Blog: SMEs and social entrepreneurship
Learning from one another: Social entrepreneurship and Small Business Social Responsibility
Without any prior knowledge, if you look at a small organization, which practices business and is socially aware, would any of us be able to tell whether that organization is a small business or a social enterprise. We know from prior research that there are many similar features which are not determined by the apparently obvious distinction of legal structure as a private business or a community interest company/B-Corp. This won’t apply to every small business, or every social enterprise, but common features include formal systems and structures, a reliance on personal relationships and the inclusion of social and economic issues in decision-making.
As part of the ESRC seminar series on Small Business Social Responsibility in developing countries, we looked to deepen understanding of how and whether these two spheres can learn from each other. One key overarching insight emerged: Despite clear commonality in the research on small businesses and social enterprises, the issues and topics covered in social entrepreneurship research diverge from those found in the small business literature. We take this divergence as a starting point to raise the question: what can these distinct stands of research learn from each other?
Context versus organizational focus
The most striking difference that emerged throughout the workshop was the difference of foci. Whereas most of the small business literature emphasizes internal processes and the influence of the owner-manager, the research discussed on social entrepreneurship had a much stronger outward orientation that underscored the importance of the cultural, economic, and social capital environment of an organization.
Anica Zeyen (Royal Holloway University of London) and Oana Branzei (Ivey Business School) pointed to the essential role close and one-off third parties play in shaping the impact created by social ventures. This idea emerged again in the Nepalese context presented by Ingeborg Patsch (Social Entrepreneur, Nepal). Moreover, the presentation by Amy Parker (Chief Executive, of AfriKids UK) highlighted that similar to the Nepalese context, governmental processes, societal and family perception of the value of certain endeavors as well as actual geographic space greatly influence the prevalence of small social enterprises.
So where can we go from here? Analogous to small social enterprises, small business are usually also much more dependent on specific context conditions than some of their larger counterparts. Indeed, the small business literature refers to this phenomenon as regional embeddedness.
Despite this, the small business literature places more emphasis on the role of the owner-manager than the geo-political context. Thus, small business research could benefit from taking a closer look at social entrepreneurship research and their insights on how context and space influence service and product delivery. In addition, small business research could combine this with the extant knowledge on regional embeddedness to gain an even deeper understanding of the context of the organization. Similarly, social entrepreneurship scholars could integrate the debate on embeddedness more closely into their analyses of context.
In addition, some of the research on social entrepreneurship could benefit from the management insights generated by small business scholars, in particular on how to manage and maintain an organization. This is of particular importance as some social enterprises struggle with poor working conditions, chronic underfunding, or other internal management deficiencies addressed by the small business literature. A nice example of such an approach was the presentation by David Littlewood (Reading University) and Diane Holt (Essex University) who looked at how small social enterprises could build up resilience to deal with their particular context.
Hybridity versus family firm – or things we have in common
In addition to some of the diverging foci that emerged throughout the workshop, some converging areas of interests arose as well. Both the small business literature and to a degree the emerging literature on small business social responsibility as well as social entrepreneurship research underline the importance of networks to overcome entry barriers to markets or to create more impact. This was highlighted by the presentation by Iain Davies (University of Bath) who underscored the significance of local networks to fight poverty more effectively. Thus, we can strengthen our understanding of local networks or clusters by integrating the insights generated by both social entrepreneurship and small business scholars.
In some arenas, both strands of research tackle similar or at least related phenomena, yet refer to them differently. As Fergus Lyon and Abdullah Al Furuq (Middlesex University Business School) underlined, hybridity – i.e. the dual focus on a social / environmental and financial mission – and the consequent struggle of social enterprises to deal with potential conflict, is a major issue for social entrepreneurship practice and research. While the specific nature of hybridity is somewhat idiosyncratic to social ventures, similar issues are nonetheless discussed in the area of small businesses.
Many small businesses are family-owned and run. As such, they also face a dual mission, i.e. bringing value to the family and sustaining a profitable company. Similar to hybridity in social ventures, this common dual nature of small businesses can create conflict and trade-offs in decision processes. Here again, greater understanding of such conflicts and how to avoid or overcome them might be gained by combining the insights of both fields. The concept of hybridity could also serve to generate a better understanding of small business social responsibility, as this is often driven by the values of the owner-manager and who might face similar issues to social enterprises.
In sum, we believe that by integrating the research on small businesses and especially their social responsibility with the research on social entrepreneurship will lead to a more comprehensive understanding of the ways small organizations – of either hue – deal with and generate a positive impact on society.