The Social Value of Productive Entrepreneurship

As a critical contribution to the social entrepreneurship literature, this paper first engages the concept of social entrepreneurship. Situating it within the distinctive context of charity and philanthropy, it provides structure and clarity. Next, it identifies related sources of social impact and value creation, positing social and economic value creation as potentially overlapping. It then provides comparative case studies focusing on Microsoft Corporation and Grameen Bank, to illustrate these issues relative to productive and social entrepreneurship. Recognized as highly successful innovative ventures, these two enterprises have had profound social impact on the world, even if that impact is derived from very different perspectives and motivations.


Introduction
Evidence suggests that social entrepreneurship, despite substantial growth as a field of research, still lacks a unified and clear definition. For example, some analysts equate social entrepreneurship with non-profit organizations in general, others discuss it particularly in terms of philanthropy, or even focus on related activities linked explicitly to social objectives. Although sometimes a point of contention, still others have framed social entrepreneurship as a form of corporate social responsibility. Another hybrid view describes social entrepreneurship as charitable or philanthropic activities sustained through revenue generation. Indeed, many seem to view social entrepreneurship as a type of giving, akin to philanthropy and charity. Yet, while philanthropy and charity are relatively clear and established concepts within the literature, it is not always clear where social entrepreneurship fits within this framework (Dees 2001;Light 2006;Mair & Marti 2006;Martin & Osberg 2007;Short, Moss, et al. 2009).
Furthermore, distinctions between social entrepreneurship and what is often called commercial, economic, or traditional entrepreneurship are often fuzzy, turning on assessments of social impact and value as defining features (Acs and McNeely 2008). On the one hand, some analysts consider economic value to be entirely separate from social value. On the other hand, economic value is sometimes treated as a type of social value.
Still, many scholars find themselves somewhere between these poles (Auerswald, 2009). Accordingly, identifying the boundaries and relationships between social and commercial entrepreneurship remains critical for understanding social impact and value, both in theory and applied.

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We seek here to bring clarity to two issues: (1) the role of social entrepreneurship in relationship to charity and philanthropy as a creator of social value; and (2) the role of productive and destructive entrepreneurship in the creation or destruction of social value.
As a first step, we consider social entrepreneurship relative to charity and philanthropy and, especially, in light of their role in social value creation. We delineate similarities and differences along various dimensions to better understand the broader context in which social entrepreneurship is defined and enacted.
Building upon this understanding, we next invoke notions of productive entrepreneurship relative to social value creation, particularly in contrast to unproductive and destructive entrepreneurship. We define productive entrepreneurship as resulting in social value creation, whereas unproductive and destructive entrepreneurship do not have this component. This leads us to further consider social entrepreneurship more broadly to include commercial entrepreneurship that creates both social and economic value.
Generally speaking, conceptions of social entrepreneurship tend to be process or behavior oriented, while conceptions of the social entrepreneur focuses on founders, and conceptions of the social enterprise itself rely on outcomes or manifestations. The advantage of applying entrepreneurial principles to social value creation is the clarity, purpose, and vision that entrepreneurship offers more generally.

Social Entrepreneurship in Context and Effect
Arguments have been made that entrepreneurship conceptually should be modified to include creation of both social and economic value (Chell 2007 (Chell, 2007).
The notion that social entrepreneurship creates social value is often vague and does not mention the commercial aspect. This is not entirely appropriate since social enterprises have a commercial bottom line and one that is based on the creation of other values. That is, social enterprises have the ability to be self-sustaining and/or generate profit while simultaneously creating something of value for society (Dart, 2004;Auerswald, 2009). To think of social entrepreneurship as dichotomous with commercial entrepreneurship may not be useful, particularly in a capitalist social order and market system. 2 For example, social entrepreneurship is not necessarily purely altruistic, and commercial entrepreneurship can be socially responsible and ethical in practice.
Commercial entrepreneurs, concerned with their own best interests, can generate both 1 Sustainability as we use it in this paper can refer to environmental, financial, and/or social. 2 Barring social critique and philosophical challenges. economic and social value. Profit does not necessarily exclude or negate other motives (Mair & Marti, 2006), and economic value can be treated as reflecting social value, depending on its context and effect. Moreover, we note that the explicit motivation of the entrepreneur is not necessarily a requirement for social value creation.
A more profitable way of thinking of social entrepreneurship, since it can create both commercial and social value, might be to frame it in terms of a spectrum, with innovative, sustainable nonprofits on one end and productive commercial entrepreneurship on the other. If the entrepreneurship (with all that entails in the entrepreneurship literature) creates social value, then it is social entrepreneurship.
These ventures are often difficult to distinguish from productive commercial entrepreneurship, but we argue that this distinction is not always useful or necessary.
Entrepreneurship can be symbiotic in that success is determined through the provision of benefit to one's community, be it local, regional, or global in scope. A local store owner who brings goods to one's village provides something of value, and earns a living doing it. The person is not necessarily altruistic, nor does he/she have to be. At the same time, a large biotech firm that innovates and saves lives also provides something of benefit. True, it is in exchange for money, at some commercial value. However, few would argue that the community is not better off for it.
By creating wealth through mutually beneficial exchanges and/or innovation, the entrepreneur also can create social value, measured as wealth or another form of social benefit. However, those who are interested in the commercial aspects, such as venture capitalists, will focus on the economic value, looking only through the commercial entrepreneurship lens. Those who are interested in the social value creation will examine the enterprise through the social entrepreneurship lens. Both lenses are appropriate, and choosing a lens depends upon the particular interest or question. As individuals can play multiple roles, so do entrepreneurs and their ventures --awareness is not necessary.
The social impact of an entrepreneurial innovation can be seen in changes that occur in communities or social groups. Innovations can have an impact on the way people relate to one another, engage in society, and build social capital (Putnam 1993(Putnam , 2000Coleman 1988, p. 98), with social value reflecting positive effects for individuals and society. From this perspective, we can now consider some concrete examples of these points, examining their effect on social value creation in different settings.

Social Entrepreneurship within the Charity-Philanthropy Nexus
For our purposes, social entrepreneurship can be fruitfully considered within the contexts of both charity and philanthropy, representing related, yet different approaches to social value creation. Based on the literature, as reflected in Table 1, we suggest six basic dimensions as particularly useful distinctions for analyzing these relationships: Role, Social Structure, Purpose, Sustainability, Financing, and Time Frame.
Charity has been described as "generosity and helpfulness, especially toward the needy or suffering; aid given to those in need; an institution engaged in relief of the poor; [or] public provision for the relief of the needy." 3 Philanthropy, however, as developed in the Anglo-American tradition, is not charity. Instead, it is viewed in a more active or participatory sense, referring to enabling those in need and are willing to help themselves.
Here, we might invoke Lao Tzu's famous maxim to explain this difference in perspectives on charity and philanthropy: "Give a man a fish and you feed him for a day.
Teach a man to fish and you feed him for a lifetime." is the foundation, which varies in size, scope, structure, and mission. They are also independently funded through endowments, bypassing the need for fundraising (Desai and Acs, 2008).

Role of Social Value Creation
The role of charity in society is arguably that of income redistribution from the haves to the have-nots (or have-less), regardless of the circumstances surrounding how those statuses came to be. Alternatively, philanthropy, as discussed above, has been framed as a means for reconstituting capital and creating entrepreneurial opportunity. As such, it creates social value, albeit indirectly, through the opportunity it provides.

Social Entrepreneurship:
The role of social entrepreneurship in society is that of a change agent or social innovator. Social entrepreneurship creates social value through innovation and mutually beneficial exchanges. 5

Social Structure
Charity works within the given social structures such as class, socio-economic status, etc., operating through vehicles such as humanitarian assistance and individual donations. Although designed to aid those in need, it does not effect any meaningful change in social structural positions. Alternatively, philanthropy creates opportunities that can enhance social mobility and affect socioeconomic or class status.
Social Entrepreneurship: Social entrepreneurship also can offer opportunities to for social structural change, whether deliberate or as an unintended consequence. In theory, if the impact is great enough (whether from a single enterprise or in the aggregate), it can alter the social structure, possibly at many levels, and not necessarily in predictable ways. 5 In turn, such entrepreneurship can often create opportunity as a byproduct of social value creation.

Purpose
The purpose of charity in society is to alleviate immediate suffering. While some analysts may challenge this conception, the literature on charity does not frame it as creating any deep social change relative to underlying social problems. It is primarily presented in terms of direct or pressing action, as in disaster relief. Alternatively, philanthropy is aimed at providing opportunities for fundamental shifts in circumstances.
Social Entrepreneurship: The purpose of social entrepreneurship is to improve social conditions. As in any productive enterprise, it often involves improving conditions or providing something that has been lacking, whether that is clean water or the benefit of an innovation. Moreover, it is provided for a mutually beneficial exchange.

Financing
Charity is primarily financed through donations. A charitable institution relies on donor funding not only to meet start-up costs, but to continue operations. Alternatively, philanthropy is financed by reconstituting wealth, mostly through foundations, back into society. Foundations are set up and designed to create an endowment, providing an independent and self-sustaining source of funding. 6 Social Entrepreneurship: A distinguishing feature of social entrepreneurship, as in any form of entrepreneurship, is that it is funded through a business model (Dees, 2001). Involving start-up funding --through e.g., loans, equity, grants, etc. --the enterprise has to at least break even to sustain itself, even if considered non-profit. If an enterprise that is reliant on donor funds to operate and, by definition, hands out resources without getting them back, it becomes in function a charity. That is, it receives donor funds and gives them to others. However, a venture that is self-sustaining functions in the same way as any commercial enterprise would.

Sustainability
Since charity is a vehicle for income redistribution and is reliant on donor funding to maintain operations, by definition it is not sustainable. Alternatively, philanthropy, through the foundation, is self-sustaining; it does not rely on outside funding, be it revenue generation or donors.

Time Frame
Charity is designed to alleviate immediate suffering; the response is quick and the impact is short-lived. Alternatively, philanthropy typically is aimed at long-term impacts.
Indeed, in some cases, philanthropic ventures have lasted well over 100 years (e.g., as exemplified in many U.S. universities), creating opportunities as part and parcel of their purpose. Depending on economic conditions, the foundation can last indefinitely, with a long term impact. On that same note, keeping in mind that philanthropy addressed deeper, structural issues, the opportunity created by philanthropy cannot be realized in the short term.
Social Entrepreneurship: As with any enterprise, social entrepreneurship can be short-lived or last for decades. However, given a dynamic market system, the nature of the social value can create change --and, more, the enterprise must change in order to be sustainable. Thus, even if a particular venture lasts indefinitely, the exact nature and social value created is likely to change in the long run.
[Insert Table 1 about here]

Entrepreneurship and Social Value Creation
In a seminal article entitled "Entrepreneurship: Productive, Unproductive, and Destructive," William Baumol (1990, p. 898) underscored the importance of considering the full range of entrepreneurial activity that is of particular salience here. Noting that that the entrepreneur is fundamentally engaged only in activity aimed at increasing wealth, power, and prestige, Baumol observed that, while entrepreneurship can be productive, it is not inherently economically healthy and can also be unproductive and destructive. While important in general, this point holds particular relevance in, for example, many rapidly developing countries where opportunities for profit can outpace the evolution of institutions, widening the scope of rent-seeking or worse activities.
Indeed, without strong regulatory regimes in place, economic activities in underdeveloped countries have been found to be predatory and extractive. Accordingly, Baumol (1990, p. 897) extended Schumpeter's list of entrepreneurial activities to include activities of "questionable value" to society, e.g., rent-seeking, tax evasion, and avoidance, forming his conception of unproductive entrepreneurship.
However, in presenting his argument, Baumol offered no additional insight into destructive entrepreneurship. Addressing this issue, Acs and Desai (2009) shift the lens from Baumol's focus on entrepreneurship that creates output (productive) and entrepreneurship that is redistributive (unproductive) to propose a theory of destructive entrepreneurship centered on three basic propositions.

Proposition 1: Destructive entrepreneurship has a negative effect on Social
Value. This proposition is implicit in Baumol's and related treatments of the concept. However, Acs and Desai (2009) include an additional proposition to clarify why it has a negative effect on the economy.
Proposition 2: Destructive entrepreneurship is rent-destroying. The distinction between unproductive and destructive entrepreneurship has been tenuous (and, therefore, often ignored) because the furthest frontier of research tends to end with "rent-seeking." However, Acs and Desai (2009) argue that destructive entrepreneurship has a negative effect on development because the activity is not merely rent-seeking, it is rent-destroying. However, they also consider that activities and resources can be shifted to the other forms of entrepreneurship.
Proposition 3: Whenever resources are shifted from destructive to productive entrepreneurship, or from less productive to more productive activities, social value is created. In this case, emphasis is placed on the effect of productive entrepreneurship on the creation of social value as activity is shifted out of destructive and unproductive entrepreneurship, or to more productive uses in general (Weitzel et al., 2010).
Given these considerations, while recognizing activities aimed at increasing wealth, power, or prestige and motivations to capture rents, as outlined in Table 2, we see that, in the case of productive entrepreneurship, entrepreneurs create social value, whereas they destroy social value as destructive entrepreneurs. In the case of unproductive entrepreneurship, entrepreneurs are rent-seeking but they do not destroy social value. 7 [Insert Table 2 about here] Our assumption of uncertain political economy means that destructive entrepreneurship is most likely to occur in developing countries with some degree of political instability (although it occurs in some forms across countries). Most developed countries have evolved formal institutions to prevent rent-destroying and/or rent-seeking behavior, so it is simply less obvious in these places. The theory suggests that in developing countries, shifting resources from unproductive or less productive activities to those that are more productive will appear to create more social value than in more developed countries (Acs and Szerb, 2010).

Grameen Bank and Microsoft Corporation
We offer here comparative cases to illustrate creation of social impact and value through commercial and social entrepreneurial efforts. We look to two organizations in particular, both widely recognized for their innovative approaches and success in two major industries: banking and software. These organizations were both founded in 1973 as for-profit businesses and have become known around the world: the Grameen Bank of

Bangladesh and the Microsoft Corporation, founded by Muhammad Yunus and William
Gates respectively. However, while both have created significant amounts of wealth, their explicit motivations and goals have been quite different. One was private and more purely financial while the other, also private and financial, was more socially motivated.
Indeed, Yunus and the Grameen Bank together has become the poster child of social entrepreneurship (Peredo and McLean 2006).
As previously mentioned, some analysts take the position that a for-profit organization is not social entrepreneurship. However, we find that perspective to be unnecessarily limiting. Instead, we suggest that attention to for-profit organizations as innovators with varying approaches and goals can be highly instructive and provide a more nuanced depiction of entrepreneurial social impact. Grameen Bank and Microsoft Corporation provide us with representative stories of wealth creation and social impact based on different practices, encompassing different assumptions, and driven by different motivations. Our purpose here is to use these cases to better understand the social impact of entrepreneurial innovation.

Grameen Bank: Empowering Women and Strengthening Communities
Understanding the social impact of Grameen Bank requires attention to the assumptions and mission driving its activities. Three basic assumptions guided Grameen Bank action: first, that poverty is not due to a lack of skills, but rather to inefficient social and economic institutions (Acemoglu and Johnson 2006); second, that the poor have unrecognized or under-utilized skills; and, third, that the poor are creditworthy.
Therefore, as Yunus explained, "Grameen created a methodology and an institution around the financial needs of the poor, and created access to credit on reasonable terms enabling the poor to build on their existing skills to earn a better income in each cycle of loans." By so doing, the Grameen Bank has been able to fulfill its mission, which focuses on helping the poor help themselves out of poverty, particularly women. 8 Over and above economic gains stands the goal of social transformation, changing norms and creating new ways of relating in the form of empowerment and social capital.
Through Grameen Bank programs, women who were once socially excluded and marginalized have become empowered and engaged in their communities. They have found the means to challenge norms and social structures that had been mechanisms of oppression. In fact, there is a high correlation between the time that they spend in Grameen Bank programs and levels of empowerment (Hashemi et al. 1996). These Grameen Bank is not based on transactions. It is based on commitment. It deals in something more than contracts. It builds on a compact and business sense… It's the only bank in the world with its own birth control policy. Its members make this pledge: 'We shall plan to keep our families small.' It's the only bank in the world with its own marriage policy. Its members make this pledge: 'We shall keep the center free from the curse of dowry. We shall not practice child marriage.' 11 Furthermore, while the main stakeholders of the Grameen Bank are poor women, the social impact of Grameen Bank is felt throughout their communities via the groups of borrowers created around the Grameen Bank and their extended networks. Also, the programs and meetings held in villages by Grameen Bank credit agents give women opportunities to learn, share ideas, and relate in ways that build trust and solidarity, enhancing social capital. These in turn provide the women with the credibility (creditability) and trustworthiness that increases their capacity to attain loans and accumulate assets (Grootaert, 1999).

Microsoft: Effecting Technological and Societal Change
Examining the social impact of Microsoft presents a different and complex challenge. For our purposes here, we separate the company from its product innovations.
On the one hand, we consider the social impact created by the innovative software attributed to Microsoft. On the other hand, Microsoft as a corporate entity arguably has provided socially relevant services to its clients and society at large. certainly can be questioned, it is undeniable that, for example, the education of millions of students and the functional lives of thousands of persons with disabilities have been assisted or improved by Microsoft products and programs. Thus, while Microsoft as a corporate entity is not organized around a social problem and its primary mission is not the creation of social value, it has had a positive social impact --the achievement of which it trades upon to increase its market capacity. In fact, one could claim that, as commented by Barro (2007), By any reasonable calculation Microsoft has been a boon for society…A conservative estimate, in a model where software serves as a new variety of productive input, is that the social benefit of Microsoft's software is at least the $44 billion Microsoft pulls in each year. When capitalized with the same ratio (22) that the market applies to earnings, this flow corresponds to a valuation of $970 billion. Thus, through Microsoft's future operations, Gates is creating a benefit to the rest of society of about a trillion dollars…And this counts only the likely future benefits, giving no weight to the past.
The impact of technological innovations driven by Microsoft clearly goes beyond the organization itself to include the social impact resulting from software innovation generally. With more than 50 percent of the software market share (conservatively) and contributing to the employment (directly and indirectly) of about 42 percent of the information technology (IT) workforce, Microsoft clearly has played a leading role in the impact of IT innovations. In one way or another, Microsoft innovations have had a broad and transformative impact on human endeavors in the world today. Software development has enormously affected not only the more than one billion people who use computers, but also those who have never seen one. That being said, Microsoft is not principally or directly guided by a principle of social value. Its overriding motivation and mission is profit, and it is not organized around a social problem as is typically invoked in discussions of social entrepreneurship. While it is not defined explicitly as a social entrepreneurial venture, the potential for social impact is clear, irrespective of intent.
However, we also must mention that there is a general lack of consensus on whether some software Despite these commonalities, there are important contrasts differentiating them as entrepreneurial actors, particularly in terms of missions, opportunities, and outcomes.
One key aspect often overlooked in the debate over social and commercial entrepreneurship is the context within which these innovations operate, i.e., whether they operate in local, national, and/or global markets. The social impact of innovation is an even more difficult question. Microfinance clearly has the potential for major social impact on the poor of the world. Indeed, "ten years ago, the probability of an idea from Bangladesh affecting a community in Brazil, Poland, or the U.S. was very limited. Now it is common…and becoming more common every year" (Drayton 2006, p. 82). In the same vein, Microsoft has had a profound effect around the world, impacting the billions of people using computers today.
Although Yunus introduced the microfinance innovation to achieve a social mission, and the Grameen Bank has operated in pursuit of related goals, microfinance itself as an industry innovation needs not have such goals. While it has spread as a means for credit lending to the poor and may ultimately have a broadly transformative social impact, the motivation for many such ventures in the field may be primarily an identification and appreciation of the means by which this niche can be exploited for profit. Similarly, computer and IT advances have certainly introduced new ways to create and use social capital, as evidenced by the vast array of social media and networking programs available via the Internet today. We are not here arguing that the merit of these, but rather that they are social and their broader impacts and implications require further investigation.

Conclusion
Adding to the themes previously discussed, we emphasize that the link between social entrepreneurship and philanthropy goes beyond issues of funding. One of the clearest connections between social entrepreneurship and philanthropy (other than the participants/funders) is the focus on creating opportunity and sustainability, to the extent that broader cultural values and societal interactions across levels and units of analysis. needs. This approach is particularly useful in that it can be applied to financial and social, as well as environmental, sustainability. Again, sustainable entrepreneurship operates through the voluntary actions of producers and consumers and, accordingly, both the desire to create value and the need for sustainability are the drivers of social entrepreneurship (Reis & Clohesy, 2001).
While this is not necessary or sufficient for all social entrepreneurship, it is nevertheless important. A clear example of this point is microfinance, and specifically, a revolving loan fund. If the fund becomes sustainable, by either earning profit or breaking even, then it is no longer dependent upon donor funds. It is not a handout, and is potentially a mechanism that can indefinitely create opportunity, representing both an