Background
In the current world, increasing pressure from problems that arise due to daily changes in the business sector is driving businesses towards finding alternatives to abate the problem. In fact, businesses are drifting further away from the old forms of thinking and incorporating sustainability programmes to create new market (Elkington, Schwab, & Hartigan, 2008).
The changes witnessed in the current business world and the crazy search for new markets is driving entrepreneurship to have a new shift in leadership and management. Social entrepreneurship is like a hybrid that combines both commercial entrepreneurship and social aspects in an organization.
Social change in entrepreneurship
Failing governments and the lack of economic enterpreurship has driven the need for social entrepreneurship to rise (Wei-Skillern, Austin, & Leonard, 2007). Social enterpreurship is a form of enterpreurship that incorporates facets of both economic and social aspects in a business idea (Martin & Osberg, 2007). It is a venture that brings into account the activities that impact positively in a society bringing about social change.
This shift in business paradigm occurred due to the existing suffocation of markets and the need for new markets. The urgency of these new markets has been brought about by the increasing competition faced by businesses. Although social entrepreneurship starts as a small venture or limited effort, it marks troubles with the local output but makes global significance.
This includes provision of water, promoting micro-businesses, waste managing and the preservation of the environment. For example, the escalating growth of micro-industries in the world is due to social entrepreneurship (Zahra et al., 2008).
The development of such ventures and their success has turned them to the spotlight and they have received scholarly attention. This scholarly attention has led to the need to formulate theories that explain this phenomenon (Kuhn, 1962). The idea of social enterpreurship offers a platform for alleviating world poverty through promoting social good (Yunus, 2007)
The positive externalities theory
It is important that any theory that tries to define the concept of social entrepreneurship should address the issues of value creation and value appropriation (Mizik & Jacob, 2003).
The theory of positive externalities best explains the shift towards social enterpreurship. It is apparent that economic entrepreneurship cannot exist in a vacuum. This theory suggests that economic enterpreurship is not valid in areas where there are strong positive externalities.
Basically, the assertion is that the potentiality for value creation is not marched by the potential for value appropriation because the ensuing benefits to the society go much above the benefits accrued to the transacting parties. It is also observed that consumers are likely to reward businesses with positive externalities by consuming more of their goods.
Further, it is perceived that government initiatives and economic entrepreneurship benefits those people with powerful access to resources neglecting the powerless societies. In this theory, powerless society benefits from social entrepreneurship and the entrepreneurs benefit from the powerless society by establishing markets that ensure sustainability.
Although this venture brings forth an implication in the theory, it is not contrary to the definition of the terminology (Campbell & Temple University, 2008).
Explanation of the positive externalities theory
The theory points that the externality notion cannot be clearly depicted by market operation or market price structure which leads to incompetent distribution of wealth, social remuneration, personal expenditure and communal expenses (Ying & Guoli, 1997).
Characteristics of positive externality hypothesis include transferring via other way and not through the price system, non-exclusive and inseparable part as a characteristic of end user, bringing other utilities expenses to decrease and the alleviation of costs to the beneficiary.
The positive externality theory assumes that the allocation of social entrepreneurship is largely for the benefit of the society and not targeted towards the profit analysis. Therefore, the social enterpreurship system distributes benefits and costs based not on the market system of analyzing where profits can be maximized, but by targeting the neglected areas of the society.
Social entrepreneurship also targets areas where economic entrepreneurship has failed to venture, a characteristic that is not exclusive of any player in the society. It aims at creating societal value and not economic value.
Social enterpreurship alleviates the standards of the economic as well as social conditions of a neglected or powerless society. In this quest, it aims at reducing the costs of certain provisions that would have been so costly if provided by the economic entrepreneurs. The positive externality theory aims to balance between value creation and value addition in cases where it ventures (Ellwanger, 1997).
Criticisms of the positive externalities theory
Social enterpreurship is an innovative change that is gripping the business world daily. It is apparent that what the social entrepreneurs strive to achieve is becoming more complex and the desire to augment the costs incurred in creating social value is rising day by day.
The costs also involved in the set up of the social entrepreneurship activities are proving hard to meet by the entrepreneurs thereby distorting the credibility of the theory.
Furthermore, as inflation rises, due expenditures in these endeavors are becoming increasingly complex and are therefore neglected to be attended to by the government (Wei-Skillern, Austin, & Leonard, 2007). This leaves a lot of unfilled gaps in the tenacity of the theory.
Conclusion
The idea of social entrepreneurship taking shape and being embraced by the business world requires a thorough consideration and thought before being implemented. It takes a different mindset from the one embraced by economic entrepreneurs in their profit maximization.
Social entrepreneurship on the other hand aims at creating social value. In the wake of inflation and increased costs, social entrepreneurs need to have a re-consideration of the theories they use.
References
Campbell, K. A. & Temple University. (2008). Towards a general theory of entrepreneurship. London, UK: ProQuest.
Elkington, J., Schwab, K. & Hartigan, P. (2008). Power of Unreasonable People: How Social Entrepreneurs Create Markets that Change the World. New York, NY: Harvard Business Review Press.
Ellwanger, G. (1997). The externality effects of transport, rail international. New York, NY: MacMillan Publishers.
Kuhn, T. S. (1962). The Structure of Scientific Revolutions. Chicago, IL: Chicago University press.
Martin, R. L. & Osberg, S. (2007). Social entrepreneurship: The case for definition. Stanford Social Innovation Review, pp.28-39.
Mizik, N. & Jacobson, R. (2003). Trading off between Value Creation and Value Appropriation: The Financial Implications of Shifts in Strategic Emphasis. Journal of Marketing, 67, pp. 63-67.
Wei-Skillern, J., Austin, J. E., & Leonard, H. (2007). Entrepreneurship in the Social Sector. London, UK: Sage Publications.
Ying, Y. & Guoli, O. (1997). Study on the development strategy of urban rail transit based on externality. New York, NY: MacMillan Publishers.
Yunus, M. (2007). Creating a world without poverty: Social business and the future of capitalism. New York: Public Affairs.
Zahra, S. A. Rawhouser, H. N., Bhawe, N., Neubaum, D. O. & Hayton, J. C. (2008). Globalization of social entrepreneurship Opportunities. Strategic Entrepreneurship Journal, 2 (2), pp.117-131.