1

Corso di Laurea in

Economia, Commercio Internazionale e Mercati Finanziari

Curriculum Economics and Management of Innovation

ORGANIZATIONAL BEHAVIOR AND DESIGN

2

3

“Social Entrepreneurship:

a new prospective in business value creation”

“we can make market forces work better for the

poor if we develop a more creative capitalism – if we can stretch the reach of market forces so that more people can make a profit, or at least a

living, serving people who are suffering”

Bill Gates

4

Sommario INTRODUCTION ...................................................................................................................................... 6

Global Scenario ...................................................................................................................................... 6

1 COMPARISON BETWEEN TRADITIONAL AND SOCIAL ENTREPRENEURS ............................................ 7

1.1 The traditional vision of entrepreneurs and entrepreneurship ........................................................ 7

1.2 Social Entrepreneurship ................................................................................................................. 11

1.3 A possible Social Entrepreneur motto: "value is true only if shared" ............................................. 12

1.4 Some examples of Social Entrepreneurship ................................................................................... 13

1.5 Economic Karma, opportunities and the Cost of being Social ........................................................ 18

2 ENVIRONMENT ANALYSIS AND INTERACTION................................................................................... 19

2.1 Analyzing the Environment ............................................................................................................ 19

2.2 Bricolage; networks for value creation ........................................................................................... 21

2.2.1 Making do ............................................................................................................................ 22

2.2.2 The refusal to enact or be constrained by limitations ......................................................... 23

2.2.3 Improvisation ...................................................................................................................... 23

2.3 Social Entrepreneurship is all about participation .......................................................................... 24

2.3.1 Persuasion ................................................................................................................................... 24

3 HOW DOES SOCIAL ENTERPRISE CREATE VALUE? ............................................................................. 25

3.2.1 Revenue generation strategy through trading ............................................................................ 26

3.2.2 They aim to achieve social and environmental goals .................................................................. 26

3.2.3 They seek to generate additional benefits such as increased social capital and enhancement of

community cohesion. ........................................................................................................................... 26

3.3 Strategy in developing networks in order to raise funds ................................................................ 27

3.3.1 Networking and social resourcing (such as crowd funding and fundraising), .......................... 27

3.3.2 Financial bootstrapping: .......................................................................................................... 27

3.3.3 Strategy of effectuation........................................................................................................... 27

3.4 Maslow's model for value creation ............................................................................................ 29

4 THE ROLE OF IINOVATION ................................................................................................................. 31

4.1 Anthropological point of view on economic innovation ................................................................. 32

4.3 Innovation in management ............................................................................................................ 33

4.4 Bloom's Taxonomy; how to learn to innovate ................................................................................ 36

5. RISKS INVOLVED IN INNOVATION..................................................................................................... 37

5.1 SWOT analysis' for evaluation risk.................................................................................................. 38

5

6 CASES OF INTEREST ........................................................................................................................... 39

6.1 In Italy............................................................................................................................................. 40

6.2 Social enterprises: Fit for Women .................................................................................................. 42

7 CONCLUSIONS ................................................................................................................................... 43

BIBLIOGRAPHY ..................................................................................................................................... 45

6

INTRODUCTION

Over the last few years, social entrepreneurship has emerged in both the public and

the private non-profit sectors due to an increase in demand for social programs. There

has been an increase in requirement for organizational structures for an improvement

in performance in social programs that has led to an increase in interest in social

entrepreneurship.

Social entrepreneurs are seen as a possible way to increase economic sustainability and

effectiveness in non-profit organizations, especially in view of diminishing public

funding due to the financial crisis. Furthermore, entrepreneurship seems to represent

a solution in an environment characterized by increased competition for scarce

resources. The number non-profit entities have in fact increased over the last few years.

Global Scenario

Globally, we have witnessed a concentration of wealth in the private sector and a

decrease in public funding. As a matter of fact, neoliberal economic choices have led

to an increase in private company market share with a corresponding reduction in

public companies. The public sector is facing more and more difficulties in providing

public funding for the no-profit and cultural entities.

This change in wealth distribution between public and private has encouraged the rise

of public-private partnerships, a general call for private company social responsibility

and a proactive response to social problems.

In this scenario, social entrepreneurship is increasing in importance due to its

innovative way of solving social needs with an emphasis on innovation in and for

solving social problems; social enterprise reduces the traditional boundaries between

for-profit and non-profit activities. This new structure is a hybrid form that enables

those two sectors to work in harmony, therefore increasing effectiveness and opening

a new perspective in problem solving.

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But before we start to define social capitalism and how it works by explaining the

various models, we need to consider some definitions.

1 COMPARISON BETWEEN TRADITIONAL AND SOCIAL

ENTREPRENEURS

1.1 The traditional vision of entrepreneurs and entrepreneurship

As the Stanford Social Innovation Review (SSIR) states, when defining the term

“social entrepreneurship” we must first understand the meaning of

“entrepreneurship.” The word “social” simply specifies a characteristic of the term

entrepreneurship. If entrepreneurship doesn’t have a clear meaning, then modifying

it with “social” will not accomplish much, either.1

(SSIR) continues by stating that the word “entrepreneurship” connotes a special,

innate ability to sense and act on opportunity, combining out-of-the-box thinking with

a unique brand of determination to create or bring about something new to the world.

On the negative side, entrepreneurship is an ex post term, because entrepreneurial

activities require a passage of time before their true impact is evident.2

Oxford Advanced Learner’s Dictionary defines an entrepreneur as “a person who

makes money by starting or running a business, especially one involving financial

risk”

The Online Business Dictionary defines entrepreneurship as: "The capacity and

willingness to develop, organize and manage a business venture along with any of its

risks in order to make a profit. The most obvious example of entrepreneurship is the

starting of new businesses. In economics, entrepreneurship combined with land,

labor, natural resources and capital can produce profit. Entrepreneurial spirit is

characterized by innovation and risk-taking, and is an essential part of a nation's

1 https://ssir.org/articles/entry/social_entrepreneurship_the_case_for_definition 2 https://ssir.org/articles/entry/social_entrepreneurship_the_case_for_definition

8

ability to succeed in an ever-changing and increasingly competitive global

marketplace".3

What we can state from all those definitions of entrepreneur and entrepreneurship is,

that the entrepreneur has to possess the ability to forecast future risks and the

willingness to invest his resources in order to earn more in the future; taking

advantage of an innovation or through an opportunity in investment, accepting the

risk of losing money if he relies on his misrepresentation of the future.

But what is the difference between a traditional entrepreneur and a social one?

We will use criteria stated by J. Defourny and M. Nyssen in order to generalize the

characteristics of social entrepreneurship.

Most importantly, such indicators never represented the set of conditions that an

organization should meet to qualify as a social enterprise. Rather than constituting

proscriptive criteria, these indicators describe an "ideal-type" in Weber’s terms, i.e. an

abstract construction, that enables researchers to position themselves within the

"galaxy" of social enterprises.

Four criteria reflect the economic and entrepreneurial dimensions of social enterprises:

A - a continuous activity producing goods and/or selling services

B - a high degree of autonomy

C - a significant level of economic risk

D - a minimum amount of paid work

Five other indicators relate to the social dimensions of such enterprises:

E an explicit aim to benefit the community

F an initiative launched by a group of citizens

G a decision-making power not based on capital ownership

3 Read more: http://www.businessdictionary.com/definition/entrepreneurship.html

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H a participatory nature, which involves various parties affected by the

activity

I limited profit distribution4

(J. Defourny and M. Nyssen 2008, p. 11)

The first four criteria can be found in almost every enterprise, social and non, because

they are components of a business model:

A key activities

B key resources

C cost structure (the economic risk has to be considered in every activity

involving resources)

D revenue stream (used to compute income and expenses)

https://diytoolkit.org/tools/business-model-canvas/

4 SOCIAL ENTREPRENEUR, SOCIAL ENTREPRENEURSHIP, SOCIAL ENTERPRISE Three terms in quest of a theoretical framework Andrea Bassi

10

“A business model describes the rationale of how an organization creates, delivers,

and captures value”.

(Alexander Osterwalder and Yves Pigneur)5

https://www.gluu.org/blog/gluus-business-model/

The other five indicators describe the social dimension of the business and then

determine the actions of the social enterprise not from an economic perspective,

but from an ethical one.

5 Laure j. Mullins management & innovational behaviour ninth edition.

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1.2 Social Entrepreneurship

Citing the Economist: "Social entrepreneurship is a hot topic. In business schools,

students seem increasingly keen to find ways to use the skills they are learning to

improve the world as well as their bank balances".6

The word “social” in the term Social entrepreneurship is crucial in explaining how this

term is related to the manufacturing of products and services, otherwise we risk giving

a superficial definition of this term, creating the idea of a field which is closer in nature

to the non-profit sector than to a new business perspective.

(SSIR) wonders: "What distinguishes social entrepreneurship from its for-profit

cousin?".

The difference can be ascribed simply to motivation – with entrepreneurs spurred on

by money and social entrepreneurs driven by altruism. The truth is that (...) both the

entrepreneur and the social entrepreneur are strongly motivated by the opportunity

they identify, pursuing that vision relentlessly, and deriving considerable psychic

reward from the process of realizing their ideas.

The Review continues: "We believe that the critical distinction between

entrepreneurship and social entrepreneurship lies in the value proposition itself. For

the entrepreneur, the value proposition anticipates and is organized to serve markets

that can comfortably afford the new product or service, and is thus designed to create

financial profit. From the outset, the expectation is that the entrepreneur and his or her

investors will derive some personal financial gain. Profit is sine qua non, essential to

any venture’s sustainability and the means to its ultimate end in the form of large-scale

market adoption and ultimately a new equilibrium.

6 http://www.economist.com/blogs/schumpeter/2013/12/gregory-dees

12

The social entrepreneur, however, neither anticipates nor organizes to create

substantial financial profit for his or her investors – philanthropic and government

organizations for the most part – or for himself or herself. Instead, the social

entrepreneur aims for value in the form of large-scale, transformational benefit that

accrues either to a significant segment of society or to society at large. Unlike the

entrepreneurial value proposition that assumes a market that can pay for the

innovation, and may even provide substantial upside for investors, the social

entrepreneur’s value proposition targets an underserved, neglected, or highly

disadvantaged population that lacks the financial means or political clout to achieve

the transformative benefit on its own. This does not mean that social entrepreneurs as

a hard-and-fast rule shun profit making value propositions. Ventures created by social

entrepreneurs can certainly generate income, and they can be organized as either not-

for- profits or for-profits"7

In summary, this concept illustrates how the difference between two kinds of

entrepreneurs is based on different attitudes towards the creation and definition of

"value".

1.3 A possible Social Entrepreneur motto: "value is true only if shared"

Value is perceived by traditional business managers in terms of tangible benefits,

which will increase the wealth of the company and also the directors themselves, while

a social entrepreneur has a broader perspective of value creation which incorporates

all aspects of production in the attempt to achieve a distribution of wealth based on

the concept of fairness.

The core characteristic that distinguishes a mission-oriented social entrepreneurship

from a general one is the importance of social benefit.

The Professor Dees defined the entrepreneurial aspect of social entrepreneurship:

7 https://ssir.org/articles/entry/social_entrepreneurship_the_case_for_definition

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Recognition and “relentless” pursuit of new opportunities to further the

mission of creating social value

Continuous engagement in innovation and modification

Bold action undertaken without accepting the limitations of existing resources.8

This propensity to have coherent action lead the entrepreneur to provide a balanced

benefit to all stakeholders, while still maintaining the moral integrity of his mission.

A special value added by social entrepreneurs is their way of recognizing and taking

advantage of opportunities to develop projects using resources that are not used

properly or are not considered such at all.

1.4 Some examples of Social Entrepreneurship

A practical example is provided by the Swiss company Freitag who has developed a

production method of Upcycling (Upcycling, also known as creative reuse, is the

process of transforming by-products, waste materials, apparently useless, or

unwanted products into new materials or products of better quality or for better

environmental value 9.) using second hand truck tarpaulins and seat belts to produce,

for instance hand bags. The raw materials were considered waste with high

consequent recycling costs.

8 SOCIAL ENTREPRENEURSHIP: A CRITICAL REVIEW OF THE CONCEPT1 Ana María Peredo Faculty of Business

University of Victoria 3800 Finnerty Drive Victoria, 9 https://en.wikipedia.org/wiki/Upcycling

14

https://www.freitag.ch/it

In 1993, graphic designers Markus and Daniel Freitag were looking for a functional,

water-repellent and robust bag to hold their creative work and they decide to use old

tarpaulins. The use of these resources allowed them to cut costs and create a business

model based on recycled materials.

http://cognitiveseo.com/blog/9352/upcycling-increase-content-marketing-roi/

This example relates to raw material but we can also take into consideration the

labour market, which is highly competitive and where are highly important skills:

people with some form of disability or for others reasons are at a disadvantage.

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Here we can mention the community of San Patrignano which is the biggest drug

rehabilitation community in Europe and the one with the highest success. They have

2,000 inmates and promote rehabilitation by giving them the chance to work and

thus restoring their dignity.

http://expoliberia.org/comunita-san-patrignano/

This institution also offers them the opportunity to acquire new skills in different

fields, while providing them with food and a place to sleep in exchange for work. This

gives the patients the chance to rebuild their independence after losing it through the

misuse of drugs.

Another example that I would like to mention is from the financial market; it is the

enterprise of Akhtar Hameed Khan, Nobel Peace Prize winner and the inventor of

Microcredit.

Microcredit has created a wide social impact allowing many families in poorer

countries to rise from poverty (first implementation in Bangladesh): those families

could not access traditional banks for loans, because they lacked the normal

requisites to obtain them.

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The Grameen Bank provides small loans principally to women who have started

small businesses, in a way that has made the repayment of debt much easier, in fact

90% of debts have been repaid.

Microcredit has been tested with success and nowadays it is a project that is

implemented in many developing countries, under the responsibility of various

credit institutions.

The usage of this kind of ethical bank produces gains not only for the social impact,

by improving the living standards of poorer people, but it has also brought benefits

in legal terms, because this market was partly in the hands of criminals (usury).

https://www.cgap.org/blog/power-successful-market-led-savings-mobilization

The last but not least important example is of a traditional company which decided

to act socially, implementing fair trade with coffee producers.

Illy, (Italian coffee producer) ones through their fair trade practices with suppliers,

has been able to retain the good ones, innovate production with a vision which better

matches to the suppliers’ production, increases product quality and enhances the

environment.

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http://www.saporifineflavors.com/social.php

Having analyzed this kind of entrepreneurship we can say that it utilizes a different

perspective of reality, which generates projects that are both productive and virtuous.

Finally, social entrepreneurs exhibit in the social area the same skills as commercial

entrepreneurs in terms of risk-tolerance, innovation and “proactiveness”.

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1.5 Economic Karma, opportunities and the Cost of being Social

Research conducted by the Ernesto Illy foundation on value, quality and sustainability

has shown that firms which focus on quality and sustainability create more value than

firms which are only cost-efficient: the value was calculated not just inside the

company itself and this value it is higher and better spread among the stakeholders.

Moreover, this research has shown that a company interested in sustainability has a

longer life than a one that is only cost efficient (71% do not last more than 10 years,

while the sustainable ones have a longer average life). 10

This economic research highlights a sort of “economic karma” and shows that, with

the classical instruments for measuring economic performance, some elements for

evaluating long term company growth are missing.

This limit has also been shown by the whole economy, where even if the GDP is a

measure of growth, it is beginning to show limits in the measurement of the well-

being of a nation; the existence of this limit has been supported by the philosopher

and Nobel Prize in Economics Amartya Sen.

10 https://www.youtube.com/watch?v=Gl204OQtlfg

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2 ENVIRONMENT ANALYSIS AND INTERACTION

2.1 Analyzing the Environment

Clever business people recognize the right moment to put a new idea onto the market

and how to implement it. Often an idea that initially - for various - reasons didn't

succeed, was at a later time repurposed with great success.

http://www.suggest-keywords.com/cGVzdGVsIG1hY3Jv/

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Management strategies also depend on a company's external and internal

environment. A typical way of evaluating the nature of a certain region or sector is the

PESTEL analysis which attempts to assess a context using five dimensions: political,

economic, socio-cultural, environmental and legal.

In particular, social entrepreneurship not only assesses the socio-cultural and

environmental context, but it also tries to improve it by means of a smart and ethical

business strategy.

As we might intuitively understand, ethics is subjective, related to environment and

influenced by the five PESTEL dimensions. A social entrepreneur studies the context

to which he or she belongs and tries to use scarce resources to improve the situation.

Laurie J. Mullins, MANAGEMENT & ORGANISATIONAL BEHAVIOUR. NINTH EDITION.

Social entrepreneurship is important in developed countries, but is of fundamental

importance in order to create virtuous cycles in developing countries.

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If we search for example, we find Sunbula11, a non-profit organization that is working

in order to develop traditional craftsmanship through the fair trade circuit with the

aim of empowering vulnerable groups and provide for economic development in the

West Bank, Palestine.

As a matter of fact, social entrepreneurship is seen as one of the key factors that will

help in reaching the 17 Social Development Goals according to ONU.12

Decision making is seen from an ethical viewpoint, as a balance between means and

ends in commercial practice.

Therefore, the question that arises is: does the end justify the means?

While the pure capitalistic vision, primarily caring about "profit, market share, etc"

would say yes, the new social entrepreneurship model, more conscious about context,

would say "it depends”.

2.2 Bricolage; networks for value creation

In this section we are going to evaluate social entrepreneur practices which are applied

in order to create networks capable of avoiding limitations imposed by scarce

resources.

For this purpose, I refer to research conducted by Maria Laura di Domenico, Paul

Tracey and Helen Haughs, in their text “Social Bricolage: theorizing social value

creation in social enterprise” which provides an analysis summarizing the actions of

social entrepreneurship based on data collected from a sample of social enterprises

from around the world.

Social enterprises develop their activities in different fields (education, arts, fair trade,

cross sector partnerships etc..) but we can find some common features.

11 http://www.sunbula.org/ 12 http://www.un.org/sustainabledevelopment/sustainable-development-goals/

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This interesting method for the acquisition of resources is provided by Levi-Strauss’s

theory of social bricolage (Levi-Strauss 1967)

By “bricolage” we mean the process of integrating diverse knowledge sets that enable

entrepreneurs to deal with problems using a range of individuals to fully leverage their

essential skills.

"Bricolage has been denoted to resourcefulness and adaptability within an existing

context. The “bricoleur” aims to be ready to deploy whatever strategies are required

under various circumstances, such as new organization combination, in response to

unpredicted activity” (Ciborra 1996).

The bricoleur is able to recombine existing resources in order to reconfigure a structure

or process in the company; this ability is essential to be able to face a dynamic situation

that continuously alters the equilibrium. Entrepreneurs use a bricolage of skills and

resources in order to solve existing problems and create new opportunities.

Social bricolage has three main characteristics: making do, refusal to enact (or be

constrained by) limitations and improvisation.

2.2.1 Making do

Making do was first identified by Levi-Strauss (1967) and is a concept that has been

developed to solve problems to create new opportunities, where resources are not seen

anymore as ready input, but are recombined in order to create new applications. Input

determines its capability depending on the combination and application that it

assumes.

It is possible to observe three main approaches: creating something from nothing,

using discarded, disused or unwanted material for a new purpose and using hidden

or unwanted local resources that other organizations fail to recognize, value or use

adequately.

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In the create something from nothing approach there is the creation of a new

product or services not existing on the market; microcredit is a service which

didn’t exist on the market before the Grameen bank.

Another approach is to use discarded, disused or unwanted material for a new

purpose; a good example of this kind of approach is the previously cited bag

manufacturer Freitag

Finally, another method is the use of hidden or unwanted local resources that

other organizations fail to recognize, value or use adequately; an example of

this approach is the Seven Women Project in Nepal.13

This resulting company employs disabled people in its workforce in Nepal, where they

are considered to have been punished by the devil for their previous lives and

therefore are excluded by their society.

By giving them the chance to work, the company has improved their lives and

promotes in general the acceptance for women.

2.2.2 The refusal to enact or be constrained by limitations

This second characteristic of social bricolage was identified by Baker and Nelson (2005)

as a refusal to be limited by political or institutional frameworks that can stop the

development of a project.

The entrepreneur has to consciously and consistently counteract conventional

limitations, because those limits inhibit innovation and development.

2.2.3 Improvisation

Improvisation is associated with adapting standard ways of working and creative

thinking in order to counteract environmental limitation (Miner et al.,2001; Weick,

1993 b). Improvisation is shown through creativity in administration and business

development, which is able to change perspectives by substituting resources that are

not affordable or available.

13 https://www.youtube.com/watch?v=JHKmwsrGMdI

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The creative process, given that it is not quantifiable using the standard norms, cannot

provide us with an a priori definition; conversely we have to go through a trial and

error process.

2.3 Social Entrepreneurship is all about participation

To cut a long story short, to create social value, given a scarcely resourced

environment, it is not enough to work on internal management; we have to implement

a strategy involving external social relationships in order to obtain support from all

stakeholders and possible supporters.

Stakeholder participation is one of the main features of social entrepreneurship.

2.3.1 Persuasion

In order to attract support, social bricolage has a final consideration; the use of

persuasion.

Persuasion is the ability to convince, involve and influence someone, and is performed

through an emotive connection or due to a recognized social position that creates

credibility.

Starr and Macmillan (1990) noted the role of the social asset of friendship, linking trust,

obligation and gratitude in co-opting resources into an entrepreneurial venture.

These emotive connections are extremely important because we are asking for help

from society. In this case people want to be sure that the beneficiary is not trying to

gain personal profit from their generosity.

Trust is one of the main focus points when we are asking for donations. An effective

way to generate a good response is to give donors a reward; for a certain amount of

donation, many non-profit organizations give donors a form of recognition, which

may seem to be a shallow strategy but creates an emotive connection which gives a

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feeling of belonging to the mission. The idea behind this is to create long lasting

relationships and a broader awareness.

Even if the donor is going to contribute only once, this still creates the potential for the

growth of informal networks.

Persuasion can also be seen as the result of negotiation. An equilibrium created

through negotiation is seen as "a continuous permutation of action" from Levi-

Strauss's perspective, because when there is a change in environment, the terms of a

contract also have to be renegotiated.

To summarize, social bricolage, due to its optimization of resources capacity, has the

potential to lower costs by reducing risks related to financial exposure, and an

increased return on assets.

3 HOW DOES SOCIAL ENTERPRISE CREATE VALUE?

http://boldempowerment.org/site/business-network/

The limitation of resources is the one of the central concepts in social entrepreneurship,

so let's look at some ways of collecting resources in a poor environment.

26

3.2.1 Revenue generation strategy through trading

Social enterprise has learned how to develop strategies in order to sustain its projects.

These strategies were implemented due to a lack of resources provided by traditional

resources (charity donations etc..).

Using trade as a resource doesn't just provide the chance to create sustainability in

social projects, but also creates the opportunity to export the business model to other

social sectors.

The strength of this kind of model of social action is repeatability; the creation of

resources from trading is an activity that is developed through a company's own

internal capabilities, while traditional funding comes from the outside and is difficult

to replicate and predict.

3.2.2 They aim to achieve social and environmental goals

Pearce (2003, sec 2004) refers to their ethos of financing social purpose through

commercial activity.

What social entrepreneurship drives is a response to a community need that is not

satisfied by the market or by the government.

3.2.3 They seek to generate additional benefits such as increased

social capital and enhancement of community cohesion.

Networks which social enterprises develop are an intangible resource which are able

to sustain companies and help the development of projects even if they are not easily

measurable.

27

3.3 Strategy in developing networks in order to raise funds

The creation of a network is useful for social and non-social enterprises, not only to

raise funds in order to start a business but also to foster projects that find difficulty

because of scarce resources.

Good businessmen are able to apply strategy, in order to receive support from as

many funders as possible, this being possible through ability in planning,

communication and persuasion (2.3.1)

3.3.1 Networking and social resourcing (such as crowd funding and

fundraising),

Personal networking is one of the essential resources of the entrepreneur, which links

people or entities permitting the company to acquire support skills and experience

which in turn are an essential resource for market penetration.

3.3.2 Financial bootstrapping:

"Bootstrapping describes a situation in which an entrepreneur starts a company with

little capital, relying on money other than outside investments. An individual is said

to be bootstrapping when he attempts to found and build a company from personal

finances or from the operating revenues of the new company. Bootstrapping also

describes a procedure used to calculate the zero-coupon yield curve from market

figures."14

3.3.3 Strategy of effectuation. There are five core principles that define Effectual Logic. These are:

14 http://www.investopedia.com/terms/b/bootstrapping.asp#ixzz4Lw0GRokB

28

1) The Bird in Hand Principle.

Entrepreneurs start with what they have. They will look at who they are, what they

know and who they know. Their education, tastes and experience are examples of

factors which are important at this stage. Besides these examples, this is also the

stage where entrepreneurs look at their relationship circle, better known as friends,

family and fools. From this point, they will look at their abilities. So an entrepreneur

does not start with a given goal, but with the tools he or she has.

2) The Affordable Loss Principle.

An entrepreneur does not focus on possible profits, but on the possible losses and

how he can minimize those losses.

3) The Crazy Quilt Principle.

Entrepreneurs cooperate with parties they can trust. These parties can limit the

affordable loss by giving pre-commitment.

4) The Lemonade Principle.

Entrepreneurs will look at how to leverage contingencies. Surprises are not necessarily

seen as something bad, but as opportunities to find new markets.

5) The Pilot-in-the-plane.

During this stage, all the previous principles are put together. The future cannot be

predicted, but entrepreneurs can control some of the factors which determine the

future.15

15 https://en.wikipedia.org/wiki/Effectuation

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3.4 Maslow's model for value creation

In economics, the creation of a product or service is done in order to respond to a

certain demand; the demand has to be evaluated depending on which market segment

we are going to serve, the elasticity of demand in the sector (depending on possible

substitute products and utilities attached to the product) and reservation prices for the

products or services that we are going to sell.

So, when we try to develop a value proposition we have to consider social needs, but

at the same time we have to think about how we want to place ourselves on the market.

In defining our value proposition, we can take inspiration from Maslow's model by

adapting it in order to identify specific consumer needs, and then adapting it to our

vision.

Maslow's model explains that within a person's needs there is a hierarchy of priorities,

where the bottom of the pyramid shows the essential needs (psychological and safety)

and in the upper part we can find needs that we can consider to be factors that improve

our existence and create motivation in achieving goals.

30

Maslow's five categories are simplified into three categories in Aldefer's theory, and

into two in Herzberg's.

Those more simplified views enable us to easily create a strategy to motivate people,

in order to obtain support for our project.

An effective strategy would be to consider those models not just in relation to

individuals but also to society; this could lead to maximum satisfaction for each sector

by targeting each market with a proper motivator.

Let’s start with a hypothetical case involving a group that faces a problem of existence

such as the need for drinking water. For this group the motivator for work is driven

by a natural need (psychological and safety); for those people we don't need to create

a specific motivator in order to involve them in the project.

The next target is people who are close to the area but who don't suffer directly from

the problem, or people who even if they are not close to the affected area are

emotionally involved with the problem that we are trying to address. For those people,

the best motivator is relatedness. So, for those who live close to the problem, the safety

aspect is strongly promoted, by providing the possibility to reduce the necessity for

water in order to reduce their personal risk of being affected directly by the problem;

the "love" aspect will be satisfied by creating a community that drives altruistic

behavior by exploiting the relationships between individuals as a kind of "glue". Good

31

cohesion between individuals facilitates the progress of projects. Within the group

structure, personal esteem will motivate people to be more productive and

competitive.

The third group is represented by people who have already satisfied most of their

needs and the only possible motivators are growth factors such as enhanced personal

standing and self-actualization. Within this group we find professionals at the top of

their career who are looking for new and original ways to boost their profile or general

sense of achievement. Involvement in projects not directly related to corporate profit

generation or personal advancement places already successful people in a new light.

This can bring them wider opportunities for general and social appreciation which

may also feedback to improve the image of their company or institution. There are

many cases of major brands getting involved in social projects for example McDonald

who contribute to child education projects around the world and Microsoft who invest

in disease research. While this on the surface appears to be generosity on a massive

scale, it is also highly advantageous to corporations in terms of offsetting taxes.

4 THE ROLE OF IINOVATION

http://www.propertycasualty360.com/2016/04/28/4-steps-that-foster-a-culture-of-innovation

32

4.1 Anthropological point of view on economic innovation

Considering market evolution as a continuous search for equilibrium, we can see how

innovation is a driver to reach a higher level of economic balance.

In particular, the figure of the social entrepreneur is able to mix business acumen and

techniques with a responsible social vision to reach economic balance. As a matter of

fact, social entrepreneurs, by organizing collaborations between profit-making and

non-profit making structures, create a higher value that is better spread among

stakeholders.

In this way they provide a possible alternative to modern capitalism.

The economy can in fact be considered as a dynamic equilibrium which is

continuously evolving in order to survive in an ever-changing environment.

This scenario can find a metaphor in Darwin where companies are compared to

animals and the socio-economic context is compared to the process of natural selection.

"Living organisms are in balance with their environment, because the environment

changes, they too must change, otherwise they are doomed to disappear." Darwin.

4.2 Innovation in Industry

One factor that an entrepreneur and a social entrepreneur have in common is

innovation.

But what is an innovation? It is an invention put into practice; a good example is where

Leonardo da Vinci invented the helicopter. With his drawings he created a general

theory but it didn't become an innovation because he had no real mechanical means to

produce his invention.

33

An innovation is a product or service that through its commercialization changes our

lives. What often happens is that the time between the invention and the innovation is

very long, due to the lack of means of production or market demand.

Innovation can be of two types: radical or incremental.

Radical innovation is a new product not previously existing in the market, like the first

mobile-phone invented by Motorola.

Incremental innovation is an improvement on an existing technology, for example the

new I-Phone can have new features, but it is merely an improvement of an existing

product.

Innovation can be driven by product technology or production technology, the first is

a new element that is able to improve product quality or performance of an existing

market sector, or even create a new one.

Production technology instead is a new way of manufacturing goods or organizing

services.

4.3 Innovation in management

Innovation is not limited to products or processes; in fact, we can also apply this

concept to management and company structures.

Social entrepreneurship itself can be said to be both an incremental and a radical

innovation.

In fact, it embodies all the positive elements of general entrepreneurship, while taking

into account the wellbeing of its environment and not it’s just profits.

Burns & Stalker, after an analysis based on 20 industrial firms, distinguish 5 different

kinds of environment ranging from stable to least predictable. From this, they

developed two divergent systems of management; mechanical and organic.

34

The mechanical system is a rigid structure and appropriate for stable conditions; this

structure is able to optimize resources but is inadequate for a fast changing

environment.

The organic system is a more fluid structure appropriate for changing conditions, and

it appears to be the better one when unforeseeable circumstances happen constantly

and require a redefinition of roles in the hierarchy structure.

Another research conducted on 42 voluntary churches in the USA found that as the

organization becomes more mechanistic, the intrinsic motivation and the sense of

freedom are reduced.

For social enterprise it is very important to know how to create an adequate structure

in order to be efficient in the management of scarce resources and create a good

psychological contract.

Usually social entrepreneurship uses intrinsic motivators for employees who

normally cannot be motivated by extrinsic motivators because of scarce resources.

35

Moreover, good adaptability is also required because, social enterprises have less

resources necessary for a change in assets due to a change in the environment.

This weakness has to be compensated with a dynamic company structure, capable of

reinventing roles and tasks.

Another capability required for the management of the social enterprise (if it has the

possibility to grow on a global scale), is that it must improve a global vision in order

to achieve higher scale objectives, but it has to continue to act locally in order to

preserve its social mission that has to be linked to a territory in order to be effective.

36

4.4 Bloom's Taxonomy; how to learn to innovate

In this paragraph I would like to comment on the process that drives innovation or an

invention; an innovation doesn't happen by chance, but is the result of a learning

process.

1 http://www.learnnc.org/lp/pages/4719

Bloom’s Taxonomy was created in 1948 by psychologist Benjamin Bloom and several

other colleagues. Originally developed as a method of classifying educational goals for

student performance evaluation, Bloom’s Taxonomy has been revised over the years

and is still utilized in education today. In the 1990s, one of Bloom’s students, Lorin

Anderson, revised the original taxonomy. In the amended version of Bloom’s

Taxonomy, the names of the major cognitive process categories were changed to

indicate action because thinking implies active engagements16.

Bloom’s pyramid show how creation is the result of various steps of the compression

of existing concepts; the evolution of concepts can be achieved, when they are analyzed

by breaking them down and evaluated in each part with a micro and macro vision.

16 http://www.learnnc.org/lp/pages/4719

37

After the individual gain, the ability to consciously "play" with the various

components of a concept, it is then possible to recombine all the "paces" or change it in

order to create something new.

Creativity is one of the main assets of social entrepreneurship, but it is a skill that has

to be trained in order to exploit its full potentiality. It is not a coincidence that one of

the main fields where social enterprise focuses its efforts is education.

5. RISKS INVOLVED IN INNOVATION

The link between all these concepts is the capacity to choose and assume risk in a

responsible way. I stress the concept "responsible way" because the entrepreneur is

able to balance risk in different sectors in order to innovate and create value.

The entrepreneur, thanks to his skills, is able to balance risk and goals in order to

change investment from a less profitable investment to a more profitable one or

decrease risk for the same revenue stream.

The differences in entrepreneurs' behaviour can be sorted by their different attitudes

towards risk.

http://www.policonomics.com/lp-risk-and-uncertainty2-risk-aversion/

38

Risk is a factor strictly linked to the creation of value; we can find a direct relation

between risk and value created "the higher the bet the higher would be the premium

but with a proportionally higher risk of losing everything".

But how can we judge the "bet"? The bet is based on the entrepreneur's vision of

innovation, his attitude towards risk and the ability to forecast future outcomes.

Innovation often leads to the creation of value, but attached to this future value there

is a certain level of uncertainty about the revenue stream; the higher the uncertainty

the higher the risk.

The successful entrepreneur, being alert, is able to see market signals that lead to an

opportunity for a change in an existing structure, in order to solve existing problems,

also by applying "creative destruction" (Schumpeter).

5.1 SWOT analysis' for evaluation risk

http://pandora.edu.vn/en/swot-analysis/

39

SWOT analysis is a process that identifies the strengths, weaknesses, opportunities and

threats of an organization. Specifically, SWOT is a basic, analytical framework that

assesses what an organization can and cannot do, as well as its potential opportunities

and threats. A SWOT analysis takes information from an environmental analysis and

separates it into internal strengths and weaknesses, as well as its external opportunities

and threats.17

SWOT analysis' is one of the most widely used methods to evaluate a company’s

capabilities and risks. The company usually uses a process of brainstorming to collect

common ideas and opinions; from this survey it is possible to identify strengths that

will be used to support weaknesses and face threats, while opportunities have to be

cached avoiding threats and be conscious of existing weaknesses in the company.

This analysis can be done and is suited for each stage of the company’s evolution but,

in order to show a realistic picture of the company, we need a certain level of

awareness of the affordable means and freedom of expression.

6 CASES OF INTEREST

I decided to report here some interesting data about two examples of social

entrepreneurshipfrom “Iris Report Impresa Sociale in Italia identità e sviluppo in un

quadro di riforma 2015 edited by Paolo Venturi and Flavio zandonai ” : The Italian

Market for Social Enterprise and Women as Resources for Social Entrepreneurship.

17 SWOT Analysis http://www.investopedia.com/terms/s/swot.asp#ixzz4MOFgzLrj

40

6.1 In Italy

http://www.fundraisingschool.it/wp-content/uploads/2015/04/Rapporto-Iris-Network2015.pdf

There are 12,577 social enterprises in Italy. Among these, following recent legislation,

now have 774 have assumed the status of "social enterprise", 574 are organizations

classified as "social enterprises" but not yet listed in the dedicated section and 12,570

are "social co-operatives", the most widespread and consolidated legal and

organizational model of social enterprise in Italy and Europe.

There are also 144,007 organizations that constitute a "potential for social

entrepreneurship" in Italy 82,231 non-profit organizations of production (other than

social enterprises and social cooperatives) and 61,776 for-profit enterprises operating

in the fields identified by the regulations as areas where it is possible to produce and

exchange goods and services of "public benefit".

41

After our analysis of Italian potentiality in social enterprises, we can now the value of

production represented in graph 1; the north produces a higher value and the

regions of Lombardia and Emilia Romagna showing the best performance.

grap1

grap2

42

Graph 2 represents the occupation created in 2011: absolute values (left) and every

1,000 inhabitants (right). From this survey I discovered an interestig point see next

paragraph.

The Nord confirm its importance with Emilia Romagna and Piemonte showing the

best performance.

6.2 Social enterprises: Fit for Women

The Dalai Lama said something about women that is just now making the rounds on

Twitter. His statement, “The world will be saved by the Western Woman,” was

delivered during the Vancouver Peace Summit 2009.18

Social entrepreneurship is a revolution in the economy; if this revolution can save the

planet from a selfish vision it is something that we will have to wait to see; what we

know for sure is that this parallel economy is driven by ladies.

In fact, what research shows is that women are the main supporters of social

entrepreneurships; 73.9% of people hired in 2011 by social enterprises in italy were

women.

They have always been well represented in the nonprofit sector and appear to be better

represented in social enterprises than in traditional businesses. According to the 2013

State of Social Enterprise Survey in the UK, 38 percent of social enterprises (compared

to 19 percent of small-to-medium-sized businesses) and three percent of the 100 largest

companies on the London Stock Exchange were led by women.19

18 http://www.dharmacafe.com/index.php/news-briefs/article/the-dalai-lama-the-world-will-be-saved-by-the-

western-woman 19 http://www.womenofinfluence.ca/2014/11/03/rise-social-enterprise/#.v-4a_pclrhe the rise of social enterprise

43

http://www.womenofinfluence.ca/2014/11/03/rise-social-enterprise/#.v-4a_pclrhe the rise of social enterprise

In my opinion women have an advantage in this market because they display a

higher sensibility to social problems which makes them better able to detect

problems and use empathy to fully understand the necessities.

7 CONCLUSIONS

The model that should, in my opinion, be spread around the word is a reviewed kind

of capitalism that acts in a more responsible way, not just philanthropically, but also

to create long term business perspectives that will provide companies with a

competitive advantage in the various market segment.

Its good business plan will give a higher competitiveness to the company, which will

implement a global social mission and act with a vision strictly linked to the territory

where it operates.

The kind of enterprise that this model suggests is suited to a more creative capitalism,

that can adapt business to the market, to better address unmet social needs, using more

44

altruistic neoliberal ideas and where “the invisible hand of the markets is driven more

by the heart and less by the stomach”.

Watching the economic scenario, we can see that the public sector is reducing while

the private sector keeps on increasing, implementing innovation and efficiency. But –

on the other hand - if we don’t push for a more altruistic business vision, this model

will continue creating more and more inequality.

States provide public goods which profit-driven companies do not provide; there are

sectors in the market, especially the ones where social interests are involved, where a

distribution based on company profitability is morally inappropriate and will bring a

significant market failure.

Non-profit organization try to fill the gaps in the social structure, helping people to be

able to afford their basic needs; by so doing they face problems with organizational

structures due to scarce resources.

Social entrepreneurships are particularly interesting because they can be considered a

new point of view and a new way to help solve modern social problems, because they

can count on skills of traditional business organizations to raise funds, foster and

create solutions to meet unfilled social needs.

As a social enterprise can be a for profit or non-profit organization, its social attitude

can be applied to the company's mission or become part of its vision in order to create

a suitable distribution of value for stakeholders.

Moreover, by not being focused just on profit seeking, they can explore innovative

markets which are too risky from a business perspective, but can provide important

social values that, in the long term and on a wide scale, can create an interesting

monetary stream.

45

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