Each company tabled one specific service innovation challenge, and a specially selected group of social entrepreneurs presented compelling “solutions” or concept notes addressing the challenge at hand. The outcome has been a co-created and pilot-tested proposition for a “SELUSI model.” Finally, we would argue that our unique blend of fundamental research about emerging social entrepreneurship at the market frontier and applied, action-orientated research (towards a SELUSI model) has enabled us to derive a useful set of policy implications.
Project objectives
[1]: Understanding social entrepreneurship in the EU: creating new data, asking new questions
At the core of our research programme lies the development and analysis of a unique, reliable, cross-country comparable and representative panel dataset on 550 social enterprises across Europe. To the best of our knowledge, such systematic, comprehensive evidence on social enterprises’ market and organization-level behaviours was lacking at the time. Scholarly research on social entrepreneurship so far had been by and large ‘phenomenon driven’, with a methodological preference towards strategic reflection on specific examples of innovative praxis, often underpinned by profiles of ‘hero’ social entrepreneurs (see e.g. Dees, Emerson and Economy, 2001; Alvord et al., 2004).
We aim to proactively combine, enrich and confront the large scale survey evidence with other sources of new data – be it data drawing on rich case study analyses, data generated in controlled environments like computer labs, or data generated in the field through action-oriented experiments.
Our goal has been to leverage diverse new data sources to compellingly address a wide variety of open, relevant questions regarding the phenomenon of social entrepreneurship in Europe. We have aimed to generate empirically rigorous, systematic new evidence on how these social enterprises navigate markets, potentially influencing industry-wide norms; how they configure and grow their organizations; and how they (radically) innovate, and potentially produce significant knowledge spill-overs. What does it really mean to be value or mission driven? What implications does the social drive have on management style, and relatedly firm performance? Etc.
[2]: Developing and pilot-testing a SELUSI Innovation Strategy
We have aimed at developing a framework for ‘creative open business models’ that convert ideas and technologies of emerging social entrepreneurs (“lead user” intelligence) into economic value for service innovation processes. We have concentrated in particular on the design of a workable match-making mechanism –i.e. a mechanism which will allow service sector companies to match with a selection of social entrepreneurs around a concrete service innovation challenge raised by the company. The mechanism relates to the logic of crowd-sourcing (Tapscott and Williams, 2006), open innovation, and most closely to the business models of ‘innovation intermediaries.’ Innovation intermediaries are companies that either help innovators use external ideas more rapidly or help inventors find more markets where their own ideas can be used by others to mutual benefit (Chesbrough, 2006).
Our aim has been to design a specific mechanism through which the intelligence of social entrepreneurs, a niche type of entrepreneur, can be leveraged to enhance the innovation processes led by mainstream companies to create shared value – not only economic value, but also positive societal impact. By testing, documenting and evaluating this mechanism in the field, we hope to be able inform and inspire future business leaders in the field of shared value creation about cutting-edge open innovative ways that they can effectively design and launch shared value initiatives.
[3]: Policy implications
Debate on the policy-making implications of our work ran as a red thread, if you will, throughout the project. The evidence that we have produced is neatly aligned with the strategic goals set out in EU2020. Hence, one of our aims has been to mobilize new evidence for policy makers to better inform their decisions of how the vision embodied in EU 2020 can be put to practice. In addition, our work has bearing on four major policy areas: (i) the area of emerging social entrepreneurship both at the EU and member state levels, (ii) that of service innovation particularly at the EU level, (iii) areas of both emerging social entrepreneurship and services innovation in European welfare states versus emerging market economies, and (iv) the role of SELUSI at a global level.
Project Results:
1 - SELUSI PANEL DATABASE
Background: The last twenty years have witnessed a dramatic change in the division of responsibility between the state and the private sector for the delivery of public goods and services. As evidence of weaknesses of in-house government provision has accumulated, there has been a global trend toward greater involvement of the private sector. This has often taken the form of contracting-out to both nonprofits and for-profits, while maintaining state ownership (e.g. Besley and Ghatak, 2001; Chau and Huysentruyt, 2006; Levin and Tadelis, 2010). In other cases, ownership of public facilities by the private sector, or more complex forms of arrangements often referred to as “private-public partnerships” have been encouraged (e.g. Maskin and Tirole, 2008).
Interestingly, and paralleling this growing phenomenon of privatization in the domestic and international realm, we observe the rapid onset of social enterprise initiatives that likewise deliver social services, but do so in a more autonomous, self-sustaining way (Frumkin, 2002; Nicholls, 2007). Social enterprises operate oft complex revenue-generating models so as to realize social change without heavy reliance on outside support, be it government monies or private donations. Today, however, there is a rapidly intensifying interest in social enterprises notably amidst policy-making circles (The Economist, August 2010), not least because many such organizations are experimenting with fresh and bold private sector approaches to help solve urgent, intractable societal problems. Despite this, when starting SELUSI, there was a lack of rigorous empirical understanding of the market and organization-level behaviours of social enterprises.
Contributions: We therefore sought to initiate a unique, large-scale dataset on over 550 social enterprises in Hungary, Romania, Spain, Sweden and the UK. The production and analyses of these data constitute fundamental research aimed at enhancing our understanding of how social enterprises navigate markets, potentially influencing industry-wide norms; how they configure and grow their organizations; and how they (radically) innovate, and potentially produce significant knowledge spill-overs. This project has exploited the special context of social enterprise to make fresh contributions to the fields of empirical industrial organization, organizational economics, management and entrepreneurship.
No such systematic, detailed database on social enterprise currently exists. In gathering new longitudinal evidence on the behaviours of social enterprises in a selection of European countries, we believe we have put in place a powerful motor for generating cutting-edge research on social enterprises in particular, as well as more broadly, the influence of an organization’s (social) mission, its director’s values, and institutional context on managerial practices and firm performance. Furthermore, by exploiting the database’s panel dimension, we have taken first steps at furthering our understanding of the dynamics of organizational (including managerial) change, and attempted to identify its causal impact on firm performance and wider market outcomes.
Just like any other empirical endeavor (with limited resources), we needed to be very precise about our scope and focus. Our focus has been on organizations whose primary goal is to produce a social good, who self-generate at least 5% of own revenues, and who employ at least 1 FTE (apart from the owners). In addition, we always interviewed (to great length) the director - that is, collected information about these organizations from the perspective of their director. The data was mainly collected through structured phone interviews with the director and complemented with information provided to us via an online survey (which we also designed).
Distinctive and complementary: The Global Entrepreneurship Monitor or GEM (2009) represents a large-scale survey programme, capturing comparable data on attitudes toward entrepreneurship, start-up and established business activities, and aspirations of entrepreneurs for their businesses in 54 countries. Each year, a population representative sample is interviewed, on the basis of which reliable measures of the proportion of people who are involved in setting up a business or owners-managers of new businesses can be generated. However, for our purposes, this survey approach was of only limited efficiency due to the relatively low prevalence rates of social entrepreneurs in society. GEM focuses particularly on the enterprise start-up phase and does so cross-sectionally, while our database provides greater in-depth and longitudinal information on multiple phases of venture development. Hence, our database usefully complements and enriches the findings derived using the GEM database. At the same time, the GEM database allows us to verify the country representativeness of our data.
Fellowship organizations, such as Ashoka and the Schwab Foundation for Social Entrepreneurship, have also been building large, systematic databases on their fellows. They document the activities of a select group of social enterprises. And hence, these data risk compromising critical objectivity, and relatedly suffer from weak external validity.
Other large-scale survey initiatives that have informed our survey design include the Global Leadership and Organizational Behaviour Effectiveness study, Panel Study of Entrepreneurial Dynamics, The Comprehensive Australian Study of Entrepreneurial Emergence research project. We carefully reviewed these examples from a methodological (survey method and design) perspective and drawn from their survey modules, where appropriate.
Outcome: We have produced an exportable panel dataset, composed of both qualitative and quantitative data about over 550 social enterprises based in ES, HU, SE, RO and UK. The data cover areas the following major areas
o Organizational design: Organization’s vision, targets in the coming 12 months, operational model, finances, changes in revenue model in the past year, resource configuration, etc.
o Competition and Market Interaction: first mover advantage, nature of competition, etc.
o Innovation: Drivers and barriers to innovation, examples of innovations, nature of collaboration, etc.
o Organizational Performance: Measuring social and financial performance, governance, etc.
o Personnel Practices: Wage structure, goal setting, employee satisfaction and motivation, etc.
o Policy change: Influence and recommendation, etc.
o Background information about the directors: Motivation and values, socio-demographic profile, etc.
We have compiled a manual of how to navigate the dataset, codebook with details on all the variables included, and inter-rater reliability measures for the rating measures included in the dataset.
2 - SELUSI SAMPLING STRATEGY
Context: The prevalence of social entrepreneurial activity in Europe tends to be fairly small relative to traditional entrepreneurial activity. Furthermore, there exists no sampling frame (e.g. telephone directory, administrative database) on which we could readily draw to identify our sample. Moreover public acknowledgement of the social enterprise phenomenon is erratic and subjective. Therefore, to capture population representative data on what is essentially a “hidden” population, we adapted the respondent driven sampling method (Heckathorn, 1997, 2002; Salganik and Heckathorn, 2004).
Respondent-driven sampling (henceforth, RDS) uses a chain-referral procedure that exploits respondents’ social networks. By combining the breadth of coverage of network-based sampling methods with the statistical validity of standard probability sampling methods, RDS enables us to provide both unbiased population estimates and measures of the precision of those estimates. In sum, it makes it possible to draw statistically valid samples of groups that due to their small size relative to the general population and to non-availability of exhaustive list of population members previously were very difficult to reach.
Contribution: We are the first to apply the respondent-driven sampling (RDS) approach to study hidden “organizations”, not “individuals”. The very first applications of RDS aimed to study the behaviours of hidden population of “individuals”, like drug users, illegal migrants, sex workers, or jazz musicians.
In adapting the method to study social enterprises, we have encountered and overcame numerous difficulties or challenges. We hope that our experiences and methodological advancements can inspire and inform future rigorous study of hard to find organizations – new populations of organizations which cannot be readily retrieved in administrative databases or telephone directories.
Distinctive and complementary: What sets us apart from valuable past research initiatives on social enterprises in Europe is our scope, our sampling method [which like alternative sampling methods has its plusses (helps to ensure population representativeness of the sample like other methods such as convenience sampling) and minuses (costly to implement)] and our depth [we capture evidence around a wide variety of topics related to market- and organization-level behaviors, combining perspectives from economics, psychology, management and sociology] and our rigor [for instance, we recorded the interviews and 30% of all the interviews were double-scored to ensure consistency in the way the rating of some of the responses was done].
3 - SELUSI ACTION-RESEARCH
Context: The notion of action-research is far from new. The term refers to the systematic, reflective, & collaborative process of deep inquiry and problem solving (Argyris 1985; Lewin 1946). We sought to leverage the approach to document in real-time and sustainable, socially-inclusive and competitive business concepts for service innovation.
Contribution: We developed and tested an open innovative mechanism (process) by which the unique intelligence of social entrepreneurs can be leveraged and bring value to companies wishing to identify opportunities for social business innovation. The application of “a mechanism design” thinking to the specific context of social business innovation was to the best of our knowledge, new.
In our action-research experiments, we exploited the consultancy practices led by i-propeller to rigorously study how the specific know-how of social enterprises can be effectively sourced in by mainstream companies to help identify and shape workable new social business service innovations. By staging these experiments, we are able to capture rich details about the process in real-time, and iteratively evolve a workable, pilot-tested SELUSI mechanism.
Our experiments are the first to test a specific open innovation mechanism linking social entrepreneurs and mainstream commercial business. In addition, we complemented the evidence with additional survey evidence to be more precise about the distinct value that social entrepreneurs bring compared to employees at mainstream businesses or mainstream entrepreneurs.
4- SELUSI LAB EXPERIMENTS
Context: There has been a growing interest amongst economics to better understand the role that pro-social motives play in explaining individual and group behaviours. Much of the experiments are only remotely related to real-life contexts. We felt that by studying social enterprises, we were sitting on a very rich pool of data, which we could use to inspire innovative experiments.
Contribution: Two specific themes came to the foreground, when studying more closely the practices and behaviours of social enterprises using the survey data. The first regards the role of prosocial preferences or prosocial values and how this interacts with monetary incentives and organizational culture. The second regards the role of prosocial preferences or prosocial values and how this interacts with incentives to innovate, when the outcome of the innovation process is a public good, not a private good.
5- SELUSI CROSS-DISCIPLINARY, COLLABORATIVE RESEARCH PRACTICES
Context: In many research projects of the size of SELUSI, work is divided and individual teams work separately on individual work packages. SELUSI has been quite distinct in the way it sought to bring very different perspectives together and have everyone work together, work through the same work packages.
Contribution: Our distinct collaborate approach has allowed us to advance truly cutting-edge findings, bring new oxygen to more than one discipline. At the same time, it has also strengthened us in understanding under which conditions the benefits of such a working style are the highest. These are important lessons learned for future researchers.
6- RADICAL INNOVATORS IN THE SERVICES ARENA
We find that social entrepreneurs are much more likely to have introduced new-to-the-market innovations in goods, services or processes over the past 12 months compared to commercial entrepreneurs. What’s fascinating here is that this result holds true across all five distinct country contexts.
Furthermore, when we enquire about the types of radical innovations introduced, we find that 67% of all radical innovations were service-related. These results confirm our initial SELUSI conjecture that the practices of social enterprises are particularly worthwhile investigating in light of Europe’s challenge to strengthen the competitiveness of its services sector.
Relatedly, we find that overall 57% of social enterprises were at the time of starting-up, venturing into a new market in the sense that there were no other organizations that they were competing against, providing similar services or products. This share was highest in the UK, Hungary and Romania. When asked about the market landscape today, 26% of social enterprises still observe no immediate competitors, organizations providing similar services or products in their market. What this also tells us is that in roughly half of the cases, these ‘pioneers’ have been imitated by other actors, which again underlines the significance of social enterprises in creating or opening up sustainable new markets.
The figure below presents the fraction of radical innovators for a subsample of SELUSI social enterprises, namely those with at least 10 FTE employees (blue bars), and a sample of comparable commercial ventures drawn from the Community Innovation Statistics database of Eurostat (yellow bars).
7- THE POWER OF VALUES
We demonstrate that the value orientation of social entrepreneurs tends to be systematically different from that of mainstream entrepreneurs and the population at large. For instance, social entrepreneurs seem to value universalism and stimulation significantly more, while power and conservation measurably less than entrepreneurs (holding constant individuals’ gender, age and educational achievement). These results fit our intuitions that social entrepreneurs tend to care about the welfare of people and nature in general, and behave much like mavericks, tempted to (positively) deviate from established norms as they seek novelty, excitement and challenge. Indeed, it rings a chord with the nature of their business: trying to create significant social change though deploying business methods (often against all odds).
Now, it turns out that the distinct value orientation of social entrepreneurs is key to understanding the way social entrepreneurs innovate and manage their ventures.
In one study, we show that a social entrepreneur’s value profile effectively impacts his or her managerial practices. More specifically, we find that social entrepreneurs who positively value universalism and benevolence and negatively value power and conservation also adopt more participatory workplace practices. We exploit these types of relationships to investigate the influence of managerial practices on measures of organizational success, such as social performance, profit and revenue development and radical innovativeness.
In another study, we examine the relationship between an individual’s distinct value profile and the types of corporate social innovation opportunities he or she recognizes. We show evidence that the distinct value profile of a social entrepreneur systematically explains the distinct type of innovation opportunities he or she identifies and explores.
Finally, we also find that meaningfully affects the creativity of his or her social business ideas. To do so, we first had 5 judges independently rate the creativity of the specific ideas that social entrepreneurs came up with in response to a concrete challenge presented to them as part of an action-research experiment, and then sought to relate the average idea rating to various background characteristics of those social entrepreneurs. We find that the most creative ideas hailed from social entrepreneurs who attached the least importance to conservation values (tradition, conformity and security) and the most importance to openness to change values (self-direction).
8- PERSONNEL PRACTICES
The evidence based on our survey data as well as our case-study research looking into the organisational configuration of Europe’s largest and most successful ethical bank suggests that social enterprises deliver significant social impact in providing high quality work to their employees. To gain further insight into the quality of employees’ work life at social enterprises, we have added an employee survey to our second wave of survey data collection. We are currently pilot-testing the employee survey in the UK first, collecting new data on employees’ perceptions of management practices, job design, leadership, efforts and motivations. These data will notably also allow us to cross-validate entrepreneur-reported management practices with employee experiences. More importantly, we will be the first to build systematic knowledge on working conditions and the quality of work life at social enterprises in the UK.
9- CONFIGURING FOR INSTITUTIONAL CHANGE AND POLICY-MAKING INFLUENCE
Our analysis demonstrates that the extent to which social ventures rely on reputation resources (e.g. reputation of organization and its founders and leaders, reputation of its business and social activities, and organizational endorsement by important individuals), and to a lesser degree, collaboration resources (e.g. participation in joint ventures, informal social networks, and strategic alliances), as well as the social ventures’ capacity to obtain funding from diverse sources, increases their likelihood of impacting national policy-making. By contrast, we find no evidence that diversification of commercial and social activities or the utilization of various operational models affects the likelihood of impacting national policy-making. Finally, our analysis shows that there are few resource and capability configurations that consistently lead social ventures to influence national policy-making – i.e. there exists no blueprint configuration. The configuration consisting of reputation and collaboration resources together with the ability to acquire funding from diverse sources is simply the configuration associated with impacting national policy-making in the largest number of surveyed social ventures.
10 – PRO-SOCIAL VALUES, TOURNAMENT INCENTIVES AND ORGANIZATIONAL CULTURE
In our research, we combine two strands of research, one on organization-person fit (e.g. Hoffmann and Woehr, 2006; Schneider, 1987) and the other concerned with the optimal design of incentives - in the economics (Prendergast, 1999) and management literatures (Gerhardt et al., 2009). Person-organization fit theory so far mostly considered the match of people's value preferences with the organizational culture without paying attention to the incentives used in the organizations. Similarly, economics and management research discuss incentive mechanisms generally or selection into these based on personal dispositions without considering the match with the wider organizational context such as the organizational culture.
We provide new causal evidence of the importance of person-organization fit (e.g. Hoffmann and Woehr, 2006; Schneider, 1987) and extend person-organization fit theory by demonstrating how the effect of P-O fit on performance is moderated by the incentive structure. In our experiment subjects are randomly assigned to three alternative priming conditions, proxying the organizational culture, and two alternative incentive conditions. By controlling for pre-elicited measures of personal preferences as well as measures of personal values, we can study causal interaction effects of preferences and organizational cultures on the performance in various incentive schemes (team, individual).
Potential Impact:
1 – EVIDENCE-BASED POLICY-MAKING
We have developed an in-depth survey methodology that adapts the logic of respondent-driven sampling to ensure that we capture population representative data on what is essentially a 'hidden' population: Social enterprises not only represent a niche of entrepreneurial activity, also their identity cannot be readily retrieved from telephone directories or administrative databases. Our questionnaire is uniquely broad in its scope and depth - we discuss in detail a whole host of topics, ranging from the venture's innovation habits to the director's perceptions of the market environment. Furthermore, our interviewers go through great lengths to ensure high data quality - intensely training interviewers, recording all interviews and double-scoring 30% of those interviews.
The initiatives we took to formulate and disseminate research findings to policy makers at large were manifold and diverse.
Geographic reach: Leveraging our research findings, we have contributed to policy thinking at
o Regional level: for example, we have advised the Flemish government on its strategy to stimulate social entrepreneurship and co-authored a guidebook on how EU’s regions can stimulate social innovation at the request of DG Region
o State-level: we presented our findings about social enterprises in Romania at a national conference on civil society and social entrepreneurship in Romania
o European level: Marieke joined the GECES group
o International level: we have written a report on women social entrepreneurship and innovation using our data at the request of the OECD
Scope: the policy recommendations that naturally follow from our research are very neatly aligned with EU 2020. The data enable us to give evidence of enterprises that create shared value – that bridge societal progress and economic progress. We have used our research to contribute to
o Europe’s understanding of social experimentation, competition and social cohesion (for instance, presenting our results at EC Conference on Social innovation and social experimentation 26/11/2012) .
o Europe’s understanding of service innovation and the role of social enterprise (BEPA presentation)
o Europe’s evidence base on social enterprise and the importance of contextual differences (contributions to the GECES discussions and advice to mapping study on social enterprises commissioned by the EC)
o SELUSI and Globalisation in the Service Economy: Presentation in China, Hong Kong, US, Russia.
2 - SOCIAL ENTERPRISES AS A UNIQUE SOURCE OF INSPIRATION TOWARDS REALIZING THE AMBITIONS OF EU STRATEGY 2020
In reviewing the non-profit organisations social sector areas in which the 550 ventures that we have interviewed so far operate, we observe that 75% of all ventures that we are currently tracking are active precisely in those areas of direct relevance to EU’s ambitions towards inclusive, smart and sustainable growth. The 550 ventures are more or less equally divided across the following social sectors: employment and training, education, economic, social and community development, social services, and the environment.
All the enterprises we study are experimenting with alternative ways of self-sustaining their activity through selling services or products in the market. Often, against all odds given the institutional vacuum or the inefficient markets they have to navigate. And 15% of the ventures operate businesses which specifically aim to employ disadvantaged groups, and in doing so often aim to link up marginalized groups with the mainstream labour market.
3 - WOMEN AT THE HELM OF SOCIAL ENTERPRISES
On average across all countries, we observe a remarkably high share -43% to be precise- of social enterprises being run by women. This is in fact most strikingly so in Hungary and Romania. This renders the organizational dynamics and success of social enterprises of special interest to all policy-makers concerned with gender equality and empowerment.
4 - MEASURING IMPACT BOTTOM-UP
Our project is also unique with respect to the large number of observations we have on the detailed practices social enterprises have in place to measure financial and social impact. Note that only 1 out of the 550 social enterprises interviewed said they use SROI, Social Return on Investment framework to measure social impact. This goes to show that there is great opportunity here to exploit our data so to evolve a bottom-up impact measurement tool.
5 - CONTEXT MATTERS
Our data argues against any blueprint conceptualization of social enterprises in Europe. Rather, they show that social enterprises come in very different shades and colours depending on the country context we focus on. Consider the sector area of social enterprises, for instance: in both Romania and Hungary, there was a clear-cut predominance of social enterprise activity in the sectors of health and social work, and education; whereas in the other three countries (Spain, Sweden and UK), a more diverse picture emerged, though with a common, significant presence of social ventures providing community, social and related services. Or consider the sources of capital: In Sweden, the UK, and Spain, sales and/or fees were clearly the most important source of capital, (followed by grant finance (UK and Spain) or investors’ capital (Sweden). In Hungary, sales and/or fees and grant finance were nearly of equal importance (38% versus 36%). In Romania, by contrast, the most significant share of liquidity hailed from grant finance (52%), followed by sales and/or fees (28.2%) and private donations.
When it comes to policy suggestions for the EU that we elicited from our survey participants: Overall, the types of policy suggestions was very diverse, and their mix differed substantially by country. The UK social ventures most frequently suggested improving access to EU funds, employment and social rights, and financial support. In similar vein, Spanish social enterprises most frequently suggested improving employment and social rights, making legislative changes and improvements in financial support. Legislative changes were likewise frequently mentioned by Hungarian and Romanian social enterprises.
6- LEVERAGING THE INSIGHTS OF SOCIAL ENTREPRENEURS TO STIMULATE SERVICE INNOVATION
The action research experiments allow us to identify wherein the contributions of social entrepreneurs to a social business innovation challenge differ from say the expertise that employees from within a company can bring to the table. We find that corporate employees and social entrepreneurs effectively contribute qualitatively different ideas in response to the same challenge. The ideas put forward by social entrepreneurs involve many more integrative ideas compared to those advanced by internal, corporate employees. That is, they put greater emphasis on behavioural change, and the mechanisms to achieve behavioural change. Hence, when it comes to innovating services more generally, the unique intelligence of social entrepreneurs lies in their integrative approach to problem-solving, particularly attuned to questions of how to achieve sustainable behavioural change.
Mainstream businesses can thus effectively benefit from social entrepreneurs’ unique viewpoint by using them as ‘informants’ on societal trends and by leveraging social enterprises unique insights into behavioural change. Likewise, policy-makers, we contend, could equally benefit from systematically crowd-sourcing the intelligence from social enterprises to enhance the definition and evaluation of new policy reforms.
7 – DIRECT IMPACTS
The direct impact we aim at through this project is twofold:
1. Create the first reliable and comparable dataset on European social enterprises: Our dataset is now based on 5 countries and has already been extended to Belgium. A future PF7 project called SEFORIS shall enlarge the dataset with countries such as Russia, Germany, China and Brazil.
2. Advance the academic production on social entrepreneurship and social innovation and stimulate researchers to build on our findings.
• Unveil scientific knowledge on underexplored topics
• Contribute to the on-going debates about social entrepreneurship, by bringing to bear original, rich and reliable new evidence on social entrepreneurship today and Europe-wide.
• Bust more than one “myth” - popular ideas and their assumptions- about social entrepreneurship, and rather place our understanding of social entrepreneurship on a more solid knowledge base.
With this research, we wish to contribute to a more nuanced, evidence-based understanding of the specificities of social enterprises Europe-wide. The target audience for the research output is fourfold:
1. Social entrepreneurs themselves: increasing their knowledge about themselves, helping them benchmark themselves vis-à-vis their peers, perhaps even inspiring them by the variety of models and experiences captured, and helping them obtain a wider visibility and recognition for the work they are doing.
2. Academics: encouraging their use of reliable, new data to further our understanding of social entrepreneurship, their critical scrutiny and their contribution to an original evidence base about social entrepreneurship more broadly.
3. Civil society and other venture interested in supporting the development of social innovation and social entrepreneurship: increasing their knowledge of the phenomenon, better understanding the promise, potential, needs and limits of social entrepreneurship in Belgium, and this also contextualized from a European perspective.
4. Policy-makers: augmenting their understanding of the phenomenon, and encouraging more evidence-based policy-making in this realm.
8- NEW THINKING
We have invested a lot of time and resources into the data cleaning but also in disseminating the results of SELUSI but also in findings partners to expand the scope of the survey as we believe that the project allowed a unique boost in the creation of academic knowledge on social entrepreneurship and social innovation, topic highly regarded today for the potential of growth and alleviation of social issues in Europe and beyond. Back in 2007, the topic was certainly not so high on the agenda. With modesty, we do assume that SELUSI has played a role in this progression as it allowed us to generate reliable, cross-country comparable evidence on what social enterprises in Europe actually do, and what role they can play in society and the economy at large.
9 - STRATEGIC IMPACT:
Research Area 8.1 of the Seventh Framework Programme calls for the delivery of stronger, lasting growth and the creation of more and better jobs in the EU while respecting and promoting social and environmental objectives. Topic 1.2.2 of this Research Area calls for a better understanding of the implications of developments in the service economy and an assessment of its future evolution in relation to the European economy in general, and competitiveness, growth, productivity, employment and welfare in particular.
Our project responds to those aspects of the Call. Two structural trends, if you will, motivate our research agenda: (i) Pressed by increasingly intense competition from abroad, leading European companies in the services economy recognize more and more the need to rapidly innovate their service functions. (ii) Social entrepreneurship in Europe is on a roll, and an opportunity for these companies to engage the intelligence of social entrepreneurs as “lead users” in their processes of service innovation seems to be hiding in plain sight. And so, we have developed and pilot-tested a new innovation strategy for companies who wish to open up their service innovation processes. We bring forward emerging social entrepreneurs as a powerful, yet so far untapped source of ‘external’ intelligence, ideas and technologies; and devise a new strategy for how companies can access and leverage this intelligence in their service innovation processes. One major hurdle that the development of such a strategy for service innovation encounters is the lack of systematic evidence on emerging social entrepreneurship in Europe. Therefore, we have gathered data on the over 550 social entrepreneurs in Europe over time, and so started-up the first panel dataset on emerging social entrepreneurship in Europe.
10 - DISSEMINATION ACTIVITIES
Policy Brief; Public speaking activities across Europe and outside Europe; Advisory role to the EC (representation in GECES); Academic seminars; Working papers//Publications; Investing in the future (expansion of the dataset to Belgian context, and new countries in the pipeline); Methodological Papers; Manual to facilitate usage of the database; website; research meetings (with representatives both from the academic world, policy-making arena and the field of social enterprise)
List of Websites:
www.selusi.eu
Contact Person:
Dr. Marieke Huysentruyt
London School of Economics
Email: M.E.Huysentruyt@lse.ac.uk
SELUSI research project has been working to find out whether the special abilities of social entrepreneurs might be utilised by more traditional companies to promote their own innovation-led growth. The project suggests that the intelligence of social entrepreneurs can be leveraged to enhance innovative processes in corporate contexts outside the realm of the purely social enterprise.
In Europe’s mature economies, innovation is the grease that keeps the wheels of commerce turning. Consequently, considerable effort (and money) is being spent on finding out how best to foster innovation, particular in the services sector, since that accounts for the bulk of Europe’s private-sector economic activity. One source of innovative capital, however, appears to have been largely neglected in this quest: social entrepreneurs.
SELUSI was launched in 2008 with an awareness that it was operating in a field that was poorly understood. In order to approach their subject methodically, the SELUSI team developed a basic set of criteria for selecting enterprises to be included in the project panel sample. They focused on “ventures that are primarily in the business of creating significant social value and do so in an entrepreneurial, market-oriented way – that is, through generating own revenues to sustain themselves”.
Working in five EU Member States (Hungary, Romania, Spain, the UK and Sweden), the researchers sought out ventures that were not only regarded as having a special feel for societal trends but also practical experience of thinking up a business model. These types of ventures were considered as offering the most relevant intelligence for mainstream businesses.
Over the course of two years (between 2009 and 2011) the SELUSI team then set about collecting data on over 600 social enterprises, creating a unique panel data set. The researchers analysed the attributes of 500 individual social entrepreneurs, identifying what sets them apart from their non-social-enterprising peers. What they found was that social entrepreneurs appear to be much less conformist and radically more ‘universalist’ (with values transcending the self) than mainstream entrepreneurs.
With their more universalist orientation, social enterprises were found to be more sensitive - and responsive - to social market needs. Indeed, the researchers found that social ventures systematically identify and respond to such needs (e.g. environmental concerns or the specific needs of the elderly) long before the bulk of the marketplace encounters them. SELUSI suggests that in this sense social enterprises are on the cutting edge when it comes to dealing with certain needs, and that obliges them to innovate as a matter of course. In sum, these project’s findings support the hypothesis that social enterprises are indeed ‘lead users’ for social service innovation.
Aside from exploring what motivates social entrepreneurs and how they experience social service needs, SELUSI undertook three action-research experiments in which it tested ways to link the intelligence of social enterprises with the real-world innovation challenges of a mainstream business.
We have built the first systematic, detailed and population representative panel database on social enterprises in Europe. These data afford a unique look into the phenomenon of social enterprise across different country-contexts today and over time. Furthermore, we have evolved and pilot-tested practical methods through which social enterprises can inspire mainstream businesses to effectively and sustainably contribute to the realization of the EU’s Strategy 2020.
In conjunction with the service innovation consultancy, i-propeller, SELUSI developed an open-innovation mechanism based on ‘crowd sourcing’ (outsourcing a task to a large group of people or community). One of the experiments involved the mainstream ICT company, Telenet (Belgium). The aim in this case was to explore how a large telecommunication company in Western Europe can effectively recognise opportunities for social business innovation.
Utilising crowd sourcing techniques, the experiment integrated input from 17 external social entrepreneurs. They were asked to provide ideas on how to build a ‘green’ identity for the company in order to help it sustain its competitive advantage. Crowd-sourced input was also collected for the same purpose from employees within the telecommunications company. The ideas of the two groups were meticulously documented, analysed and scored.
What the researchers found was that “relative to corporate employees, social entrepreneurs delivered more integrative ideas.” Examining the results of the action-experiments, the research team concluded that ideas crowd-sourced from social entrepreneurs do indeed differ from those that a company can access internally.
While much research remains to be done in this exciting field, SELUSI has demonstrated that social entrepreneurialism does have an innovative capacity that can be of benefit to mainstream companies. Importantly, the researchers note that social entrepreneurs are particularly strong with regard to services innovation. If that strength can be systematically leveraged – for example, through collaborative techniques such as crowd sourcing – this could have positive implications for Europe’s economic and social development.
Project Context and Objectives:
Project context:
Companies that don’t innovate lose their competitive edge. This is one certainty companies in an increasingly competitive, complex environment face, and which is further driven home by the 2005 re-launch of the Lisbon Strategy. But how should a Philips, IMEC or say a leading company in high-tech or knowledge-based services innovate their service function? While the key to successful innovation once lay in the controlled environment of the corporate laboratory, today the widespread distribution of useful knowledge makes such control unfeasible. Competitive advantage now often comes from leveraging the discoveries, new processes and strategies of others (see e.g. Chesborough, 2003). Now “social entrepreneurs are one potential wellspring of insight and inspiration,” notes Paul Achleitner, Allianz’s CFO. “[Social entrepreneurs] from Bonn to Bangalore are seizing the chance to turn challenge into opportunity, in the process pioneering new markets.” Microfinance, as an example, is now a nearly 7 billion Euro market that is increasingly empowering citizens to realize their full potential in society. Social entrepreneurs do not have all the answers, but they often do see the world and markets differently, experimenting with new business models that could potentially break out of their niches and help transform key elements of the global economy. And yet, research or praxis has not addressed so far how companies in the services sector could productively engage with social entrepreneurs as they seek to accelerate their service innovation processes. Therefore, a key ambition of this research project has been to develop a new ‘service innovation strategy’ whereby companies convert the intelligence and technologies of emerging social entrepreneurs to innovate their services functions.
This research project has aimed to explore the potential for social entrepreneurs to serve as “lead users” for service innovation. Many starting social entrepreneurs are arguably at the leading edge of the market with respect to market trends: They often create new markets and empower new users to participate in those markets. The fair trade coffee label, as an example, was introduced in Europe by the Max Havelaar Foundation in 1988, but has become increasingly mainstreamed by e.g. major supermarket chains including Marks & Spencer (who today sell exclusively fair trade coffee). They take on business challenges that seem hopeless, ones that both governments and companies have abdicated, such as delivering eye care examinations to the poor in India and selling mobile phone services in the Third World. They observe and act on demographic events, which businesses had often neglected hitherto. Homeshare, for instance, acts on the pressing needs and untapped offerings of the elderly and the younger professionals in the UK. New social ventures like Homeshare change our perception of a fact -a glass from half full to half empty, and exploit the innovation opportunities this opens up.
Together these examples suggest that the “lead user” intelligence of starting-up social entrepreneurs relates to at least four common sources of innovation for pure for-profit companies (see e.g. Drucker, 2002). These are consumer trends (in ethics, social values, health, etc.), the demands of the ‘base of the pyramid (BOP)’ (that is, the needs of the very poor and the market opportunities they open up), community trends (like issues of diversity or social cohesion) and demographics. Processes that engage “lead users” have already proven their success elsewhere. Annual sales of lead user product ideas generated for the average lead user project at 3M are conservatively projected to be $146 million after 5 years - more than eight times higher than sales for the average contemporaneously-conducted “traditional” project (that is to say, using ordinary customer input). However, to further explore the potential for social entrepreneurs as “lead users” for services innovation, we needed to better understand the intelligence of emerging social entrepreneurs - that is, unpack the rising phenomenon of social entrepreneurship in a much more systematic way than has been done so far.
A first, major step in our research project has been the creation of a unique panel dataset on emerging social entrepreneurship in developed and emerging market economies in the EU. The production and analysis of these data thus constitute fundamental research aimed at enhancing our understanding of how emerging social entrepreneurs experiment with organizational design, position themselves in the market, reach out to their clients, finance their activities, and innovate. This knowledge has allowed us to define areas where collaborations with service sector companies appear most promising. We have taken those pointers to inform the design of ‘creative open business models,’ with a particular emphasis on a match-making mechanism – again, as we seek to mobilize the potential of social entrepreneurs as “lead users” in service innovation. We have pilot-tested the match-making model with three different companies using a series of action-orientated workshops with academics, social entrepreneurs and a leading company. Each company tabled one specific service innovation challenge, and a specially selected group of social entrepreneurs presented compelling “solutions” or concept notes addressing the challenge at hand. The outcome has been a co-created and pilot-tested proposition for a “SELUSI model.” Finally, we would argue that our unique blend of fundamental research about emerging social entrepreneurship at the market frontier and applied, action-orientated research (towards a SELUSI model) has enabled us to derive a useful set of policy implications.
Project objectives
[1]: Understanding social entrepreneurship in the EU: creating new data, asking new questions
At the core of our research programme lies the development and analysis of a unique, reliable, cross-country comparable and representative panel dataset on 550 social enterprises across Europe. To the best of our knowledge, such systematic, comprehensive evidence on social enterprises’ market and organization-level behaviours was lacking at the time. Scholarly research on social entrepreneurship so far had been by and large ‘phenomenon driven’, with a methodological preference towards strategic reflection on specific examples of innovative praxis, often underpinned by profiles of ‘hero’ social entrepreneurs (see e.g. Dees, Emerson and Economy, 2001; Alvord et al., 2004).
We aim to proactively combine, enrich and confront the large scale survey evidence with other sources of new data – be it data drawing on rich case study analyses, data generated in controlled environments like computer labs, or data generated in the field through action-oriented experiments.
Our goal has been to leverage diverse new data sources to compellingly address a wide variety of open, relevant questions regarding the phenomenon of social entrepreneurship in Europe. We have aimed to generate empirically rigorous, systematic new evidence on how these social enterprises navigate markets, potentially influencing industry-wide norms; how they configure and grow their organizations; and how they (radically) innovate, and potentially produce significant knowledge spill-overs. What does it really mean to be value or mission driven? What implications does the social drive have on management style, and relatedly firm performance? Etc.
[2]: Developing and pilot-testing a SELUSI Innovation Strategy
We have aimed at developing a framework for ‘creative open business models’ that convert ideas and technologies of emerging social entrepreneurs (“lead user” intelligence) into economic value for service innovation processes. We have concentrated in particular on the design of a workable match-making mechanism –i.e. a mechanism which will allow service sector companies to match with a selection of social entrepreneurs around a concrete service innovation challenge raised by the company. The mechanism relates to the logic of crowd-sourcing (Tapscott and Williams, 2006), open innovation, and most closely to the business models of ‘innovation intermediaries.’ Innovation intermediaries are companies that either help innovators use external ideas more rapidly or help inventors find more markets where their own ideas can be used by others to mutual benefit (Chesbrough, 2006).
Our aim has been to design a specific mechanism through which the intelligence of social entrepreneurs, a niche type of entrepreneur, can be leveraged to enhance the innovation processes led by mainstream companies to create shared value – not only economic value, but also positive societal impact. By testing, documenting and evaluating this mechanism in the field, we hope to be able inform and inspire future business leaders in the field of shared value creation about cutting-edge open innovative ways that they can effectively design and launch shared value initiatives.
[3]: Policy implications
Debate on the policy-making implications of our work ran as a red thread, if you will, throughout the project. The evidence that we have produced is neatly aligned with the strategic goals set out in EU2020. Hence, one of our aims has been to mobilize new evidence for policy makers to better inform their decisions of how the vision embodied in EU 2020 can be put to practice. In addition, our work has bearing on four major policy areas: (i) the area of emerging social entrepreneurship both at the EU and member state levels, (ii) that of service innovation particularly at the EU level, (iii) areas of both emerging social entrepreneurship and services innovation in European welfare states versus emerging market economies, and (iv) the role of SELUSI at a global level.
Project Results:
1 - SELUSI PANEL DATABASE
Background: The last twenty years have witnessed a dramatic change in the division of responsibility between the state and the private sector for the delivery of public goods and services. As evidence of weaknesses of in-house government provision has accumulated, there has been a global trend toward greater involvement of the private sector. This has often taken the form of contracting-out to both nonprofits and for-profits, while maintaining state ownership (e.g. Besley and Ghatak, 2001; Chau and Huysentruyt, 2006; Levin and Tadelis, 2010). In other cases, ownership of public facilities by the private sector, or more complex forms of arrangements often referred to as “private-public partnerships” have been encouraged (e.g. Maskin and Tirole, 2008).
Interestingly, and paralleling this growing phenomenon of privatization in the domestic and international realm, we observe the rapid onset of social enterprise initiatives that likewise deliver social services, but do so in a more autonomous, self-sustaining way (Frumkin, 2002; Nicholls, 2007). Social enterprises operate oft complex revenue-generating models so as to realize social change without heavy reliance on outside support, be it government monies or private donations. Today, however, there is a rapidly intensifying interest in social enterprises notably amidst policy-making circles (The Economist, August 2010), not least because many such organizations are experimenting with fresh and bold private sector approaches to help solve urgent, intractable societal problems. Despite this, when starting SELUSI, there was a lack of rigorous empirical understanding of the market and organization-level behaviours of social enterprises.
Contributions: We therefore sought to initiate a unique, large-scale dataset on over 550 social enterprises in Hungary, Romania, Spain, Sweden and the UK. The production and analyses of these data constitute fundamental research aimed at enhancing our understanding of how social enterprises navigate markets, potentially influencing industry-wide norms; how they configure and grow their organizations; and how they (radically) innovate, and potentially produce significant knowledge spill-overs. This project has exploited the special context of social enterprise to make fresh contributions to the fields of empirical industrial organization, organizational economics, management and entrepreneurship.
No such systematic, detailed database on social enterprise currently exists. In gathering new longitudinal evidence on the behaviours of social enterprises in a selection of European countries, we believe we have put in place a powerful motor for generating cutting-edge research on social enterprises in particular, as well as more broadly, the influence of an organization’s (social) mission, its director’s values, and institutional context on managerial practices and firm performance. Furthermore, by exploiting the database’s panel dimension, we have taken first steps at furthering our understanding of the dynamics of organizational (including managerial) change, and attempted to identify its causal impact on firm performance and wider market outcomes.
Just like any other empirical endeavor (with limited resources), we needed to be very precise about our scope and focus. Our focus has been on organizations whose primary goal is to produce a social good, who self-generate at least 5% of own revenues, and who employ at least 1 FTE (apart from the owners). In addition, we always interviewed (to great length) the director - that is, collected information about these organizations from the perspective of their director. The data was mainly collected through structured phone interviews with the director and complemented with information provided to us via an online survey (which we also designed).
Distinctive and complementary: The Global Entrepreneurship Monitor or GEM (2009) represents a large-scale survey programme, capturing comparable data on attitudes toward entrepreneurship, start-up and established business activities, and aspirations of entrepreneurs for their businesses in 54 countries. Each year, a population representative sample is interviewed, on the basis of which reliable measures of the proportion of people who are involved in setting up a business or owners-managers of new businesses can be generated. However, for our purposes, this survey approach was of only limited efficiency due to the relatively low prevalence rates of social entrepreneurs in society. GEM focuses particularly on the enterprise start-up phase and does so cross-sectionally, while our database provides greater in-depth and longitudinal information on multiple phases of venture development. Hence, our database usefully complements and enriches the findings derived using the GEM database. At the same time, the GEM database allows us to verify the country representativeness of our data.
Fellowship organizations, such as Ashoka and the Schwab Foundation for Social Entrepreneurship, have also been building large, systematic databases on their fellows. They document the activities of a select group of social enterprises. And hence, these data risk compromising critical objectivity, and relatedly suffer from weak external validity.
Other large-scale survey initiatives that have informed our survey design include the Global Leadership and Organizational Behaviour Effectiveness study, Panel Study of Entrepreneurial Dynamics, The Comprehensive Australian Study of Entrepreneurial Emergence research project. We carefully reviewed these examples from a methodological (survey method and design) perspective and drawn from their survey modules, where appropriate.
Outcome: We have produced an exportable panel dataset, composed of both qualitative and quantitative data about over 550 social enterprises based in ES, HU, SE, RO and UK. The data cover areas the following major areas
o Organizational design: Organization’s vision, targets in the coming 12 months, operational model, finances, changes in revenue model in the past year, resource configuration, etc.
o Competition and Market Interaction: first mover advantage, nature of competition, etc.
o Innovation: Drivers and barriers to innovation, examples of innovations, nature of collaboration, etc.
o Organizational Performance: Measuring social and financial performance, governance, etc.
o Personnel Practices: Wage structure, goal setting, employee satisfaction and motivation, etc.
o Policy change: Influence and recommendation, etc.
o Background information about the directors: Motivation and values, socio-demographic profile, etc.
We have compiled a manual of how to navigate the dataset, codebook with details on all the variables included, and inter-rater reliability measures for the rating measures included in the dataset.
2 - SELUSI SAMPLING STRATEGY
Context: The prevalence of social entrepreneurial activity in Europe tends to be fairly small relative to traditional entrepreneurial activity. Furthermore, there exists no sampling frame (e.g. telephone directory, administrative database) on which we could readily draw to identify our sample. Moreover public acknowledgement of the social enterprise phenomenon is erratic and subjective. Therefore, to capture population representative data on what is essentially a “hidden” population, we adapted the respondent driven sampling method (Heckathorn, 1997, 2002; Salganik and Heckathorn, 2004).
Respondent-driven sampling (henceforth, RDS) uses a chain-referral procedure that exploits respondents’ social networks. By combining the breadth of coverage of network-based sampling methods with the statistical validity of standard probability sampling methods, RDS enables us to provide both unbiased population estimates and measures of the precision of those estimates. In sum, it makes it possible to draw statistically valid samples of groups that due to their small size relative to the general population and to non-availability of exhaustive list of population members previously were very difficult to reach.
Contribution: We are the first to apply the respondent-driven sampling (RDS) approach to study hidden “organizations”, not “individuals”. The very first applications of RDS aimed to study the behaviours of hidden population of “individuals”, like drug users, illegal migrants, sex workers, or jazz musicians.
In adapting the method to study social enterprises, we have encountered and overcame numerous difficulties or challenges. We hope that our experiences and methodological advancements can inspire and inform future rigorous study of hard to find organizations – new populations of organizations which cannot be readily retrieved in administrative databases or telephone directories.
Distinctive and complementary: What sets us apart from valuable past research initiatives on social enterprises in Europe is our scope, our sampling method [which like alternative sampling methods has its plusses (helps to ensure population representativeness of the sample like other methods such as convenience sampling) and minuses (costly to implement)] and our depth [we capture evidence around a wide variety of topics related to market- and organization-level behaviors, combining perspectives from economics, psychology, management and sociology] and our rigor [for instance, we recorded the interviews and 30% of all the interviews were double-scored to ensure consistency in the way the rating of some of the responses was done].
3 - SELUSI ACTION-RESEARCH
Context: The notion of action-research is far from new. The term refers to the systematic, reflective, & collaborative process of deep inquiry and problem solving (Argyris 1985; Lewin 1946). We sought to leverage the approach to document in real-time and sustainable, socially-inclusive and competitive business concepts for service innovation.
Contribution: We developed and tested an open innovative mechanism (process) by which the unique intelligence of social entrepreneurs can be leveraged and bring value to companies wishing to identify opportunities for social business innovation. The application of “a mechanism design” thinking to the specific context of social business innovation was to the best of our knowledge, new.
In our action-research experiments, we exploited the consultancy practices led by i-propeller to rigorously study how the specific know-how of social enterprises can be effectively sourced in by mainstream companies to help identify and shape workable new social business service innovations. By staging these experiments, we are able to capture rich details about the process in real-time, and iteratively evolve a workable, pilot-tested SELUSI mechanism.
Our experiments are the first to test a specific open innovation mechanism linking social entrepreneurs and mainstream commercial business. In addition, we complemented the evidence with additional survey evidence to be more precise about the distinct value that social entrepreneurs bring compared to employees at mainstream businesses or mainstream entrepreneurs.
4- SELUSI LAB EXPERIMENTS
Context: There has been a growing interest amongst economics to better understand the role that pro-social motives play in explaining individual and group behaviours. Much of the experiments are only remotely related to real-life contexts. We felt that by studying social enterprises, we were sitting on a very rich pool of data, which we could use to inspire innovative experiments.
Contribution: Two specific themes came to the foreground, when studying more closely the practices and behaviours of social enterprises using the survey data. The first regards the role of prosocial preferences or prosocial values and how this interacts with monetary incentives and organizational culture. The second regards the role of prosocial preferences or prosocial values and how this interacts with incentives to innovate, when the outcome of the innovation process is a public good, not a private good.
5- SELUSI CROSS-DISCIPLINARY, COLLABORATIVE RESEARCH PRACTICES
Context: In many research projects of the size of SELUSI, work is divided and individual teams work separately on individual work packages. SELUSI has been quite distinct in the way it sought to bring very different perspectives together and have everyone work together, work through the same work packages.
Contribution: Our distinct collaborate approach has allowed us to advance truly cutting-edge findings, bring new oxygen to more than one discipline. At the same time, it has also strengthened us in understanding under which conditions the benefits of such a working style are the highest. These are important lessons learned for future researchers.
6- RADICAL INNOVATORS IN THE SERVICES ARENA
We find that social entrepreneurs are much more likely to have introduced new-to-the-market innovations in goods, services or processes over the past 12 months compared to commercial entrepreneurs. What’s fascinating here is that this result holds true across all five distinct country contexts.
Furthermore, when we enquire about the types of radical innovations introduced, we find that 67% of all radical innovations were service-related. These results confirm our initial SELUSI conjecture that the practices of social enterprises are particularly worthwhile investigating in light of Europe’s challenge to strengthen the competitiveness of its services sector.
Relatedly, we find that overall 57% of social enterprises were at the time of starting-up, venturing into a new market in the sense that there were no other organizations that they were competing against, providing similar services or products. This share was highest in the UK, Hungary and Romania. When asked about the market landscape today, 26% of social enterprises still observe no immediate competitors, organizations providing similar services or products in their market. What this also tells us is that in roughly half of the cases, these ‘pioneers’ have been imitated by other actors, which again underlines the significance of social enterprises in creating or opening up sustainable new markets.
The figure below presents the fraction of radical innovators for a subsample of SELUSI social enterprises, namely those with at least 10 FTE employees (blue bars), and a sample of comparable commercial ventures drawn from the Community Innovation Statistics database of Eurostat (yellow bars).
7- THE POWER OF VALUES
We demonstrate that the value orientation of social entrepreneurs tends to be systematically different from that of mainstream entrepreneurs and the population at large. For instance, social entrepreneurs seem to value universalism and stimulation significantly more, while power and conservation measurably less than entrepreneurs (holding constant individuals’ gender, age and educational achievement). These results fit our intuitions that social entrepreneurs tend to care about the welfare of people and nature in general, and behave much like mavericks, tempted to (positively) deviate from established norms as they seek novelty, excitement and challenge. Indeed, it rings a chord with the nature of their business: trying to create significant social change though deploying business methods (often against all odds).
Now, it turns out that the distinct value orientation of social entrepreneurs is key to understanding the way social entrepreneurs innovate and manage their ventures.
In one study, we show that a social entrepreneur’s value profile effectively impacts his or her managerial practices. More specifically, we find that social entrepreneurs who positively value universalism and benevolence and negatively value power and conservation also adopt more participatory workplace practices. We exploit these types of relationships to investigate the influence of managerial practices on measures of organizational success, such as social performance, profit and revenue development and radical innovativeness.
In another study, we examine the relationship between an individual’s distinct value profile and the types of corporate social innovation opportunities he or she recognizes. We show evidence that the distinct value profile of a social entrepreneur systematically explains the distinct type of innovation opportunities he or she identifies and explores.
Finally, we also find that meaningfully affects the creativity of his or her social business ideas. To do so, we first had 5 judges independently rate the creativity of the specific ideas that social entrepreneurs came up with in response to a concrete challenge presented to them as part of an action-research experiment, and then sought to relate the average idea rating to various background characteristics of those social entrepreneurs. We find that the most creative ideas hailed from social entrepreneurs who attached the least importance to conservation values (tradition, conformity and security) and the most importance to openness to change values (self-direction).
8- PERSONNEL PRACTICES
The evidence based on our survey data as well as our case-study research looking into the organisational configuration of Europe’s largest and most successful ethical bank suggests that social enterprises deliver significant social impact in providing high quality work to their employees. To gain further insight into the quality of employees’ work life at social enterprises, we have added an employee survey to our second wave of survey data collection. We are currently pilot-testing the employee survey in the UK first, collecting new data on employees’ perceptions of management practices, job design, leadership, efforts and motivations. These data will notably also allow us to cross-validate entrepreneur-reported management practices with employee experiences. More importantly, we will be the first to build systematic knowledge on working conditions and the quality of work life at social enterprises in the UK.
9- CONFIGURING FOR INSTITUTIONAL CHANGE AND POLICY-MAKING INFLUENCE
Our analysis demonstrates that the extent to which social ventures rely on reputation resources (e.g. reputation of organization and its founders and leaders, reputation of its business and social activities, and organizational endorsement by important individuals), and to a lesser degree, collaboration resources (e.g. participation in joint ventures, informal social networks, and strategic alliances), as well as the social ventures’ capacity to obtain funding from diverse sources, increases their likelihood of impacting national policy-making. By contrast, we find no evidence that diversification of commercial and social activities or the utilization of various operational models affects the likelihood of impacting national policy-making. Finally, our analysis shows that there are few resource and capability configurations that consistently lead social ventures to influence national policy-making – i.e. there exists no blueprint configuration. The configuration consisting of reputation and collaboration resources together with the ability to acquire funding from diverse sources is simply the configuration associated with impacting national policy-making in the largest number of surveyed social ventures.
10 – PRO-SOCIAL VALUES, TOURNAMENT INCENTIVES AND ORGANIZATIONAL CULTURE
In our research, we combine two strands of research, one on organization-person fit (e.g. Hoffmann and Woehr, 2006; Schneider, 1987) and the other concerned with the optimal design of incentives - in the economics (Prendergast, 1999) and management literatures (Gerhardt et al., 2009). Person-organization fit theory so far mostly considered the match of people's value preferences with the organizational culture without paying attention to the incentives used in the organizations. Similarly, economics and management research discuss incentive mechanisms generally or selection into these based on personal dispositions without considering the match with the wider organizational context such as the organizational culture.
We provide new causal evidence of the importance of person-organization fit (e.g. Hoffmann and Woehr, 2006; Schneider, 1987) and extend person-organization fit theory by demonstrating how the effect of P-O fit on performance is moderated by the incentive structure. In our experiment subjects are randomly assigned to three alternative priming conditions, proxying the organizational culture, and two alternative incentive conditions. By controlling for pre-elicited measures of personal preferences as well as measures of personal values, we can study causal interaction effects of preferences and organizational cultures on the performance in various incentive schemes (team, individual).
Potential Impact:
1 – EVIDENCE-BASED POLICY-MAKING
We have developed an in-depth survey methodology that adapts the logic of respondent-driven sampling to ensure that we capture population representative data on what is essentially a 'hidden' population: Social enterprises not only represent a niche of entrepreneurial activity, also their identity cannot be readily retrieved from telephone directories or administrative databases. Our questionnaire is uniquely broad in its scope and depth - we discuss in detail a whole host of topics, ranging from the venture's innovation habits to the director's perceptions of the market environment. Furthermore, our interviewers go through great lengths to ensure high data quality - intensely training interviewers, recording all interviews and double-scoring 30% of those interviews.
The initiatives we took to formulate and disseminate research findings to policy makers at large were manifold and diverse.
Geographic reach: Leveraging our research findings, we have contributed to policy thinking at
o Regional level: for example, we have advised the Flemish government on its strategy to stimulate social entrepreneurship and co-authored a guidebook on how EU’s regions can stimulate social innovation at the request of DG Region
o State-level: we presented our findings about social enterprises in Romania at a national conference on civil society and social entrepreneurship in Romania
o European level: Marieke joined the GECES group
o International level: we have written a report on women social entrepreneurship and innovation using our data at the request of the OECD
Scope: the policy recommendations that naturally follow from our research are very neatly aligned with EU 2020. The data enable us to give evidence of enterprises that create shared value – that bridge societal progress and economic progress. We have used our research to contribute to
o Europe’s understanding of social experimentation, competition and social cohesion (for instance, presenting our results at EC Conference on Social innovation and social experimentation 26/11/2012) .
o Europe’s understanding of service innovation and the role of social enterprise (BEPA presentation)
o Europe’s evidence base on social enterprise and the importance of contextual differences (contributions to the GECES discussions and advice to mapping study on social enterprises commissioned by the EC)
o SELUSI and Globalisation in the Service Economy: Presentation in China, Hong Kong, US, Russia.
2 - SOCIAL ENTERPRISES AS A UNIQUE SOURCE OF INSPIRATION TOWARDS REALIZING THE AMBITIONS OF EU STRATEGY 2020
In reviewing the non-profit organisations social sector areas in which the 550 ventures that we have interviewed so far operate, we observe that 75% of all ventures that we are currently tracking are active precisely in those areas of direct relevance to EU’s ambitions towards inclusive, smart and sustainable growth. The 550 ventures are more or less equally divided across the following social sectors: employment and training, education, economic, social and community development, social services, and the environment.
All the enterprises we study are experimenting with alternative ways of self-sustaining their activity through selling services or products in the market. Often, against all odds given the institutional vacuum or the inefficient markets they have to navigate. And 15% of the ventures operate businesses which specifically aim to employ disadvantaged groups, and in doing so often aim to link up marginalized groups with the mainstream labour market.
3 - WOMEN AT THE HELM OF SOCIAL ENTERPRISES
On average across all countries, we observe a remarkably high share -43% to be precise- of social enterprises being run by women. This is in fact most strikingly so in Hungary and Romania. This renders the organizational dynamics and success of social enterprises of special interest to all policy-makers concerned with gender equality and empowerment.
4 - MEASURING IMPACT BOTTOM-UP
Our project is also unique with respect to the large number of observations we have on the detailed practices social enterprises have in place to measure financial and social impact. Note that only 1 out of the 550 social enterprises interviewed said they use SROI, Social Return on Investment framework to measure social impact. This goes to show that there is great opportunity here to exploit our data so to evolve a bottom-up impact measurement tool.
5 - CONTEXT MATTERS
Our data argues against any blueprint conceptualization of social enterprises in Europe. Rather, they show that social enterprises come in very different shades and colours depending on the country context we focus on. Consider the sector area of social enterprises, for instance: in both Romania and Hungary, there was a clear-cut predominance of social enterprise activity in the sectors of health and social work, and education; whereas in the other three countries (Spain, Sweden and UK), a more diverse picture emerged, though with a common, significant presence of social ventures providing community, social and related services. Or consider the sources of capital: In Sweden, the UK, and Spain, sales and/or fees were clearly the most important source of capital, (followed by grant finance (UK and Spain) or investors’ capital (Sweden). In Hungary, sales and/or fees and grant finance were nearly of equal importance (38% versus 36%). In Romania, by contrast, the most significant share of liquidity hailed from grant finance (52%), followed by sales and/or fees (28.2%) and private donations.
When it comes to policy suggestions for the EU that we elicited from our survey participants: Overall, the types of policy suggestions was very diverse, and their mix differed substantially by country. The UK social ventures most frequently suggested improving access to EU funds, employment and social rights, and financial support. In similar vein, Spanish social enterprises most frequently suggested improving employment and social rights, making legislative changes and improvements in financial support. Legislative changes were likewise frequently mentioned by Hungarian and Romanian social enterprises.
6- LEVERAGING THE INSIGHTS OF SOCIAL ENTREPRENEURS TO STIMULATE SERVICE INNOVATION
The action research experiments allow us to identify wherein the contributions of social entrepreneurs to a social business innovation challenge differ from say the expertise that employees from within a company can bring to the table. We find that corporate employees and social entrepreneurs effectively contribute qualitatively different ideas in response to the same challenge. The ideas put forward by social entrepreneurs involve many more integrative ideas compared to those advanced by internal, corporate employees. That is, they put greater emphasis on behavioural change, and the mechanisms to achieve behavioural change. Hence, when it comes to innovating services more generally, the unique intelligence of social entrepreneurs lies in their integrative approach to problem-solving, particularly attuned to questions of how to achieve sustainable behavioural change.
Mainstream businesses can thus effectively benefit from social entrepreneurs’ unique viewpoint by using them as ‘informants’ on societal trends and by leveraging social enterprises unique insights into behavioural change. Likewise, policy-makers, we contend, could equally benefit from systematically crowd-sourcing the intelligence from social enterprises to enhance the definition and evaluation of new policy reforms.
7 – DIRECT IMPACTS
The direct impact we aim at through this project is twofold:
1. Create the first reliable and comparable dataset on European social enterprises: Our dataset is now based on 5 countries and has already been extended to Belgium. A future PF7 project called SEFORIS shall enlarge the dataset with countries such as Russia, Germany, China and Brazil.
2. Advance the academic production on social entrepreneurship and social innovation and stimulate researchers to build on our findings.
• Unveil scientific knowledge on underexplored topics
• Contribute to the on-going debates about social entrepreneurship, by bringing to bear original, rich and reliable new evidence on social entrepreneurship today and Europe-wide.
• Bust more than one “myth” - popular ideas and their assumptions- about social entrepreneurship, and rather place our understanding of social entrepreneurship on a more solid knowledge base.
With this research, we wish to contribute to a more nuanced, evidence-based understanding of the specificities of social enterprises Europe-wide. The target audience for the research output is fourfold:
1. Social entrepreneurs themselves: increasing their knowledge about themselves, helping them benchmark themselves vis-à-vis their peers, perhaps even inspiring them by the variety of models and experiences captured, and helping them obtain a wider visibility and recognition for the work they are doing.
2. Academics: encouraging their use of reliable, new data to further our understanding of social entrepreneurship, their critical scrutiny and their contribution to an original evidence base about social entrepreneurship more broadly.
3. Civil society and other venture interested in supporting the development of social innovation and social entrepreneurship: increasing their knowledge of the phenomenon, better understanding the promise, potential, needs and limits of social entrepreneurship in Belgium, and this also contextualized from a European perspective.
4. Policy-makers: augmenting their understanding of the phenomenon, and encouraging more evidence-based policy-making in this realm.
8- NEW THINKING
We have invested a lot of time and resources into the data cleaning but also in disseminating the results of SELUSI but also in findings partners to expand the scope of the survey as we believe that the project allowed a unique boost in the creation of academic knowledge on social entrepreneurship and social innovation, topic highly regarded today for the potential of growth and alleviation of social issues in Europe and beyond. Back in 2007, the topic was certainly not so high on the agenda. With modesty, we do assume that SELUSI has played a role in this progression as it allowed us to generate reliable, cross-country comparable evidence on what social enterprises in Europe actually do, and what role they can play in society and the economy at large.
9 - STRATEGIC IMPACT:
Research Area 8.1 of the Seventh Framework Programme calls for the delivery of stronger, lasting growth and the creation of more and better jobs in the EU while respecting and promoting social and environmental objectives. Topic 1.2.2 of this Research Area calls for a better understanding of the implications of developments in the service economy and an assessment of its future evolution in relation to the European economy in general, and competitiveness, growth, productivity, employment and welfare in particular.
Our project responds to those aspects of the Call. Two structural trends, if you will, motivate our research agenda: (i) Pressed by increasingly intense competition from abroad, leading European companies in the services economy recognize more and more the need to rapidly innovate their service functions. (ii) Social entrepreneurship in Europe is on a roll, and an opportunity for these companies to engage the intelligence of social entrepreneurs as “lead users” in their processes of service innovation seems to be hiding in plain sight. And so, we have developed and pilot-tested a new innovation strategy for companies who wish to open up their service innovation processes. We bring forward emerging social entrepreneurs as a powerful, yet so far untapped source of ‘external’ intelligence, ideas and technologies; and devise a new strategy for how companies can access and leverage this intelligence in their service innovation processes. One major hurdle that the development of such a strategy for service innovation encounters is the lack of systematic evidence on emerging social entrepreneurship in Europe. Therefore, we have gathered data on the over 550 social entrepreneurs in Europe over time, and so started-up the first panel dataset on emerging social entrepreneurship in Europe.
10 - DISSEMINATION ACTIVITIES
Policy Brief; Public speaking activities across Europe and outside Europe; Advisory role to the EC (representation in GECES); Academic seminars; Working papers//Publications; Investing in the future (expansion of the dataset to Belgian context, and new countries in the pipeline); Methodological Papers; Manual to facilitate usage of the database; website; research meetings (with representatives both from the academic world, policy-making arena and the field of social enterprise)
List of Websites:
www.selusi.eu
Contact Person:
Dr. Marieke Huysentruyt
London School of Economics
Email: M.E.Huysentruyt@lse.ac.uk
