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A Positive Theory of Social Entrepreneurship

Abstract

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.

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Notes

  1. 1.

    Which in its most extreme form requires perfect competition (no increasing returns to scale, multiple buyers and sellers), complete information available to all economic actors, and no transaction costs or externalities.

  2. 2.

    For example, the European Venture Philanthropy Association counts more than 100 Funds as members.

  3. 3.

    Indeed, there is increasing empirical evidence that a narrow focus on self-interest does not capture well the motivations and behavior of economic actors. For example, research on marketing as shown that people are happier when they spend money on others than on themselves (Dunn et al. 2008).

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Acknowledgments

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.

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Correspondence to Filipe M. Santos.

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Santos, F.M. A Positive Theory of Social Entrepreneurship. J Bus Ethics 111, 335–351 (2012). https://doi.org/10.1007/s10551-012-1413-4

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Keywords

  • Social entrepreneurship
  • Theory development
  • Market failure
  • Capitalism
  • Externalities
  • Empowerment
  • Sustainable solutions