MSc Thesis | University of Amsterdam
U
NIVERSITEIT
VAN
A
MSTERDAM
A
COMPARATIVE STUDY ABOUT
S
OCIAL
E
NTERPRISES AND FOR
-
PROFIT
COMPANIES ENGAGED IN
CSR,
APPROACHING AN EMERGING MARKET
Name: Denise van het Kaar
Number: 10468336
Master: Business Administration
Track: International Management
Supervisor: Mr. E. Dirksen MSc.
Second supervisor:Dr. M. K.
Westermann-Behaylo
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Abstract
This Master thesis presents a comparative study on the motivational differences for the social initiatives of for-profit companies that have integrated Corporate Social Responsibility into their business and social enterprises that are conducting a business in the emerging market, Africa. With this study it is hoped to map important differences between these two types of companies with social initiatives. In the current existing literature, the opinions still differ strongly on how to define CSR and social entrepreneurship, which causes the lack of any universally accepted definitions. By mapping the differences in motives for the social initiatives of for-profit companies and social enterprises, this study does an effort to make a contribution to how these two concepts can be defined. Besides the companies’ motives this study also concentrates on the priority given to either financial or social objectives in case these are in conflict with each other, in order to find how dedicated the for-profit and social enterprises are to their social initiatives.To put this study in an international context, it is exclusively concentrated on Dutch companies that are conducting a business in Africa. Since this is an emerging market with financial as well as social opportunities, it was also investigated which motives drive the two types of companies to set up their business in Africa. For this study, qualitative data was collected via 10 semi-structured interviews with 5 for-profit companies and 5 social enterprises. After coding and analyzing the data it was first of all found that for-profit companies a driven by both strategic and social motives to engage in CSR and the social enterprises exclusively by social motives. Concerning the priority for financial or social objectives it was found that this varies per for-profit company whereas social enterprises unconditionally give priority to their social objectives in conflicting situations. Finally, it was found that for-profit companies are mainly driven by strategic motives for approaching the African market with their business and that any present social motives play a secondary role in this. For the social enterprises it accounts that they are purely driven by social motives for entering the African market.
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Table of content
1. Introduction ... 4
2. Literature review ... 7
2.1 Commercial entrepreneurship ... 7
2.2 Corporate Social Responsibility ... 11
2.2.1. Definitions of Corporate Social Responsibility ... 11
2.2.2. Perspectives on CSR ... 14
2.3 The social enterprise ... 16
2.3.1 What is social entrepreneurship? ... 16
2.3.2 Benefits and challenges of social entrepreneurship ... 19
2.4 Research gap ... 21
3. Theoretical framework ... 22
3.1 Behavioral intentions ... 22
3.2 Motives social initiatives ... 23
3.2.1 Working proposition 1 ... 25
3.3 Motives emerging markets ... 26
3.3.1 Working proposition 2 ... 27
3.4 Commercial and social objectives ... 27
3.4.1 Working proposition 3 ... 29
4. Methodology ... 30
4.1 Research design ... 30
4.2 Subjects ... 31
4.3 Data collection ... 32
4.4 Coding and data analysis ... 33
4.5 Limitations ... 34
5. Results ... 35
5.1 General characteristics ... 35
5.1.1 The definition of profit-companies engaged in CSR ... 35
5.1.2 The business structure ... 36
5.1.3 The mission and CSR activities ... 38
5.1.4 The definition of a social enterprise ... 39
5.1.5 The Business structure of a social enterprise ... 40
5.1.6 The mission and social activities of a social enterprise ... 44
5.2 motives social initiatives ... 46
5.2.1 For-profit companies: strategic motives ... 46
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5.2.3 Social enterprise: strategic motives ... 49
5.2.4 Social enterprise: moral motives ... 50
5.2.5 Working proposition 1 ... 51
5.3 Motives emerging markets ... 52
5.3.1 For-profit companies ... 52 5.3.2 Social enterprises ... 54 5.3.3 Working proposition 2 ... 55 5.4 Objectives ... 56 5.4.1 For-profit companies ... 56 5.4.2 Social enterprises ... 58 5.4.3 Working proposition 3 ... 60 6. Discussion ... 61 6.1 General patterns ... 61
6.2 Motives social initiatives ... 64
6.3 Motives for the emerging market ... 66
6.4 Objectives ... 66
7. Conclusion ... 68
8. Literature list ... 71
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1. Introduction
In the past, in contrast to government owned organizations, private owned companies were almost always profit orientated with having only commercial objectives. This already changed slightly when more and more profit orientated companies were, and still are, setting the condition for themselves to damage the society as least as possible with their production process and sometimes even wanted to make a small contribution to that societythrough their activities. Companies that engage in these ‘Corporate Social Responsibility’ (CSR) activities canhavedifferent motives, going from developing a market solution to social problems (Peredo& McLean, 2006)toimportant enlightened-self-interest motives like increased competitiveness, improved stock market performance and a better brand image (Bansal&Roth 2000; Waddock& Smith 2000; Brown &Dacin 1997). Typical for these companies is that they have a strong focus on their financial objectives and even if they have defined any social objectives, thesewill always be secondary to the financial objectives.Therefore, some authors doubt if or even deny that corporations can truly be socially responsible (Friedman, 1962). However a relatively new development and less unraveled subject than corporations engaged in CSR is the rise of social enterprises.An important reason for existence of these enterprises is their drive to increase social value and thus they have a strong social mission (Peredo et al., 2006) just as a charity. The only difference between those two is that social enterprises are financially self-providing and therefore do not depend on donations.Social enterprises are financially self-providing and therefore have to be profitablejust as commercial, for-profit corporations. Howeveraccording to theory they distinguish themselves from a commercial corporation in the way thatitaimsat creating social value, either exclusively or at least insome prominent way (Peredo et al., 2006).Opinions differ strongly about when a company can call itself a social enterprise, from a not-for-profit company that has some social goals as the exclusive aim and where wealth generated by the company is just a means to the social end (Dees, 1998) to a company that is driven by social goals, but where profits that are being distributed to owners and operators is also part of the picture (Peredo et al., 2006).
5 Since the literature does not come up with one solid answer on when exactly a company is just performing CSR activities or in fact is a social enterprise, this study will try to find an answer to that by comparing real life companies that claim to be engaged in CSR activities and companies that are called to be a social enterprise. When looking at the example of the successful company Ben & Jerry's, we see that the line between these two concepts is very thin. Ben & Jerry's is a highly profitable company that at the same time has a rich agenda on environmental and social responsibility. One example of their projects is the Partnershop program, which gives select not-for profit (NFP) organizations the chance to open a franchise without having to pay the usual franchise fee.Some may say that a company like Ben & Jerry's qualifies for a social enterprise, while for others it is just another fashionable act of corporate social responsibility, because for them the emphasis on profitability within a company disqualifies it from being a social enterprise (Leadbetter, 1997).
This study will concentrate on the motivation for and the level of honest dedication to the social initiatives and the true reason for existence(mission) for the two types of companies. Is it true that social enterprises have an exclusive social aim as their motive for doing business and that for-profit companies only engage in CSR out of self-interest to improve their own performance or is it less black and white, meaning that social enterprises may also treat their financial and social objectives as equally important and that for-profit companies could also participate in CSR out of true belief that they can help society or the environment with it?
Another topic that this study will pay attention to is the presence of financial as well as social objectives at the two different types of companies and if the companies in fact work with both types of objectives, is it indeed true that social enterprises always put their social goals on the first place, while for-profit companies have a strong focus on the financial objectives. Or is the focus between the two types of objectives more nuanced and does the importance of a social enterprise's financial objectives rank closely to it social objectives, while for-profit companies pay a significant amount of attention to their CSR activities/objectives?
6 To put this study in an international business perspective, the focus of this study will be on small Dutch businessesthat perform business in Africa. Companies engaged in CSR activities and social entrepreneurship as well have been active in Western countries for quite a while but are now approaching emerging markets more and more as well. Africa is an emerging market that at the same time consists out of many developing countries where still a lot of social issues have to be addressed. Therefore Africa offers large financial opportunities, but also comes with a lot of social challenges. A question that rises up from this and that will be addressed during this study is what the motives are for both social enterprises and companies with CSR activities to practice their business in an emerging market instead of a developed market. It is hoped that the answers to these questions can disclose the reason for existence forboth social enterprises and companies engaged in CSR and if and how these differ from each other, which will hopefully in its turn create more clarity aboutwhat we can understand by the definitions social enterprise and corporate social responsibility.This resulted in the following research question: With what motives and objectives do social enterprises and for-profit companies engage in social or CSR activities in the emerging market Africa?
This paper begins by examining the existing literature to define the definitions of entrepreneurship, CSR and social entrepreneurship, followed by a theoretical framework in which three working propositions are formulated. Subsequently a research design is drawn and the empirical results of this research are presented. Finally, the discussion section and the main conclusions and contributions of this paper are presented.
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2. Literature review
This chapter discusses the existing scientific literature on commercial entrepreneurship, corporate social responsibility and social entrepreneurship.
2.1 Commercial entrepreneurship
The practice of commercial entrepreneurship already exists for ages and is as old as when humans started trading. The concept of commercial or for-profit entrepreneurship however, was defined for the first time around 400 years ago, when commercial or for-profitentrepreneurship was just seen as a new business that was started up by a businessman. Backthen the essence of commercial entrepreneurship was and now still is, the act of producing a product or service that is purchased at a market value which exceeds the intrinsic value, resulting in a profit (Godeon, 2010).In general when speaking of entrepreneurship the literature implicitly speaks of commercial entrepreneurship, unless the author has explicitly deviated from this assumption by addingan adjective, like for example ‘social entrepreneurship’. Therefore from this point on, this study will only use the term entrepreneurship, when it is referring to commercial or for-profit entrepreneurship.Since the beginning of the concept entrepreneurship, many different approaches to define and analyze this concept have appeared, which overall can be categorized into three main streams of research which have the following focuses: the characteristics of entrepreneurship,the psychological and sociological traits of the entrepreneur himself andthe entrepreneurial management process(Austin, Stevenson & Wei-Skillern, 2006). These three streams can also be translated into what happens when they act, whythey act and how they act(Stevenson &Jarillo, 1990).Firstly, when concentrating on the characteristics of entrepreneurship or on what happens when entrepreneurs act, Schumpeter (1934) describes entrepreneurship quite specific asa creation of new combinations caused by innovationwhichdisrupts the market equilibrium and as a result of that the economy as a whole is advanced. According to Schumpeter (1934) innovation is a “process of industrial mutation, that incessantly revolutionizes the economic structure from within, incessantly destroying the old one,
8 incessantly creating a new one.” He states that the innovation process consists of four dimensions, which are invention, innovation, diffusion and imitation. In Schumpeter's analysis of the innovation process, the invention phase and the innovation do not have a large impact, while the diffusion and imitation process have a much greater influence on the state of an economy. This is because the macroeconomic effects of any basic innovation are hardly noticeable in the first few years. Therefore for an innovation to develop the economy, what matters is not the discovery of the innovation, but the execution of it. Thus entrepreneurship is innovation as well as the actualization of innovation.Since Schumpeter's work, most economists have accepted his identification of entrepreneurship with innovation, which has changed the tradition of seeing an entrepreneur just as a businessman (Kilby, 1971). Another important scholar who focused on the characteristics of entrepreneurship is Gartner (1988). Only whereas Schumpeter describes entrepreneurship as carrying out new combinations, Gartner states that entrepreneurship is the creation of new organizations, which has also been employed by many other researchers(e.g. Bygrave, 1993; Learned, 1992).Thus both definitions have merit and see entrepreneurship as a process of value creation, either by the creation of value or an organization. However, although the definitions overlap each other partly, they also cover some different territory, because while the carrying outof new combinations may result in thecreation of a new organizationandthecreation of a new organization may involve a new combination, they can also occur separately from each other (Sharma & Chrisman, 1999).In his article, Davidsson (2003) identifies two main stream views on entrepreneurship, called the emergence perspective and the opportunity perspective, which are actually in line with the different ideas of Schumpeter and Gartner. The emergence perspectiveviews entrepreneurship as organizational or firm emergence where the evolutionary and dynamic aspects of entrepreneurship are crucial (Hindle&Moroz, 2010), which are in line with Gartner's ideas. On the other hand the opportunity stream follows more the idea of Schumpeter and sees entrepreneurship as a disequilibrium activity, which is about the discovery, evaluation and exploitation of opportunities (Shane and Venkataraman, 2000 in Hindle&Moroz, 2010). These opportunities are ‘situations in
9 which new goods, services, raw materials,markets and organizing methods can be introduced through the formation of newmeans, ends, or means-ends relationship’ (Eckhardt and Shane 2003 in Hindle&Moroz, 2010). In his article, Klyver (2005)distinguishes the emergence view from the opportunity view by contrasting two main dimensions (figure 1). The first dimensions sets out the nature of the actions involved in the entrepreneurial process, which are either defined by the creation and identification of new means and ends relationships or maximizing existing means and ends relationships. The second dimension sets out the creation of new organizations against entrepreneurship in an existing organizational context. This results in the distinction between three types of entrepreneurship, namely:
Figure 1. Types of entrepreneurship
Source:Hindle&Moroz, 2010, p.362.
A. Change oriented venture creation: innovative start-ups that change the competitive conditions within an industry and drive the market;
10 B. Non-change oriented venture creation: start-ups that fill gaps in an existing market by maximizing existing means and ends relationships and therefore leaving the current competitive conditions in tact;
C: Change oriented venture in existing context:existingorganizationsthat change the competitive market conditions by the introduction of new products, processes or production methods;
D: Traditional management: no entrepreneurship from either the opportunity or the emergence perspective (Klyver, 2005).
Coming back to the three main streams of research on entrepreneurship as mentioned earlier, the second stream focuses on the psychological and sociological traits of the entrepreneur, or in other words why he acts like he acts.Whereas the studies on the characteristics of entrepreneurship abstracts from the individual entrepreneur to focus on the process, this study points out that it is individuals who carry out the entrepreneurial activities and that they have specific characteristics in their personality, background and skills, which make them an entrepreneur (Stevenson &Jarillo, 1990). However, also a lot of criticism exists on theattempts to understand the why of entrepreneurship, because it is very difficult to causally link a specific psychological or sociological trait to a complicated behavior as entrepreneurship. Next to that, the focus on the individual entrepreneur has led to a strong identification of entrepreneurship with small business management and to the lack of a clear differentiation between the individual and the organization, which hinder the transfer of any knowledge gained about entrepreneurship to any broader field. The final main stream of research focuses on the entrepreneurial management process, in which the how question is central. Within this field of study the emphasis is placed on questions like how to recognize an opportunity and how to commit to and foster that opportunity.
When referring to important scholars who have contributed to the field of economics, there is one person who's theory has been thefoundationfor all others, namely Milton Friedman (1970). He argues that the responsibility of corporations is to conduct business in line with the owners desires,
11 whom are the shareholders. In general this means that the corporation has to make as much profit as possible, while still conforming to the basic rules of society, according to law as well as ethical custom. He also states that corporations which do not follow this profit-maximization strategy, will eventually be driven out of the market, which is called the market selection argument (Dutta &Radner, 1999). Since then many scholars have shed their light on this subject and didn't always agree with Friedman. For instance, Dutta and Radner (1999) argue that in times of market uncertainty a high rate of return is far more important than achieving the maximum profit, because it provides insurance against a string of losses. In today’s businesses another important topicis their social function through the implementation of CSR activities. Thus for-profit corporations are not only concentrating anymore on a maximum profit or a high rate on return, because many of them are becoming important social players as well. The next section will elaborate on CSR activities by for-profit corporations.
2.2 Corporate Social Responsibility
2.2.1. Definitions of Corporate Social Responsibility
When looking for the most early roots of the CSR by for-profit companies principle, they already can be found in the actual business practice of successful companies in the mid-18th century, in the form of initiatives such as a 'greenfield' site and joint consultation. Concerning the academic literature, CSR made its entrance about a century ago when J.W. Clark, who was writing for the Journal of Political Economy, stated that “if men are responsible for the known results of their actions, business responsibilities must include the known results of business dealings, whether these have been recognized by law or not” (in Katsoulakos et al., 2004, p. 5). In 1931, professor Theodore Kreps was the first one to use the term ‘social audit’ in relation to companies reporting to their social responsibilities and in 1942, Peter Drucker argued that for-profit companies have a social dimension as well as an economic purpose (in Katsoulakos et al., 2004) and that those companies have responsibilities that go beyond their direct environment, which are shareholders and customers, and
12 instead are focused on stakeholders in their indirect environment and society as a whole(Lee, 2008).‘A stakeholder is an individual or group, inside or outside the company, that has a stake in or can influence the organizations performance’ (Atkinson, Waterhouse & Wells, 1997). However not everyone agrees on this, like Friedman who states that there is only one responsibility of business, which is to use its resources and engage in activities designed to increase its profits, in order to return these to the shareholders. Friedman, (1970)even argued that CSR activities are a financial loss, because every dollar spent on an environmental act like pollution reduction, is one dollar less paid as dividends. Thus a CEO isin fact spending the shareholder's money and therefore duping the owners of the company, because he sees CSR as a financial loss. According to Friedman (1970) if a shareholders decides to support social goals, the can do so with the returns from his shareholdings through personal giving, rather than through CSR. According to others, CSR does in fact create value and not only in the form of more happy employees or customers, but also financially. Like Edmans (2014) who studied the relationship between CSR and company performance. To measure company performance he looked at future stock return, since he argued that there exists a reverse causality between a company's CSR activities and profit. It is difficult to fully measure CSR, since it is intangible and consists of many aspects, therefore Edmans (2014) decided to focus on one important element, namely employee satisfaction. He found that a high employee satisfaction leads to a higher stock return, which shows that at least some aspect of CSR has a positive influence on company performance.
Although the term CSR has been used for many decades, one has never been able to design one universal definition of the term whereby academia, businesses and society agree (Smith, 2011). In fact, through these decades more and more different opinions about what CSR exactly entails have evolved. To create more structure in the chaos of existing CSR definitions,Dahlsrud (2006) studied the similarities and differences between 37 CSR definitions by categorizing them into five dimensions, which are described in figure 2, and exploring how consistently these dimensions are invoked.
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Figure 2. The Five Dimensions of CSR
Source: Dahlsrud, 2006, p.4.
It appeared that each of these dimensions are frequently used in CSR definitions; Dahlsrud (2006) found that there is more than a 50 percent probability for any of the dimensions to beincluded in a random definition and that there is a 97 percent probability that at least three of thedimensions are used in a random definition. Thus it can be assumed that in order to completely define CSR, all five dimensions are necessary. Based on this assumption CSR could be described as voluntary activities by a for-profit company that go beyond living up to the direct demands of the company's shareholders and instead are focused on improving the conditions for the company's direct stakeholders by satisfying their needs and on performing activities that contribute to a cleaner environment and better society as a whole. On top of that these activities contribute to the economic development and profitability of the company itself.
14 2.2.2. Perspectives on CSR
In the CSR literature several distinctions are made concerning contrasting perspectives on CSR activities practiced by profit oriented companies from the well-known Friedman statement of ‘the business of business is business’ to a far more accommodating stakeholder framework.
Devinney (2009) mentions the distinction between the narrow and the wide conception of CSR. Those with a narrow conception think “the corporation has little, if any, obligation to the society other than the creation of economic rents that can accrue to the stakeholders with recognized rights to those rents”(Devinney, 2009, p. 1) and according to those with the expansive view of CSR “the corporation should serve as an instrument of public policy by other means” (Devinney, 2009, p. 1) which involves acting on behalf of the disadvantaged and demanding active claims on rents by broad sections of the society (Devinney, 2009). Some seek for a compromise between these two extremes, like the corporatist orientation, which argues that CSR only includes activities such as safety, mandated environmental and occupational health practices and that companies do not respond to claims by outside stakeholders on the firm's rents (Banerjee, 2007).
In their article Quazi and O’Brien (2000) mention the two dimensional-model of corporate social responsibility based on two axis. The first axe has 'narrow' and 'wide' responsibility as extremes, which are in line with the narrow and wide conception as Devinney (2009) perceives them and the second axis has two extremes “representing the perceptions of the consequences of social action of businesses ranging from concern with the cost of social commitment to a focus on the benefits of social involvement”Quazi and O'Brien (2000, p. 4). Here the negative end of the axis concerns the short term cost focus on social responsibility and the positive end represents the long term benefits arising from social action that outweigh the costs in the long term. Based on these two axis with four extremes Quazi and O'Brien describe four views on corporate social responsibility, namely:
15 1. Classical view:“is concerned with the classical view of social responsibility in which there is no provision to look beyond a narrow view of profit maximization as it is seen to
generate a net cost to the company without any real benefit flowing from an activity” (Quaziand O’Brien, 2000, p. 5).
2. Socio-economic view: “represents a narrow view of social responsibility but accepts that adopting some degree of social responsibility will lead to net benefit to the company in terms, for example, of avoiding costly and embarrassing regulation, building good customer relationships, good supplier relationships or the politics of networking” (Quazi and O’Brien, 2000, p. 5).
3.Philanthropic view:“depicts a broader view of social responsibility in which business agrees to participate in the charitable activities even though this is perceived as a net cost. This impetus may come from altruistic or ethical feelings to do some good for society” (Quazi and O’Brien, 2000, p. 5). 4. Modern view:“captures a perspective in which a business maintains its relationship with the broader matrix of society where there are net benefits flowing from socially responsible action in the long run, as well as in the short term” (Quazi and O’Brien, 2000, p. 5).
Although the opinions about the legitimacy and attractiveness of CSR in the existing literature are very diverse, based on surveys amongst global business executives it can be stated thatinreal life there is a growing trend of CSR activities by businesses and in fact CSR is becoming part of the business strategy. McKinsey (2006) did a study among executives, in which most of them disagreewithFriedman’s assertion that companies' sole responsibility is to shareholders and theyoverwhelminglystatedthat corporations mustbalance shareholder needs while making contributions that benefit society. The leading CSR organization, Business for Social Responsibility conducted a survey among CSR professionals globally, in which only 8 percent mentions that they expectto have their sustainability budgets decreased (BSR/Cone, 2009). Furthermore, 72 percent of the respondents believe that more demand will be placed onbusinesses to solve societal problems and even 77 percent expects global business to integrate their strategies and operations (BSR/Cone,
16 2008). Based on this, it can be stated that CSR has become well and truly a phenomenon in the world of nowadays business.
2.3 The social enterprise
2.3.1 What is social entrepreneurship?
A still little less well known phenomenon in the field of business, that increasingly is being acknowledged as an important contributor tothe economic and social well-being, is social entrepreneurship (Christie and Honig, 2006; Weerawardena and Mort, 2006). In the age that we are living the boundaries between the government, nonprofit organizations and commercial business are blurring as a result of the search for innovative, cost-effective and sustainable manners to address social problems (Dees & Anderson, 2003). The solution for this search seems to be the use of business practices and structures of a for-profit organization to serve social objectives, which can be described as social entrepreneurship.The emerge and development of social enterprises started in the US already in the late 70’s and in Western Europe in the 90’s (Defourny and Nyssens, 2010). However, despite this increased interest in social entrepreneurship in the public sector as well as for scholars, the scholarly research remains challenging, since the definitions of social entrepreneurship have been developed in a number of different domains, such as not-for-profits, for-profits, the public sector, and combinations of all three (Lasprogata and Cotton, 2003; Wallace, 1999; Baron, 2007), but a unified definition does not exist yet. Some see this as a problem, because they say it works confusing (Dees, 1998), but others see it as a unique opportunity for researchers from different fields to challenge and rethink central concepts and assumptions (Mair and Marti, 2006). Overall the literature makes a distinction between three different types of social enterprises. The first group sees it as an action from non-profit organizations to gain additional revenues to overcome negative effects, caused by decreasing governmental support, cuts in individual and corporate giving, increasing competition, more social needs and the pressure from fund providers to merge or downsize (Dees, 1998 and Buschee, 1995). The second group sees it as an initiative of independent
17 social entrepreneurs who aim to solve social problems (Alvord, Brown and Letts, 2002) and the third group sees it as social responsibility practices of commercial companies that are engaged in cross-sector partnership. In their article, Dees et al. (2003) take a clear point of view concerning these different types of social entrepreneurship and describe specifically what not to understand by a social enterprise. First of all, according to them, social entrepreneurship is no nonprofit organization that operates commercial activities within its nonprofit structure, because although these organizations pursue the same objectives as a social enterprise, a nonprofit organization is legally not allowed to distribute any economic surplus, but is free to accept philanthropic support. In contrast to that as an enterprise the social enterprise does not receive any charity, thus has to keep itself viable, possibly even with an economic surplus. Therefore the nonprofit organizations does not experience the same financial pressure as a social enterprise. Secondly, a social enterprise is not a for-profit company with CSR activities, also called a social responsible business. Even though it conducts business in ways that respect ethical values, people, communities, and the environment, its primary objective remains the creation of economic value, unlike the social enterprise, which pursues the creation of social value and its social objectives are just as or even more important as its economic objectives. Third and lastly are purely profit-motivated companies operating in the social sector. This type of company has entered the social sector solely to approach a new market in the search of profit and do not place inherent value on the possible social impact the create (Dees et al., 2003), unlike a social enterprise. Based on the statements of Dees et al. (2003) about what social entrepreneurship not is, it can be concluded that they see social entrepreneurship ‘1. Legally incorporated as for-profit entities, with one or moreowners who have a formal right to control the firm and who are entitled to its residual earnings and net assets. For-profit forms include proprietorships, partnerships, corporations, limited liability companies, and cooperatives.’ And ‘2. Explicitly designed to serve a social purpose while making a profit.Having a social purpose involves a commitment to creating valuefor a community or society rather than just wealth for the owners or
18 personal satisfaction for customers’ (Dees, 2003, p.2).Like Dees et al. (2003) state andapart from the different organizational structures, for-profit companies and a social enterprise mainly differ based on the type of value they pursue. Although not every company is run by an entrepreneur, it is assumed here that the same applies for the main difference between for-profit entrepreneurship and social entrepreneurship. Elaborating on that, in their article Main and Marti (2006) define social
entrepreneurship as follows: “First, we view social entrepreneurship as aprocess of creating value by
combining resourcesin new ways. Second, these resource combinationsare intended primarily to explore and exploit opportunities to create social value by stimulatingsocial change or meeting social needs. And third,when viewed as a process, social entrepreneurshipinvolves the offering of services and products butcan also refer to the creation of new organizations”(Main & Marti, 2006, p. 37). This definition is close to the ideas regarding entrepreneurship of Schumpeter (1934) about value creation through innovation, and Gartner (1988) about value creation in the form of organizations. It again only differs in that it is about the creation of social value instead of economic value, so again a different type of value creation. After comparing several definitions of social entrepreneurship Austin et al. (2006) also state that the underlying drive for social entrepreneurshipto create social value, rather than personal and shareholder (economic) value, is common among all and that “the activity is characterizedby innovation, or the creation of something new rather than simply the replication of existingenterprises or practices” (Austin et al., 2006, p. 2). However, in contrast to the specific idea of Dees et al. (2003) about what social enterprises are Austin et al. (2006) state that thesocial problem that is being addressed forms the central driver of the social enterprise and that the decision about how the social enterprise takes shape should be based on the format that most effectively mobilizes the resources that are needed to address the social problem. Based on this assumption they define social entrepreneurship as innovative, social value creating activity that can occur within or across thenonprofit, business, or government sectors (Austin et al., 2006).
19 2.3.2 Benefits and challenges of social entrepreneurship
Since the social enterprise is gaining ground in the field of business, it can be assumed that there are some benefits of combining social value creation with economic wealth creation. First of all from a for-profit view, companies try to maximize the value of every dollar spend, while at the same time minimizing their expenses and investing in innovative, cost-effective ways to do business (Dees et al., 2003). For-profit businesses can also tap into private capital markets and private revenue sources for investments, which makes them independent. Lastly, according to Hansmann (1996), for-profit companies are better able to quickly respond to a change in market demand. Thus, with their for-profit financial structure, the social enterprises become more innovative, cost-effective and independent and better able to quickly respond to demand changes.
Although the structure of a social enterprise has many benefits, it also comes with challenges and difficulties. As described earlier, social enterprises focuses both on social as well as economic wealth creation.Combining these, sometimes divergent, objectives in this two different areas can lead to conflicts, which have to be overcome in order to make the for-profit structure successful. The two main challenges are intangibility of social outcome, which makes it hard to measure and the trouble of creating an integrated organization with having two different types of objectives. The intangibility of social outcome makes it almost impossible to measure this outcome and this hinders managers to make bottom line decisions aboutresource allocationor practical cost/quality tradeoffsbased on the economic and social outcome. At the same time the uncertainty around social outcome makes it difficult to estimate how much there should be invested into pursuing a particular means of creating social value orachieving a certain quality of social goods or services (Dees et al., 2003). Concerning building the organization, the objectives in the economic as well as social sector, it is very challenging to put together a team of people that can set up one successful strategy, with sometimes strongly differing objectives. Especially when that team consists of members that normally are only used to work either in the business or social sector. Next to that, as a social enterprise it is your duty to create social value and thus to spend a large amount of your assets and equity to that. This has an
20 effect on locating the human resources, because social enterprises cannot afford the market price for qualified employees and thereforecannot compete with the salaries that for-profit are paying to their employees. Thus, social enterprises have to rely on volunteers an employees who pay more value to social wealth than economic wealth, who can be quite difficult to find (Certo and Miller, 2008). Besides these described challenges, social entrepreneurship sometimes comes with pressures to compromise on one of the two objectives. Having a social mission creates an internal pressure to do more social good than is actually financially responsible and therefore it is at the expense of the company's profit. Scholars such as Friedman (1962) and Baumol (1991), state that profit should overrule social preferences in order not to experience an competitive disadvantage and to be driven out of the market, this might be a worst case scenario, but nevertheless social objectives at least create opportunity cost by limiting the company's financial possibilities and this inefficiency makes it harder for the company to sustain (Dees et al., 2003). Another challenge that hampers a maximal social value creation are the expectations of investors and customers. Nowadays most of the investors still have their priorities with profit levels and liquidity than with social returns, which pressures social enterprises to take actions that benefit the financial returns, but are at the expense of the social mission. Also, actions that are in line with the social mission, not always lead to the best product or service quality, but since social value is hard to measure, it is hard to make a trade-off between the social and product quality. The occurrence of conflicting social and commercial objectives, like described above, is the so called ‘mission drift’. During the Social Enterprise Conference at Harvard in 2012, this was discussed as one of the most important learning points for social entrepreneurs. VikramAkula, the former Chairman of SKS Microfinance, explained that one of the main causes of the failure of a program to help the poor,was the move away from the focus of serving the poor as the core mission of the company. He pointed out the lack of altruism among everyone in SKS Microfinance’s environment as the reason for this (Social Enterprise Buzz, 2012).Thus it is very important to find a balance between the social and commercial objectives in order to make a social enterprise successful.
21 2.4 Research gap
As the prior discussed literature shows, there is a lot of debate about the exact meaning of the phenomenon CSR and social enterprise. Nevertheless the large amount of debate also shows that this are two very important phenomena in literature as well as in practice. The meaning of this study is not to come up with one solid answer on how CSR and a social enterprise should be defined universally, but making a clear distinction between the two concepts, could create more clarity about how to understand CSR and a social enterprise and how not to. When putting the several definitions of CSR and the social enterprise, discussed earlier, next to each other, we can state that the social activities play a different role within these two concepts. In a social enterprise the social activities are the core business of the companies and the activities evolve around it, while in a for-profit company the CSR activities are additional to the core business. Thus the difference lies in their reason for existence, which suggests they have a different motive for their social activities. This study aspires to search for the motives to engages in CSR or to set up a social enterprise and how they differ if that is the case. Another thing is thatsince CSR and social entrepreneurship are both designed in a way that they perform social activities and generate revenue, it is assumed that both have social and economic goals which are translated into objectives. This study seeks to find if and how these objectives between CSR and social entrepreneurship differ and if both concepts have a priority for one.Lastly, this study is placed in an international context, meaning that it focuses on Dutch companies that are connected to Africa. Arica is an emerging market which means that it offers a lot of chances and possibilities for foreign companies, but that are also still many problems and struggles for business to overcome. So what are the reasons for commercial companies engaged in CSR and social enterprises to set up their business in Africa? Do attractive financial reasons or addressing a social challenge play part in this or is it because of something else?This study will attempt to find an answer on the questions that have arised.
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3. Theoretical framework
In linewiththe research question, this study examines the motives for and objectives of companies with CSR activities and social enterprise in an emerging market. Based on the supporting literature, three working propositions will be presented concerning motives, objectives and the context of the social activities.
3.1 Behavioral intentions
In most cases, entrepreneurship is a well over thought act of behavior, so before starting up a business, there wasalready the intention to do so, which makes entrepreneurship an intentionally planned behavior (Krueger, Reilly, Carsrud, 2000). One act that shows this is the emphasis put on the importance of an appropriate business plan before realizing it, in academic literature as well in practice. According to the theory of planned behavior, behavior is best predict by intentions that cause that behavior (Azjen, 1985). “Behavioral intentions are regarded as a summary of the motivation required to perform a particular behavior, reflecting an individual’s decision to perform a particular behavior, reflecting an individual’s course of action, as well as an index of how hard people are willing to try and perform the behavior”(Ajzen and Fishbein, 1980 in Armitage and Christian 2004, p. 4).Intentions appear to be powerful predictors of behavior, especially in the caseof purposive, planned and goal oriented behavior (Bagozzi, Baumgartner & Yi, 1989), like with entrepreneurship. When looking at the behavior of an entrepreneur of a commercial company with CSR activities and a social entrepreneur, they are similar in the sense that they both have implemented a dimension of social activities. However, according to prior literature they place a different emphasize on this social dimension, which would make them different types of companies. According to the theory of
23 planned behavior (Azjen, 1985) this applies that both types of companies have different behavioral intentions for the implementation of social activities into their business. As Azjen and Fishbein (1980) described, behavioral intentions are a summary of motivation, thus it is assumed that both types of companies have different motives for the social activities.
3.2 Motives social initiatives
According to the academic literature there are different types of motives for engaging in CSR activities. In his article Swanson (1995)classified these motives into three different categories, which are: positive duty, utilitarian duty and negative duty motives. The value driven motive implies that companies are self-motivated to implement CSR initiatives regardless of external or social pressure, whereas with the negative duty approach the adoption of social responsible activities is a response is an initiative due to pressures from various stakeholders. Lastly, the utilitarian perspective assumes there is a strong relationship between CSR and profitability and therefore implements it to achieve performance objectives, such as profitability and ROI. Both the negative duty approach and the utilitarian approach suggest that CSR is used as a marketing tool in order to make an impression the stakeholders perceptions of the corporate image (Hooghiemstra, 2000).
Another distinction made between CSR motives is the one by Takala and Pallab (2000), which consists of juridical and ethical responsibility. Companies that are ethically responsible pursuit moral actions as a means in itself, because they have internalized ethical practices as an intrinsic value. These ethical responsible companies perform social actions that go beyond the legal requirements, because they have chosen to do so, while in contrast to that, juridical responsible companies mimic good behavior, because they are obligated to do so and thus to avoid any kind of sanction.
These distinctions of motivesas mentioned above, are related to CSR activities by their authors. Other authors who did an empirical study to the corporate motives for social initiatives are Brønn&Vidaver-Cohen (2009). In their article they define these social initiatives in the business context as “any program, practice, or policy undertaken by abusiness firm to benefit society” (Brønn&Vidaver-Cohen, 2009, p. 92). They state to have chosen deliberately for the term social
24 initiative, because they want to differentiate from the term corporate social responsibility, since it is argued that this term has an underlying moral drive of duty and accountability (Altman and Vidaver-Cohen, 2000; Matten and Moon, 2008; Waddock, 2004; Wood, 1991 in Brønn&Vidaver-Vidaver-Cohen, 2009). There where Brønn&Vidaver-Cohen (2009) attempt to uncover both practical as moral motives, they wanted to work with a term that contained no explicit normative overtones, but rather focused on the behavioral dimension. When looking at the distinction between several types of motives that is being made, they are divided into two different perspectives, namely the strategic and the moral perspective. Like the name already implies, according to the strategic perspective, engaging in social initiatives brings a strong strategic business. This perspective covers two motivational themes, which are instrumental and institutional motives. The instrumentalmotiverevolves around the idea that social initiatives have a direct influence on the company’s profitability, because it significantly strengthens the company’s reputation, which can protect its profitability in times of crisis or threat. A strong reputation also reduces transaction costs (Fombrun, 1996) and has a positive influence on shareholder value maximization (Tudway and Pascal, 2006) and consumers’ purchasing decisions (Sen and Bhattacharya, 2001). Continuing to the institutional motives, the importance of a strong company reputation through social initiatives shows that a social agenda is becoming just important as a strong bottom line for a company to be recognized as legitimate. Thus the institutional perspective suggests that companies engage in social initiativesprimarily due to institutional pressures, like the growing customer intolerance for corporate practices that damage theenvironment or neglect human rights (Brønn et al., 2008). According to these customers and other stakeholders of the company, it is the company’s moral duty to act in a socially responsible way. Lastly, the moral motive, is an altruistic motive that argues that a company’s social agenda is driven by personal moral values and the desire to make a positive contribution tosociety’sfuture.“The literature distinguishes between pure andimpure altruism (Ribar and Wilhelm 2002). In the case of pure altruism, an executivevalues CSR solely because of its positive societal consequences (Rabin, 1998). Inthe case of impure altruism, executives also derive private
25 enjoyment from the act of performing CSR.” (Graafland&Mazereeuw-Van der Duijn Schouten, 2012, p. 5).
Some studies even found that altruistic reasons for social initiatives weigh heavier than the benefits that are generated by these activities, while others concluded that they are equally important to strategic motives. When making a comparison between these motivational perspectives among 500 companies. Brønn et al. (2008) found that within the strategic perspectives, there significantly was more support for the institutional perspective than the instrumental perspective among these companies. When putting the strategic next to the moral perspective, overall, moral motives were found less relevant to engage in social initiatives than motives related to strategic concerns.However, when looking more specifically, there is a large variety between industries as regards the importance of moral motives, which possibly implies that companies within social sectors are more concerned with social causes.
3.2.1 Working proposition 1
According to theory, social enterprises are mainly driven by the need to create social value for their stakeholders, while their economic activities purely serve for the achievement of their social mission. This appearance indicates that social enterprise are mostly driven by moral motives to conduct their business activities. As for commercial activities engaged in CSR, although their intensions may be pure, it is more likely that some strategic motives are involved to perform CSR activities, since their initial goal is to create economic value and they might believe that CSR will add to this value. This leads to the following working proposition:moral motives, which include pure and impure altruism, are expected to account more for social enterprises than for commercial enterprises with CSR activities, which in their turn are more driven by strategic motives, which include instrumental and institutional motives, to perform business
.
26 3.3 Motives emerging markets
Emerging markets can be defined as “low-income, rapid-growth countries using economic liberalization as their primary engine of growth” (Hoskisson, Eden, Lau & Wright, 2000, p. 249). Concerning these emerging markets, there is a large scholarly consensus (Cavusgil et al. 2002; Hoskisson et al. 2000; Peng 2003) as well as within international development agencies(World Bank, 2002) on which transition economies are included. These economies are East Asia, Central and Eastern Europe, the newly independent states of the former Soviet Union and many of the economies in the Middle East, Latin America, Southeast Asia and Africa (Tracey & Phillips, 2011). These emerging markets present both opportunities and risks for foreign, western companies. Over more than 80% of the world population lives in an emerging market (International Monetary Fund, 2010), making it a gigantic consumer market for companies that are searching for new markets to address in order to generate more profits.The main needs of this gigantic market are basic needs in the areas of education,healthcare, food and nutrition, water, energy, housing and materials, but also in connectivity and tools and services for stimulating entrepreneurship.A very important characteristic of emerging markets is their weak institutional framework. When entering an emerging markets, companies are facing a lot of challenges and risks due to the lack of stable political structures, strategic factor markets and public transparency, high levels of bribery and corruption, poor records on human rights, inadequate environmental, safety and labor standards and high levels of poverty and inequality (Zhang, 2008).Another thing that characterizes many emerging markets, is their poor social and ecological conditions concerning income generation, education, health problems, fast depletion of resources and inefficient production techniques, etc.Thus, although the entrance of an emerging market is not without risk, it also creates new opportunities for companies, including commercial enterprises engaged in CSR and social enterprises, for the creation of economic and social value in many areas.
27 3.3.1 Working proposition2
As mentioned, emerging markets offer large economic and social opportunities for Western companies to address. This study assumes that that these two types of opportunities are very important motivators for commercial enterprises engaged in CSR and social enterprises to conduct their business in Africa. Concentrating on this, this study expects a difference in the type of opportunity that motives these two types of enterprises. This expectation is based on the fact that, according to most literature, “social entrepreneurship relates to exploiting opportunities for social
change and improvement,rather than traditional profit maximization” (Zahra et al., 2009, p.
521).Therefore it is expected that this type of enterprise is mainly driven by the social opportunity to conduct its business in an emerging market. Whereas for enterprises that conduct business and engage in CSR activities in emerging markets, it is expected that they do this morebecause of the economic opportunities that are offered, since they have stronger commercial focus than the social enterprise. This leads to the following working proposition: social enterprises enter the emerging market Africa for more social reasons than for-profit companies, which in their turn are more driven by commercial reasons.
3.4 Financial and social objectives
As pointed out earlier, one thing that implicitly defines social entrepreneurship according to theory (e.g. Dees, 2003; Mair and Mart,i 2006; Peredo and McLean, 2006; Leadbetter, 1997)is the central role of its social mission. Another thing that defines it, is its self-supporting financial structure through production of goods or the provision of services. According to theory (Defourny&Nyssens, 2010), there are several ways to shape this self-supporting mechanism. In one way, the nature of the economic activity is closely connected to the social mission, for instance if the goal is to create jobs for low-qualified people, this specific group of people are used in the production process. In another way the nature of the traded goods or services does not really matter as such and just serves as a good of income. In either way, the core mission of the social enterprise is to create social value and the distribution of profit functions as a means for this bigger cause. As the social enterprise has a
28 double bottom line, referring to itssocial as well as economic accountability, it is assumable also dealing with both social ascommercial objectives, these objectives are the ends that an organization sets out to achieve. Efforts to combine for-profit and nonprofit features and tendencies in a single
structure can sometimes be very problematic, when the social and commercial objectives are in conflict with each other. Also, in contrast to non-profit organizations,social enterprises have to compete intensely with other social and commercial enterprises for market opportunities and funding, which highlights the dual nature of the strategy that a social enterprise has to pursue in order to survive, because it has to be commercially successful and it has to fulfil the social mission. Some are concerned with the fact that the emphasis upon a business-likeapproach and financial management with the social enterprise might lead to social ‘mission drift’ (Anheier2000; Evers 2001; Foster &Bradach 2005 in Seanor&Meaton 2007). In practice this might lead to a situation in which the goal of profitability appears to rank closely if not equal to theobjectives of environmental and social benefits. When looking at CSR, companies that perform CSR activitiesare dealing with a lot of stakeholders, just as social enterprises. It’s managements’ challenge to create a win-win situation for all stakeholders, but since this is sometimes unachievable, there has to be decided which stakeholders get priority in the decision making process. According to Carroll (1991) there are two vital criteria on which the decision is based, namely legitimacy, which refers to “the extentto which a group has a justifiable right to be making its claim” (Carroll, 1991. p. 10) and power. From a CSR perspective the legitimacy of the stakeholder should be the most important factor, when taking the decision, but from a cost efficiency perspective, the power criteria outweighs the stakeholders’ legitimacy. Thus just as for social enterprises, living up to a CSR policy by a commercial company can cause conflicting objectives. For instance, in a decision whether or not to invest in employee development programs, it is legitimate to say that employees should be supported by their employer to develop themselves and reach their potential, which can be one of company’s social objectives. However the company will have to justify this choice to its investors, while it creates opportunity
29 costs of using the time and resources for other purpose, which might not be in line with the company’s commercial objectives.
3.4.1 Working proposition 3
As described, both social enterprises and for-profit companies that participate in CSR are dealing with many different stakeholders who’s interest they have to take into account when making decisions and therefore the companies could experience conflicts within their differing objectives. However, based on the theory that social enterprises are mainly driven by their social mission, it is assumed that there is a stronger focus on the achievements of social objectives than on the company’s commercial objectives. On the contrary, commercial enterprises have the core goal to generate profit, therefore in a situation with conflicting objectives, it is expected that this type of company gives priority to its commercial objectives rather than its social objectives. This leads to the following working proposition: Social enterprises are more likely to give priority to their social objectives, whereas commercial enterprises engaged in CSR prioritize their commercial objectives over any social objectives in conflicting situations.
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4. Methodology
In this chapterthe research approach and design of this paper are described. For this study 10 semi-structured interviews were conducted among 5 profit companies that participate in CSR activities and 5 social enterprises, leading to the results that are presented in the next chapter. The goal of this study is to findthe difference in the degree of honest dedication of these companies for conducting business in an emerging market and their social activities in that same market, by comparing their motives and objectives. Firstly, the way in which the research is designed is explained, including the research strategy. The chapter continues with a description of the subjects, the data collection strategy and finally, the data analysis strategy.
4.1 Research design
In order to decide how to conduct a research, one should first be clear about what kind of theoretical view is being expressed (Gephart, 2004). In the area of business and management research, to which the subjects of this study apply, situations are complex and unique, which makes them difficult to generalize. However, in the dynamic and unique world of business, being able to generalize any findings becomes less important and instead attention should be paid to the details of one specific situation and the meaning that people give to that situation in order to understand the underlying motives and reasons for people’s behavior (Saunders, Lewis, Thornhill, 2004). For this reason an
31 interpretive perspective was maintained during the study.As for the objective of this research, there is a descriptive goal (Saunders, Lewis, Thornhill, 2012)to find the degree of honest dedication to their social activities in an emerging marketthrough the companies’ motives and objectives and to make a comparison in these motives and objectives for profit companies and social enterprises.Concerning the research method, a combination between the inductive and deductive research approach (Saunders et al., 2012) was chosen, sincealready existing theory that could be related to the topic, was used to formulate the working propositions for this study.Subsequently the goal of the research was to collect data and to develop new theory that contributes to the existing definitions on CSR and social entrepreneurship and that is valuable for making a distinction between these two concepts.For this study the available information about motives and financial as well as social objectives was needed. The acquired information on this topic is not quantifiable and means something different for each individual enterprise, therefore a qualitative research methodwasthe most appropriate method to collect data for this study. In this particular case the data was collected through semi-structured interviews.
4.2 Subjects
The interviews were conducted among a sample of 10 Dutch enterprises, consisting of 5 for profit enterprises and 5 social enterprises (table 1). All 10 enterprises are in some way connected to African countries with their business across different sectors and are involved in social activities.To select the social enterprises, a list of all social enterprises that are a member of the Dutch ‘Social Enterprise NL’ platform was used as a sampling frame. The social enterprises that were involved with Africa were approached for participating in an interview. Concerning the for-profit enterprises, the enterprises that were approached for an interview were selected based on their participation in the PSI program in Africa, a program of the Dutch Secretary of State to support innovative investmentprojects in emerging markets that result in a positive influence on the local economy and society. In the most cases the interview was conducted with the owner of the company, since it was expected that this
32 person is most able to elaborate extensively on the motives for starting up the company and the execution of the company’s social activities. In a few cases where the owner was not available, another manager in the company with sufficient knowledge about the subject was asked to participate. Table 1 presents the following important interview characteristics respectively: the name of the company, the type of company, the branch in which the company is operating, the person who was interviewed and the position of the interviewee within the company.
Table 1. Interview characteristics
No. Name Company type Interviewee Job title
1 YEP Africa social enterprise Paul founder
2 Village Pump social enterprise Herman founder
3 Humana social enterprise Marc director
4 More2Win social enterprise Clara junior project manager
5 People4Change social enterprise Martine founder
6 Afriek for-profit Sivan founder
7 AfricaJuice for-profit Marcela founder
8 Finish Profiles for-profit Dennis technical designer
9 BBROOD for-profit Renee founder
10 Van Oers for-profit Maria sustainability manager
4.3 Data collection
As stated earlier the research instrument used for this study was a semi-structured interview, since the goal was to trace and understand the underlying reasons for certain decisions and behavior(Saunders et al., 2012).The interviewer conducted the interviews based on a list of themes
33 and some key questions (appendix A), which was composed prior to the first interview. This list varied from interview to interview, because some questions or subjects were added to it along the process because they appeared to be frequently discussed and thus important. The order of the questions also varied for some interviews, depending on the flow of the conversation. All the interviews were conducted face- to-face and audio-recorded to capture the data. Permission from each interviewee was asked and obtained to record the interview and to use the collected information exclusively for the purpose of this study.
4.4 Coding and data analysis
After conducting the interviews, they were transcribedwhich means that the lyrics were reproduced as a written account by using the actual words (Saunders et al., 2012). Subsequently the transcripts were imported into NVivo 10, softwarefor qualitative data analysis, in order to analyze the data. To analyze the transcripts a qualitative content analysis was conducted. A qualitative content analysis can be referred to as “a research method for subjective interpretation of the content of text data through the systematic classification process of coding and identifying themes or patterns” (Hsieh & Shannon, 2005, p. 1278). This approach can be divided into inductive and deductive qualitative content analysis and the key difference between the two approaches centers on how initial codes or categories are developed. “In the inductive approach, codes, categories, or themes are directly drawn from the data, whereas the deductive approach starts with preconceived codes or categories derived from prior relevant theory, research, or literature” (Cho & Lee, 2014, p.4).In this case the deductive approach was applied. At the beginning of the coding processtwo initial lists with codes and sub codes, based on the prior discussed theory, was composed. One list was used to code transcripts of the social enterprises and the other one for the companies with CSR activities. All texts that appeared to be relevant for the research were assigned to the best fitting predetermined (sub)code. During the coding process this list was complemented with new additional codes for the data that could not be assigned to one of the predetermined (sub)codes. After the coding process the codes were compared based on their content and the amount of references and sources for the
34 separate company types, followed by a comparison in content and the amount of references and sources between the two company types.
4.5 Limitations
The most important limitation of this research design is the small amount of interviewees. Only 10 interviews were conducted among 5 social enterprises and 5 companies with CSR activities. Because of this small amount of interviewees it was hard to establish a clear relation in the motives and objectives for the two separate types of companies and therefore to make a comparison between the motives and objectives between the two types of companies. An increase in the amount of interviewees would be necessary to support the reliability and generalizability of the outcome of this study. Another limitation in this case, which decreases the credibility of the study, is that only one research method was used (mono method), which increases the likelihood of researcher bias in the data and the likelihood of misinterpretation when checking the findings against various data sources and perspectives. In order to decrease this likelihood, multiple research methods (triangulation) should have been used. However, due to limits in time and resources, the semi-structured interviews is seen as the best alternative to obtain the data which was necessary to answer the research question.
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5. Results
In this chapter the findings of the data analysis are presented. This chapter starts by separately discussing the general findings on the social and financial characteristics for both the for-profit companies and the social enterprises. Next, the data will be analyzed extensively to collect the results on the for-profit companies and social enterprises in order to test whether or not the working propositions are supported, which will be discussed in the next chapter.
5.1 General characteristics
First of all this section presents the results on why these 10 companies call themselves a company with that is engaged in CSR or a social enterprise and thus what theinterviewees mean by the these definitions. Secondly, the results on the companies’ business structure are presented, including their legal form,revenue model and the target group and the countries of their financial activities. Finally, their missions, social activities and the target group and countries of their social engagement are shown.
5.1.1 The definition of profit-companies engaged in CSR
When looking at the most important characteristics that defines these 5 companies two important things arise. First of all, all 5 companies declared that they started their company because of a strong entrepreneurial interest and that this drive of wanting to conduct a business was the main and most
