Impact of socio economic

conditions on Social
entrepreneurship

Introduction
Instead of focusing solely on financial value creation, social
entrepreneurship centers on the creation of social value for
disenfranchised members of society
To date, little attention has focused on understanding the
macro-level factors that influence the occurrence of social
entrepreneurship firms

Introduction
Social entrepreneurs are one species of the genus
entrepreneur (Dees et al., 2011, p. 2) and social
entrepreneurship founders are utilizing both for-profit and nonprofit organizational forms (Townsend and Hart, 2012).
Both social and commercial entrepreneurship address similar
questions about the discovery, evaluation and exploitation of
opportunities and the set of individuals who engage in these
actions (Shane and Venkataraman, 2012), and both offer
products and services to gain financial sustainability (Di
Domenico et al., 2011).

Introduction
little research has examined the impact of Socio
economic factors has on social venture creation
Much of the research has not fully explained the
causes of differences in nations and none, to our
knowledge, addresses the impact of social and
economic variables on social entrepreneurship.

Introduction
The impact of these variables is crucial to our
understanding, since there are significant challenges
to producing and marketing products and services at
the base of the economic pyramid, such as imperfect
and incomplete markets, fluctuating prices and costs,
unreliable or absent infrastructure, and weak or
absent formal governance (Thompson and MacMillan,
2013).

Introduction
The purpose of this research is to incorporate the
demand- and supply-side theories of entrepreneurship
that analyze how Socio economic variables influence
social entrepreneurship activity.

Research Question.
Do certain macro-level and micro-level influences
including specific social and economic factors
Stimulate the emergence of social entrepreneurship?

Literature Review
Thornton (2010) has extended this perspective by
integrating the supply-side perspective (where the
focus is primarily on the individual) to complement
and enhance our understanding of firm creation. She
argues for a sociological framework, where
institutional and ecological theories and multilevel
models can be used to integrate the two schools of
thought

Literature Review
Other researchers have similarly proposed the integration
of social and ecological economy objectives, including a
framework for green community entrepreneurship
development (Gliedt and Parker, 2013).
Companys and McMullen (2013) reviewed many of the
theories that incorporate both the demand- and supplyside perspectives and argued that there are two distinct
and emerging schools of thought regarding the
development of any entrepreneurial activity, including
social venture creation.
(1) The economic school;

(2) The social school.

Social influences
The social school emphasizes the role of social
structures in defining the attractiveness of
participating in entrepreneurial activities.
Meek et al. (2010) proposed that social norms have a
significant role in new firm creation, and that
decentralized institutions that are socially determined,
as well as more centralized ones developed by
government, are critical to venture development
Sullivan (2014) reported that governmental support
offered by cities promoted such social
entrepreneurship within communities

Social influences
Social legitimacy refers to the process by which key
stakeholders, the general public, key opinion leaders,
or government officials accept a venture as
appropriate and right, given existing norms and laws
(Aldrich and Fiol, 1994),
based on a reframing of ecological and institutional
theories, emerging firms can develop legitimacy by
employing strategies such as organizing collective
marketing and lobbying efforts (Aldrich and Fiol, 1994).

Social influences
Various formal and informal influences on corruption
have also been investigated, and closed social
networks, particularly within transitional economies,
tend to be associated with greater corruption, while
higher GDP is linked to lower corruption (Tonoyan et
al., 2010).

Economic influences
The economic school contends that the attractiveness of
social entrepreneurship exists as a result of the
information about material resources in society
(Companys and McMullen, 2013, p. 301) and the
economic context of entrepreneurial opportunities.
In a study of the formal and informal factors that
promote social entrepreneurial activity, Ferri and Urbano
(2010) asserted that governments have a role to play in
fostering the entrepreneurial dynamism of the economy

Economic influences
Their results showed that public spending including
the payments of subsidies, grants, social benefits and
the like has a negative impact on social
entrepreneurship, indicating that lower levels of public
expense may discourage individuals from even
considering social entrepreneurial activity and reduce
the economys entrepreneurial potential (Ferri and
Urbano, 2010).
In a study by Gliedt and Parker (2013), green
community entrepreneurship was driven by a loss of
government funding and a related market collapse for
residential energy audits, while it was facilitated by
external social capital network flows, human capital
stocks and strategic partnerships.

Economic influences
Van Putten and Green (2010) found that during a recession
such as the one experienced beginning in 2007, factors
including low cost of skilled labor, cheaper supplies, tax
incentives, technology and social networks increase the ease
of entry into social entrepreneurship.
Recent work has suggested that partnerships are critical to
the emergence and success of nonprofit and for-profit social
ventures, and that they are more important for social ventures
operating in developing regions characterized by greater
institutional constraints, such as Africa, Asia and Latin America
(Meyskens and Carsrud, 2011).

Economic influences

Social entrepreneurs can more effectively address social ills in some

contexts by partnering with governments and other institutions (Sud,
2009).

Researchers have also proposed that hybrid structures in international

new ventures enable properties of social capital embedded in the new
firm to form effective international market channels and deliver high
long-term performance (Berg et al., 2008).

Research model

Economical
Factors

Social Factors

Social
Entrepreneurship

Hypothesis

There is significant relationship between social factor and social

entrepreneurship.

There is significant relationship between social entrepreneurship and

economic factors.

Discussion of variables

We utilize the method employed by Griffiths et al. (2009a), where this

measure is operationalized using the index developed by Transparency
International, who rank the level of government corruption

(Broadman and Recanatini) find the same broad social and economic
causalities in a study of transition economies, as do most global crosscountry studies (e.g. Djankov et al., ), i.e. that corruption tends to
decline with economic development, strengthening of democratic
processes and, to some extent, greater openness of trade.

Discussion of variables

Gender equality is introduced for two principal reasons. First, one would
rationally expect that increases in the labor force would result in
additional (social) entrepreneurial activity.

Second, Wilson and Kickul (2006) found that females interested in

entrepreneurial careers are more likely than males to be motivated by
social aspects than by economic motives

Males interested in entrepreneurship are more likely to be motivated by

the lure of financial success than by the social aspects of
entrepreneurship.

Discussion of variables

Economic and social motives are not, however, mutually exclusive;

Wilson and Kickul (2006) contend that young women want to succeed
financially, but appear unwilling to do this at the expense of also making
a positive difference, making them a powerful source of future
entrepreneurship that will have both social and economic value creation
at its core.

In a study of per capita incomes and levels of corruption, Treisman

states: Rich countries are perceived to be less corrupt than poor ones
Hence, we employ GDP per capita to control for wealth levels,
competitiveness and the allocative efficiency of the nation

Discussion of variables

Sullivan and Shkolnikov (2014) contend that, among other things,

corruption leads to misallocation of resources, a lack of competitiveness
and efficiency, lower public revenues for essential goods and services,
lower productivity and lower levels of innovation, lower growth and
private sector employment rates.

Ovaska and Sobel (2012) find no significant impact on the number of

new ventures per 1000 inhabitants, while both Parker and Robson
(2011), and Fisman and Sarria-Allende (2012) find that entrepreneurship
increases with increasing levels of GDP

Discussion of variables

Finally, to proxy for the availability of crucial start-up funding for

potential social entrepreneurial ventures, we employ the national
savings rate as a measure of the availability of capital in the country.
Given the crucial need for such funds, it is not surprising that most
developed countries have small business financing programs

Citing the benefits of a more entrepreneurial labor market,

governments and other macro-economic actors around the world have
instituted programs to foster entrepreneurship

Discussion of variables

Despite evidence to the contrary (Davis et al., 2011), it is often argued

that small entrepreneurial ventures create a disproportionate share of
jobs in the economy

Long (2012) generally conclude that higher federal tax rates cause
higher rates of self-employment.

The explanation for this result usually rests on the assumption that high
tax rates drive workers out of paid employment, or wage jobs, into
entrepreneurial ventures where they can more easily avoid or evade
taxes

Conclusion

The future for social entrepreneurship abounds with many possibilities

and innovations to effectively address, and potentially solve, some of
societys most intractable problems resulting from market and/or
government inadequacies or failures