Strategic capital in social entrepreneurship Joris de Vries (s1760092)

Strategic capital in social entrepreneurship Joris de Vries (s1760092)

Supervisor: Dr. O. Belousova Co-assessor: Prof. Dr. A.J. Groen

Author Note

Master Thesis for the Master of Business Administration with a specialization in Small

Business and Entrepreneurship, July 2016.

Table of Contents

Abstract ... 4

Strategic capital in social entrepreneurship ... 5

Introduction ... 5

Theoretical framework ... 6

Social entrepreneurship ... 6

Social systems theory ... 8

Social capital. ... 9

Strategic capital. ... 9

Economic capital. ... 9

Cultural capital. ... 10

Strategic capital ... 10

Power and authority. ... 11

Legitimacy. ... 12

Strategic intent ... 14

Artefacts ... 15

Methodology ... 16

Reliability and validity ... 16

Data collection and preparation ... 18

Data analysis ... 19

Case description ... 19

Lysogene, Inc. ... 19

Diagnosis... 20

Starting a patient organization. ... 20

Commission an audit on MPS-III. ... 20

Create a research program. ... 21

Found a company. ... 21

Analysis... 22

Conclusion ... 24

Discussion ... 26

References ... 28

Tables ... 33

Abstract

Occasionally, entrepreneurs start ventures outside their field of education. Groen (2005) has identified four factors (capitals) which an entrepreneur needs in order to be successful. One of those capitals is strategic capital, which enables entrepreneurs to decide on goals and to manage people and other resources to reach those goals. The exact use and development of strategic capital have not been systematically investigated, a gap which this study aims to fill. Based on extant theory a theoretical framework is constructed. The results are inconclusive with regards to the use and development of strategic capital, but suggest formal addition of legitimacy as a component.

Keywords: social entrepreneurship, strategic capital, entrepreneurship, social systems

theory, goal setting, power, legitimacy, artefacts

Strategic capital in social entrepreneurship Introduction

Social entrepreneurship has grown dramatically across various fields of expertise in recent years (Zahra, Rawhouser, Bhawe, Neubaum, & Hayton, 2008). Social entrepreneurs differ from entrepreneurs in general because they are primarily motivated by the social value they can achieve, rather than by fiscal capital or value (Zahra, Gedajlovic, Neubaum, & Shulman, 2009).

Social entrepreneurs often start their venture after being prompted by a major life event such as an unexpected severe illness of a spouse or child (Yitshaki & Kropp, 2015). Because of their focus on social value, these entrepreneurs may identify opportunities that other companies or governmental institutions are not able or willing to exploit.

A typical example of social entrepreneurship is Karen Aiach, whose daughter was diagnosed with a rare neurodegenerative disease for which no treatment is available. This eventually led Ms. Aiach — who is an audit specialist by trade — to found a biotech company (Solomon, 2015). Another well-known example is that of John Crowley who has a law degree and an MBA. Two of his three children were diagnosed with Pompe disease in 1998, which prompted him to start a biotech company two years later which developed the drug that is still used today to treat Pompe disease (Sanfilippo & Lin, 2014; Secher, 2010).

These examples highlight that social entrepreneurs can be successful in a field which is thoroughly different from the one in which they were originally active. While small

discrepancies between an entrepreneur’s skills and the activities of her/his venture are common

(O’Gorman, Bourke, & Murray, 2005), the differences these two entrepreneurs show may be

considered extreme, and one

A suggestion proposed in literature comprises four capitals, which are necessary for a starting a successful venture: strategic capital, economic capital, cultural capital, and social capital (Groen, 2005; Parsons, 1964). Of these, only strategic capital seems to be able to compensate lacunas in the other three to a certain extent (Groen, Wakkee, & De Weerd-

Nederhof, 2008). This study therefore focuses on strategic capital, which is “the set of capacities that enables actors to decide on goals and to control resources and other actors to attain them”

(Groen et al., 2008, p. 62). Some theoretical work on the role of strategic capital in

entrepreneurship is available (Groen, 2005; Groen et al., 2008). However, no detailed empirical investigation on its function has yet been performed (Groen, 2005; Groen et al., 2008).

Therefore, the research question of this paper will be: “How do social entrepreneurs develop and use their strategic capital?” This paper aims to contribute to the study of social

entrepreneurship by performing a case study to cultivate a deeper understanding of how strategic capital is used and developed. First, I will introduce social systems theory, the theoretical

framework used to answer the research question. Then, I will outline the methodology used in this paper, followed by an in-depth description of the case. The analysis of this case based on the overarching framework will result in an answer to the research question and some implications for future research. Finally, some limitations will be discussed.

Theoretical framework Social entrepreneurship

A clear and consistent definition of social entrepreneurship is needed. Earlier definitions have

been either too narrow and focus only on a subset of aspects, or have been too broad to yield

coherent results (Austin, Stevenson, & Wei-Skillern, 2006; Groen, 2005). The narrow definition

of social entrepreneurship in most cases focusses on nonprofit organizations using market-based

skills and business expertise to develop new approaches to acquiring financial resources (Reis &

Clohesy, 2001; Thompson, 2002). The broad definition of social entrepreneurship can refer to innovative activities with a social objective in different contexts, such as commercial ventures with a specific social purpose (e.g., Anderson & Dees, 2003), corporate social entrepreneurship (e.g., Austin, Leonard, Reficco, & Wei-Skillern, 2004), or even hybrids between non-profit and for-profit structures which span both sectors (e.g., Dees, 1998).

Two aspects are consistently noted in definitions of social entrepreneurship: first, the motivation of the entrepreneur is to create social value, rather than shareholder and personal wealth (Bacq & Janssen, 2011; Dees, 1998; Peredo & McLean, 2006); second, the activities are highly innovative in new sectors , rather than replications of existing enterprises (Austin et al., 2006; Bacq & Janssen, 2011). However, these definitions also show many differences. Unifying the differences in existing definitions may allow for the integration and understanding of (partial) existing research outcomes and may provide guidance of future research (Bacq & Janssen, 2011;

Groen, 2005). Furthermore, although the terms ‘social entrepreneurship’, ‘social entrepreneur’, or ‘social entrepreneurship organization’ are distinct concepts, they have often been used interchangeably to express the same phenomenon.

To reflect that distinction, I will use the definitions of Bacq & Janssen (2011). They define the social entrepreneur as an indvidual “whose main objective is to create social value, able at one and the same time to detect and exploit opportunities, to leverage resources necessary to his/her social mission and to find innovative solutions to social problems of his/her

community that are not properly met by the local system” (Bacq & Janssen, 2011, p. 382). The term social entrepreneurship is “the process of identifying, evaluating and exploiting

opportunities aiming at social value creation by means of commercial, market-based activities

and of the use of a wide range of resources” (Bacq & Janssen, 2011, p. 376). Finally, I will adopt the convention to call social entrepreneurship organizations ‘social entrepreneurship ventures’

(SEVs) from Austin et al. (2006), and I will use the definition from Bacq & Janssen (2011): “an SEV must encounter three criteria. First, its social mission must be explicit and central. […]

Second, its market orientation must be consistent with its social mission. It takes the form of a continuous productive activity of goods and/or services that generates earned-income. Third, SEVs should not be defined by their legal framework.” (Bacq & Janssen, 2011, p. 388). This definition of an SEV is consistent both with the definitions for the other concepts I use, as well as with a broader stream of literature on social entrepreneurship (Dees, 1998; Peredo & McLean, 2006; Pomerantz, 2003).

Social systems theory

Besides the need for coherent definitions, an overarching framework is also needed. Groen (2005) first proposed the application of social systems theory to social entrepreneurship to provide the missing overarching framework pertaining to entrepreneurial processes . Social systems theory was first defined by Parsons (1964) and uses four assumptions to describe patterns of actions, motivation, and behaviors of actors under study, in this case social entrepreneurs.

The first assumption is that in a social system multiple individual actors interact with

each other, and this interaction must have at least a physical or environmental aspect. Second, the

interactions help the individual actors to reach their goals, Third, in reaching their goals actors

tend to seek to optimize their gratification. Fourth, the relation of each actor to the other actors,

as well as their own situation is based on and mediated by a system of culturally structured and

shared symbols (Groen, 2005; Parsons, 1964).

Groen (2005) extracts four mechanisms from these assumptions which comprise the overarching framework used for analysis in this paper:

1. interaction between actors, 2. striving for goal attainment, 3. optimization of processes, and

4. maintaining patterns of culturally structured and shared symbols.

These four mechanisms can be translated to four types of capital which the entrepreneur can accrue (Groen et al., 2008). I will discuss these capitals in the order of the corresponding mechanisms mentioned above.

Social capital. Social capital pertains to the interactions between actors. It concerns the network of social ties of an actor which affords her or him access to other actors and their resources. It relates to what in Germany is sometimes called Vitamin B, where B stands for Beziehungen or social connections. It is important to note that social capital specifically pertains

to the access to other actors and their resources to delineate it from the other types of capital. The resources themselves — once an actor has access to them — are part of the other types of capital (Groen, 2005). Taking these considerations into account, I use Groen et al.’s (2008) definition of social capital as “the set of network relations through which actors can utilize, employ, or enjoy the benefits of capital that is controlled or owned by other actors.”

Strategic capital. Strategic capital is the main subject of this paper and therefore a more in-depth discussion of strategic capital will follow in the next section.

Economic capital. Economic capital is closest to financial capital and is the collection of

highly mobile resources which can be measured in monetary means, like stocks or bonds. Actors

can use economic capital in exchange relationships between themselves and their environment, either for acquisition or selling (Groen et al., 2008).

Cultural capital. Cultural capital comprises that which gives an actor their place relative to the context of their environment. I use the definition from Groen et al. (2008): “the set of values, norms, beliefs, assumptions, symbols, rule sets, behaviors and artefacts that define the actor in relation to other actors and his or her environment” (Groen et al., 2008, p. 62). This definition implies that any state of the environment — any position of actors in relation to others

—will change as soon as one of the components of cultural capital (artefacts, norms, symbols, etc.) changes, thus changing the actors’ relative place amongst their peers and environment.

Strategic capital

In this section I will further discuss the concept of strategic capital and link it to social

entrepreneurship. I will also discuss its components and their interconnections. Strategic capital is what enables actors to use their resources and influence other actors in such a way as to reach their goals. I will use Groen et al.’s (2008, p. 62) definition of strategic capital as “the set of capacities that enables actors to decide on goals and to control resources and other actors to attain them.” The resources noted in this definition may also include non-human resources.

patents, for example, are artefacts that can enable an actor to reach their goal.

According to Groen, de Weerd-Nederhof, Kerssens-van Drongelen, Badoux, and Olthuis

(2002), the resources comprising strategic capital are power, authority, influence, and strategic

intent. This is later expanded to include artifacts, as they can contribute to an actor achieving his

or her goals (Groen et al., 2008). Finally, the later definition by Groen et al. (2008) implies that

influence is the result of the other factors, instead of a separate factor as in Groen et al. (2002)

which is more in line with other authors’ opinions (French & Raven, 1959; Tyler, 2006; Uphoff,

1989) and I will thus follow the later definition and not treat influence as a separate factor. In the next section, I propose to combine the components of power and authority in the single concept power. In the section thereafter I will discuss the concept of legitimacy.

Power and authority. Max Weber originally defined authority as a special case of power: “Herrschaft ist […] ein Sonderfall von Macht” (Weber, 1922, p. 603). Power is the combination of all resources an actor has at their disposal to steer another actor towards a path of action he or she would not have otherwise taken (Raven, Schwarzwald, & Koslowsky, 1998).

Power can come from multiple bases and the most-often used bases of power are those by French and Raven (1959): coercive, reward, legitimate, expert, and referent power. Legitimate power stems from an individual’s position within a social system such as a firm. Coercive power is the threat of negative consequences: “do as I say, or else.” Reward power is the opposite of coercive power, and is the promise of positive consequences such as bonuses. Expert power stems from the expertise one has in a field of knowledge. Finally, there is referent power, which comes from others’ desire to belong to one’s group (Davis, Schoorman, & Donaldson, 1997; Raven et al., 1998).

Groen et al. (2002, 2008) deviate from Weber’s (1922) definition of autority by defining power and autority as two seperate components of strategic capital. Through the years, authors have blurred the distinction between power and authority. A notable example is Talcott Parsons, who reserved the concept of authority for those power relationships deemed legitimate (Uphoff, 1989). Multiple authors acknowledge that power in the broadest sense requires a certain

legitimacy to be used or useful (Suchman, 1995; Tyler, 2006; Uphoff, 1989). However, they

disagree with Parsons’ almost mathematical definition (power + legitimacy = authority), instead

arguing legitimacy is a separate concept from power and disregarding authority in the sense of

Parsons’ definition (Suchman, 1995; Tyler, 2006; Uphoff, 1989). That is not to say authority as a concept is invalid but rather that I view it as a type of power — as Weber originally intended.

This is in line with Weber’s (1922) and Uphoff’s (1989) views on the hierarchical nature of authority and hence the reason why I categorize the concept authority from Groen et al.’s (2002) definition here as a type of power (legitimate power), rather than as a separate concept.

Legitimacy. Power alone is not sufficient to explain why people let themselves be influenced (Suchman, 1995; Tyler, 2006). An additional factor separate from incentives and sanctions is needed to explain how people choose to behave: legitimacy (Tyler, 2006; Weber, 1922). Exact definitions vary by author but Suchman’s (1995) definition is succint and includes most — if not all — elements others (French & Raven, 1959; Parsons, 1964; Tyler, 2006;

Uphoff, 1989; Weber, 1922) have proposed: legitimacy is “a generalized perception or

assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions” (Suchman, 1995, p. 574).

Legitimacy can be divided in several subtypes, which can be linked to corresponding types of power. In the case of legitimacy, there is a triptych of broad types: pragmatic legitimacy, moral (or normative) legitimacy, and cognitive legitimacy (Deephouse & Suchman, 2008).

Pragmatic legitimacy. Pragmatic legitimacy is — as the name implies — based on

pragmatic and self-interested behaviors: “what is the expected value to me” (Suchman, 1995).

This can go beyond the simple direct exchanges between two actors and can pertain to a larger

context where the actions of an organization visibly affect an audience’s well-being (Suchman,

1995). Pragmatic legitimacy can be linked to both reward power and coercive power due to its

exchange component. The larger contxt view of pragmatic legitimacy, where an organization

affects an audience’s well-being can be linked to referent power. It might be beneficial to belong

to a certain group, for example to gain access to cures that are still in their testing phases rather than having to wait for an approval process which might take multiple years.

Moral legitimacy. Moral or normative legitimacy is not about self-interest, rather, it is

about whether something is in the interest of society as a whole, and “the right thing to do.” This judgement by an actor reflects the actor’s personal beliefs rather than a universal standard (Suchman, 1995). Moral legitimacy is therefore connected to Parsons’ definition of authority, which I discussed earlier in the section on power. More specifically, it has a connection to legitimate power, where the position of someone offers them power to order subordinates to perform an action (although within bounds set by the legitimacy the subordinates assign to that position) (Deephouse & Suchman, 2008). One subtype of moral legitimacy is interesting to discuss given the concrete problems in the context of social entrepreneurship, namely

professional legitimacy. It is a subtype of normative (moral) legitimacy which specifically covers those cases where legitimacy is conferred by professional endorsement (Deephouse & Suchman, 2008). Professional legitimacy is thus linked to expert power, for example through professional endorsement of one’s own expert status.

Cognitive legitimacy. Cognitive legitimacy is not based on any evaluation, in contrast to

pragmatic and moral legitimacy. Rather, legitimacy stems either from the fact that actors possess

cultural models that provide plausible explanations for another actor’s position and efforts, or

from the fact that an actor has managed to shape the cultural models into ‘facts’ in such a way

that it is unthinkable for things to be otherwise (Suchman, 1995). In essence, the current situation

is taken for granted and there is an almost entire absence of questioning the status quo which

makes it difficult to measure (Deephouse & Suchman, 2008).

In the last two sections I have addressed both power and legitimacy, arguing for an integrated concept of power somewhat separate of Parsons’ (1964) and Groen et al.’s (2002, 2008) vision. I have introduced legitimacy as an independent concept, though related to power in several ways, and I have shown which types of legitimacy relate to which types of power. In the next section I will discuss and operationalize the concept of strategic intent from Groen et al.’s (2002) definition.

Strategic intent

Strategic intent originates from the goal attainment function in the social system theory by Parsons (1964) and its application to entrepreneurship, where strategic goals together with power form the basis for strategic capital (Groen et al., 2002). Goal setting is an important factor in firm performance (Baum, Locke, & Smith, 2001; Shane, Locke, & Collins, 2003). Particularly, the ways in which goals are set can lead to higher performance, with specific and ambitious goals leading to higher performance (Baum et al., 2001; Latham & Locke, 1991). The specificity of goals is a spectrum, ranging from vague to precise (Latham & Locke, 1991). I define specific goals as any goals containing both a concrete target (i.e. “I will start a patient organization”) and a clear timeframe (i.e. “in five years”). Vague goals are all other goals (i.e. “I want to help people who have an orphan disease”).

In addition to specificity, the ambitiousness of a goal is also relevant. The ambitiousness of a goal in the definition of strategic capital is ambiguous, and carries two distinct meanings.

First, it relates to the difficulty of the goal to the actor who is trying to achieve it. In general terms, the higher the level of ambitiousness of the goal, the higher the performance (Latham &

Locke, 1991) However, one actor might find the same goal easier to achieve than another actor.

Because difficulty is dependent on the actor trying to achieve the goal, and the level of

ambitiousness is only a general indication (is “run the marathon in 2h:30m” harder than “publish a paper in Nature”?), extant research uses a self-reported scale to measure the difficulty of goals (Baum et al., 2001).

Second, the ambitiousness of a goal is connected to the vision the entrepreneur has for the future. A vision is more general than a goal, rather, it is an ideal for the future carrying moral connotations and of an ideological nature (Kirkpatrick & Locke, 1996). By that definition, vision is an ideological end-state the entrepreneur would like to achieve, whereas goals are concrete steps towards that vision. Therefore, the fewer intermediate goals the entrepreneur sets to reach this vision, the more ambitious the goals are. For a social entrepreneur, vision may be

particularly effective in inspiring followers Kirkpatrick and Locke (1996). One problem might be that the most ambitious goals are — by definition — equal to the vision and thus it will not be possible to make a distinction between the two.

Artefacts

The final constituent part of strategic capital are the non-actor resources used in goal attainment, artefacts. Artefacts are ‘things’ — in the broadest sense of the word — that the entrepreneur owns or has control over (Groen et al., 2008). These can include tangible items such as buildings or machines, or less tangible items such as patents or technical standards. While it is relatively straightforward to assign a monetary value to especially the two former items, they are rather immobile compared to those resources belonging to economic capital and thus are examples of artefacts belonging to strategic capital. In addition, artefacts share the property that they are

“devoted to the ‘production’ of future utility” (Parsons, 1964, p. 72).

In the final two sections of the theoretical framework I have discussed and

operationalized goals and artefacts. Goals have to be specific and ambitious for maximum

positive effect. Artefacts can include most (in)tangible ‘things’ an entrepreneur controls. In the next sections I will discuss the methodology, followed by the case description.

Methodology

This paper aims to further extend and deepen existing theory on how social entrepreneurs use and develop their strategic capital. Qualitative methods offer flexible methods of

investigation, and therefore are especially suited for investigating how things operate, as is the case in this paper, for example in gauging the level of ambitiousness of goals (Ritchie, Lewis, McNaughton Nicholls, & Ormston, 2014). I adopt a soft positivism stance, in which phenomena and their relations are pre-existing, and research merely the method to discover them (Madill, Jordan, & Shirley, 2000). Soft positivism allows one to formulate expectations which will be based on extant theory in order to conduct a more focused data analysis, while also leaving room for new discoveries from the phenomena in the data. The approach to the qualitative research is so-called ‘grounded theory’, wherein analytical categories and related dimensions are generated until additional data ceases to contribute to the developing theory (Corbin & Strauss, 2008). One case will be examined, about an entrepreneur who started a social venture outside their field of expertise. A detailed description will be given after the methodology section.

Reliability and validity

Reliability is achieved by addressing the four potential sources of bias: the researcher, the instrument, the respondents, and the situation (van Aken, Berends, & van der Bij, 2007).

Researcher bias can be mitigated by having an additional person repeat the study (van Aken et

al., 2007). This is not possible due to the nature of the study. However, Miles and Huberman

(1994) introduced the concept of a friendly stranger, who can offer a different perspective. The

friendly strangers are acquaintances currently working towards their PhDs and thus well versed

in research. Instrument reliability is achieved spacing multiple episodes of analysis in time, and expert evaluation of the initial analysis. Respondent reliability is difficult to achieve through multiple respondents, as the case is about one specific individual, the entrepreneur, and how she deals with certain circumstances. Therefore, the respondent is one person by definition. A possible solution might be to include persons close to the entrepreneur (such as their partner or business associate) to get another perspective. This study — due to time constraints — has strived for respondent reliability through the use of data from different moments in time,

reflecting on the same incidents. Data from a previous effort by Belousova, Groen, and Ouendag (2015) is re-examined. Situational reliability is achieved through the same technique of using data which is generated at different moments in time.

Validity consists of three main types: construct validity, internal validity, and external

validity (van Aken et al., 2007). Construct validity “refers to the quality of the operationalization

of a concept” (van Aken et al., 2007) and is ensured by a thorough theoretical framework and

expert evaluation. Internal validity relates to the justifiability of conclusions about relationships

between phenomena (van Aken et al., 2007), and is achieved by performing a within-case

analysis, as proposed by Miles and Huberman (1994), combined with theoretical triangulation,

were a problem is viewed from several theoretical angles (van Aken et al., 2007). In this paper

this is achieved by linking the power and legitimacy concepts and using both perspectives to

investigate a critical incident. External validity concerns the applicability of conclusions and

results of one study to other situations (van Aken et al., 2007) and cannot usually be achieved

with a single case. However, generalizability of a completely new theory is not the goal of this

paper, rather it is expansion and refinement of current theory, for which a single case should

suffice (Groen et al., 2008).

Data collection and preparation

In this study, only secondary data has been used. This data was gathered through use of databases of news articles, using the entrepreneur’s name, their company’s name, foundation names, or a combination thereof as search terms. Additional search terms were used as they were discovered in the data, such as when the name of a foundation is found, which is then added to the search terms used to find more data. Additionally, data from a previous effort by Belousova, Groen, and Ouendag (2015) is used. Any data not in English was translated using Google Translate and while this might cause some of the intricacies of the original to get lost in

translation, the main message should remain clear. The main focus for the analyses is interview data, because interviews are most likely to contain statements made by the entrepreneur

themselves, rather than on their behalf. In addition to interview data, press statements and other available data was used where available in order to form a complete picture. Table 1 contains information on the types and amounts of the 29 documents (including one video interview and one podcast interview) found.

From this data a chronological narrative was constructed, detailing the process from diagnosis to where they currently stand, by taking snippets of statements where a date is

mentioned and ordering them. Concurrently, critical incidents are identified, either based on the

interpretation of the entrepreneur (for example: “the foundation gave us recognition that we felt

was essential in dealing with doctors”), or based on the definition of strategic capital (for

example an artifact: “we completed a comprehensive review of studies pertaining to the

disease”).

Data analysis

For the analyses, an Excel-spreadsheet is used (see Table 2), which allows for reviewing critical incidents as well as the definitions of the concepts under study. In addition, the spreadsheet allows for emergent concepts through space for free-form input. The spreadsheet also allows for sorting and filtering in order to further aid analysis in detail over time as well as in-depth

analysis of a single concept. For the analysis, references in the data to one or more critical incidents and the component of strategic capital will be recorded in the spreadsheet. I will continue analyzing new incidents until the concepts reach saturation, that is to say when the additional analysis of an incident does not add new insights (van Aken et al., 2007). The results will be discussed in a chronological narrative which enables emphasizing the interwoven nature of the components.

In the previous section I have discussed the methodology: the data collection process, the creation of a narrative, the definition of critical incidents, the analysis, and the summarization of the results. In the next sections, I will describe the case in more detail, and analyze the

components of strategic capital found in the data.

Case description

Here I will describe the case and the crucial events from the case, in order for the reader to get acquainted with them. This will be a descriptive section making lavish use of quotes to fully benefit from the richness of the data. The analysis will be performed in the next section.

Lysogene, Inc.

Lysogene was founded in 2009 by Karen Aiach, as a result of her daughter’s diagnosis with

MPS-III type A in 2005. MPS-III A is also known as Sanfilippo Syndrome A and results in

severe developmental problems and reduced lifespan (Solomon, 2015).

Diagnosis. The diagnosis in 2005 is the first critical incident. Ms. Aiach and her husband were told no cure was available and perceived the diagnosis as a “shock” but “decided to believe in the possibility of curing this rare disease.” They used the internet to “make contact with

‘people like us’.” Furthermore, “the internet has allowed [them] to learn quickly about the disease” and Ms. Aiach “quickly became very active in the community of the rare diseases.”

Starting a patient organization. After discovering that “there was no organization dedicated exclusively to this disease” Ms. Aiach “decided to set up an association of Sanfilippo patients” and Alliance Sanfilippo was started in October 2005. Ms. Aiach felt that starting an

“organization dedicated exclusively to this disease […] was the only way to make the situation move” and an “association of patients at European or even global level would give [the patients]

power.” Alliance Sanfilippo was not just started as a place for patients to meet, rather, Ms. Aiach believes “it is essential to encourage and even initiate research, raise funds and contribute to the achievement of clinical trials.” The research community reacted positively, as “the researchers encountered, aware of the need for a global forum, welcomed the prospect of finally seeing the creation of patient organization for Sanfilippo syndrome” even though the positive reaction was not unanimous and “[Ms. Aiach] and the families of Alliance Sanfilippo first had to overcome the initial distrust of some practitioners.”

Commission an audit on MPS-III. As a result of Ms. Aiach’s far reaching ideas,

“towards the end of 2005, Alliance Sanfilippo has requested that a scientific audit report about

[MPS-III] would be created.” The audit was published at the end of 2006 and consisted of “a

detailed critical overview of the existing and the needs in the areas of research, information and

therapeutic trials.” The audit “benefited from the active support of a young neurobiologist” hired

by Ms. Aiach, who “specialized in neurodegenerative diseases [and] who accompanied [Ms.

Aiach] in many laboratories, companies and hospitals worldwide.”

Create a research program. Ms. Aiach used the information from the audit and

leveraging her “original professional background” to rally people, “build the [research] program, and raise funds.” The research program was started in 2007 and continued through 2008. The mission was “compelling” and “outstanding scientists, clinicians, regulatory experts, patient advocate groups and others rallied to the cause.” Among the activities of the program were

“efficacy studies on mice.”

Found a company. Ms. Aiach felt the results from the audit and the research program

“looked like more than a philanthropy program [and she] had a drug development program in [her] hands.” Ms. Aiach started Lysogene in 2009 together “with a seasoned advisor, Professor Olivier Danos, who was Scientific Director of Genethon and directed the Gene Therapy Consortium at the University College of London.” Lysogene’s goal was to “develop gene

therapies against brain rare diseases in children” which is “a pioneering approach to both sides of

the Atlantic.” Ms. Aiach found the company easier to run than the not-for-profit as she is “a

corporate person and even though the company was tiny, it was easier.” Despite that, there were

challenges, and “the biggest challenge for [Ms. Aiach] at the beginning was that [she] was not a

scientist or a clinician or gene therapist.” Ms. Aiach found that it was “necessary to be accepted

in environments that were not ours” and that she wasn’t seen as a scientist, but as “a mother

taking responsibility to build a program and manage it.” However, Ms. Aiach really longed to

succeed and “it is this profound conviction that led us to move forward in this process.”

Analysis

The analysis will be structured after the theoretical framework, that is, structured according to the components of strategic capital. While I have given broad definitions of the four capitals in the interest of completeness I will focus only on the components of strategic capital in the analysis, even though some incidents and quotes are also applicable to the other capitals. An overview of critical incidents, the component of strategic capital they belong to, corresponding quotes, and applicable remarks can be found in Table 2. After the analysis I will use the

discussion to evaluate my findings and develop propositions.

Immediately after the diagnosis, Ms. Aiach possesses very little strategic capital of any kind except for the vision of the possibility of a cure. She started to learn as much as she could about the disease and fellow patients via the internet — which she uses as an artefact — setting the first steps towards gaining expert power. Ms. Aiach then uses the moral legitimacy she possesses with the other patients as mother of a patient herself to start Alliance Sanfilippo, effectively creating an artefact to realize her vision. Alliance Sanfilippo allowed Ms. Aiach to cultivate moral legitimacy with the community of researchers involved in the disease and the patient community, as well as referent power with the patient community, who now have a focal point to rally around. In addition, through Alliance Sanfilippo, Ms. Aiach starts building

pragmatic legitimacy with the patient community due to her stated vision of encouraging and initiating research and contributing to achieving clinical trials. Despite generally positive reception of Alliance Sanfilippo, Ms. Aiach also specifically mentions the difficulties she and Alliance Sanfilippo had in connecting to some practitioners.

Ms. Aiach continues to leverage Alliance Sanfilippo to create another artefact by

commissioning an audit on all current knowledge of and research on MPS-III A. Alliance

Sanfilippo also hires a neurobiologist, improving their expert power and starting professional legitimacy. Ms. Aiach uses this expert power and professional legitimacy to perform the audit by bringing the neurobiologist whenever Ms. Aiach visits laboratories, companies, and hospitals.

The published audit proved to be a powerful artefact, allowing Ms. Aiach to identify the most promising avenue of research, which she leveraged and combined with her moral legitimacy as patient advocate to start a research program.

When the research program culminated in the discovery of promising vectors for delivery, Ms. Aiach decided to use that artefact combined with her professional background to start a company, Lysogene, Inc. Ms. Aiach used her professional background as expert power and moral legitimacy in starting Lysogene. Notably, she was still lacking the moral legitimacy to be accepted as a peer by the medical community around MPS-III, even though they accepted Ms.

Aiach as a patient advocate. However, Ms. Aiach used her vision for Lysogene to rally support from scientists, clinicians, regulatory experts, and the patient community. Through this vision, she also gained a lot of referent power with those groups, as well as pragmatic legitimacy with the patient community. Ms. Aiach boosted her moral legitimacy and expert power with the medical and scientific communities by hiring a renowned professor in the field of gene therapy as a scientific advisor.

As Lysogene made progress and the first clinical trials were performed, Ms. Aiach again encountered a lack of moral legitimacy, this time in the investigator she was working with.

However, the fact that there was a professional relationship meant that Ms. Aiach could use the

legitimate power stemming from the client-contractor relationship to influence the clinical design

and gain moral legitimacy with the investigator. During clinical trials, Ms. Aiach and Lysogene

used the professional legitimacy conferred by the support of a large partner (Sofinnova) to reach

several new milestones. Ms. Aiach finally used that professional legitimacy in order to create a pragmatic and professional legitimacy with several other partners (Bpifrance and Novo) in order to secure funding and transitioning Lysogene from entrepreneurial to enterprise.

Conclusion

While not the primary objective of this paper, the analysis clearly shows that the addition of legitimacy to the definition of strategic capital is valid and valuable. Legitimacy is used in multiple ways to enhance the other — more established — components of strategic capital, such as through creating artefacts. Likewise, components of strategic capital such as power are used to in turn create or expand legitimacy. Additionally, the situations where Ms. Aiach experiences a lack of legitimacy only serve to further underscore the importance of legitimacy to strategic capital. Furthermore, the addition of legitimacy to strategic capital has aided analysis through offering an additional theoretical perspective on some critical incidents, whose significance might otherwise have been misjudged.

Despite that, the answer to the research question “How do social entrepreneurs develop and use their strategic capital?” has not become fully obvious. The analysis shows that Ms.

Aiach uses those components of strategic capital that she possesses to work around the fact that she lacks some other components. However, there is no clear indication of a consistent

dependent relation; sometimes Ms. Aiach uses her moral legitimacy to gain legitimate or expert

power while at other times she uses her legitimate or expert power to gain moral legitimacy. The

only clear critical incident is the initial moral legitimacy conveyed by the diagnosis of her

daughter which then allowed Ms. Aiach to start Alliance Sanfilippo. A similar situation exists for

artefacts: Ms. Aiach both uses artefacts to enhance legitimacy and power, as well as using

legitimacy and power to create artefacts. Goals are an exception, as the usage of goals as found in the analysis only marginally corresponds to the usage as theorized.

In the theoretical framework, goals are theorized as separate from vision, and needing to be both ambitious and specific in order to be effective. From the analysis I find that goals are not used in that way, rather, vision used to enhance the legitimacy of both Alliance Sanfilippo as well as Lysogene. Unlike the other components, I have only found evidence for vision being used to enhance legitimacy and I have found no evidence for the reverse being true.

While the answer to the question how remains slightly ambiguous, the analysis does shed some light on what subtypes of components of strategic capital are used. For legitimacy, these are mainly pragmatic and moral legitimacy. Even though it is not possible to prove a negative and cognitive legitimacy is characterized by an absence of questioning of the status quo, all critical incidents included some questioning of the status quo. Therefore, it seems highly

unlikely that cognitive legitimacy was present but mislabeled or overlooked. For power, the most used subtypes are expert and referent power. This is not unexpected, as the other types of power (coercive, reward, and legitimate) are usually associated with larger hierarchical constructs such as large companies. Indeed, only when the company Lysogene is formed is the first (and only) case of legitimate power encountered. The theorized link between legitimacy and power is supported by the analysis, in that most critical incidents where a subtype of one component is applicable the corresponding subtype of the other component also is pertinent.

In conclusion, the answer to the research question necessarily remains broad: social

entrepreneurs use their strategic capital to enhance their strategic capital. The precise but narrow

definition of goals, while theoretically sound, was insufficiently supported in favor of a broader

interpretation more in line with vision. However, the results do indicate the added value of

including legitimacy in the components of strategic capital as defined by Groen et al. (2002, 2008).

Discussion

In the methodology section I have outlined all precautions I have taken to ensure the quality of this paper. Nevertheless, I have not been able to account for all potential weaknesses in the design of the study. The primary weakness is the fact only one case has been analyzed, meaning the study has little generalizability. The fact that this paper does not aim to generate broadly generalizable conclusions but aims to refine existing theory only partially justifies having just one case. The single case design also introduces potential survivor bias, because while Lysogene has been wildly successful others may not have seen the same level of accomplishment. In addition to that a multiple-case study would have allowed for cross-case validation of consistency of found concepts and relations as discussed by Yin (2014).

Besides the single-case design the fact that only interviews and statements of one

individual from that case have been used exposes this study to issues of both respondent as well as situational bias. As mentioned in the methodology, some of that is mitigated by the fact that the interviews are spread out over time, which at least ensures the found concepts are stable within that individual over time. However, this is still one perspective on the critical incidents and another observer might have had an entirely different interpretation of the same events.

While this would have complicated analysis, it would have added to the reliability of the final result.

Another limitation is the fact that due to using the grounded theory approach, I have

stopped analyzing when new data did not seem to contribute to the theory. While it seemed like

theoretical saturation was achieved, there is a remote but real possibility more answers could be

found in that part of the data which was not analyzed. However, analyzing more data from the same case might not have been the definitive answer, as around the cutoff where theoretical saturation was reached, the case was also starting to move from entrepreneurial to enterprise due to a successful first solicitation of venture capital.

In spite of these limitations and the fact no satisfactory answer to the research question

was found, I think this paper offers a very real contribution to the existing theory on strategic

capital by showing the importance of legitimacy as a component of strategic capital. Certainly

for those interested in the topic, this paper should contain sufficient probable cause for a more in-

depth follow up.

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Tables Table 1

Number of data sources by type Data source Number Interviews 8 Press releases 8 Presentations 1

Profile 1

News 9

Study records 2

Total 29

Table 2

Analysis of critical incidents for Lysogene, Inc.

Capacity Date Event Quote Remark

Goals Jul-05 Diagnosis Once the shock of the new overcome, Karen and her husband

decided to believe in the possibility of curing this rare disease. Vision Power Jul-05 Diagnosis the internet has allowed us to learn quickly about the disease. Expert power Artefacts Jul-05 Diagnosis the internet has allowed us to learn quickly about the disease. Internet as an

artefact Legitimacy Aug-05 Reaching out to

patient communities

I quickly became very active in the community of the rare diseases.

Moral

Artefacts Aug-05 Reaching out to patient

communities

Thanks to the internet, one can in a few days to make contact with "people like us". Internet actually helps to break

isolation.

Internet as an artefact Power Oct-05 Creating Alliance

Sanfilippo Association of patients at European or even global level

would give us power. Legitimate

Legitimacy Oct-05 Creating Alliance Sanfilippo

The researchers encountered, aware of the need for a global forum, welcomed the prospect of finally seeing the creation of patient organization for Sanfilippo syndrome. (Les chercheurs rencontrés, conscients de la nécessité d'une tribune mondiale, ont accueilli favorablement la perspective de voir enfin se créer une association de patients atteints du syndrome de Sanfilippo.)

Moral

Power Oct-05 Creating Alliance Sanfilippo

Association of patients at European or even global level would give us power.

Referent power Artefacts Oct-05 Creating Alliance

Sanfilippo

there was no organization dedicated exclusively to this disease. For me, that was the only way to make the situation move

Artefacts Oct-05 Creating Alliance Sanfilippo

Meanwhile, I myself decided to set up an association of

Alliance Sanfilippo patients and am quickly became very

active in the rare disease community.

Goals Oct-05 Creating Alliance Sanfilippo

I believe it is essential to encourage and even initiate research, raise funds and contribute to the achievement of clinical trials.

(Je crois qu'il est fondamental de soutenir, voire d'initier la recherche, de récolter des fonds et de contribuer à la réalisation des essais cliniques)

Vision

Legitimacy Oct-05 Creating Alliance Sanfilippo

Karen and the families of Alliance Sanfilippo first had to overcome the initial distrust of some practitioners. (Karen et les familles d'Alliance Sanfilippo ont d'abord dû surmonter la méfiance initiale de certains praticiens.)

Lack of legitimacy

Power Oct-05 Creating Alliance Sanfilippo

we want to move forward, that is to say, tell us about the disease, make contacts and become familiar with all the technical terms used by specialists to be able to place the discussion of the syndrome on a different terrain than the relationship between patient and doctor.

Expert

Legitimacy Oct-05 Creating Alliance

Sanfilippo Meanwhile, I myself decided to set up an association of Alliance Sanfilippo patients and am quickly became very active in the rare disease community.

Moral

Legitimacy Dec-05 Hiring

neurobiologist I hired a neurobiologist who had been involved for years in

gene therapy for neurodegenerative disorders. Professional legitimacy

Power Dec-05 Hiring

neurobiologist

This work benefited from the active support of a young neurobiologist specialized in neurodegenerative diseases, who accompanied Karen in many laboratories, companies and hospitals worldwide.

Professional legitimacy

Power Dec-05 Hiring

neurobiologist

I hired a neurobiologist who had been involved for years in gene therapy for neurodegenerative disorders.

Expert power Power Dec-05 Scientific audit on

Sanfilippo

Thus, towards the end of 2005, Alliance Sanfilippo has

requested that a scientific audit report about the disease would be created. (Ainsi, vers la fin 2005, Alliance Sanfilippo a demandé que soit réalisé un rapport d'audit scientifique sur la maladie.)

Expert power

Power Dec-05 Scientific audit on Sanfilippo

A graduate of ESSEC, this former consultant at Arthur Andersen decided to audit every expert on the planet to find a therapy. (Diplômée de l'Essec, cette ancienne consultante chez

Expert

power

Arthur Andersen décide alors d'auditer tous les experts de la planète pour trouver une thérapie.)

Artefacts Dec-06 Publish audit on Sanfilippo

We now have a detailed critical overview of the existing and the needs in the areas of research, information and therapeutic trials. (Nous disposons désormais d'un aperçu critique détaillé de l'existant et des besoins dans les domaines de la recherche, de l'information et des essais thérapeutiques.)

Artefacts Jan-07 Building own

research program We were doing efficacy studies on mice, and a team had published preliminary data in Italy at the same time with very compelling data using the same vectors.

Power Apr-09 Founding company (15-04-2009, Bureau van Dijk)

I leveraged on my original professional background (steering and piloting highly complex international projects at Arthur Andersen) to build the program, and raise funds.

Expert power Power Apr-09 Founding company

(15-04-2009, Bureau van Dijk)

Attracted by the compelling mission, outstanding scientists, clinicians, regulatory experts, patient advocate groups and others rallied to the cause.

Referent power Legitimacy Apr-09 Founding company

(15-04-2009, Bureau van Dijk)

Attracted by the compelling mission, outstanding scientists, clinicians, regulatory experts, patient advocate groups and others rallied to the cause.

Pragmatic

Legitimacy Apr-09 Founding company (15-04-2009, Bureau van Dijk)

Attracted by the compelling mission, outstanding scientists, clinicians, regulatory experts, patient advocate groups and others rallied to the cause.

Moral

Legitimacy Apr-09 Founding company (15-04-2009, Bureau van Dijk)

The biggest challenge for me at the beginning was that I was not a scientist or a clinician or gene therapist. (Solomon)

Lack of legitimacy Artefacts Apr-09 Founding company

(15-04-2009, Bureau van Dijk)

It looked like more than a philanthropy program—I had a drug development program in my hands. So I started Lysogene in 2009.

Goals Apr-09 Founding company (15-04-2009, Bureau van Dijk)

It is this profound conviction that led us to move forward in this process. We decided to go ourselves to the conquest of an experimental treatment and we succeeded!

Vision

Legitimacy Apr-09 Founding company (15-04-2009, Bureau van Dijk)

It was also necessary to be accepted in environments that were not ours. Scientists are not always used to be faced with patients who, in addition in our case, decided to form a company to enter the drug development planning.

Moral

Artefacts Apr-09 Founding company (15-04-2009, Bureau van Dijk)

Scientists are not always used to be faced with patients who, in addition in our case, decided to form a company to enter the drug development planning.

Goals Apr-09 Founding company (15-04-2009, Bureau van Dijk)

Develop gene therapies against brain rare diseases in children.

A pioneering approach to both sides of the Atlantic.

(Développer des thérapies géniques contre les maladies rares du cerveau chez l'enfant. Une approche pionnière de part et d'autre de l'Atlantique.)

Vision

Goals Apr-09 Founding company (15-04-2009, Bureau van Dijk)

When faced with orphan diseases, what is lacking in order to create treatments is first and foremost motivation. (Lorsqu'on est face aux maladies orphelines, ce qui manque pour créer des traitements, c'est avant toute chose de la motivation)

Ambition/M otivation

Legitimacy Apr-09 Founding company (15-04-2009, Bureau van Dijk)

The biggest challenge for me at the beginning was that I was not a scientist or a clinician or gene therapist. I was a mother taking responsibility to build a program and manage it.

Lack of legitimacy Legitimacy Apr-09 Founding company

(15-04-2009, Bureau van Dijk)

With a seasoned advisor, Professor Olivier Danos, who was Scientific Director of Genethon and directed the Gene Therapy Consortium at the University College of London.

Professional legitimacy Power Apr-09 Founding company

(15-04-2009, Bureau van Dijk)

Was it more difficult to run a for-profit than a not-for-profit?

Aiach: No, it was the opposite. I’m a corporate person – and even though the company was tiny, it was easier.

Expert power Power Apr-09 Founding company

(15-04-2009, Bureau van Dijk)

Lysogene was founded in 2009 by Karen Aiach, CEO, and Professor Olivier Danos, PhD, Scientific Advisor, which enjoys international recognition in the field of gene therapy

Expert power Legitimacy Aug-11 Phase 1 study The investigator we worked with on our Phase 1 study was

always quite difficult with me because he only considered me the bank. He couldn’t see why on Earth I would care about the clinical design. It was hard for him to listen to my voice.

Lack of

legitimacy

Power Aug-11 Phase 1 study The investigator we worked with on our Phase 1 study was always quite difficult with me because he only considered me the bank. He couldn’t see why on Earth I would care about the clinical design. It was hard for him to listen to my voice.

Legitimate

Goals Aug-11 Start first clinical

trial I/II Because she did not understand being told that there was nothing to do to heal her daughter. But stubborn and hardliner - "I am a fighter," she says - she moved further obstacles

Motivation

Legitimacy Aug-11 Start first clinical

trial I/II The continued support of Sofinnova Partners for several months was a chance for Lysogene. Their presence in the seed stage of this prestigious round allowed us to reach new

milestones.

Professional legitimacy

Legitimacy May-14 VC funding

16,5million euros With support from Sofinnova, Lysogene (4 employees) convinced Bpifrance and Novo, the Danish enzymes giant, participate in its exercise of 16.5 million fund in 2014.

(Avec l'appui de Sofinnova, Lysogène (4 salariés) a convaincu Bpifrance et Novo, le géant danois des enzymes, de participer à sa levée de fonds de 16,5 millions d'euros en 2014.)

Pragmatic

Legitimacy May-14 VC funding

16,5million euros With support from Sofinnova, Lysogene (4 employees) convinced Bpifrance and Novo, the Danish enzymes giant, participate in its exercise of 16.5 million fund in 2014.

(Avec l'appui de Sofinnova, Lysogène (4 salariés) a convaincu Bpifrance et Novo, le géant danois des enzymes, de participer à sa levée de fonds de 16,5 millions d'euros en 2014.)

Professional

legitimacy