Social Entrepreneurship
The concept of social entrepreneurship is relatively new and may not be thought of as a theory. It is more like a domain or niche phenomenon that may deserve attention.
According to Dees (2017), social entrepreneurship has largely emerged out of discontent with the performance of government and charitable organizations in tackling social problems. Governments are often underfunded, ineffective, and too political to do what is right for all. Charities are busy fighting for funds and justifying their existence and many successful such organizations use many of their donors' funds for internal development purposes.
If governments and charities would be more effective at tackling poverty, health issues, and inequality, then there would not be a need for social entrepreneurs to try to pick up the slack. This is also a core idea in the stakeholder theory of entrepreneurship.
What Is Social Entrepreneurship?
Source: Skoll World Forum 2019 • Oxford Saïd Business School
This session from the Skoll World Forum examines the core frameworks of social entrepreneurship, exploring how innovative, market-driven strategies can be systematically deployed to address deep-rooted systemic social and environmental challenges.
Social entrepreneurs act as transformative agents of change by systematically applying rigorous market logic, financial discipline, and business acumen to combat systemic social problems. Unlike traditional philanthropists who rely entirely on unstable donor cycles, these innovators design sustainable, self-funding frameworks to address market failures. They deliberately aim to generate a financial profit—even a slim or tightly managed one—not to enrich private shareholders, but to ensure operational self-sufficiency, maintain a robust cash runway, and continuously expand their business operations to maximize the long-term impact on their target mission groups.
Each social venture is fundamentally organized around a core hybrid mission designed to aid, uplift, or empower a specific underprivileged sub-population or marginalized group. By blending traditional for-profit operational efficiency with non-profit ideological goals, these hybrid enterprises pioneer novel delivery models. Classic real-world examples include microfinance and community development banks (such as Muhammad Yunus’ Grameen Bank), which provide accessible credit lines to unbanked individuals to break cycles of poverty, or localized food banks and recycling networks that explicitly double as subsidized job-training centers and employment conduits for chronically underemployed populations.
Because their core identity is tied to systemic change, social entrepreneurs operate with a profound sense of accountability and ethical duty toward their mission populations. However, evaluating their true performance presents an immense administrative hurdle: unlike commercial startups that measure success through clear, objective metrics like net profit margin or customer lifetime value, many of the qualitative social goods produced by these ventures—such as increased community resilience, psychological well-being, or systemic educational equity—are notoriously difficult to measure or quantify accurately.
This inherent quantification friction makes it incredibly challenging to audited, verifiable proof that a social venture is succeeding in its core mission. Nonetheless, in an increasingly crowded impact economy, these enterprises must aggressively adopt sophisticated "Theory of Change" frameworks and social return on investment (SROI) metrics. Demonstrating transparent, positive, and verifiable outcomes is an absolute operational necessity when they compete against traditional entities for impact investment capital, corporate sponsorships, philanthropic donations, and highly skilled volunteer labor.
Four types of social entrepreneurship
Theories that have been used in the domain of social entrepreneurship include social capital theory, institutional theory, resource dependence theory, effectuation theory, and stakeholder theory.
These frameworks help researchers understand how social entrepreneurs mobilize resources, navigate complex regulatory or cultural environments, create social value, and balance competing commercial and social goals.
Dacin et al. (2010) argue that social entrepreneurship may not need new theory at all and encourage researchers to look to existing entrepreneurship theories to help support the concept.
Related Theories
Social entrepreneurship thrives by blending business efficiency with social mission. These frameworks provide deeper insight into how these hybrid ventures operate:
Ethics & Responsibility
- Stakeholder Theory: Prioritizing mission groups over shareholders.
- Entrepreneurial Responsibility: Managing accountability for social impact.
- Emancipation Theory: Business as a tool for social liberation.
Structural Gaps
- Institutional Voids: Solutions where governments and charities fall short.
- Bricolage Theory: "Making do" with limited resources to solve social needs.
- Informal Entrepreneurship: Meeting community needs outside formal systems.
Strategic Logic
- Xenophilic Theory of Social Entrepreneurship: A special type of social entrepreneurship"
- Effectuation Theory: Means-driven action in social sectors.
- Diffusion of Innovations: How social solutions scale across populations.