Relationships between Social Entrepreneurship, CSR and Social Innovation: In Theory and Practice

The shared goal of social entrepreneurship, corporate social responsibility and social innovation is the advancement of society. The business model of social enterprises is characterized by unique strategies based on the competencies of the entrepreneurs, and is not aimed primarily at the maximization of profits, but rather at carrying out goals for the benefit of society. Corporate social responsibility refers to the active behavior of a company, by which it can create new solutions to meet the needs of society, either on its own or in cooperation with other social stakeholders. The objectives of this article are to define concepts, describe and integrate relevant theoretical models, develop a model and introduce some examples of international practice that can inspire initiatives for social development. Keywords—Corporate social responsibility, CSR, social innovation, social entrepreneurship. I. DEFINITION OF CONCEPTS HERE is a wide selection of definitions in the literature for the terms social enterprise, corporate social responsibility, and social innovation. Here we discuss these concepts in that order. Significant changes were evaluated in search of an explanation to the reasons for differences. A. Social Enterprise Although the term social enterprise came into use in the 1960s, even today the expressions social enterprise (as a business organization), social entrepreneurship (as an activity), and social entrepreneur (with the focus on a key person) are used in a variety of conceptual systems based on different approaches, and therefore with differing content [1]. The significance of social enterprises is increasing in the European Union economy, the 10% of the overall GDP was produced by them already in 2011 [2], [3]. In this study we will focus primarily on the economic organization of social enterprises. One shared and essential element of all concepts of social enterprise is that the enterprise exists for the purpose of some goal, mission or endeavor related to society. Beyond this, our results of the research related to this concept show that the definitions can be classified into three groups, depending on which features of the social enterprise are emphasized (the three main groups can be found in Table I). These approaches are: Krisztina Szegedi is with the University of Miskolc, H 3515 MiskolcEgyetemváros, Miskolc, Hungary (phone: 3646-565-111; fax: 3646-311-100; e-mail: [email protected]). Gyula Fülöp and Ádám Bereczk are with the University of Miskolc, H 3515 Miskolc-Egyetemváros, Miskolc, Hungary (e-mail: [email protected], [email protected]). 1. Business model approach – social enterprises attempt to fulfill their social goals based on business models and processes used in commercial enterprises. 2. Entrepreneurship competence approach – the key to realizing social goals lies in taking advantage of the characteristics, competencies and skills of the entrepreneur, such as innovation skills, risk taking and a proactive approach. 3. Financial "double bottom line" approach – financial and profitability factors are emphasized based on the so-called double bottom line. The double bottom line approach is related to the strategic approach in its adoption of business policies, though the strategic approach is much broader, and there more direct emphasis is placed on the "down-to-earth" condition of income-producing operation. Regarding the third type, it is important to note that there are several other definitions that consider one of the most important features of a social enterprise to be the reinvestment of profits. Some of these definitions refer to the criteria of a non-profit (or a "hybrid") organization, while others implicitly link it with earnings adequate to cover needs, rather than profit maximization. One such definition is that issued by DTI: “A social enterprise is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners” [14]. Furthermore, corporations have to establish balance between the economic responsibility and the legal, ethical responsibility [15]. Thus, social enterprises are economic units based on certain strategies, business models, and/or business competences (innovation, risk taking) typical of commercial enterprises, whose primary aim is not maximizing profits but tackling a particular social goal. These criteria are best met by the complex definition given by the OECD, which says social enterprise refers to “any private activity conducted in the public interest, organised with an entrepreneurial strategy but whose purpose is not the maximisation of profit but attainment of certain economic and social goals, and which has a capacity of bringing innovative solutions to the problems of social exclusion and unemployment” [16]-[18]. B. Corporate Social Responsibility, Social Innovation, and Corporate Social Innovation According to the definition of the EU, corporate social responsibility (CSR) is “the responsibility of enterprises for their impacts on society” [19]. The approach to corporate social responsibility has a history of over half a century. The Relationships between Social Entrepreneurship, CSR and Social Innovation: In Theory and Practice Krisztina Szegedi, Gyula Fülöp, Ádám Bereczk T World Academy of Science, Engineering and Technology International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering Vol:10, No:5, 2016 1534 International Scholarly and Scientific Research & Innovation 10(5) 2016 scholar.waset.org/1999.10/10004399 In te rn at io na l S ci en ce I nd ex , E co no m ic s an d M an ag em en t E ng in ee ri ng V ol :1 0, N o: 5, 2 01 6 w as et .o rg /P ub lic at io n/ 10 00 43 99 personal responsibility of corporate leaders emerged in the 1930s, and a movement towards taking responsibility for the consequences of the operation of a company and responsibilities towards society strengthened in the 1960s. The corporate situation has undergone major changes: globalization [20], growth in the size of firms, economic powers, negative externalities and various corporate scandals leading to a loss in trust towards companies and the strengthening of the corporate social responsibility movement. Corporate social responsibility can be traced back to ethical consequences, showing true development of business ethics in business practice [21]. The philosophical approach has been replaced by a business approach, with research finding that it is increasingly worthwhile for companies to behave responsibly [22]. The concept of corporate social responsibility has broadened: CSR is a voluntary managerial approach to sustainable development [23]. The question these days is not whether CSR is justified in existing, but rather how to implement it [24]. TABLE I EXAMPLES OF APPROACHES TO THE CONCEPT OF SOCIAL ENTERPRISES „Business models and entrepreneurial methods for social aims” Crossan, Bell and Ibbotson (2004) [4, p.7] „Social enterprises are organisations that are driven by a social mission, aims and objectives, that have adopted an economic business model to achieve their social aims.” BC Centre for Social Enterprise/1, (2016) [5] „A social enterprise is a business that uses entrepreneurial methods to accomplish social goals and/or feed profits to a parent charity or non-profit to enable it to fulfill more of its own social mission.” „Business competences used for social purposes” Mort et al. (2002) [6, p.76] „A multidimensional construct involving the expression of entrepreneurially virtuous behavior to achieve the social mission...the ability to recognize social value creating opportunities and key decision-making characteristics of innovation, proactiveness and risktaking.” NYU Stern (2005) [7] „The process of using entrepreneurial and business skills to create innovative approaches to social problems.” Peredo and McLean (2006) [8, p.56] „Social entrepreneurship is exercised where some person or group aim(s) at creating social value ... shows a capacity to recognize and take advantage of opportunities ... employ innovation ... accept an above average degree of risk ... and are unusually resourceful ... in pursuing their social venture.” Gray, Healy and Crofts (2003) [9, p. 141] “Social enterprise refers to a broad set of approaches that use business acumen to address social goals.” Said School (2005) [10] „A professional, innovative and sustainable approach to systematic change that resolves social market failures and grasps opportunities.” Financial „double bottom line” directly stated Alter (2006) [11, p. 14] “A revenue generating venture to create economic opportunities for very low income individuals, while simultaneously operating with reference to the financial bottom-line.” Fuqua School (2005) [12] „The art of simultaneously pursuing both a financial and a social return on investment (the “double” bottom line).” BC Centre for Social Enterprise/2 (2016) [5] „Social enterprises are revenue-generating businesses... a social enterprise has two goals: to achieve social, cultural, community economic and/or environmental outcomes; and, to earn revenue.” NESsT (2016) [13] „A social enterprise is a business created to further a social purpose in a financially sustainable way.” The definition of CSR that we employ is rather distant from the traditional corporate perspective, and supposes that a company is more than simply a construct pursuing capital return and profit maximization, and that environmental and social aspects need to be integrated into its operation. “Social innovations are new solutions (products, services, models, markets, processes etc.) that simultaneously meet a social need (more effectively than existing solutions) and lead to new or improved capabilities and relationships and better use of assets and resources. In other words, social innovations are both good for society and enhance society’s capacity to act” [25]. The concept of social innovation (SI) appeared in the economics literature in the 1960s, but has truly evolved mainly in the past decade. The reasons for this are dissatisfaction with the orientation in the literature towards technological innovations in economics, and the need for tackling growing social, environment, and demographic challenges, characterized by complex, multi-layered interrelationships, and not really possible to overcome. The literature on social innovation emphasizes civil society, the role of social enterprises and commercial enterprises, and the interplay between skills, competencies, resources and capital in social innovation [25]. Corporate Social Innovation (CSI) forms a bridge between business innovation and social innovation. CSI uses marketbased solutions in the interest of creating possibilities for profitable business, while handling social demands and ecological constraints [26], and attempts to take advantage of opportunities offered by ever expanding national, industrial and cross-border networks [27]. In order to consider a process, a product or a service as a social innovation, there must be clear social and commercial value creation in the background, and a new model is needed to bring a new design, development to market and/or to access new markets. For corporate social innovation, it is necessary to create an innovative culture in order to reward and implement new ideas. It is important to reward the social entrepreneurs who carry out corporate change and who take on the role of social entrepreneurs within large organizations. The best of these entrepreneurs have the ability to inspire others, build coalitions, discover those people within the organization who possess the needed expertise, and influence the implementation of ideas. There is still much to be done in bringing internal and external rewards systems into line with objectives, and often it would be expedient to involve partners with different perspectives in order to achieve success [28]. World Academy of Science, Engineering and Technology International Journal of Social, Behavioral, Educational, Economic, Business and Industrial Engineering Vol:10, No:5, 2016 1535 International Scholarly and Scientific Research & Innovation 10(5) 2016 scholar.waset.org/1999.10/10004399 In te rn at io na l S ci en ce I nd ex , E co no m ic s an d M an ag em en t E ng in ee ri ng V ol :1 0, N o: 5, 2 01 6 w as et .o rg /P ub lic at io n/ 10 00 43 99