Is Entrepreneurship Development? The Challenges & Contradictions of the Social Enterprise Model

Camille’s Fellowship is made possible by the Rural India Supporting Trust.

“They constantly want to me to lower my prices,” the woman sighed, “I feel as if I have to choose between cutting my costs or narrowing my distribution channels.” Others in the room grimaced and nodded sympathetically. I was at a workshop for social entrepreneurs, learning best practices for sales and marketing from private sector specialists. The entrepreneur in question was discussing the dilemma of being constantly squeezed by procurement officers at department stores and boutiques, key outlets for many enterprises working in the handicraft sector to make sales. According to her, many of these department stores and boutiques were only marginally interested in the “social” aspect of her venture and wanted her to cut the prices of her products to be more competitive on the market. Like many, this entrepreneur faced a nearly impossible choice: cut her costs (potentially lessening her potential social and economic impact) or narrow the scope of her distribution (limiting the enterprise’s ability to grow).

Managing inventory in Avani’s stock room

The workshop facilitator nodded sadly. “It’s tough, but that’s business,” she shrugged. In a sense, I agreed. In a capitalist system, businesses have to make a profit, plain and simple. If your prices are too high for the market, it’s difficult to compete. Still, as the conversation proceeded, and participants began discussing strategies for reducing their production costs or satisfying demanding buyers, I found myself asking, “Is this really development?”

The challenges that social enterprises face are the same of those of any small business: minimizing costs while maximizing revenues, adapting to consumer demands, and maintaining price-competitiveness in an increasingly crowded marketplace. Yet social enterprises should, in theory, face some additional considerations: spurring substantive social, economic, and environmental change in the communities in which they work. All too often, it seems that the solutions to the former lie in direct opposition to the more noble goals of the latter. In the pursuit of “profit”, “revenue”, or “market competitiveness”, businesses have to make compromises. At what point do the effects of these compromises serve to eliminate the “social” aspect of a social enterprise? Put more simply, are the terms “social” and “enterprise” inherently contradictory?

(From Right) Avani weavers Kamla, Malti, and Hema discussing the design of a textile

As Marshall Ganz, Tamara Kay, and Jason Spicer noted in their recent article, “Social Enterprise is Not Social Change,” the social entrepreneurship model constructs poverty as a knowledge problem, related to a lack of technical or professional innovation, rather than a power problem, related to systemic disenfranchisement and marginalization of certain groups at the societal level (p.59-60). Constructing the challenges facing, say, a rural village in the Himalayas as an issue of knowledge is not entirely wrong, and innovation and entrepreneurship in this region is undoubtedly a good thing. However, to claim that poverty in rural Uttarakhand is only related to a lack of knowledge seems to miss something crucial about the nature of poverty itself.

Social enterprises have an important place in the development ecosystem. Creating jobs and generating income is critical in helping communities reach their full human potential. But a shortage of income or innovation is not the sole driver of poverty. Poverty is structural, systemic, and deeply rooted. A woman’s inability to provide for her children is related not only to her lack of income, but also to structural biases against women that may have prevented her from completing her education, delaying her marriage, or having a greater say in the economic decisions of her household. Low levels of economic activity in a rural village are related not only to a lack of entrepreneurship, but also to the persistent political marginalization of rural communities, structural biases against certain castes or tribes, insufficient access to high-quality education or medical care, and poorly developed infrastructure. Entrepreneurship can help to alleviate some of these challenges, but it is by no means a panacea.

The shortcomings inherent in the social entrepreneurship model should not be troubling in and of themselves: after all, no single model or approach is a silver bullet in alleviating systemic poverty, and development requires a network of integrated, multifaceted approaches. Yet in recent years, social entrepreneurship seems to have taken center stage in the development world, shifting donors’ focus away from more traditional development programs and encouraging the “marketization” of social services typically provided by the public sector (Doane 2014; Eikenberry & Kluver 2004). In place of investing in schools, roads, or hospitals, increased attention has been paid towards investing in social enterprises, often with little regard for what, exactly, about that enterprise makes it “social”. Simply operating a business in a community deemed to be “developing” often seems to be sufficient. And while many more “traditional” development projects are subject to intense monitoring and evaluation, social enterprises are, perhaps by virtue of their vague definition, generally allowed to operate unfettered.

It is not my intent to condemn social enterprises. Having worked with a social enterprise for the past 10 months, I have experienced first-hand the power of entrepreneurship in spurring economic development in underserved communities. However, my experiences over this year have also led me to question the extent to which we apply a “social enterprise” label to any business that claims it, and, moreover, the extent to which we assume that such an enterprise can address a whole host of societal ills, simply by spurring some economic activity. In applying this “social enterprise” label indiscriminately, I believe that we are failing to rigorously examine the changes these enterprises are enacting at the structural level. More importantly, in viewing poverty through the social enterprise lens, which constructs development challenges as a mere lack of innovation and investment, I worry that we may be disregarding the structural inequalities that are continuing to marginalize certain communities and groups. In essence, I worry that by simply giving a woman a job in a social enterprise, we are falsely assuming that her “empowerment”—political, social, and economic—will naturally follow.

Examined critically, the social enterprise model is an oddly neoliberal approach in a field that is generally more inclined towards progressive, redistribution-focused economic models. This is not necessarily a bad thing, but certainly an issue that merits further scrutiny. While social entrepreneurship, and entrepreneurship in general, can be effective, it is also just a small piece of the complex puzzle of development.

Sources

A.M. Eikenberry, J.D. Kluver (March 18, 2004). “The Marketization of the Nonprofit Sector: Civil Society at Risk?” Public Administration Review (64:2), 132-140. Retrieved from: <https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1540-6210.2004.00355.x>

D. Doane (February 25, 2014). “Social Enterprise: Can It Succeed where Development Has Failed?” The Guardian. Retrieved from: <https://www.theguardian.com/global-development/poverty-matters/2014/feb/25/social-enterprise-succeed-traditional-development-failed>

M. Ganz, T. Kay, and J. Spicer (2018). “Social Enterprise Is Not Social Change.” Stanford Social Innovation Review (Spring 2018), 59-60. Retrieved from: <http://keough.nd.edu/wp-content/uploads/2015/12/SSIR-Spring_2018_social_enterpise_is_not_social_change.pdf>

Camille graduated in 2015 from Vanderbilt University with a double major in Public Policy Studies and History. While at Vanderbilt, Camille's studies focused on sustainable development, development policies, and transnational history, and she had the opportunity to present her research on Laotian and Iraqi refugees as a Presidential Fellow at the Center for the Study of the Presidency and Congress. Upon graduation, Camille received summa cum laude honors and was elected to Phi Beta Kappa. After graduation, Camille spent time working with a children's education nonprofit in Nepal, where she taught English and assisted in their funding and reconstruction efforts in the wake of the April 2015 earthquake. She then began a role at Deloitte Consulting in Washington, D.C., where she worked on research-based program evaluation and capacity building projects in the International Development and Public Health sectors with clients such as USAID and the Defense Health Agency. Most recently, Camille returned from a client assignment in Tanzania, where she was helping Anza, a social entrepreneurship accelerator, scale and expand their operations. Although her family currently resides in Portland, Oregon, Camille spent the majority of her childhood in Singapore, where she gained her love for travel.

Camille's Fellowship is made possible by the Rural India Supporting Trust.

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