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INTERNATIONAL SOCIAL ENTREPRENEURSHIP

EXPLORING T HE LANDSCAPE OF INTER NATIONAL SOCIAL VENT URES IN THE UK

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Page | 1 “Right now a poor farmer in India can buy a water pump on a payment plan to improve his yields and access crop prices over SMS. His children can study their lessons after dark under the light of a solar-powered lamp. With these tech products enabling him to earn more income off the land and his children to further their education, it would seem that he and his family are making steady progress up the economic ladder”.

– SocialEarth Blog (2009)

COLOFON

Document: Master’s thesis Version: Final

Date: 28-08-2012 Author: Jaring Dijkstra Student number: 1902636

Email: jaring_d@hotmail.com Phone number: +316 5358 2216

Address: Van Wassenaerstraat 6b, 9726 HP, Groningen Institution: University of Groningen

Faculty: Faculty of Economics and Business Degree programme: International Business & Management Phase: Master

Supervisor: Dr. A.A.J. van Hoorn Assessor: Dr. R.K. Kozhikode

© Jaring Dijkstra, Groningen, 2012.

No part of this document may be reproduced without the permission of the author

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Page | 2 SUMMARY

The goal of this study is to examine, both at a conceptual and at an empirical level, the landscape and the specific features of international social entrepreneurship (ISE). Frequently international social ventures (ISVs) are used to exemplify the social enterprise (SE) concept. Despite these inspiring examples, social enterprise research is dominated by observations from a local or regional perspective. This study aims to address this gap in the literature and advance our theoretical and empirical understanding of ISE activity. By first introducing different theoretical frameworks of SE, and examining several developments that catalyze and characterize international social entrepreneurial activity. And secondly, using a study of 150 UK-based international social ventures to provide additional insight into the specific ISE landscape and draw empirical support for the assumptions derived from theory.

A comprehensive study of the contemporary field of social entrepreneurship (SE) reveals that social entrepreneurship is of ambiguous nature and has developed differently in different parts of the world. However, the increasing interfaces between social enterprise and international business offer great potential to accelerate forms of international social value creation in support of sustainable development. Well-established initiatives such as fair trade, microfinance, and certain forms of NGO-operation, seem to relate well to the ISE conception. These initiatives are found to primarily resemble the North-American interpretation of SE. In an effort to further characterize ISE operation, the dimensions of; social transformation, financial self-sufficiency, and innovation, are explored as useful guidelines to distinguish ISE activities in a for-profit vs. not-for-profit context.

In the second part of the study, a dataset comprising 150 international social ventures from the UK is used to assess the presence of these characteristics, and the diversity of ISE operation. Findings indicate that while the ISE field is very heterogeneous, it is evidently dominated by ethical trade initiatives. The field can be grouped into three main types, and a total of nine subcategories. Consequently, country-orientation and the transformative stream (being either ‘upstream’ or ‘downstream’ transformative) are suggested as decisive features to distinguish various ISV modus operandi. The divide according to the transformative stream has several implications for the degree of social transformation, financial self-sufficiency, and the nature of the innovation of these ventures. Despite the distinctiveness of the proposed categorization, indications of increasing hybridity are also encountered. Thereby, drawing support for the notion of blurring boundaries between models, in time leading to a more diversified ISE field.

This article provides a solid basis to establish international social entrepreneurship as a specific field of theory and business, as assumptions derived from theory are reinforced with empirical findings. Future research could build upon the findings of this study to further explore specific topics of social entrepreneurship in an international context.

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Page | 3 ACKNOWLEDGEMENTS

I would like to take this opportunity to express my sincere appreciation and gratitude to the many people who contributed to both the realization and completion of this study. First, special appreciation is given to Dr. A.A.J. van Hoorn, for his continuous support, feedback, suggestions and inspiration. Secondly, I would sincerely like to thank everyone at the Third Sector Research Centre (TSRC), based at Middlesex University in London. During an internship of three months at TSRC, it has been a real privilege and an inspiration to work with such a bright and insightful group of people. In particular, I would like to thank Professor Fergus Lyon and Dr. Leandro Sepulveda for their insights, support, and opportunities they have provided me with regarding the intricate phenomenon of social entrepreneurship. My time in London has contributed significantly to my understanding of this subject, and the development of my Master’s Thesis. Fergus, Leandro, Stephen, Ian, David, Bianca and of course Pamela; thank you. Thirdly, I also want to thank all of my family and friends for their support during this journey, I would not have been able to do this without them.

Lastly, I want to make a statement. A year ago, I was introduced to the concept of social entrepreneurship. Having explored the topic extensively, I now truly believe that social entrepreneurship is an inspiring way of doing business. It presents a direction forward within the field of business, by putting social achievements before economic outcomes; business can become a real inspiration and a powerful force engaging pressing social challenges worldwide.

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TABLE OF CONTENTS

1. INTRODUCTION ... 5

2. LITERATURE REVIEW ... 7

2.1 UNDERSTANDING SOCIAL ENTERPRISE ... 7

2.1.1 The Social Enterprise ... 7

2.1.2 The Third System ... 8

2.1.3 Different Developments of Social Entrepreneurship ... 9

2.1.4 Overview of Different Interpretations ... 11

2.2 INTERNATIONAL SOCIAL ENTREPRENEURSHIP ... 12

2.2.1 Defining International Social Enterprises ... 12

2.2.2 Exploring International Social Entrepreneurial Activity ... 13

2.2.3 Features of International Social Entrepreneurship ... 15

2.2.4 ISE Operation and the Key Dimensions of Social Entrepreneurship ... 17

3. RESEARCH PROBLEM AND METHODOLOGY ... 20

3.1 RESEARCH PROBLEM ... 20 3.1.1 Inductive Research ... 20 3.1.2 Deductive Research ... 21 3.2 METHODOLOGY ... 22 4. DATA ... 23 4.1 THE SAMPLE ... 23 4.2 DESCRIPTIVE STATISTICS ... 23

5. FINDINGS AND RESULTS ... 25

5.1 SEGMENTATION OF BUSINESS ACTIVITIES ... 25

5.1.1 Ethical Traders ... 25

2.1.2 Social Businesses ... 26

2.1.3 Trading Charities ... 27

5.2 RESULTS OF STATISTICAL TESTING OF WEB-BASED PROFILES ... 29

5.2.1 Social Transformation ... 29

5.2.1 Financial Self-sufficiency ... 30

5.2.1 Innovation ... 31

6. DISCUSSION ... 33

6.1 ASSESMENT OF THE FINDINGS ... 33

6.2 IMPLICATIONS OF THE RESEARCH ... 36

6.3 LIMITATIONS OF THE RESEARCH ... 36

6.4 OPPORTUNITIES FOR FUTURE RESEARCH ... 36

7. CONCLUSIONS ... 38

REFERENCES ... 39

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CHAPTER 1: INTRODUCTION

The unprecedented emergence of social enterprises all over the world has been a welcome sign of increasing innovation in the service of humanity. Social enterprises trade products and services to address social and environmental problems (Leadbeater, 2007). With human needs and wants considered as the fundamental drivers of companies’ decisions as to which products or services to produce (Seelos & Mair, 2005), and with the increasing globalization of economies; the importance of entrepreneurial action for creating wealth and addressing persistent social problems has heightened. In addition, demographic shifts, liberalization of national economies and attendant markets, institutional and state failures, and technological advances have combined to increase the call for more social consciousness within business, providing the impetus for the formation of social ventures that address social inequalities in developing countries (Zahra et al., 2008). These international social ventures (ISVs) are increasingly common feature of the business and social landscape in many countries worldwide (e.g. Bornstein, 2007; Chen, 2012). Moreover, social ventures with international social benefit are frequently used to illustrate the concept of social entrepreneurship. Despite the growing international nature of many social entrepreneurial activities and the widespread interest that has resulted, theoretical development that deals specifically with social enterprises that engage social inequalities across borders, is mostly lacking (Chen, 2012; Zahra, 2008). To address this gap in literature, the aim of this study is to explore the general features, and the specific landscape of international social entrepreneurship (ISE).

The necessity of ISE seems evident as global poverty is a scandalous state of affairs. “Nearly 50% of the world’s population – almost 3 billion people – live on less than $2 a day. 840 million suffer from hunger. Meanwhile the richest 20% of the world’s population own 77% of the world’s wealth while the poorest 20% own 1.4% (Griffiths & Tan, 2007: p.8). What makes it even worse is that for problems such as the easily preventable deaths of children, access to clean water and universal primary education, there are ways to help which do not involve great expense. And with resources so highly concentrated in developed economies and social problems rampant in developing nations, globalization increases awareness of opportunities for social improvement in developing countries (Zahra et al., 2008). Accordingly, Seelos & Mair (2005) argue that social entrepreneurs offer inspiring role models when it comes to devising innovative organizational models to alleviate poverty. In their study they advocate several examples of social entrepreneurs that succeed in catering to the needs of the poor, contrasting more traditional methods of poverty alleviation such as through the allocation of massive development funds.

By trading products and services to further social and environmental goals; social entrepreneurship (SE) plays an important role in attempting to solve challenging social issues (e.g., improving quality of life, and economic development). Due to this nature of social entrepreneurship, it is plausible to increase the global movements of workers, products and services that impact economic activity, social welfare and quality of human conditions. While literature on the social enterprise is commonly particular attentive towards SE-operation on a local or regional scale, from a global perspective, social entrepreneurs may well be able to transform communities across boundaries of governments and countries. Creating ways to connect resources internationally, navigating cross- culturally and across policy contexts, and employ processes and strategies that will ultimately impact some great challenges of improving the quality of life. International social ventures are therefore understood as social enterprises that engage in social transformation across borders. And already, well-established forms of international social activity such as fair trade and microfinance are frequently incorporated in social entrepreneurial literature to exemplify the social enterprise conception (e.g., Alter, 2006; Huybrechts, 2010; Martin & Osberg, 2007; Seelos & Mair, 2005; Thompson & Doherty, 2005).

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Moreover, NGO’s increasingly endeavour in commercial activities (Easterly & Miesing, 2009), and in parallel, business entities have been joining in a growing global movement which often transcends their CSR agenda’s (Kolk, 2010). For this reason, including international business theory is considered as a quintessential part of studying international social entrepreneurship.

An accumulation of these developments (globalization, achieving sustainable development through social entrepreneurship, transcending CSR efforts by for-profit IB, and increasing trade activities by not-for-profit IB), set the stage for a potentially flourishing field of international social entrepreneurship. And the fact that these initiatives have not been drawn together before signal a clear deficient in both SE and IB literature, leaving the size and scope of ISE activity yet to be explored. Therefore, in an effort to advance our theoretical and empirical understanding of this phenomenon, the objective of this study is to develop a comprehensive understanding of the general features and the specific landscape of international social entrepreneurship.

This study considers ISE as a subset of social entrepreneurship, as social entrepreneurship is still quite new to many as a field of scientific enquiry, an introduction to the initial concept might be in place. Moreover this is the case, considering that the initial concept of SE remains somewhat ill-defined. Consensus regarding what exactly constitutes a social enterprise and what not, is often a matter of debate. Sometimes the only thing researchers seem to agree on is the lack of consensus regarding a common definition. E.g., “Social

entrepreneurship has become so inclusive that it now has an immense tent into which all manner of socially beneficial activities fit” (Martin & Osberg, 2007: p.30), or Nyssens (2006: p.10) describing social enterprise as

“encompasses a whole galaxy of firms”, Trexler (2008: p.65) goes even further by stating: “Interpretation of

the concept is as useful as trying to make sense of a Rorschach blot”. Due to this complexity, the field of social

entrepreneurship is still poorly understood and the mission of finding a common narrative still remains unaccomplished, leaving those new to the subject with a vast number of, sometimes misleading, definitions; some of them overlapping, some disagreeing, some serving special purposes or reflecting a different agenda. As such providing an overview of the terminology used, several general guideline features, and a preliminary understanding of some of the different interpretations, will greatly contribute to our understanding and our ability to further theorize upon the topic.

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CHAPTER 2: LITERATURE REVIEW

2.1 UNDERSTANDING SOCIAL ENTERPRISE

The literature on social enterprise and social entrepreneurship is recent and heterogeneous. It has evolved in different ways, with, on the one hand, contributions by North-American authors, and on the other hand, contributions by authors from continental Europe. Despite considerable interest among researchers, policy makers and support organisations, and while a substantial body of literature has emerged over recent years, the phenomenon remains ill-defined and there is no consensus over its conceptual boundaries. Much of the developing literature base has focused on definitional issues around what exactly is meant by social

entrepreneurship and social enterprise (Dees, 1998; Mair & Marti, 2006; Martin & Osberg, 2007; Peredo &

McLean, 2006). These two terms are often used interchangeably, and the precise meaning remains a matter of debate. “One person’s definition of a ‘social entrepreneur’ is another person’s definition of a volunteer or aid worker. Similarly, the meaning of ‘social enterprise' potentially covers everything from not-for profit organizations, through charities and foundations to cooperative and mutual societies” (Harding, 2004: p.40). In order to prevent any definition related confusion in this review, it is of importance to clarify the usage of terms before proceeding. In general, literature distinguishes three different terms which, at first sight, might seem linked in a very simple way: “social entrepreneurship” is the dynamic process through which a specific type of individual, deserving the name of “social entrepreneur”, creates and develops an organization that may be defined as a “social enterprise” (Mair & Marti, 2006: p.38). The focus of our study is on the latter, the organisational view of social entrepreneurship; the social enterprise.

2.1.1 THE SOCIAL ENTERPRISE

At first sight, the concept of a ‘social enterprise’ might seem straightforward: ‘Social enterprises trade products and services to further social and environmental goals’. However, one could argue that all production foresees in a need - and therefore a social benefit - also commercial production. Leadbeater (2007: p.3) remarks: “in a way all commercial activity delivers benefit for a community. The products and services offered by companies that are sold through the market only succeed by addressing social needs, from soap to keep us clean, to mortgages that pay for our housing, to heating in the winter and smoke alarms that keep us safe”. Accordingly, most businesses would claim to have a social mission, as they create jobs for people; provide consumers with products they need; pay taxes that support public services; donate to charities and foundations; often the best play a role in their communities (Leadbeater, 2007; Austin, 2006). However, much of the literature concerning social enterprises contrasts social entrepreneurs and business entrepreneurs, and underscores the major difference between the two as the social change emphasis of the social entrepreneur. Sharir et al. (2009: p.75) summarize a common view: “The main difference between entrepreneurs operating in the business sector versus those in the non-profit sector is that social contribution, in the sense of mission and service, becomes the main goal of social entrepreneurs, and not just profitability or financial gains.” So, social entrepreneurship emphasizes the primacy of the social mission (Dees, 1998; Nicholls, 2006a), distinguishing SE from other forms of entrepreneurship, in that it gives higher priority to social value creation –by catalyzing social change and/or catering to social needs- than to value capture (Mair & Marti, 2004; Dart, 2004; Leadbeater, 2007).

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Additionally a restricted distribution of surpluses is commonly understood as a third feature of social enterprise operation. And a general emphasis is placed on democratic control over the production and delivery of goods and services (Ridley-Duff & Bull, 2011). Taking this into account, a commonly acknowledged definition of social enterprise is provided by the Department of Trade and Industry in the UK as the following: “A social

enterprise is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners” (DTI, 2002). And although this definition frames important boundary features of the

concept, it still presents a wide interpretation of what constitutes a social enterprise.

2.1.2 THE THIRD SYSTEM

As the social entrepreneurship phenomenon has been growing and gaining prominence, it has increasingly been distinguished as a sector of the economy that is operating alongside the private and public sector. It is therefore a valuable exercise to see where social enterprises fit in, in the greater business ecology.

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Social enterprises are generally perceived to belong to the ‘third sector’. This third system describes informal and formal associations that people establish outside the public and private sectors. In this sense, civil society is the coming together of people independently, free from state or commercial intervention, and has roots in the democratic right to ‘freedom of association’ (Ridley-Duff & Bull, 2011: p. 13). If there is a ‘third system’ that not only compensates for the shortcomings of the state and market, but offers the potential to go beyond it (Pearce, 2003), it should closely resemble this illustration by Pearce (2003) – see figure 2.1. This association particularly prevails in the UK, where the third sector has been portrayed as a system next to the public and private sector. “In the last decade, third-sector-organizations have been increasingly drawn into government agendas and had considerable sums invested to increase their capacity to deliver services. In the UK, the establishment of Office of the Third Sector in 2006, and a Centre for Third Sector Research (TSRC) in 2008, marks the political acceptance (and social construction) of the third sector as a distinct grouping with its own rationale and outlook” (Ridley-Duff & Bull, 2011: p.11).

Observation of figure 2.1 learns that any third sector organisations (voluntary associations, charities and cooperatives) have a claim to the term ‘social enterprise’ depending on their beneficiary and market orientation. However, the more market oriented they are, and the more they are oriented toward public and community benefit, the more they are accepted as part of the social enterprise mainstream (Lyon and Sepulveda, 2009). Therefore, as indicated in the figure, social enterprises are perceived to primarily operate in the ‘social economy’ section of the third system segment. The best government data in the UK (the Annual Survey of Small Businesses UK 2005-2007) estimates that there are approximately 62,000 social enterprises in the UK contributing at least £24bn to the economy (Fightback Britain, 2011). The true picture however, is that the social enterprise sector is believed to be bigger than this data suggests, as Lyon and Teasdale (2010) show how different definitions of social enterprise result in widely differing estimations of the population. Leadbeater (2007: p.2) comments on the position of social enterprises: “Although most social enterprise are small, and many are fragile, and therefore make up only a small part of the total enterprise sector of the economy, they matter in the overall business ecology because they are pioneering approaches to show how business can operate successfully while also taking into account social and environmental issues. Social enterprises are one vital source of new business approaches to fair trade, social inclusion, community regeneration, creating jobs for those most marginalized in labour markets and environmental sustainability”. Moreover, due to growing social needs and social problems in most parts of the world, accompanied by reduced government ability to provide the funding necessary to effectively combat these social problems, it is expected that the social enterprise sector will continue to grow both in number and importance (Dees, 1998; Dees & Battle Anderson, 2006; Christie & Honig, 2006; Madill et al., 2010; Mair & Marti, 2004; Leadbeater, 2007; Rangan et al., 2008). While the UK government has been at the forefront of several developments (Nicholls, 2006a), similar developments have been observed in other parts of the world. In the US, Canada and several countries in continental Europe, a significant social enterprise sector has also emerged (McKinsey report, 2011). And while the UK has developed a strong social enterprise sector, it’s specific direction has not been fully paralelled by the US and the rest of Europe.

2.1.3 DIFFERENT DEVELOPMENTS OF SOCIAL ENTREPRENEURSHIP

What became apparent early on, is the strong contrast between the European tradition of studying social enterprise in the broader social economy (with a strong interest in mutuals and co-operatives), and the North American view that typically prioritised business solutions to social problems; taking a more market-oriented approach to social entrepreneurship (Nicholls, 2006a). A definition that closely reflects the US focus is provided by Alter (2006: p.12) as: “a social enterprise is any business venture created for a social purpose –

mitigating/ reducing a social problem or a market failure – and to generate social value while operating with financial discipline, innovation and determination of a private sector business”. This definition reflects the

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attention given to public sector involvement. This omission is in part explained by Kerlin’s (2006) comparative analysis of social entrepreneurship in the United States and Europe. She points out that “social economy” has been slow to gain recognition in the US. Nor is there a strong public sector tradition in welfare provision and market intervention (Kerlin 2006). An illustration of the commonly held perception of social enterprise in the US is provided by Alter (2006) - see appendix I. An updated version of this interpretation is provided by Ridly Duff & Bull (2011) and is displayed below – see figure 2.2.

Figure 2.2: adapted Alter social enterprise sustainability equilibrium - Ridley-Duff 2011 (p.67)

In addition, the approach developed by North-American authors initially made a strong distinction between

social entrepreneurship and social enterprise. Among researchers this divide is commonly referred to as two

different ‘schools of thought’. The first school, called the "social innovation" school, was based on the theories of entrepreneurship and focused on innovation rather than on income generation. Using the term 'social

entrepreneurs' to describe innovators pursuing social change helped to reinforce the idea that social

entrepreneurship needs not to be framed in terms of income, but more about outcomes; about social change" (Dees and Battle Anderson, 2006). This first school of social entrepreneurship thus capitalized on individuals as social innovators.

This view was somewhat contrasted by the second school, called “earned income”, which focused more on social enterprise as an organization, and on earned income-strategies developed to support an organizations social mission. At its origins, the focus of this school was on ‘not-for-profit organizations’ increasingly looking for new resources from the market and seeking to adopt a more efficient and market-oriented behaviour (e.g. Emerson & Twersky, 1996). Later, it was observed that ‘for-profit companies’ were increasingly including social purposes in their primarily economic mission. As such, social enterprises are seen as emerging either from the social sector or from the business sector, between which the boundaries are increasingly ‘blurred’ (Huybrechts, 2010). This concept of a ‘hybrid spectrum’ is the same as the one depicted in figure 2.2. Central to social enterprises in this approach was the idea of using the market and generating own incomes to achieve sustainability and thus pursue the social mission more effectively. This double interpretation of a largely similar concept in the US, has contributed to the interchangeable usage of different terms.

Although the two schools initially developed separately, bridges have recently been established, revealing more convergences than what might have been expected at first (Defourny & Nyssens, 2008). Dees and Battle Anderson (2006) propose to call this intersection "enterprising social innovation", including in it all the innovative initiatives that seek to create sustainable social change by blending methods from both the business and the social sectors (Huybrechts, 2010). This intersection is described as the most promising research area. And accordingly, Nicholls and Cho (2006b) define social entrepreneurship as composed of the three elements: sociality, innovation, and market orientation. Nicholls' book “New Models of Sustainable

Change” (2006) can be seen as one example of this intersection, with contributions covering both the process

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2.1.4 OVERVIEW OF DIFFERENT INTERPRETATIONS

Thus, the European tradition of studying the social enterprise phenomenon is primarily rooted in the social economy sector, as part of the (larger) third system. In particular, continental Europe focuses on a set of strict criteria that SE’s have to comply with in order to qualify as a social enterprise. In the United Kingdom, these criteria have been somewhat loosened. In addition, this approach is characterized by high government involvement and an emphasis on democratic governance and shared ownership (Kerlin, 2006). Opposing this European perception, the US has adopted a broader - more market oriented – approach, here the sector is characterized by low government involvement and emphasizes a hybrid spectrum between for-profit and non-profit. A comparative overview of social enterprise in the United States and Europe is provided by Kerlin (2006):

Table 2.1: Comparative overview of social enterprise in the US and Europe - Kerlin, 2006

In consideration of these differences it can be concluded that whilst certain beliefs and principles are routinely evident, social enterprises most certainly cannot be described as “one-size-fits-all” (Thompson & Doherty, 2006: p.361). Also the search for a single definition has been somewhat a sterile activity and has instead proposed a set of boundaries for social entrepreneurship arguing that “a key part of what makes social entrepreneurship so successful is that it resists isomorphic pressures to conform to set types of action preferring instead to remain fluid and adaptable to fill institutional voids in environmental or social provision” (Nicholls, 2006a: p.xii). Nicholls (2006a) points out that, social entrepreneurs operate in an extraordinary breadth of operational contexts and organisational forms, which makes classification extremely difficult. In general however it is widely agreed in the literature, that social enterprises are innovative organizations established to address social needs; the social mission is central and explicit; and assets and wealth are used to create community benefit (Austin et al., 2006; Dees, 1998; Dees & Anderson 2003; Haugh 2007; Thompson & Doherty 2006; Sullivan-Mort, Weewardena & Carnegie 2003). As such, social enterprises constitute businesses with primarily social (and/or sometimes environmental) objectives that are involved in some form of trading

activity (Lyon & Ramsden 2006; Thompson & Doherty, 2006). And in a broader sense, the nature of social

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Page | 12 2.2 INTERNATIONAL SOCIAL ENTREPRENEURSHIP

On numerous occasions international operating social ventures have been used to exemplify the concept of social entrepreneurship. A review of in total 41 articles on social entrepreneurship, suggests that out of 17 papers using social enterprise case studies, 14 use international examples to illustrate the SE concept - see

appendix III. With many of the world’s poor, illiterate, and sick living in developing countries, this common

usage may well be explained by the persistent social challenges that these developing countries face. Widespread disparity in income and access to opportunities exists in these countries, and this disparity continues to grow (Zahra et al., 2008). Consequently, social entrepreneurs that operate across borders, create organisations to engage these problems (e.g. Bornstein, 2007). In this sense, the notion of “hero entrepreneurs” (Nicholls, 2006a: p.13) set out to tackle poverty, is a captivating thought. Moreover, early SE literature that addresses poverty alleviation, often capitalized on social entrepreneurs as individuals. An example of this, are the many references in SE literature to Muhammad Yunus; Nobel peace prize recipient, and founder of the Grameen Microfinance bank (e.g. Bornstein, 2007; Boyer, 2003; Martin & Osberg, 2007). Grenier (2006) argues that this focus on ‘individual global entrepreneurs’ in part, has been accelerated by accrediting organisations like Ashoka, and the Schwab foundation; organisations that identify and single out individuals as social entrepreneurs and consequently provides them with globally oriented networks and resources to work with. As this individual-centred view of social entrepreneurship was particularly featured as part of the ‘social

innovation’ school of thought, international social activity is considered to have rooted in this perception of

social entrepreneurship.

International social entrepreneurship is however believed to be supported as a wider organisational platform. “Demographic shifts, liberalization of national economies and attendant markets, institutional and state failures, and technological advances have combined to increase the call for more social consciousness within business, providing the impetus for the formation of social ventures” (Zahra, 2008: p.118). And accordingly, Bornstein’s (2007) book “How to change the world; social entrepreneurs and the power of new

ideas”, likens the birth of this sector to the creation of the commercial sector after the Middle Ages, when the

barriers to entrepreneurship fell as the feudal and guild system, which restricted entry, collapsed. “Similarly, the barriers to becoming a social entrepreneur are dropping as the public sector devolves and deregulates and the private sector’s role shifts as well” (Boyer 2003: p.4). And “with resources so highly concentrated in developed economies and social problems rampant in developing nations, globalization has increased awareness of opportunities for social improvement in developing countries” (Zahra et al., 2008: p.118). Globalization; the growing interdependence and integration between economies and societies around the world (Grenier, 2006), is considered as an important development catalysing ISE activity. As such, international social ventures are increasingly common feature of the international business and social landscape in many countries worldwide (Chen, 2012; Bornstein, 2007). Reporting on the social enterprise sector in the UK - Fightback Britain 2011 – confirms this notion, as 15% of social enterprises operate on an international scale, while this was only 4% two years earlier (State of Social Enterprise survey, 2009). The assumption is that this propensity for ISE activity is reflected in the many references to international social ventures in SE discourse. And consequently ISE activity should not be considered as an activity solely instigated by individual social entrepreneurs.

2.2.1 DEFINING INTERNATIONAL SOCIAL ENTERPRISES

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must be of at least of equivalent importance to the commercial. In other words, any investment in the business must lead to an incremental increase in social impact. And secondly, social enterprises are generally defined as businesses that are trading for a social purpose (Thompson and Doherty, 2006); meaning that they are trading (charging fees for products and services) and reinvesting a proportion of their profits back into achieving their social mission. Essentially, the first criterion rules out the majority of mainstream Multinational Companies (MNCs) from our definition. While MNCs often maintain elaborative Corporate Social Responsibility (CSR) programs, these ethical policies generally do not have a direct relation to the company’s core-activities. The second criterion excludes organisations that have operations that solely rely on donations and grants as a source of income, and have no form of trade (e.g. traditional charities). In an effort not to get too lost in defining statements, no further restricting criteria are imposed.

2.2.2 EXPLORING INTERNATIONAL SOCIAL ENTREPRENEURIAL ACTIVITY

As a concept shaped by boundaries; international social entrepreneurship does not consist of a single model-of-operation; rather it comprises a range of different initiatives. As Thompson & Doherty (2006) already elaborated on the diverse nature of social enterprises in general, likewise, purely international social ventures exhibit a range of diverse initiatives that qualify as ‘social’ and ‘international’ (e.g., Seelos & Mair, 2005). The addition of the international nature however draws an important connection between ISE and the theoretical field of international business. Moreover, this is the case, considering recent international business theory increasingly incorporates notions of social consciousness, and mutual- or shared-value creation (e.g., Porter, 2011). Kolk (2010: p.119) explains: “While attention for the social and environmental impacts of international business is certainly not new, the past years have seen renewed interest due to pressing global problems such as climate change, poverty, human rights violations and HIV/aids. Firms are increasingly called upon to play a positive role, and thus contribute to more sustainable development”. In part, this involved business entities joining in a growing global movement towards CSR activities (Kolk, 2010). This however does not capture the breadth of sustainable development instigated by IB, as several developments transcend CSR activities. Hartigan (2006: p.329) observes “over the past twenty years, the growth in the size and global influence of socially oriented activity by both the for-profit and not-for-profit sector has become a factor promising positive transformation of national and international development”. For this reason, international business literature is considered a quintessential part of studying international social entrepreneurship. Moreover - and as the following section explores - several developments from the field of IB are considered to have helped shape and drive different initiatives of ISE activity.

FAIR TRADE

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generally includes fair pricing. Huybrechts (2010) substantiates the link between fair-trade and social enterprise, even opting to refer to these ventures as Fair Trade Social Enterprises (FTSE) in further research. However, while the term ‘fair trade’ is generally considered as a way of operating, more specifically it constitutes a certification - or a label - and consequently not a distinct business model. To illustrate this notion; examples of industries exist that generally do not carry a ‘fair-trade-mark’ even though their products are produced in a highly ethical manner. Jewellery from Africa or clothes from Asia, for example can be produced under ethical conditions, yet, the products are not labelled as ‘fair trade’. In consideration of this argument, the category of ‘fair-trade’ is reconfigured to a broader, more comprehensive understanding, as: ‘ethical trade’.

SOCIAL BUSINESS AT THE BOTTOM OF THE PYRAMID

Somewhat contrasting the export/import-strategy of the ethical trade movement; foreign markets are increasingly recognized as rising markets on their own. With established markets becoming saturated, multi-national corporations have turned increasingly towards emerging markets (EMs) in the developing world (London and Hart, 2004). The emerging economies of the BRICS-countries (Brazil, Russia, India, China, South-Africa) exemplify this notion. Due to rapid population growth, sustained economic development and growing middle class, many companies look at these emerging markets in a whole new way, considering them as promising markets on their own. Consequently, designing economically viable ventures to serve emerging markets has gained considerable prominence over the past several years (Prahalad and Hart, 2002; Prahalad, 2004). More recently, the emphasis of this foreign market opportunity itself has somewhat shifted, as the significantly present poor communities in developing countries are increasingly noticed as a promising market. This is interesting, considering that this simultaneously has the capacity to act as a way to instigate sustainable development and engage in poverty alleviation. London (2004: p.2) explains: “while initial strategies were directed at the top of the economic pyramid, with products and business models similar to those used in the developed world, firms were only seeing the tip of the proverbial iceberg. Almost completely ignored until recently, is a huge base of potential customers whose annual power parity (PPP) is less than $1500 per year, a market aptly termed the bottom (or base) of the pyramid (BoP) by Prahalad and Hart”. “Driving this interest is the view that pursuing business ventures designed to serve the BoP suggests a synergistic connection between business strategy and poverty alleviation. This relationship centres on the proposition of mutual value creation; that by employing business strategies that alleviate local poverty, a venture will also generate greater economic returns” (London, 2008; 2010: p.590). Hence, the connection to social entrepreneurship, as this combination of a social mission motive and commercial activity coincides particularly well with the social enterprise conception.

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ENTERPRISING NON-PROFITS

A third form of ISE activity opposes the previous - primarily market driven – approaches as it originates in the not-for-profit side of international business. Non-governmental organizations (NGOs) have played a major role in pushing for sustainable development at the international level. These NGO’s operate under a social purpose mission to deliver services, and are primarily supported by donations and grants, and governmental funding (Easterly & Miesing 2009). However, “the environment within which voluntary or not-for-profit organisations (NFPs) operate is rapidly changing due to increasing globalization, increasing needs in their target communities, and a generally tighter funding environment with growing competition for donors and grants. ‘Reinventing government’ initiatives, resulting in the retreat of many governments from a vision of their role as involving strong participation in ‘society’, have had a large impact by both creating more space for more civil organizations and attracting commercial providers to markets, such as aged care, usually served exclusively by NFPs. Consequently, NFPs have been forced to adopt a competitive posture in their operations and to pursue innovative ways of delivering superior value to the target market and through this capturing competitive advantage for the social organization” (Sullivan Mort, Weerawardena & Carnegie 2002: p.77). A consequence of this growing ‘competitive posture’ is that NFP’s are also increasingly part of the social enterprise paradigm. This is also reflected in the purely not-for-profit set-up case studies that are part of the social enterprise landscape review by Thompson & Doherty (2006). This can thus be considered as a third development that influences and drives ISE activity. Moreover, this development is underpinned by reductions in western governmental donations for development and aid funding. For the past five decades the major approach by governments to tackle global poverty has been through government aid. However government aid is subject to much criticism, not because of the shortfall in volume but because of its ineffectiveness in terms of output (Griffiths 2007). Seelos and Mair (2005) have argued business in support of sustainable development a success, where traditional development aid is failing. And as such, international social ventures are considered to offer a lot of potential to alleviate poverty, catalyzing the common ground with social entrepreneurship. This notion is also confirmed in the following quote: “increasingly, we see examples of overlap and collaboration between SE and international organizations, NGOs, and development institutions” (Seelos & Mair 2005: p.245). And accordingly, several references to NGO-operation have also been drawn into literature on social entrepreneurship (e.g. Manmohan 2010; Seelos & Mair 2005a; 2005b). A frequent used example is BRAC; the world’s largest NGO with an extensive network of all-female health workers in Bangladesh to sell eyeglasses utilizing their Business-in-a-Bag concept. BRAC’s deep local infrastructure helps reach the rural poor in Bangladesh, while the Business in a Bag provides additional income to BRAC’s community health workers. Throughout the rest of this study this third and final category is referred to as ‘trading charities’.

2.2.3 FEATURES OF INTERNATIONAL SOCIAL ENTREPRENEURSHIP

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BORN-GLOBAL INTERNATIONALIZATION

First, it is quite unique for these, often small- or medium-sized ventures (SMEs), to be able to span their operations over these great distances. Due to the international nature of the social mission, ISE activity is identified as international from inception, opposing the traditional Johanson & Vahlne (1977) model of incremental-internationalization. Developments in transportation and communication technologies, and the rising number of people with international experience, the traditional model based on a series of sequential stages, is no longer a prerequisite for business to operate on an international level. A company does not have to build a stable domestic position before starting international activities but can be international from the start; or ‘born-global’ (McKinsey & Co., 1993; Oviatt &McDougall, 1994; Rasmussen & Madsen, 2002). Consequently, more and more start-ups are global from the start (Isenberg, 2008). Operating as a born-global applies particularly well to social enterprises that engage social inequalities on an international level. This is in line with Isenberg (2008, p.110) who observes “social entrepreneurs to be global from birth”. The assumption is that for ISE, this is due to the international nature of the social mission. However, a foreign presence of the firm is not necessarily implied rather it would constitute an international connection.

COUNTRY ORIENTATION

A second observation builds upon the first, as it has become clear that this international connection of ISV’s also appears to feature a specific direction. While all ISV’s have some relation to a foreign country, the focus of this connection can be either predominantly directed at the home-, or the host-country. This is in accordance with Perlmutters (1969) EPG-model, arguing international businesses to be either 1.ethnocentric (home country-oriented), 2.polycentric (host country-oriented) or 3.geocentric (world-oriented). To clarify this notion; fair-trade initiatives tend to focus its retail activity primarily on the home-country market, while social businesses seem especially adept to create a market abroad. A geocentric-focus would correspond best to environmental-driven purposes, which are predominantly found at CSR-related consultancies. However, while this does constitute an international social purpose, CSR consultancies do not adhere to the criteria of transferring products or services abroad, for this reason they are excluded from this study.

Figure 2.3: UPSTREAM transformation vs. DOWNSTREAM transformation

The argument here is that - opposing local forms of social entrepreneurship - international social ventures exhibit a more evident distinction between 1.where the commercial market activity, and 2.where the social beneficiaries are located. This is because the social beneficiary market is separated by distance, while the social benefit always ends up in the foreign market, the commercial activity can take place in the home-market, the host-market, or even in between markets. Also in the context of international social entrepreneurship, the supply chain of ISV’s is unique in that it operates according to what is generally referred to as; the double

bottom line, giving rise to some unconventional supply chain-mechanics. In general the concept of the social

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charities raising donations). Thereby the community in the foreign country either take on the role of producer or recipient of the product/service. Using communities in foreign countries as producers is in line with findings by Manmohan (2011) who emphasizes the potential of Poor as Producers (PaP). This concept is similar to examples of social enterprises on a local scale that employ i.e. disabled, homeless, or troubled youth as a way of social inclusion. Jamie Oliver’s restaurant Fifteen, is a well-known example of such a model, providing troubled youth in England with career training to become chefs while at the same time running a restaurant. However, in contrast to international social enterprises, the market activity and social benefit of localized social enterprises is more reciprocal in the community and the beneficiaries of the social benefit generally occupy the same region as the product markets. Madill, Brouard & Hebb (2011) refer to this distinction as 1.upstream transformative; using the community as a producer, or 2.downstream transformative; where the disadvantaged community is the client/consumer of the benefit. For international social ventures the social benefit always goes to the foreign – or host – market, the product market, can be based in the host, or home-market.

PROFIT MOTIVE

A final observation learns that some forms of ISE activity clearly have a strong relation to not-for-profit organisations, while others tend toward for-profit business practice. This is understandable as ISE business activity is fed from both sides of the business spectrum. And this coincides with notions by Seelos & Mair (2005: p.245) “The interfaces between social enterprise, CSR efforts, and public institutions offer great potential for discovering new forms of collaborative value creation in support of sustainable development”. Consequently, this draws support to perceive international social ventures occupying the space in between not-for-profit (charitable) organisations and for-profit (traditional business). This corresponds best with Alters’ (2006) conception of a hybrid spectrum; a range of diverse initiatives positioned in between for-profit and not-for-profit (see figure 2.2 on page 10). Therefore the assumption is that ISE activity shares a strong resemblance to this North-American held definition of social entrepreneurship, where SE is perceived to operate alongside a spectrum of initiatives ranging in between not-for-profit to for-profit businesses (Alter, 2006; Battle Anderson, 2006; Dees, 1998). We hereby divert from the European held interpretation of social enterprise, where SE is strongly associated as a part of the third sector. Adding to this argument is that the European perception of third sector is generally dictated by high government involvement, whereas international social ventures are perceived to have a high degree of autonomy, and thus a relatively low level of government involvement. This is understandable in the sense that international business generally falls outside of national policy jurisdiction.

Several implications follow from this last feature as it is of direct influence on the trade-off between social and economic mission-motive. Considering the pragmatic issue of balancing the double- or triple-bottom line paradigm (most often financial and social returns, sometimes environmental returns) is frequently discussed in the literature to distinguish social enterprises (e.g.: Madill et al., 2011; Neck et al., 2009). Balancing social (and/or sometimes environmental) objectives and involvement of trading activity (Thompson & Doherty, 2006) is often considered as the crux of social enterprise operation. The implication of our categories displaying differences according to this trade-off is considered as influential across the key characteristics of social entrepreneurship, and is therefore further examined in the following section.

2.2.3 ISE OPERATION AND THE KEY DIMENSIONS OF SOCIAL ENTRREPRENEURSHIP

Nichols and Cho (2006) argue social entrepreneurship is mapped across three key dimensions: sociality, innovation, and market orientation. “Particular social entrepreneurship ventures will include these elements to

differing degrees, but they are useful markers for mapping out the structure of a field” (Nicholls, 2006b: p.115).

A recent paper by Madill et al. (2011) interpret these dimensions as; 1) Social transformation, 2) Financial

self-sufficiency, and 3) Innovation. In their study, a random sample of Canadian social enterprises is screened for

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constructs of SE, and these characteristics additionally provide useful guidelines to distinguish different forms of ISE activity, it is imperative to our research to explore how these characteristics relate to ISE.

SOCIAL TRANSFORMATION

Social transformation refers to the impact of the social change desired or achieved by a venture. Considering social enterprises are established to address social needs and alleviate social problems, virtually all social enterprises seek to attain social change or social transformation (Austin et al., 2006; Madill, Brouard & Hebb, 2010; Babos et al., 2007; Dees, 1998; Dees & Anderson, 2003; Haugh, 2007; Thompson & Doherty, 2006; Sullivan-Mort et al., 2003). As noted before social entrepreneurship thus emphasizes the primacy of the social mission (Nicholls, 2006; Dees, 1998). This social mission purpose is shared by not-for-profits, as they operate under a social mission mandate that defines the organisation’s central purpose, which is philanthropic in nature (Easterly & Miesing, 2009). Accordingly, for-profit international businesses are frequently acclaimed of instigating a degree of social transformation however the term used is ‘sustainable development’ (Brundtland, 1987). The commitment to this social transformation however, relies on fundamental different underpinnings. Where social entrepreneurship is distinguished from other forms of entrepreneurship in that it gives higher priority to social value creation (Mair & Marti, 2004; Dart, 2004; Leadbeater, 2007), social transformation instigated by MNCs, is often considered as an “add-on” (Porter, 2011) to core business activities. In line with this view Neck et al. (2009) have developed a model that makes a distinction perceiving the nature of social transformation to be either ‘social purpose’ or ‘social consequence’ (Neck, Brush, & Allen, 2009). This also corresponds with notions by Massetti (2008) who argues SE social activity to be either market-driven or

social-driven (Massetti 2008).An interpretation of these nuances is provided in the following figure.

FINANCIAL SELF-SUFFICIENCY

Financial self-sufficiency refers to the ability of a social enterprise to gain financial autonomy through generating profits from income generating activities. Many writers argue financial self-sufficiency to be a quintessential aspect of social entrepreneurship (Boschee, 2001; Nicholls, 2006a). “The question of how to

fund these new social ventures is at the heart of their diversity” (Nicholls, 2006a: p.xii). International businesses

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INNOVATION

In many definitions of social enterprises and the related concept of social entrepreneurship, the innovative nature of SE is backed by many authors (Austin et al., 2006; Dees, 1998, 2001; Dees & Anderson, 2003; Chell, 2010; Lyon and Chew, 2012; Weerawardena, 2001). Here innovation is often connected to the social benefit initiated by the enterprise. Mair & Marti (2006) see social enterprises as using innovative behaviour to achieve social objectives, and additionally, Chell et al. (2010) argue it is necessary for social enterprises to foster innovation. In similar fashion, for-profit international business theory accounts for numerous adaptations of ‘innovation’ (e.g., Chandra et al., 2008; Wang et al., 2009). Here, again a divide is encountered according to the profit-motive of an organisation. Weewardena and Sullivan-Mort (2001) point out a distinct nuance between innovation in a for-profit-, and non-profit context. They note that the not-for-profit literature is dominated by discussion of non-technological innovation. “Whilst past research on business innovation has been biased

toward technological innovation not-for-profit innovation research is dominated by non-technological innovation. Technological innovations relates to product/services and processes. Non-technological innovations relate to managerial systems (e.g.., new employee rewards schemes and information systems) and marketing methods (new methods to reach the target market)” (Weerawardena & Sullivan-Mort, 2001: p.62). This notion

appears to coincide remarkably well, with the focus of IB-literature on innovation in the context of developing markets, which predominantly emphasizes the need to capitalize on product innovations to suit the needs of markets at the bottom of the pyramid (Chandra et al., 2008; Wang et al., 2009). Opting for example that people in developing markets do not wait to buy a big-screen TVs, rather they want to have productive tools that will enable them to improve the quality of their life. Consequently the difference of innovation does not revolve around the degree of innovation, but rather, the nature of the innovative behaviour is different. In light of this, the 4 P’s of innovation are helpful to make this distinction more comprehensible. For-profit IB literature often emphasizes manufacturing technological product innovations to engage developing markets. Whereas not-for-profit IB literature emphasizes organizational; more process oriented innovation.

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CHAPTER 3: RESEARCH PROBLEM AND METHODOLOGY

The common usage of international social ventures throughout social entrepreneurship literature and international business literature on sustainable development signals a clear overlap of international social entrepreneurial activity. The preceding literature review indicates that ISE stems from different developments, giving rise to various forms of international social entrepreneurship. Together, they comprise a hybrid spectrum of ISE initiatives that can be positioned in between for-profit and no-for-profit activity. In general, these initiatives can be regarded as international from inception, and able to have a specific country-orientation. More specifically, ISE activity can be distinguished according to differences in the key SE characteristics of social transformation, market orientation and innovation. This ISE conception does however still raise several questions, and the assumptions made are in need of empirical support to support our claims. 3.1 RESEARCH PROBLEM

The fact that the various ISE initiatives have not been drawn together before suggests an apparent deficient, as several developments set the stage for international social entrepreneurship as a potentially flourishing sector of business and theory. But despite this propensity for ISE activity, the initial conception still relies on a set of broad assumptions derived solely from studying literary sources. Moreover the early segmentation constitutes a wide categorization with no indication of the weight and scope of the different initiatives. As the objective of this study is to develop a comprehensive understanding of the scope and features of international social entrepreneurship, it is imperative to investigate how the ISV landscape is structured more specifically, and accordingly; reinforce the key characteristics as fundamental constructs to distinguish differences among ISE activities. Therefore the main research-question is directed toward understanding what the different organisational models of international social entrepreneurship are, and how they address the dimensions of a. social transformation, b. market-orientation and c. innovation. As such, the research is twofold and will on the one hand be of inductive nature, by exploring the specific landscape of international social entrepreneurship, and on the other hand of deductive nature, by testing assumptions to distinguish differences among the general ISE categories.

3.1.1 INDUCTIVE RESEARCH

Given the relatively new and unexplored nature of the phenomenon – the features of international social ventures – this study adopts a research strategy that is in part exploratory. Following our findings from the literature review, several “archetype”-categories of ISE activities have already been identified. Considering that these categories largely rely on a collection of individual case studies and still constitute a broad generalization, it is a valuable exercise to further explore the nature of these activities and get a deeper understanding of the specific business activity of each category. Therefore the first research objective is to explore a suitable classification ISE business operation.

This explorative research for specific business activity draws on Grounded Theory (Strauss & Corbin 1998) in its approach. Grounded theory suggests that the phenomenon – in this case international social ventures – can be examined by investigation of several dimensions of the phenomenon. Such investigation when carried out through a set of systematic steps allows the researcher to gain deeper insight and understanding of the phenomenon. Grounded theory method is a research method, which operates almost in a reverse fashion from traditional research and at first sight may appear to be in contradiction to the scientific method. Rather than beginning with a hypothesis, the first step is data collection. From the data collected, key concepts are grouped into similar categories. These categories are the basis for the creation of a theory.

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approach by importing products from the foreign country (ethical trade), 2.a market-based approach by exporting products or services to engage the foreign market (social business) or 3.social-based approach involving trade activities of products and services, but not directed at income maximization (trading charity).

In particular this study centres in on ISE operation from developed countries in support of developing countries. With a well-developed social enterprise sector; the United Kingdom has proven to be an adequate sector to test SE business practice. Here SE is predominantly associated with the ‘third sector’ (Ridley-duff, 2011) and it will be of particular interest to investigate evidence of international social entrepreneurship in this setting. As ISE is believed not to share this relation to the third sector - but rather to share a connection with an interpretation of social entrepreneurship characterized by low-government involvement - it would provide an interesting contrast to this third sector context.

3.1.2 DEDUCTIVE RESEARCH HYPOTHESES

The second objective of this research is to reinforce the assumption of different categories of ISE activity. Considering the separate categories are assumed to be subject to converging developments, and subsequently able to overlap, it is essential to examine the distinctiveness of the proposed categorization. Findings from the literature review suggest that this can be achieved through application of the key characteristics of SE as distinguishing features. As such, a combination of the initial categorization and the assumptions on the key characteristics is used to distinguish activities. Straightaway this leads to a first hypothesis, as in general the level of social transformation and financial self-sufficiency is subject to change, therefore the first assumption is that these categories will differ significantly in relation to the constructs of social entrepreneurship.

H1a: A significant difference in the level of social transformation and financial self-sufficiency is

expected for the categories of 1.ethical trade, 2.social businesses and 3.trading charities

Subsequently, the assumption is that the categorization can be arranged from predominantly more for-profit, to predominantly not-for-profit. This would then be reflected in the patterns of the characteristics in relation to the three distinct categories of ISE. As the ethical trade-segment is described to predominantly focus on the home-market - and having identified ISE largely as SME’s – the assumption is that ethical traders often only have the scale and the scope to cater the home-market purely as an importer. This is in contrast to social business operation that has a focus directed toward the foreign market. As there is a general stronger market opportunity in the western market, the assumption is made that ethical traders have a stronger market-orientation than social businesses. Consequently, trading charities are assumed to generally have a weak market-orientation and therefore have a strong resemblance to not-for-profit organisations. So, ethical trade is considered to primarily feature for-profit characteristics on account of their home-market-orientation, social businesses are intermediate as they interact with foreign markets, but uphold market driven activity, and trading charities are predominantly not-for-profit as there profit-motive is secondary. The hypothesis that follows from these assumptions is the following:

H2a: The degree of social transformation and financial self-sufficiency will be positively associated

with the level of not-for profit activities of international social enterprises.

The omission of the dimension of innovation in the preceding hypotheses is justified by the fact that the literature review pointed out that there is no expected increase of ‘general innovation’ corresponding to either for-profit or not-for-profit activities. In other words, the level of innovation should be the same across the different categories. As such, to substantiate this notion, the first assumption is substituted by the following:

H1b: No significant difference in the level of innovation is expected for the categories of 1.ethical trade,

2. social business, and 3.Trading charities.

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H2b: The changes in the level of technological innovation will be positively associated to increasing

for-profit activities of international social enterprises.

H2c: The changes in the level of non-technological innovation will be positively associated to

increasing not-for-profit activities of international social enterprises.

In order to adequately investigate these differences among categories, the constructs need to be reconfigured into measurable indicators for each dimension. This presents somewhat of a challenge as our constructs are of intangible nature. This problem is overcome by using proxies (or dummy variables) to provide a measure for each dimension.

3.2 METHODOLOGY

To assess a company’s level of commitment to its social transformation we observe if the venture has an active social development programme abroad. Using website information, the assumption is that companies that employ a social programme in a foreign country are also prone to illustrate this social benefit on their company website. Assumptions on the degree of financial-self-sufficiency are also measured using company website information; gathering from the website if there is any indication of charitable incomes. Often companies will use their website as a donations generating platform when they rely on it as a form of income. The assumption is that more donation seeking activity is related to less financial-self sufficiency. Also for the dimension of innovation website information is used, as the company websites are screened for the word ‘innovation’ or ‘innovative’, as a general indicator of innovation. Subsequently, a measure is needed to assess the nature of the innovative behaviour. As such, based on the website information, the researcher will assess whether the innovative features of the organisations’ product or service resides in technological aspects (product and process), or in non-technological aspects (positioning and paradigm) of the product/service. Here technological innovation is understood as a new product, new service or new process of manufacturing. And non-technological innovation as new managerial systems (e.g., new employee rewards schemes and information systems) or new positioning and marketing methods. Accordingly, the researcher observed if the innovative aspects of the company revolved around product aspects, process aspects, positioning aspects or paradigm aspects. These are understood as the following:

Product Innovation: Changes in the things (products/services) which an organization offers Process Innovation: Changes in the way in which they are created and delivered.

Position Innovation: Changes in the context in which the products/services are introduced.

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