Towards a better understanding of socially driven business : a case study for exploring characteristics of Dutch competitive social enterprises

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Towards a better understanding

of Socially Driven Business:

A case study for exploring

characteristics of Dutch competitive

social enterprises

VU University Amsterdam University of Amsterdam

Faculty of Economics and Business Administration

Master thesis

Name Jurrian Tromp

Degree Msc Entrepreneurship (joint degree UvA & VU)

Student number UvA: 10092536 VU: 2528453

Date August 2016

Supervisor Prof. Dr. R.C.W. van der Voort

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Abstract

The distinction between for-profit and non-profit has blurred. Social entrepreneurship is on the rise and commercial enterprises are adopting more and more social components. In recent years, various subtypes of entrepreneurship have evolved in a continuum between social and financial goals. In this thesis the landscape of social entrepreneurship is explored to identify one of the subtypes in the continuum: The Socially Driven Business (SDB) tries to create social mission impact while staying competitive. It appeared that this subtype has had little academic attention and needed to be better defined. Properties of this type of social entrepreneurship are identified in order to analyse two cases to explore their characteristics. Although the validity of the study is limited, an outline is created based on what was found to come to basic understanding of the phenomenon. Results of this study thus might be useful for further research and provides insights on the characteristics of SDB’s that might be relevant for entrepreneurs as well. It is found that SDB’s are interacting differently with their

environment and are more depending on it for legitimacy, acquiring of resources, amongst others.

Keywords: social entrepreneurship, socially driven business, for-profit social entrepreneur,

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1. Introduction

Times are changing. It’s interesting to see what has changed in the way we do business in the last ten years. Supporting green and sustainability used to be some niche called the “third sector”, which was more related to government than business but being ultimately non-governmental, value-driven and reinvesting (Westall, 2009). Activist organizations like Greenpeace and NGO’s like Unicef were just some of a few big players.

But now we see that the situation has changed. Different types of entrepreneurship have evolved and are now filling the gap between the non-profit NGO’s and the traditional commercial businesses. These so-called social entrepreneurs desire to address societal challenges that range from economic development to environmental issues to wellbeing and civil engagement. The main difference with commercial entrepreneurs is that social entrepreneurs are intrinsically motivated to address a certain issue in society.

A conceptual problem with social entrepreneurship is that it is unclear what the term ‘social’ actually means. Even more: “being engaged in social enterprise is not necessarily the same as being a social entrepreneur” (Peredo & Mclean, 2006, p.62). For instance, the term ‘social value’ is confusing and mainly an empty shell because, depending on the context, it can refer to different things. To illustrate this issue: some argue that the ‘social’ aspect of entrepreneurship should be considered as a dimension of entrepreneurial action. Even commercial enterprises create social value in the form of jobs and valuable goods, even if the enterprise is strictly in business for profit. All business ideas lead to social change, even if it is unintended or half-intended (Groot & Dankbaar, 2014). In the present thesis, ‘social entrepreneurship’ refers to an intrinsic motivation of striving for a better world.

In the past, social enterprises almost exclusively operated in the non-profit sector. However, that distinction has blurred (Alter, 2007; Peredo & Mclean, 2006; Westall, 2009). A hybrid or continuum has emerged between the two (Dees, 2001; Austin, Stevenson & Wei-Skillern, 2006; Bolton, Kingston & Ludlow, 2007; Alter, 2007; Mitchell, Kingston & Goodall, 2008). Nowadays, social-purpose enterprises operate in the for-profit sector (Dees & Anderson, 2003) along-side commercial companies that adopt social components, also known as corporate social responsible businesses.

One of the factors that play a role in this growing overlap is that stakeholders are also changing towards an increasing social focus. As a result, they have changed their expectations of non-profits and are spreading their funding also towards non-profit companies to achieve greater social impact (Alter, 2007; Hoogendoorn, 2011). At the same time commercial companies have various reasons to adopt social components. The traditional distinction between non-profit and for-profit is becoming

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When looking at the trends among commercial enterprises it becomes clear that even the biggest corporations adopt social components. For instance, according to an investigation into the strategic documents of Standard & Poors (S&P) 500 companies (Baral & Pokharel, 2016), those companies that mention a plan to climate change or the disclosure of emission have found to increase their return on investment by 18% and 67% respectively. Furthermore, S&P 500 companies mention terms like Triple-P (12%) or safeguarding the planet (14.8%) more often than in the past. Also, it has been found that firms doing wrong that are exposed by consumer groups and have led to large-scale boycotts (Snider, Paul & Martin, 2003).

There can be various reasons for enterprises to become ‘social’, e.g. for moral, profit, or survival reasons. One might argue that in the mixture of motives for adapting social components, the considerable pay-offs could be the decisive factor rather than the intrinsic merit (Peredo & Mclean, 2006). The problem seems to be that in reality social entrepreneurship is rather obstinate, it is quite difficult or maybe even impossible to determine the motives based solely on statements and the appearance of the enterprise. A rapid growth seems to be going on of all kinds of companies that strive for social components in different ways and for different reasons. On the one hand, this seems like a great development for social reasons. On the other hand, as mentioned before, it is questionable how many ‘social’ business activity is actually based on a social motive and is carried out to the extend where it actually leads to a positive impact on social issues in society.

As commercial enterprises are increasingly adopting social components in their strategies to achieve their commercial goals (and possibly to actually be ‘social’ as well), this might also work the other way around. Can social enterprises also adopt commercial strategies to achieve their social goals? In order to address this issue, social entrepreneurship will first be further elaborated.

1.1. Rise of social entrepreneurship

Social entrepreneurs (SE’s) tend to exert social value, radically changing the outcome of the whole situation by targeting an unfortunate but stable equilibrium using a social value proposition (Martin & Osberg, 2007).

In the Netherlands, although the numbers still are relatively small compared to CE, it seems that SE is on the rise. Some reports claim modest numbers ranging from 2.400 to 6.400 in 2013, which equals 0,3% of the total economic activity in the Netherlands (Stegeman, 2015). Others claim a constant, rapid growth of employment rates of social enterprises in the Netherlands of 25% in 2013, 12% in 2014 and 36% in 2015, whereby total turnover increased in one year by 24% from 383 million in 2013 to 476 million in 2014 (Social Enterprise Monitor, 2015).

According to the European Economic and Social Committee, the total of Dutch social economy employment has increased by 26.79% between 2003 and 2010, from 11 million to 14 million (Chaves

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Avila & Monzon Campos, 2012). This social trend has been around for a longer time since non-profit organizations between 1987 and 1997 have been growing to 1.2 million (Lampkin, 2002). This indicates that SE in the Netherlands has been a steady trend and will likely continue to develop for many years to come.

Similarly, the development of SE can also been found in the rest of Europe and other western countries. Egyptian Ibrahim Abouleish recently received the “Alternative Nobel Prize” for being one of the first to enable and embrace SE. Furthermore, in 2004 e-Bay founder Jeff Skoll donated 4.4 million pounds to set up a SE research center and ever since knowledge and support for SE has been growing. In The Netherlands, SE is supported and monitored by the interest group Social Enterprise NL, among others. Also, a growing number of (government-controlled) organizations are now

focusing on developing and stimulating SE. These and other global, national and local initiatives try to support and stimulate SE startups, indicating that there is increasingly more attention for the

phenomenon.

However, traditional SE’s have to cope with disadvantages. It is a fact that SE’s tend to have more difficulty to ‘stay in the race’ than commercial entrepreneurs, because many SE’s depend on subsidies and are less likely to survive when the funding stops. Also, they tend to be less ambitious

(Hoogendoorn, 2011). Moreover, social products and services are often much more expensive for several reasons. Many of these products are created to combat social unfairness and therefore fair prices are offered to the whole supply chain, leading to substantially higher product prices which makes the companies less competitive. Also, less efficient market structures often lead to higher prices. SE’s often pioneer new areas of (fair) business and have to overcome more challenges, thus making it harder to financially survive.

However, it seems that SE’s are adopting new ways of doing business along with a new business ethos. This can lead to stronger competitive power towards traditional companies. SE’s seem to have some natural advantages which they can use. One of these competitive advantages is that social businesses naturally draw positive attention to themselves and their product. Their social focus and fair policy create trust and credibility with their public and a natural positive word of mouth. In other words, their product ‘sells’ itself. Because they naturally draw attention and create a loyal customer public, they also might have to spend less money on marketing. Another advantage might be that they are able to address social issues for which no solution exists, and can even apply for subsidies while doing so.

Some companies go even further with respect to having a positive impact on society. A new

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is Ctaste, a Dutch restaurant in the dark that employs visually handicapped waiters. The result can be a win-win situation, in that social and commercial goals are achieved simultaneously. For instance, the Ctaste is aiding visually handicapped people while setting up a business for profit, thus combining both a social and commercial goal. Being competitive and growing the company is mandatory for this kind of enterprises. This way, the company gains economic strength in order to have an even bigger social impact.

SE’s are interesting for governments as well, because SE’s often address issues that are traditionally the domain and responsibility of the government. Changing priorities in government spending have caused SE’s to be called upon to address social problems (Akemu, Whiteman & Kennedy, 2016). In line with this, the aforementioned restaurant Ctaste fulfils what is actually the government’s

responsibility, to provide people with a visual impairment with a job. Therefore, whereas commercial parties might not enter a market because of the limited monetary opportunities, social enterprises can play a role that is far greater than only monetary return and can complement or add where the government fails to do so.

Mixing social and commercial goals can be interesting, but also create a tension. For, when does a social focus turn into a commercial focus? For some, social and commercial might be conflicting properties. Naturally, one could expect a social-purpose enterprise to want to stay away from this tipping point because it finds social and commercial goals incompatible and therefore wants to avoid any commercial focus. Moreover, a SE might not want to run the risk to lose its social focus and become actually commercial-focused. However, as discussed above, it can be argued that for the very same reason SE’s might want to draw as close to the commercial border as possible in order to gain competitive power, enabling maximum social impact in return. These different motives and causes make it more difficult to describe SE.

Present thesis aims to explore how SE’s can be commercial in order to be competitive on the regular market and have maximum social impact on society. This commercial SE subtype tries to enact the best of both worlds in order to maximize social impact and compete in a competitive market. In the Netherlands, a number of competitive social enterprises have successfully emerged in this new

playfield, for instance: Tony’s Chocolonely, Fairphone, Argu, Peerby, Ctaste, Freud, Fifteen, Binbang, Greenchoice, Greenwheels, Triodos, to name a few.

All of these enterprises are primarily motivated to promote a better society. Their social mission enables them to make a difference and at the same time to stay commercially viable. The more market share they are able to acquire, the more social impact they will be able to make. Commercial

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Although effective commercial SE’s already exist, a theoretical framework about this type of entrepreneurship is barely available. Present thesis aims to shed a first light on how effective Dutch competitive SE’s operate and what characteristics can be distinguished that can be used as a first theoretical framework for competitive SE.

The main research question is: what are the characteristics of Dutch effective competitive social enterprises?

In order to gain an understanding of competitive SE’s, a theoretical framework of the

social-commercial continuum of entrepreneurship subtypes, its definition and context, will be provided in the next chapter.

2. Theoretical Framework

The following section provides a theoretical framework about the continuum between social and commercial enterprises and how these properties can be combined.

The problem of the changing landscape between non-profit and for-profit entrepreneurship led researchers such as Alter (2007) to create continuum models presenting a spectrum between strictly pure/traditional non-profits and traditional for-profits. Alter (2007) made a first attempt to create to distinguishable subgroups of non-profit and for-profit enterprises. In this first model four hybrids are distinguished that move from social impact towards stakeholder profit as primary purpose (appendix A). Non-profits are increasingly forced to supply their own funding (Hoogendoorn, 2011), whereas for-profits often need to make social contributions to survive (Alter, 2007). It thus seems that both types are more often forced to find a way in-between the two traditional main types.

Therefore, both types of hybrids pursue dual value creation strategies to achieve sustainability

equilibrium. This results in non-profit based hybrids that are implementing commercial components to support their sustainability strategy, and on the other side for-profit based hybrids that “do well by doing good” in order to satisfy environmental demands and ultimately to survive.

SE is still emerging as an active area for academic inquiry. What makes research into this topic difficult is that SE is not a tidy concept (Peredo & Mclean, 2006). Short, Moss and Lumpkin (2009) argue that in the past 20 years of SE research, remarkably little scholarly output has appeared in mainstream management and entrepreneurship journals. They argue that this is due to the fact that no established scientific theories have been applied in the past research efforts, resulting in vague understanding of the phenomenon.

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focus of research seems to find theory that applies to all SE’s, instead of focusing on what

distinguishes them. The few authors that actually try to identify and explore the various SE subtypes be discussed later on in this chapter.

Because the boundary between social and commercial is vague, it is important to define it. This is enables to determine to what extend an SE can become commercial without losing its main social focus.

Like Alter (2007), Mitchell, Kingston and Goodall (2008) posed a second model (appendix B) that extends on philanthropic investment research, resulting in specific emphasis on the outcome of entrepreneurial action. Although different terms are used, the model is similar to that of Alter (2007) and more or less poses the same continuum from non-profit to for-profit. However, one more type of entrepreneurship is added in the middle of their model.

What becomes clear is that the primary focus on the outcome leaves out the social processes (Allinson, Braidford, Houston, Robinson & Stone, 2011). This corresponds to the observation of Westall (2009) that the model does not cover the complexities of the business processes but only the outcomes. Westall (2009) therefore argues that the definitions are too narrow since ‘special’ cases do not fit in a model that is only focussed on economical outcome. Move over, some companies are “changing economies rather than meeting social needs, or [have a] complex profit distribution” (Westall, 2009, p.8). Consider an enterprise that strives for minimal viable profit to employ as many disadvantaged people as possible while still being highly competitive, where would this enterprise fit in this model? When comparing the two models it becomes clear that socially responsible business (number 5) exists in both diagrams. Its primary objective is to maximize profitability but it is tempered by social or environmental return. Social purpose business is structured as for-profit but has social impact as its core mission. The social benefit enterprise on the other hand remits reduced profit, for the profit is primarily invested back into the company.

According to the second model, any company that comprises even just a small social component already meets the term SE. For present thesis, such definition is much too broad, since the purpose is to identify social companies that apply commercial goals to maximize social impact. More useful would be to place the boundary between subtypes 4 and 5. Such boundary is comparable to the distribution according to Alter (2007).

In sum, the relation between social and profit is vague in these models. Although the second model also gives some direction to the different existing subtypes, it does not provide a thorough, in-depth conceptual framework that defines the subtypes well and gives a clear boundary between social and profit.

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Pieter Oostlander, promoted by Shaerpa and EVPA, combined the model of Mitchell, Kingston & Goodall (2008) with a model developed for UnLtd by McKinsey & Company into a third model (appendix C). Shaerpa is a Dutch consulting firm that offers services to venture philanthropists involved in social venturing choosing for “return on lifetime” rather than “return of investment”, and could be considered a SE itself. Shaerpa is a member of EVPA, the European Venture Philanthropy Association, a non-profit branch organization to promote and shape the future of venture philanthropy in Europe and beyond (evpa.eu.com). The association aims to be a hub for knowledge and publishing research on venture philanthropy.

Unfortunately, no source publication is available in which the third model is discussed. Therefore, the terms used in the model are not properly defined, and the model has never been subject to scientific scrutiny either. Therefore, the scientific relevance of the model is low. Also, consistent with the second model, the focus is once again on the outcome rather than the social process. However, the third model has been adopted in theory (Sommerrock, 2010) and is used in policymaking (SER, 2015). Compared to the other models, the third is the most comprehensive and clear model of the continuum that is available. For example, when compared to the second model, it gives more information as it features the ranges of venture philanthropy and social venturing, and most notably features a spectrum from social impact value to financial value.

Compared to second model, the boundary between social and profit is different here. The third model describes a continuum from impact-only to financial-only. This corresponds to the relation between social impact as primary purpose versus shareholder profit in the first model. Also in this model, the boundary is placed between profit distributing socially driven and CSR company, which makes much more sense. Thus, this boundary is more useful than the previous ones.

However, it remains unclear in the third model at what point impact-first becomes financial-first. The same happens in model 1 when looking at where social (blue) turns into commercial (green). The question is what boundary can be drawn now, as the models differ in the exact point where they draw it.

2.1. Conclusions on the models

There is some confusion about different definitions of (social) entrepreneurship subtypes. This seems to be one of the main obstacles in consensus on the subject of SE and proves to frustrate research since it cannot be assumed that the term used in one study always nearly matches the definition in another. Westall (2009) attributes this to the fact that enterprises that are changing market structures often feel different and “devise new terms for their identity”.

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Even more problematic appears to be that after reviewing these three models – although they give similar views of how the continuum could be conceptualized – the actual terms are not well-defined. No literature has been found that comes to a well-defined continuum from social to commercial and actually defines in-depth what the subtypes on the continuum are.

One could argue that SE simply will not allow itself be classified in an orderly manner, that some enterprises might apply to more than one subtype in these models. Still, it should be possible to bring some order in the SE landscape. This would be achieved by expanding one or more of the discussed models with more rigid definitions or criteria for subtypes of SE that could be found empirically. The goal of this thesis is not to consolidate these models and test them thoroughly, but to find a starting point in identifying effective commercial SE. Finding out what the specific attributes of the subtypes are therefore seems a fruitful path for further academic exploration. Putting those discussed models together and find a mapping between the different terms could lead to a better understanding of the continuum.

It has become apparent that most authors mentioned to a certain degree agree how the continuum flows from social to commercial. Although there are different terms available for the subtypes on the continuum, there are similarities as well. And although the use of mentioned models may be limited, for this study it provided enough information to display an outline to work with.

We could argue that, although we are dealing with a continuum, there is some tipping point where a company is considered more commercial than social. Why would this tipping point be so interesting one might ask? Because it brings us closer to the essence of understanding what drives, and ultimately divides SE’s and CE’s. It would seem that focusing on making profit but not maximizing profit separates SE from CE, since CE will normally be focused on profit maximization.

In that respect, the most compelling criterion that I’ve found puts the focus on the financial driver instead of social goals. Peredo (2006) carefully contemplates that theoretically only companies that would be willing to accept reductions in their profits to maintain their social mission, could be regarded as a criterion for SE in that sense. Companies that would abandon social aims if they believed that they wouldn’t contribute to the profit tend more towards commercial than social entrepreneur.

In my opinion this criterion could still be used to define the boundary between SE and CE because in its essence it reveals a fundamental difference between the two. On the one hand we see the

intrinsically socially motivated entrepreneur who hypothetically would expectedly accept reductions in profit. On the other we see the financially driven social entrepreneur, which may very well take care for the social cause but ceases to support it when the social aspect threatens profit.

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However, it is said that “such speculation clearly invites ill-founded judgement […] in an area where any sharp boundary is arbitrary” (Peredo, 2006, p.63). Since there will always be exceptions to the rule which make it very difficult to draw a line. The tipping point should thus been understood with

appropriate flexibly, to ensure that enterprises are not disqualified beforehand. Flexibility would mean that other (contextual) factors should be accounted for. Imagine an enterprise that reinvests all its profit in commercial activities to achieve massive commercial growth, ultimately creating huge social impact. Why should we disqualify this as an SE if it would theoretically not accepted a reduction of profits? And should we consider paying the profits to the employees as a reduction or not?

With the aforementioned models this is also the case, there is always a certain measure of how well an organization fits a subtype. The subtypes are constructs, generalized, and therefore have properties that more or less fit a company. Thus, we can only classify the companies based on their resemblance to the posed criteria. Exceptions will always arise. So, it needs to be kept in mind that the boundaries are never exact. If these boundaries are applied to the models mentioned in this thesis, we need to look for the global tipping point in the transitions between the different subtypes.

For the present thesis, the aforementioned criterion will be used because it is practical and the best that can be found in literature. When looking at the models, the third model fits best to this criterion because it draws the line at the point where social value-first meets financial value-first. The subtype on the left of this boundary is profit distributing socially driven, for now we will assume that these social for-profit entrepreneurs would accept reductions in profit to maintain their social mission. The term seems to correspond to social enterprise and social purpose business in first and second model respectively.

Now that a conceptual division point between social and commercial has been found, the social subtype that is most commercial can be established as well. For, this is the social subtype closest to the division point. As no other starting point has been found in literature, the social subtype that is most commercial is the best subtype to take as a starting point for investigation commercial SE’s. We thus assume that this subtype is the profit distributing socially driven business that we found left of the boundary.

Since the phenomenon is on the rise it is more valuable for the contribution of this study. Marshall (2011) points out that – opposed to non-for-profit hybrids – for-profit SE’s might have been scarcely researched due to the perceived contradiction of financial vs social objectives. The term profit distributing socially driven used in the third model is a relative unfamiliar term, terms like socially driven business and socially responsible business as can be found in the models are more common terms. For the purpose of this study we will abbreviate it as SDB.

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I reasoned why I think this criterion might help in explaining the tipping point. Review of the models resulted in similar views on the continuum in which the terms were not well-defined. From there I tried to identify the boundary between SE and CE and established SDB as the most interesting subtype to investigate. We will now try to find a working definition for SDB that can be used in this study.

2.2. Socially Driven Business

When we look at the terms that were mentioned by authors in literature, we find that the following terms are associated with the term SDB: Socially-Driven, Mission-Driven, Value-Driven, Purpose-Driven, People-Planet-Profit, Triple bottom line, Socially responsible and For-Profit Social

Entrepreneur. What these terms have in common is that the entrepreneur with a specific mission tries to accomplish a social goal and optionally tries to make profit in the process.

It appeared that there is little academic literature available that specifically describes the entrepreneur that is: 1) social and 2) for-profit. Or as Hurst (2014) puts it: “a purposeful social enterprise should integrate at least one of these three methods into their enterprise: 1) delivering purpose to customers, consumers or participants, 2) providing purpose to employees, and/or 3) building purpose throughout the supply chain” (p.148).

Currently, the conceptualization of the ‘international for-profit entrepreneur’ by Marshall (2011) is the only noteworthy scientific source that is in-depth and well-defined enough to work with. He defines the ‘international for-profit entrepreneur’ as follows: “an individual or group who discover, enact, evaluate and exploit opportunities to create social value through the commercial exchange of future goods and services across national borders” (Marshall, 2011, p.185). He poses a model, utilizing the four dimensions of mindset, opportunity recognition, social networks, and outcomes. The properties that he discusses have been brought together in table 1, below. For clarity, this table is a compilation of the mentioned properties by Marshall (2011) by the author of this thesis.

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Mindset Opportunity recognition Social networks, knowledge, partnerships

Outcomes

1. Idea and motivation to do something different (Jack and Anderson, 2002)

12. Market knowledge of recipient countries to detect competitive opportunities (Oviatt and McDougall, 2005)

19. Network ties can enhance the ability to elaborate opportunities (Ardichvili, 2003)

28. Social mission above or at parity with financial success

2. View risks optimistically (Palich and Bagby, 1995)

13. Motivation to address market failure (Dorado, 2006; Dees, 1998)

20. Network ties can enhance the ability to acquire resources (Batjargal, 2003)

29. Growth, only if improving the social problem

3. Entrepreneur committing to bold action without concerning resource constraints

14. Worldview of transformative market potential tightly coupled with social mission

21. Network ties can enhance the ability to gain legitimacy (Aldrich and Fiol, 1994)

30. Value to society is priority outcome (Murphy and Coombes, 2009) 4. Addressing a seemingly

intractable social issue

15. Inclined to identify systematic nature of social challenges and potential for new types of “citizen-customer” responses

22. Network relationships essential to overcome institutional limitations (Freeman and Cavusgil, 2007)

31. Continuation may not be necessary when social issue seems resolved

5. Discover novel means to achieve constructive social change (Murphy and Coombes, 2009, p. 326)

16. Seek (opportunity) to overcome bad consumptive behaviour by conscious or ethical consumerism (Doherty and Meehan, 2006)

23. Network relationships to understand the in-depth complexity of needs, values and circumstances (Murphy and Coombes, 2009)

32. Social mission and entrepreneurial intentions fundamentally differ from outcome of traditional entrepreneurs 6. Enact social change in

source countries

17. Capacity to reduce tension between social and profit objective when consumers engage in ethical

consumerism

24. Knowledge of cultural, social, and economic systems of the source country

33. Personal and organizational wealth are higher valued than long-term organization viability (Timmons, 1978) 7. Strive for moral objective

serving “recognized social need” (Hemingway, 2005)

18. Connecting consuming country in favour of disadvantaged country (Doherty and Meehan, 2006)

25. Worldviews highly value collectivistic collaboration and consensus-building (Hemmingway, 2005) 8. Dealing with a

multiplicity of cultural, social, political and economic systems

26. Collaborative partnerships to gain intellectual capital, local networks, additional capacity and skill sets 9. Holds high the potential

for market mechanisms and consumer choice to be transformative (Dart, 2005)

27. Cultural and civic norms of mutuality and reciprocity as guiding principles (Fowler, 2000, p.647)

10. Conscious choice for market-driven rather than government-based solutions 11. Driven by believes to work within markets to address (social) issues

Table 1. Conceptualisation of the international for-profit social entrepreneur. Adapted and composed based on Marshall (2011)

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The four dimensions of the ‘international for-profit entrepreneur’ can be summarized as follows: 1. Mindset – the enterprise is founded on taking risk in order to bring about social change in one or several countries. Broad social or environmental problems are best addressed through smart marketing concepts instead of through the government. The entrepreneur has a foundational belief in a world view that assumes the potential to change market mechanisms and consumer behaviour.

2. Opportunity recognition – the entrepreneur is convinced of the inexhaustible social mission to strive for the opportunity of this potential improvement, to break through market structures and consumption patterns, and to connect nations. Especially social issues that are not addressed by other are interesting from this point of view.

3. Social networks, knowledge, and partnerships – in order to bridge the cultural, social and economic differences between nations, the international for-profit entrepreneur is more than others dependent on network relationships and partnerships to contain complexity, needs and circumstances and to

overcome institutional limitations such as market knowledge. They are often focused on cooperation and consensus building.

4. Outcomes – economical goals are important for survival and the growth of the company, but the social mission is more important than, or equally important to, financial gain. Growth of the company is only positive when the contribution to society is guaranteed. Short-term wealth of man and

organization often has priority above long-term perspectives. The outcomes and intentions of the social mission is the most foundational difference from traditional entrepreneurs, causing the achievement of the social goal to not be necessary anymore in some cases.

When the conceptualization it compared to the criterion that was found as boundary for SE, we see that the following numbers clearly meet this criterion: social success is more important than financial success (#28), and growth is only desirable when the contribution to society is guaranteed (#29, 30). Although there are several points a CSR company can possible also meet (#2, 8, 11 18), there is more than enough reason the exclude them (#4, 5, 6, 7, 13, 14, 16, 17, 25, 28, 29, 30, 31, 32, 33). These numbers correspond to the properties listed in table 1.

Although Marshall (2011) puts an explicit focus on the international context of entrepreneurship, this should not be a problem for the use of the conceptualisation in this thesis. Because although some aspects are only applicable in an international setting, the remaining aspects do not lose context on the moment we apply this international definition of entrepreneurship on national or local forms of entrepreneurship. When using the conceptualisation to examine forms of entrepreneurship without an international context, we should note that some of the properties just do not apply.

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These first two chapters have already revealed a large part of this study. The relation between SE and CE has been discussed, resulting in various models describing a continuum from social to financial. This study so far has contributed by bringing together and critically reviewing these models, making an overview of the discourse and avenues for further research. Resulting in a tipping point between SE and CE to come to the subtype of SDB.

3. Methodology

In this study a case study is carried out come to a better understanding of SDB in practice and to examine some real world examples. A case study is a quantitative study method that works with only one variable so that one research unit can be fully and deeply investigated, because the focus is all on this one research unit. The scope of this master thesis is limited, the scope is set to probe, explore and come with insights that might prove useful and contribute to a better understanding of the SDB phenomenon. This is in line with Westall (2009) who first calls for an exploratory approach before creating theoretical concepts since we don’t know enough about why hybrid forms of entrepreneurship actually exist. The thesis is therefore explorative of nature instead of scientifically testing theoretical evidence.

The cases study is used to examine characteristics of SDB’s. The selection of cases is based on convenience sampling. Cases were selected based on how much in-depth information was available. The cases differ in the sense that they have similar general objectives but employ different means to an end. They are in a similar in the sense of entrepreneurial phase and operate at a comparable scale. Although the selection was conveniently, cases were selected specifically that operate in distinct industries and countries to be able to generalize to some degree what has been found in the exploration of these cases.

3.1. Case study

The two cases that are discussed are Tony’s Chocolonely and Fairphone. Both enterprises are quite successful in their branch and are able to expand their social goals, while being competitive and remaining commercially viable. Chocolate bar producer Tony’s Chocolonely started in 2005, aimed to make chocolate 100% slave free. Fairphone makes smartphones since 2003, focussing on reducing as much conflict-minerals in the phone as possible. Both companies aim to offer fair and human working conditions – throughout their supply chain – as their main social mission. The companies are founded and have their headquarters in Amsterdam and both have an international supply chain.

Based on the outline of Marshall (2011) we assume for now that these companies can actually be classified as SDB. To prove that these two companies are in line with the properties in table 1 (p.14), the table will be used to analyse the cases and to measure how the cases comply to the properties that

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some properties cannot be found in the cases. The cases are reviewed by the four dimensions that are mentioned in order to recognise how the cases align with these dimensions.

In the dimension mindset we try to identify how the social entrepreneur envisioned social change, in opportunity recognition how the social entrepreneur found a way to change a social problem, in social networks, knowledge, partnerships we look the enterprise interacted with the environment to survive, in outcome we look at what the outcome was of the social mission. These dimensions should enable us to analyse the cases in a structured way and could help in better understanding the processes and motives that happened along the way.

The case study method will enable to find insights into the doings those companies based on the material that is available on the internet. The advantage of this approach is that the many professional interviews that are already available can be used and give a broad and varied view on the topic. Drawing upon the diverse range of interviews that are already out there should result in enough insights to analyse.

Furthermore, it should enable us to say something about the behaviour of SDB’s and the

characteristics they have. The main goal therefore is to find hints and clues for potential patterns. However, the purpose of this study is not to go in-depth on the deeper motivations of customers but will instead focus on finding basic patterns in the behaviour of the enterprises that emerge from analysing the cases.

The scope of the case study is limited to the Dutch for-profit market. In other countries SDB might be subject of a different context or environment. In the discussion will be elaborated on the consequences of this decision.

The procedure used in this study was as follows:

1. Interviews, case studies, and additional information about the cases was extracted from the internet and reviewed.

2. Interesting and remarkable facts and findings were collected and expanded.

3. The conceptualisation of Marshall (2011) was used to structure the cases according to the four dimensions: mindset, opportunity recognition, social networks etc., outcomes.

4. The cases were compared to the SDB definition as posed in table 1 (p.14) and properties were referenced inline when a property seemed to correspond with the case.

5. Findings and implications of the characteristics of SDB were discussed.

An example of reliability is Cronbach’s alpha which says something about correlations of the different variables. Because of this qualitative research the reliability of it cannot be tested by statistical

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must be careful with conclusions based on just these two cases. However, this case study is set-up in this specific way because we first want to reach a basic understanding SDB’s. Also we may be biased by the subject because we self-selected the cases. Therefore, replicating this study is recommended in order to be able to use the conclusions because then test-retest reliability can be analysed.

The validity of research has different forms. For example, ecological validity says something about its application in natural environments. Because of the cases about two already existing successful companies the ecological validity is relatively good, though investigating more cases is always something to strive for. Another form of validity is external validity which has to do with

generalisability, in other words, can the results of this study be used for other SDB’s? We have to be careful to not overrate the external validity because this research only investigates two case studies. Recommended is to feature more cases and quantify the method.

Internal validity says something about the quality of the reasoning in the research. Because of the fact that this research uses other authors investigations we must be careful with concluding that the reasoning of this study, since the other authors may be biased. In further research internal validity can be supported by a quantitative research.

The cases were compared to the SDB definition as posed in table 1 (p.14) and properties were referenced inline when a property seemed to correspond with the case. The hash is used to show that the number is a reference to the table instead of a page-number.

4. Tony’s Chocolonely Case

This case is primarily based on a case by Blom et al. (2013) which gives a detailed timeline and overview of how the enterprise started. References to this source in this chapter are shortened to ‘idem’. Further, the annual reports (Tony’s Chocolonely, 2015) and numerous online interviews and documents were reviewed.

4.1. Mindset

The chocolate bar producer Tony’s Chocolonely started in 2005 and aimed to make chocolate 100% slave-free. Realizing that over 460.000 (Tulane University, 2011) people were being forced or underpaid for labour on cocoa plantations inspired the founders to make a change (#11). The large chocolate companies had signed the Harkin-Engel protocol, eliminating the worst kind of child labour within 10 years. However, after several years there was no sign of progress (#13). The following three principles were defined in order to build a successful business and add value to the customer:

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2. Serious about what matters most, people: Tony’s team, farmers, consumers, customers, suppliers.

3. Continuously improving business and stay at forefront in responsible chocolate making. These three principles show the social mission as well as the value proposition to the customers. A key value in their social mission is that people should be respected and should earn what they deserve, this true for the farmers (#6), the team and all the people that are involved.

The first point is probably the most important one since the customers should like the new chocolate and should be aware that there was no slave labour involved. This addresses a certain market of people that are caring about their mission in some way (#1, 7).

Instead of pushing their product they try to get the customer to appreciate their message and goal. By being notable with their brightly coloured and attention-grabbing product wrappings, they try to stand out and immediately transfer their message about an unfair cocoa market. The chocolate bar is divided in unequal pieces to emphasize the problem (#4). By doing so, they want to focus on the meaning of the brand instead of the image of the brand.

Since the end of 2011 the team had extended to 18 people. They were carefully selected for their strong intrinsic capabilities like being progressive, taking responsibilities and having an

entrepreneurial drive. The company is set-up in a way that gives a lot of freedom to the employees but in the same time requires them to take responsibilities and being undaunted at looking for new

opportunities to achieve Tony’s social mission. The effect of this policy became apparent when the director Beltman got an apoplexy and the company was ran by its employees for half-a-year.

To summarize, the mindset of Tony’s Chocolonely is to do something different, driven by the believe that they can work within the markets by changing the supply chains in African countries. Striving for a moral objective to serve Dutch chocolate consumers with a fair alternative. Some properties in Marshall (2011) could not be found, like the ability to deal with cultural, political and economic systems. Furthermore, it is relevant to note that the “conscious choice for market-driven rather than government-based solutions” is per definition applicable for all SDB’s, since SDB’s are generally not ran by the government.

4.2. Opportunity recognition

The product is generally aimed at people that are more aware about sustainability, environment and human rights. They have defined three target groups that are the most important:

1. Conscious buyers choosing for fair trade. 2. Food lovers that like the taste.

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Conscious buyers are a mixed group but it has in common that it comprises highly educated people, although it has been found that spending power is unrelated. They try to buy local when they can and consider the environment in their purchases. The group has grown from 26% in 2002 to 33% in 2016. The term “buycotters” references those people that deliberately choose not to buy products and services that are not conscious (#16). In the Netherlands both groups often consist of women, politically left orientated, society minded and more trustful. This group has grown from 10% of the population in 2002 to 15% in 2016 (SCP, 2016).

The company says it is responsible for all ingredients they use, especially the chocolate beans. Chocolate beans are imported from West-Africa, and the complete supply chain has been recreated to be slave-free (#14). By making their own deals with the local farmer organizations they have secured a stable source of beans. Because of their mission to create a slave-free market and support the farmers they pay a premium to the farmers, higher than or on top of other fair trade labels. Unlike their mission to be responsible for the whole chain and be certified, they deliberately recanted from using eco-labelled sugar and milk. The price of the eco-labelled eco products would in the end be not in favour of their farmers. Their solution was to still buy the biological products for a fair price but without the label, showing that in order to be successful as a social company compromises must be made in order to be commercially viable.

To have more impact, the chocolate is broadly distributed and not only to idealistic stores. This means that their chocolate is also being sold in stores that only care about profit and not about the farmers they support. Most buyers haven’t been unsympathetic to the idea of slave-free chocolate, in order to give them a chance they ask a higher margin. Another value they add is that the customer demands transparency. To be transparent about everything Tony’s Chocolonely says it will share as much business information as possible, even its doubts. For example, whether they should adapt the Eco certification label, what their considerations are concerning sugar, or whether they are doing enough to abolish slave work. Most of the information they disclosed can be found in their statements and annual reports (Tony’s Chocolonely, 2015).

It seems they are quite successful in a content marketing principle called storytelling, in which they engage their audience rather than impose their product. This is also the reason why they do not do paid advertising. Their marketing goal is to engage the customer in different ways via multiple channels to make their target group face the problem and not be able to ignore their brand after first sight. Social media is an important channel to reach their audience in an effective way. People that are swayed might consider buying their product (#17), even if the price is 28% higher than a premium brand, 66% higher than a store brand or more than three times as much as a budget brand. As the company is active on social media, they often reward and stimulate input by sending a free bar when socially

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justified. Since those bars are given away for free, the possible overhead this might be compensated by the loyalty and positive brand attention it generates.

The effectiveness of their branding all has to do with their social values as a social enterprise that sparks customers to believe in a better world and give them a way to contribute by buying their product. Essentially this boils down to engaging the customer to do good and therefore feel good. Enabling them to embrace the social brand helps to build a long term relationship with the customers and in time turns their loyal customers in walking salespeople advocating the brand (Li, C., Bernoff, J., 2011). They listen to their customers for new ideas like new flavours of chocolate bars. By informing, captivating and binding customers they try to spread their ideas and incite word-of-mouth marketing in the form of storytelling (#15).

To summarize, it would appear that there is a growing group of conscience buyers and Tony’s Chocolonely has found an opportunity to bridge the gap in their needs. They engage their audience in a way that is different from traditional business and are successful in connecting their customer to their social mission and an alternative to the abuse in the chocolate industry. Their branding and storytelling enable them to inspire the customer even when the product price is significantly higher and not

competitive. The properties that were found do largely match with Marshall (2011).

4.3. Social networks, knowledge, partnerships

Serious about people not only means being serious about the farmers. In their approach they do business with a “people-first” mentality ranging from their suppliers till their customers. Differentiation is the keyword when looking at how they position themselves in relation to their suppliers, buyers and competitors. At Valentine’s day they featured a special edition which they announced to the press by attaching a personal note saying: “Will we meet at yours at page 25?” (#19, 21).

The unusual and people minded approach stands out and enables them to win hearts with their social mission and it also makes them get away with things more easily. For example, they received notice from Albert Heijn – the largest Dutch supermarket – demanding a 2% discount on the chocolate bars. As response they sent some of their typical unequally divided bars back to Albert Heijn along with a hand-written note: “For you, this is a small amount; for our farmer in Ghana, this means a 25% income reduction. No matter the outcome of our conversation, we will not take anything from our farmer. Enjoy your bars, but … share equally!” (idem, p.12).

Here again the clear duality between the seriousness of the issue and what they are trying to

accomplish and the “fun factor” is visible. The CCO (Chief Chocolate Officer) is the highest function in the company which reflects appearance that the company gives room for fun even when their mission is very serious. “We always have to be careful not to go too far in one direction or the other. If

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we get overly serious, then it becomes too depressing. If we get too fun, then we end up losing the fact that we are here to really change the industry” (#9, 14).

Instead of critizing what others are doing wrong, Tony’s Chocolonely comes with a positive message that gives an alternative. In order to build a successful company, they serve as a role model that others can relate to. It is necessary to show traditional chocolate companies that it is possible to offer fair prices and at the same time being profitable as well. Proving this possibility of a fair alternative with the possibility that others might follow fits perfectly with their social mission.

There is no company in the world that wants their competitors to copycat their formula’s and ideas. However, at Tony’s they like nothing better than Mars or Nestlé to imitate their business. Since their social mission will have more impact when other companies copy them they have no problem with that. Moreover, when they do it alone the impact of their work will be significantly lower. This seems to be in line with wat the Dutch Social and Cultural Planning Agency concludes in its study (Schyns & SCP, 2016) of consumer behaviour and socially responsibility.

It seems that social companies often prefer working together instead of competing (#25). Although Tony’s repeatedly stressed the need for cooperation and working together to realise their mission, there is no evidence found of any corporation so far. As mentioned before, although their product price is significantly higher than their competitors they are still beating their main competitors at market share in the Dutch market. Other slave free or conscious chocolate initiatives do exist in the Dutch market but have not made it to the main supermarkets yet, and no competing social brands have been seriously able to contest their spot on the shelves. Currently the company is also active in the USA to conquer the market, but clear evidence of that endeavour still has yet to be revealed. However, their B-Corp status helped them cooperating with their first American B-B-Corp customer supermarket (#27). To summarize, being and acting different allows them to position themselves audacious to their suppliers, buyers and competitors in order to get things done. This is something that is not recognised in Marshall (2011) which focusses more on network relationships and partnerships to contain

complexity, needs and circumstances to overcome institutional limitations. These are properties that are not found in the case, although they might be observed with a closer look. The relation between Tony Chocolonely’s and their stakeholders might be unique for them or could be a limitation of the conceptualization by Marshall (2011). What clearly surfaces, is that instead of telling what others do wrong, they try give an alternative for changing the market and co-operate in changing the market.

4.4. Outcomes

When the company started producing chocolate in 2005, the company began earning some money but was there was no profit. At first four people were employed and by 2009 the revenues were stable

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3 chocolate bar brand in the largest Dutch supermarket, Albert Heijn. “We are still a small social enterprise, with 3-4% market share in the Netherlands, but we are successful. We’re already bigger than Ritter and Verkade in value in Albert Heijn. We have a very ambitious vision to change an entire sector, and we all know we are making a difference (#4, 7)” (item, p.14).

For the traditional commercial company money is the goal, for Tony’s it is just a means to an end. This doesn’t mean that the company is a non-profit company; there is no problem in making money along the way (#28, 30, 32). As a socially responsible premium product, the product prices are significantly higher in comparison with other products.

Doing things the other way may also imply higher costs in the supply chain: Due to corruption and their refusal to comply with it containers are often delayed by as much as three weeks; They convinced their confectionary producer Barry Callebaut to separate their beans from the bulk in order to be traceable.

This unusual way of producing requires amongst others that the chocolate molds are cleaned before processing their slave free chocolate. Altogether the different approach in the supply chain may lead to inefficiencies compared to their conventional competitors and therefore might contribute to a higher product cost and consequently a higher product price.

Because of the clever marketing structure and appealing social mission they don’t have to pay for advertising. According to U.S. Small Business Administration the recommended spending on marketing is 7 to 8 percent of the gross revenue. One of the largest chocolate manufacturers of the USA spends 7,7% of gross revenue on advertising, based on financial information of the Hershey Company in 2015. Having a minimum of paid advertisements and a cost effective marketing strategy drastically reduces the spending on the balance sheets (#32).

Considering the cost structure, the cost effective marketing compensates for the higher cost price. Still, the selling price is not competitive when looking at similar products. Contradicting, the net income on average has been growing 74% every year for the last four years, based on the figures from 2011 till 2015 in Tony’s annual report 2015, indicating that a high product price apparently is no barrier for their target group. The target group seems to understand that the premium they have to pay, bridging the gap with other products, is paid to the farmers in the supply chain and is considered as an added value to the product.

Customers are not the most important group. They come third after the farmers and the employees, respectively. According to director Beltman, the employees are always the most important. Second are the farmers because without their dedication quality wouldn’t be as high. This can only be

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“Tony’s vision of a 100% slave free chocolate sector can only be fulfilled if we have the best people who are 100% convinced that Tony’s can change this sector systematically and who are committed to making the best chocolate” (idem, p.12). Therefore, there selection process needs to be tough to recruit the best people. Although they considered the many volunteers who offered their help but often declined, they need to fit the team perfectly.

In the beginning when the more socially principled Teun van der Keuken as founding father was managing the firm the company when it was not making any profit. Moreover, the company was losing money. When Henk Jan Beltman took over the company started to make profits and grow in size (#17). Beltman says: “The company had no priority for Teun, for him it was all about the cause. (#28) My opinion is that commercial success is the precondition to achieve our social goals”.

Beltman is more a man of give-and-take and strongly believes that showing that you are better makes a better example. Van der Keuken, still politically affiliated with the firm is far more critical about the progress that was made and argues that the company is aimed to be too commercial while the social mission should be first priority without compromise. It seems that the dilemma between the social and commercial mission forms a constant struggle and cause of debate in the future development of the company.

To summarize, it seems that the company is having success and can enact more social impact while slowly taking more market. The social mission is the most important but does not prevent them from making money along the way. Although their unconventional way is often more difficult and may have disadvantages, it shows that there are advantages compared to traditional companies. One of the things that appears is that they do not do paid advertising, but still are able to achieve fast public awareness and attentions for their product. A dilemma seems to exist between social and financial objectives, making a difficult compromise. Further, it is unclear what would happen when a fair chocolate market would become a reality in the future. Would they be able to differentiate themselves when their social mission is achieved or will they realise that continuation may not be necessary?

5. Fairphone Case

Very recently, Akemu, Whiteman & Kennedy (2016) conducted a longitudinal case study on

Fairphone. In a detailed matter they described how Fairphone has grown and what difficulties they had to overcome. Resulting in model of social enterprise emergence based on Effectuation and Distributed Agency theory. Because of the in-depth knowledge that boils up from this case, it is most valuable for this study since we can use it to search for characteristics of SDB. Therefore, this source will be used as primary source for the Fairphone case. References to this source in this chapter are shortened to ‘idem’. Furthermore, factsheets and other information on the website were used as well as several

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5.1. Mindset

Fairphone started in 2009 as a social campaign in collaboration with an NGO to raise awareness (#15) for “conflict minerals” in the Democratic Republic of Congo. Their plan was to design a

non-functioning smartphone together with customers to convince manufacturers for making a fairer alternative. No one in the team of four had any experience in making smartphones (#2, 3), only the design perspective was interesting. The founder & CEO Van Abel even mentioned that “the whole aspect of bringing the phone to market did not interest [him]” (idem, p.855). They chose to produce an ethical phone since phones are ubiquitous and the perfect metaphor for complex interconnected supply chains. Therefore, Fairphone resulted as a campaign as a means to an end not a goal on its own. They chose a different approach (#1) involving the public in “open design”, Van Abel knew this as industrial designer at Waag Society where he worked. The choice for open design helped to create a movement community of involved environmentalists, that eventually became the first customers. Later on Fairphone still supported their loyal customers by facilitating workshops like smartphone-mining and environment-friendly recycling programs (#17).

The campaign was all about awareness for the problems in Congo, at first there was no objective to create a real working phone. Is was not until the beginning of 2013 that they actually seriously considered bringing a smartphone to market. Their objective stated ‘to produce a cool phone that puts human values first’, making sure that there are fair labour conditions for the workforce in the supply chain, from mine to assembly line (#18). They have a strong vision on reuse of materials and recycling old phones. In 2015 it won the price for fastest-growing tech start-up. Since its launch till January 2016 the company sold over 60.000 Fairphone devices and aim to more than double this effort by the end of 2016. Based in Amsterdam, it had 40 employees in January 2016 with different nationalities speaking 17 languages. The main aims for Fairphone to create social impact:

1. Supporting local communities in mining their materials instead of armed militias. 2. More repairable, longer lasting phones, giving buyers control over their product. 3. Safe working conditions in factories, fair wages and worker representation. 4. Addressing the full lifespan of mobile phones, including use, reuse and recycling. 5. Creating a new economy focused on social values and transparency.

To summarize, Fairphone started not with the idea to create a working smartphone but wanted to involve people in addressing a social issue in countries like Congo. With several social goals they mainly try to support local communities, create safer working conditions, and make more repairable phones. As we see in the next paragraph, they eventually took a risk and took an opportunity to change the market mechanisms and consumer behaviour.

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5.2. Opportunity recognition

By the end of 2011 – when it was still a campaign – the team had received significant support via social media, appeared in a major Dutch newspaper and had won €10.000 of prizemoney. However, no one had any idea how to further the project, “nobody dared to say we were going to build a phone” (idem, p.856). The NGO that till then had supported them withdrew support, their funds depleted. The founders could not afford to work on Fairphone, so they returned to their day jobs. It seemed like that would have been the end of the project. But then they recruited an intern named Ballester that was able to represent Fairphone in a London-based incubator, since the founders could not leave their families. Every time they found opportunities to be able to leverage contingencies.

During the campaign they might had hoped that a smartphone manufacturer would have listened and changed their ways. However, although they accepted them, they weren’t heard. While in the incubator they encouragement and support led them to the first time they believed they “could make this happen” (idem, p.869). An angel investor they met while in the incubator put the point concisely: “Of course, if you really want to change something you must be dangerous for them [the industry]” (idem, p.859). The sequence of support they received eventually led them to recognize the market failure (#13) and take it as an opportunity to do what they couldn’t accomplish till then in their campaign: to give the right example and try to transform the market (#14).

They discovered a social market gap, the director of an electronics firm says about this that: “they turned the story around [from how NGOs tell it] as it were, in that ‘all mobile phone makers were evil’, but actually there was a way in which you could make a fair phone. I think, personally, that was brilliant” (idem, p.860). What stands out is their positive approach instead of accusing others of their wrongdoings. Using their different approach, they hope to “achieve that their plan will shake industry ‘big boys’ out of complacency” (idem, p.864).

5.3. Social networks, knowledge, partnerships

The success of this case shows how strong symbols can be. A smartphone is often very personal and thus has an emotional and tangible aspect to it. By choosing a smartphone they were able to address media, NGOs, public, mobile network operators, and consumer electronics firms that they wouldn’t have reached in another way. It proved to be an ideal way to send their message about conflict minerals since it exposes the problems in the supply chain and makes the users part of the solution (#16, 18).

The public was made aware of the conflict-minerals but at the same time got the opportunity to contribute in a positive way. It might have appealed to some that the mission should be continued after the campaign. The media attention they received shows that there clearly was a desire to make the

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explained by sociological theory, but that is not the aim for this thesis. Still it might be interesting to why these actors did act since it can explain some of the successes in SDB.

Although the founders at first had no intention to build a complex product, the overwhelming enthusiasm that the campaign received enabled the founders to take the idea further. Together, the external stakeholders or actors legitimized the pursuit of the ultimate dream they would not have dreamt of in the beginning. The following actors were identified that helped to support in their own way:

1. Supporters – To actually produce a smartphone, the team decided to set-up a crowdfunding campaign pre-selling 5000 non-existing Fairphone’s for €325 apiece. The campaign generated so much media coverage that all pre-orders were sold in no-time. Putting an additional 20.000 smartphones on sales, all phones were sold in less than a year. Customers reportedly pre-ordered because they think the brand fit their personal beliefs and values, a way to express their beliefs in fairness and ethical consumption.

The authors conclude their paper with the notion that social enterprises may find themselves surrounded by a groundswell of supporters who, given the opportunity to express moral values, commit resources to address those challenges. Social entrepreneurs could embed themselves in communities of practice that coalesce around addressing a social problem in order to facilitate the distributed accretion of resources and legitimacy. Fairphone tried to interact with these communities directly by face-to-face meetings and workshops with journalists, government officials, MNO executives and civil society members, and indirectly via print, electronic, social media and the campaign website.

2. Corporate actors – The authors write that three mobile network operators provided industry-specific expertise and tested the prototype for free based on affordable loss pre-commitments to Fairphone, meaning that the relation would be mutual beneficial (#25) but took for granted that Fairphone might not be able to return the favour. A German mobile network operator for example voluntarily

discovered and solved a software problem while testing the prototype smartphone (#26), we can suspect that this operator might also benefit from this relation when they are able to sell the Fairphone to their customers.

The MNO was aware that something was wrong in the supply chain (idem, p. 859), sympathised with the idea and was motivated to help. One manager pointed out that they normally don’t have such personal relationships “with all the other smartphone vendors, but this [relationship with Fairphone] is really one of personal belief, personal commitment” (idem, p.858), this also points towards

Towards a better understanding of socially driven business : a case study for exploring characteristics of Dutch competitive social enterprises