Journal of Business Ethics

, Volume 111, Issue 3, pp 335–351 | Cite as

A Positive Theory of Social Entrepreneurship

  • Filipe M. Santos


I propose a theory aimed at advancing scholarly research in social entrepreneurship. By highlighting the key trade-off between value creation and value capture and explaining when situations of simultaneous market and government failure may arise, I suggest that social entrepreneurship is the pursuit of sustainable solutions to neglected problems with positive externalities. I further discuss the situations in which problems with externalities are likely to be neglected and derive the central goal and logic of action of social entrepreneurs, in contrast to commercial entrepreneurs. Overall, this article provides a conceptual framework that allows understanding the growing phenomena of social entrepreneurship and its role in the functioning of modern society.


Social entrepreneurship Theory development Market failure Capitalism Externalities Empowerment Sustainable solutions 



I thank the helpful feedback of Phil Anderson, Kathleen Eisenhardt, Michelle Rogan, Craig Smith, Andy Phillipps, Greg Dees, Pamela Hartigan, Andrew Dowlin, Maciej Workiewicz, Johanna Mair, and Nicola Pless. This paper was improved while in sabbatical during 2011 at the Nova School of Business and Economics in Lisbon.


  1. Alvarez, S. A., & Barney, J. B. (2004). Organizing rent generation and appropriation: Toward a theory of the entrepreneurial firm. Journal of Business Venturing, 19(5), 621.CrossRefGoogle Scholar
  2. Austin, J., Stevenson, H., & Wei-Skillern, J. (2006). Social and commercial entrepreneurship: Same, different, or both? Entrepreneurship: Theory & Practice, 30(1), 1–22.CrossRefGoogle Scholar
  3. Baker, T., & Nelson, R. E. (2005). Creating something from nothing: Resource construction through entrepreneurial bricolage. Administrative Science Quarterly, 50(3), 329.CrossRefGoogle Scholar
  4. Boschee, J. (2001). The social enterprise sourcebook. Minneapolis, MN: Northland Institute.Google Scholar
  5. Certo, S. T., & Miller, T. (2008). Social entrepreneurship: Key issues and concepts. Business Horizons, 51, 267–271.CrossRefGoogle Scholar
  6. Chowdhury, I., & Santos, F. M. (2011). Gram vikas: What is the essence of social entrepreneurship. INSEAD, Case 04/2011-5633.Google Scholar
  7. Dacin, M. T., & Dacin, P. A. (2011). Social entrepreneurship: A critique and future directions. Organization Science, 22(5), 1203–1213.CrossRefGoogle Scholar
  8. Dacin, P. A., Dacin, M. T., & Matear, M. (2010). Social entrepreneurship: Why we don’t need a new theory and how we move forward from here. Academy of Management Perspectives, 24(3), 37.CrossRefGoogle Scholar
  9. de Soto, H. (2000). The mystery of capital. London: Black Swan.Google Scholar
  10. Dees, J. G. (2001). The meaning of “social entrepreneurship”. Unpublished article.Google Scholar
  11. Dees, G., Emerson, J., & Economy, P. (Eds.). (2001). Enterprising nonprofits: A toolkit for social entrepreneurs. New York: John Wiley Sons.Google Scholar
  12. Elkington, J. (1998). Cannibals with forks: The triple bottom line of the 21st century. Gabriola Island: New Society Publishers.Google Scholar
  13. Elkington, J., & Hartigan, P. (2008). The power of unreasonable people: How social entrepreneurs create markets that change the world. Boston, MA: Harvard Business Press.Google Scholar
  14. Emerson, J. (2003). The blended value proposition: Integrating social and financial returns. California Management Review, 45(4), 35.CrossRefGoogle Scholar
  15. Dunn, E. W., Aknin, L. B., & Norton, M. I. (2008). Spending money on others promotes happiness. Science, 319(5870), 1687–1688.Google Scholar
  16. Ghoshal, S., & Moran, P. (2005). Towards a good theory of management. In J. Birkinshaw & G. Piramal (Eds.), Sumantra Ghoshal on management (Chapter 1, pp. 1–27). New Delhi: Pearson Education.Google Scholar
  17. Grossman, S. J., & Hart, O. D. (1986). The cost and benefits of ownership: A theory of vertical and lateral integration. The Journal of Political Economy, 94(4), 691–719.CrossRefGoogle Scholar
  18. Harding, R. (2006). Social entrepreneurship monitor. London: Global Entrepreneurship Monitor.Google Scholar
  19. Haugh, H. (2007). New strategies for a sustainable society: The growing contribution of social entrepreneurship. Business Ethics Quarterly, 17(4), 743–749.CrossRefGoogle Scholar
  20. Hodgkinson, G. P. (1997). Cognitive inertia in a turbulent market: The case of UK residential estate agents. Journal of Management Studies, 34(6), 921.CrossRefGoogle Scholar
  21. Jones, T. M., Felps, W., & Bigley, G. A. (2007). Ethical theory and stakeholder-related decisions: The role of stakeholder culture. Academy of Management Review, 32(1), 137–155.CrossRefGoogle Scholar
  22. Kaiser, O., & Santos, F. (2009). CDI: Growth challenges of a social entrepreneur. ©INSEAD.Google Scholar
  23. Kuhn, T. S. (1962). The structure of scientific revolutions. Chicago, IL: Chicago University Press.Google Scholar
  24. Lavie, D. (2007). Alliance portfolios and firm performance: A study of value creation and appropriation in the U.S. software industry. Strategic Management Journal, 28, 1187–1212.CrossRefGoogle Scholar
  25. Leonard-Barton, D. (1992). Core capabilities and core rigidities: A paradox in managing new product development. Strategic Management Journal, 13, 111–125.CrossRefGoogle Scholar
  26. Mair, J., & Marti, I. (2006). Social entrepreneurship research: A source of explanation, prediction and delight. Journal of World Business, 41, 36–44.CrossRefGoogle Scholar
  27. Markides, C., & Gerosky, P. A. (2005). Fast second: How smart companies bypass radical innovation to enter and dominate new markets. San Francisco, CA: Jossey-Bass.Google Scholar
  28. Martin, R. L., & Osberg, S. (2007). Social entrepreneurship: The case for definition. Stanford Social Innovation Review, Spring, 28–39.Google Scholar
  29. Maynard, M. T., Mathieu, J. E., Marsh, W. M., & Ruddy, T. M. (2007). A multilevel investigation of the influences of employees’ resistance to empowerment. Human Performance, 20(2), 147.CrossRefGoogle Scholar
  30. 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(January), 63–76.CrossRefGoogle Scholar
  31. Murphy, P. J., & Coombes, S. (2009). A model of social entrepreneurial discovery. Journal of Business Ethics, 87(3), 325–336.CrossRefGoogle Scholar
  32. Nichols, A. (Ed.). (2006). Social entrepreneurship: New models for sustainable change. Oxford: Oxford University Press.Google Scholar
  33. Nichols, A., & Young, R. (2008). Preface to the paperback edition. In A. Nichols (Ed.), Social entrepreneurship: New models for sustainable change. Oxford: Oxford University Press.Google Scholar
  34. Nickerson, J. A., Silverman, B. S., & Zenger, T. R. (2007). The ‘problem’ of creating and capturing value. Strategic Organization, 5(3), 211.CrossRefGoogle Scholar
  35. O’Mahony, S. (2007). The governance of open source initiatives: What does it mean to be community managed? Journal of Management and Governance, 11(2), 139.CrossRefGoogle Scholar
  36. O’Mahony, S., & Bechky, B. A. (2008). Boundary organizations: Enabling collaboration among unexpected allies. Administrative Science Quarterly, 53(3), 422.CrossRefGoogle Scholar
  37. Pache, A.-C. (2002). The development of Unis-Cité: 19942002(A) (Vol. 2002-04). ESSEC Case.Google Scholar
  38. Pache, A.-C., & Santos, F. (2010). When worlds collide: The internal dynamics of organizational responses to conflicting institutional demands. Academy of Management Review, 35(3), 455.CrossRefGoogle Scholar
  39. Peredo, A. M., & Chrisman, J. J. (2006). Toward a theory of community-based enterprise. Academy of Management Review, 31(2), 309.CrossRefGoogle Scholar
  40. Pfeffer, J. (1993). Barriers to the advance of organizational science: Paradigm development as a dependent variable. Academy of Management Review, 18(4), 599–620.Google Scholar
  41. Pfeffer, J., & Salancik, G. (1978). The external control of organizations: A resource dependence perspective. New York: Harper & Row Publishers.Google Scholar
  42. Pless, N. M. (2007). Understanding responsible leadership: Role identity and motivational drivers. Journal of Business Ethics, 74(4), 437–456.CrossRefGoogle Scholar
  43. Porter, M. E. (1980). Competitive strategy. New York: Free Press.Google Scholar
  44. Rangan, S., Samii, R., & Van Wassenhove, L. N. (2006). Constructive partnerships: When alliances between private firms and public actors can enable creative strategies. Academy of Management Review, 31(3), 738.CrossRefGoogle Scholar
  45. Rocha, H. O., & Ghoshal, S. (2006). Beyond self-interest revisited. Journal of Management Studies, 43(3), 585–619.CrossRefGoogle Scholar
  46. Rosenberg, R. (2007). GACP reflections on the Compartamos initial public offering: A case study on microfinance interest rates and profits. Washington, DC: GACP/World Bank.Google Scholar
  47. Roy, B., & Hartigan, J. (2009). Empowering the rural poor to develop themselves. Innovations. Special Edition for the World Economic Forum Annual Meeting 2009, pp. 71–97.Google Scholar
  48. Santos, F., & Eisenhardt, K. (2009). Constructing markets and organizing boundaries: Entrepreneurial power in nascent fields. Academy of Management Journal, 52(4), 643.CrossRefGoogle Scholar
  49. Scarlata, M., & Alemany, L. (2011). Deal structuring in philanthropic venture capital investments: Financing instrument, valuation and covenants. Journal of Business Ethics, 95, 121–145.CrossRefGoogle Scholar
  50. Schumpeter, J. (1934). The theory of economic development. Cambridge, MA: Harvard University Press.Google Scholar
  51. Seelos, C., & Mair, J. (2005). Social entrepreneurship: Creating new business models to serve the poor. Business Horizons, 48, 241–246.CrossRefGoogle Scholar
  52. Sen, P. (2007). Ashoka’s big idea: Transforming the world through social entrepreneurship. Futures, 39, 534–553.CrossRefGoogle Scholar
  53. Smith, A. (1922). The wealth of nations. London: J. M. Dent & Sons.Google Scholar
  54. Smith, A. (1976). The theory of moral sentiments. New York: Oxford University Press.Google Scholar
  55. Smith, A. (2003). The wealth of nations (1904, 5th ed.). New York: Bantam Dell.Google Scholar
  56. Sud, M., VanSandt, C., & Baugous, A. (2009). Social entrepreneurship: The role of institutions. Journal of Business Ethics, 85, 201–216.CrossRefGoogle Scholar
  57. The Economist. (2008, June 26). Doing good by doing very nicely indeed.Google Scholar
  58. Tripsas, M. (2009). Technology, identity and inertia through the lens of “the digital photography company”. Organization Science, 20(2), 441–460.CrossRefGoogle Scholar
  59. Rhyne, E. (2010). The state of global microfinance: How public and private funds can effectively promote financial inclusion for all (pp. 55–59).
  60. VanSandt, C. V., Sud, M., & Marme, C. (2009). Enabling the original intent: Catalysts for social entrepreneurship. Journal of Business Ethics, 90, 419–428.CrossRefGoogle Scholar
  61. Williamson, O. E. (1991). Comparative economic organization: The analysis of discrete structural alternatives. Administrative Science Quarterly, 36(2), 269–296.CrossRefGoogle Scholar
  62. World Bank. (2009). Empowerment.Google Scholar
  63. Yunus, M. (2007). Creating a world without poverty: Social business and the future of capitalism. New York: Public Affairs.Google Scholar
  64. Yunus, M. (2008). Press release of professor Muhammad Yunus on discussing charges against Telenor. Bangladesh: Grameen Bank.Google Scholar
  65. Zahra, S. A., Gedajlovic, E., Neubaum, D. O., & Shulman, J. M. (2009). A typology of social entrepreneurs: Motives, search processes and ethical challenges. Journal of Business Venturing, 24(5), 519–532.CrossRefGoogle Scholar
  66. 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), 117–131.CrossRefGoogle Scholar
  67. Zott, C., & Amit, R. (2007). Business model design and the performance of entrepreneurial firms. Organization Science, 18(2), 181.CrossRefGoogle Scholar
  68. Zott, C., & Amit, R. (2008). The fit between product market strategy and business model: Implications for firm performance. Strategic Management Journal, 29(1), 1.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media B.V. 2012

Authors and Affiliations

  1. 1.INSEADFontainebleauFrance

Personalised recommendations