Social entrepreneurs versus commercial entrepreneurs

Social entrepreneurs versus commercial entrepreneurs Authors: Catalina Mitra , Anca Borza , Razvan Nistor, Alexandra Tirca Babes-Bolyai University Fac...
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Social entrepreneurs versus commercial entrepreneurs Authors: Catalina Mitra , Anca Borza , Razvan Nistor, Alexandra Tirca Babes-Bolyai University Faculty of Economics and Business Administration Theodor Mihali Street, No. 58-60, 400591, Cluj-Napoca, Romania Phone: 0040-264-418652/3/4/5 Fax: 0040-264-412570 Abstract: Social entrepreneurship is still emerging as an area for academic inquiry leaving its theoretical underpinnings insufficient explored. Outside of a few well known examples we were having trouble identifying any products, groups, or people that we could place in the bucket. Social Entrepreneurs are individuals or private organizations that take the initiative to identify and solve social problems in the community, showing preference to vision, energy and ability to develop new ways to combat social problems (Korosec & Berman, 2006). This article emphasizes the characteristics of social and commercial entrepreneurs, underlining the main differences. The objectives of this study were to examine firstly differences between the profile of commercial entrepreneurs and that of social entrepreneurs, as well as to identify the factors that influence the qualities that a successful entrepreneur must have. The statistical universe was composed of commercial firms and NGOs in Cluj County. Key words: entrepreneur.

Social

Entrepreneurship,

commercial

entrepreneur,

social

Introduction The term of „entrepreneur” comes from the French word, is dating from the seventeenth century, and it refers to a man in charge of arranging and conducting exploratory and military expeditions (Hisrch, 1990). Basically the word has been used to describe a person who assumes some risks when they launch a business, or to describe a person who undertakes an important project or activity. The term entrepreneurship is often associated with launching a business, but nowadays it has

a more complex meaning. More specifically, the word is used to identify people who stimulate economic progress in an innovative way. The French economist Jean Baptiste Say argued that "the entrepreneur manages resources in an area with low productivity and efficiency to one with greater productivity and efficiency" (Say, 1975). Starting from Jean Bauptiste Say definition, Peter Druker (1977), underlines the opportunity of exploitation. He believes that entrepreneurs should not lead to change, but rather to exploit the market opportunities (technological innovation, changing consumer preferences, social norms, etc.), arguing that entrepreneurs are trying to cope with the challenges, making them into opportunities. In this sense the entrepreneur must have the necessary skills to identify optimal solutions and overcome challenges imposed by change. Another approach considers that an entrepreneur is a person who organizes, conducts and assumes the risk "arising from a business management (Barringer and Ireland, 2004). In the twentieth century, the economist whose name was commonly associated with the term entrepreneur was Joseph Schumpeter. He described entrepreneurs as innovators who are leading the process of "creation-destruction" of capitalism (Schumpeter, 1934). In his opinion, "entrepreneurial function is to reformulate or revolutionize the production model”. Schumpeter’s innovation classified into five categories: "a new product or substantial improvement of an existing one; the introduction of new production methods; opening new markets; developing new sources of raw materials and to create or change an industrial undertaking" (Schumpeter, 1934). He believes entrepreneurs are change agents, ensuring the continuity and development of the economy (Swedberg, 2006). Schumpeter has offered various interpretations over time regarding this concept, but the main idea is that entrepreneurs are the catalyst behind economic progress and innovation. Another approach is, that "entrepreneurship refers to an individual's ability to transform ideas into action. It involves creativity, innovation and risk taking, and ability to plan and manage projects to achieve objectives "(Dees, 1998). The Austrian School believes that in a market economy, the essence of entrepreneurship is the ability to buy cheap and sell expensive. In this way absolute motivation entrepreneur is to maximize profits by seeking the best way to minimize costs and increase revenue. From the perspective model GEM (Global Entrepreneurship Monitor) entrepreneurship involves both the allocation of resources for Start-up Company and the establishment of the market until work completed.

Commercial entrepreneurs The term entrepreneur has evolved over time, many economists offering a wide range of definitions, which show similar characteristics to reveal a very complex structure of the person who becomes a successful entrepreneur (Scarborough, et al. 2009, Hatten, 2009, a Borza et all, 2009):  Creativity - continuing desire to take initiatives  Innovative spirit - requires constant looking to apply creativity  Risk taker - the owner should consider the startup risks imposed, assuming the potential loss or potential business failure.  Intention to reach as high performance – a high expectations on profit and increase is desired  Responsibility - to hold a deep sense of responsibility towards their business results; eager to control and use the resources they have to achieve goals  Confidence in their ability to succeed - to be optimistic over their chances of success  Desire immediate feedback - need to know whether they acted properly at all times seeking a quick feedback  High level of energy - more energy than ordinary people, being willing to work overtime. This feature is more a rule than an exception  Vision in perspective - their views have a broad spectrum, being more focused on what they can do in the future than what they did in the past; seeing potential where most see problems  Flexibility - entrepreneurs have an enhanced ability to adapt to change, being aware that a rigid global economy leads to failure. There are a variety of approaches related to the term entrepreneur in this research but to allow distinction, we will use the term commercial entrepreneur. The concept is justified in our view based on the idea that commercial entrepreneur is motivated primarily by profit, earning it through acts of trade. To extend the theoretical analysis we will emphases the characteristics of social entrepreneurs for highlighting both common and different features. Social entrepreneurs The social entrepreneur may be considered a promoter of social mission because whatever role he plays in the organization, he is occupying a central role in creating social value. Social entrepreneurs play the role of change agents in the social sector by: adopting a mission characterized by values such as creating and

sustaining social value (and not just private), identifying and pursuing new opportunities, engaging in a continuous process which involves innovation, learning and overcoming limitations imposed by scarce resources and they show greater responsibility for the results and the value achieved. Next we highlight some essential features of social entrepreneurs:  They are change agents and are revolutionizing the social reforms, making fundamental changes in terms of functioning social systems. They focus on how society and the environment can be improved through the implementation of their vision (Yunus, 1982). Social entrepreneurs’ creativity is emphasized through identifying new resources, through finding nu ways to finance their activities or to increase the social value etc. Innovation is a constant desire to promote social entrepreneurship, and not a momentary outburst. This must be supported by a continuous process of research, knowledge and sustained improvement in this matter.  For social entrepreneurs social mission is paramount. They adopt a mission characterized by values such as creating and sustaining social value (and not private benefit). This is the basic element that characterizes the social entrepreneurs distinguishing them from commercial entrepreneurs. For a social entrepreneur social mission is fundamental, promoting social welfare which cannot be reduced to an engagement for personal (and private) benefit income. Profit is reached by serving the needs of those in needs and also by sustaining the organization oriented trough creating social value, but it must be regarded as an instrument for achieving the social objective.  There are people who enjoy the confidence and increased notoriety within the communities in which they operate handed holding leadership qualities. To support social entrepreneurship it is necessary to conduct a transparent activity, in accordance with ethical and moral principles because only thus will attract many followers.  Intend to remove the cause of social problem solving not just address symptoms. This is achieved by promoting self-development and sustainable progress. Social entrepreneurs do not seek short-term results but want to create a lasting social impact and sustained results. Although they act locally, their actions may trigger global changes, as in education, health, economy, art or any other field.  They consider failure as a part of development. Social entrepreneurs must consider failure as a part of the innovation process and not as a personal tragedy. Social entrepreneurs have a high tolerance to ambiguity in trying to

overcome difficult times as easily as possible (b Borza et all, 2009).  Assume those risks for which the organization serves. They create businesses that provide the most compelling solutions for social problems (Scarborough et al., 2009). They can develop organizations that sustain education for those without possibilities, can provide low cost housing for low-income people in developing countries, organizations that are oriented on educating young people to reduce resource consumption. Also, social entrepreneurs combine the concern for proper social issues with a desire to promote a better life.  They do not give up when it comes to challenges. They are preoccupied in identifying the best way to overcome the drawbacks trough innovation, adaptation and research (Wickham, 2006). Social entrepreneurs do not allow scarce resources to represent a barrier in pursuing their own vision. They have the power to do more with fewer resources than the idea of promoting the efficiency and effectiveness. They use available resources to maximize results by promoting partnerships and collaboration with other organizations, making use of resources coming from both philanthropic and economic activities. They are aware of the risks tolerated by stakeholders and are willing to share with those who want to engage in such activities (Mair and Noboa, 2006). All this characteristics emphasizes an idealistic profile and for many of us is difficult to believe that social entrepreneurs can encompass all this qualities. Probably they will expose all these characteristics in different combinations, but what is important is that these characteristics has to characterize the profile required in ordered to guide those who want to promote social entrepreneurship. Research methodology The objectives of this study were to examine first the differences between the profile of commercial entrepreneurs and that of social entrepreneurs, as well as to identify the factors that influence the qualities that a successful entrepreneur must have. The statistical universe was composed of all commercial firms and NGOs in Cluj County. Sampling methods were different: for NGOs we used a census, and for firms we used a disproportionate stratified sample. Initially we have created a database of names and contact details of the organizations involved in the survey. Then we contacted the representatives of the firms by telephone (corporations, SMSE) and we also discussed with the chairmen of all NGOs. We explained the theme and the research objectives of our research and they were asked as well to participate at the research project that we wanted to develop, or to appoint a person within the organization that had all the qualities and powers to

answer our questions. After obtaining the agreement, questionnaires were sent by email. After two days of sending the questionnaires, the organization or the person designated by the representative was contacted again by phone to be reminded of its importance for achieving the objectives of the survey responses. We sent to commercial firms a number of 394 questionnaires, and received and validated a number of 79 and from 234 questionnaires sent to the representatives of NGOs we have received and validated a number of 76 questionnaires. Thus, the response rate was 20% for commercial firms and 31% for NGOs. The research instrument used comprised 12 items, grouped in a symmetric multi-scale, with a total of six steps, numbered from 0 ("no") to 5 ("very much") by which we sought to examine respondents' perceptions about the qualities required of a good entrepreneur, in other words, to identify the profile of a successful entrepreneur. We opted for a scale with an even number of steps to avoid placement tendency of respondents in the middle or neutral. Regarding the tests performed in the first phase we conducted a univariable analysis of variables used, calculating the relative frequencies and averages. In the next phase we conducted a series of bi-variable analysis, calculating correlations between variables using Spearman's correlation coefficient. We tested a series of statistical hypothesis, using ANOVA test, comparing the specific environmental and quantitative variables using t student test of media comparison with a specified value. In the last phase we tested the validity and the consistency of the model used to define the profile of a successful entrepreneur using Cronbach Alpha (Cronbach, 1951) and item-to-total. The mentioned coefficient quantifies the internal consistency of the items noted that comprise a model, a scale or a factor (Peterson, 1994).With its help we can remove from the analyses the variables that through their variation fail to explain the studied phenomenon. If the Cronbach coefficient value (α) is closer to one, the data have increased confidence. Item-to-total correlation and Cronbach α coefficient measures the extent to which an indicator is correlated with the amount of other indicators included in the model. For a better identification of the items that have to be included in the model we used the option phenomenon. If the Cronbach coefficient value (α) is closer to one, the data have increased confidence. Item-to-total correlation and Cronbach α coefficient measures the extent to which an indicator is correlated with the amount of other indicators included in the model. For a better identification of the items that have to be included in the model we used the option “Cronbach α if item deleted "to exclude variables that do not contribute significantly to the model.

Results analyses In the following part we will emphasize the main results of our research which will underline the difference between commercial entrepreneur and social entrepreneur in Cluj County. We will start by calculating frequencies of the main qualities that are required for an entrepreneur in both cases. Table. 1 Relative frequency of a social entrepreneurs’ qualities

Innovator Risk taking Management abilities Communication abilities Conflict management Self-improvement Self-discipline Developed sense of ethics Authority Empathy Persuasion Adaptability to change

Importance Not the case None Less Relatively 1.4 14.9 6.8 20.3 1.4 25.7 4.1 28.4

Important 33.8 29.7

High 23.0 10.8

0.0

12.2

0.0

17.6

29.7

40.5

0.0

1.4

0.0

2.7

20.3

75.7

1.4

17.6

1.4

4.1

28.4

47.3

1.4 1.4

10.8 9.5

1.4 0.0

12.2 32.4

31.1 29.7

43.2 27.0

0.0

1.4

0.0

18.9

13.5

66.2

1.4 1.4 1.4

14.9 17.6 10.8

12.2 0.0 1.4

23.0 23.0 36.5

41.9 8.1 20.3

6.8 50.0 29.7

1.4

10.8

0.0

9.5

35.1

43.2

As it can bee seen in the table 1, the most frequent qualities for a social entrepreneur are communication skills, followed by a developed sense of ethics, empathy, adaptability to change and self-perfection. Surprisingly innovation is not considered a very important quality.

Table. 2 Relative frequencies of commercial entrepreneurs’ qualities

Innovator Risk taking Management abilities Communication abilities Conflict management Self-improvement Self-discipline Developed sense of ethics Authority Empathy Persuasion Adaptability to change

Importance Not the case None Less Relatively 8.9 1.3 1.3 19.0 2.5 5.1 8.9 24.1

Important 19.0 21.5

High 50.6 38.0

1.3

0.0

3.8

10.1

19.0

65.8

3.8

0.0

0.0

11.4

8.9

75.9

3.8

0.0

3.8

13.9

24.1

54.4

5.1 6.3

1.3 1.3

0.0 0.0

12.7 13.9

32.9 27.8

48.1 50.6

5.1

0.0

6.3

20.3

21.5

46.8

6.3 7.6 11.4

1.3 3.8 3.8

5.1 16.5 8.9

27.8 24.1 20.3

22.8 22.8 24.1

36.7 25.3 31.6

3.8

3.8

1.3

3.8

12.8

74.4

In the case of commercial entrepreneur, the most important quality is communication, followed by adaptability to change, management abilities, and conflict management abilities as it can be seen in table 2. In this case, innovation is considered more important than in the case of NGO’s. The differences observed are justified considering that commercial entrepreneurs have to act in a competitive market continuously changing, but on the order side, in the case of social entrepreneurship innovation is a required quality but as we can see this is not considered important by our subjects. However in the case of commercial entrepreneurs we observed that ethics is an important aspect too, reaching the value of 46.8. Then we wanted to verify if the two averages obtained within these types of organizations are statistically different. In order to do so we used the test "t" bidimensional. The results of our findings are presented in the following table:

Table. 3 Comparison of the average values on commercial enterprises and NGOs Commercial NGO Test “t” enterprise bidimensional N Mean N Mean 1. Innovation 79 3,90 74 3,39 ** (S.E.=0,171) (S.E.=0,161) 2. Risk taker 79 3,71 74 2,92 **** (S.E.=0,150) (S.E.=0,162) 3. Managerial abilities 79 4,43 74 3,86 **** (S.E=0,109) (S.E.=0,151) 4. Communication skills 79 4,49 74 4,69 n.s. (S.E.=0,126) (S.E.=0,077) 5. Conflict management 79 4,18 74 3,82 *** (S.E.=0,135) (S.E.=0,179) 6. Self-improvement 79 4,11 74 3,91 n.s. (S.E.=0,140) (S.E.=0,157) 7. Self-discipline 79 4,08 74 3,61 *** (S.E.=0,150) (S.E.=0,144) 8. Developed sense of 79 3,94 74 4,45 **** ethics (S.E.=0,149) (S.E.=0,098) 9. Authority 79 3,94 74 3,09 **** (S.E.=0,149) (S.E.=0,144) 10.Empathy 79 3,27 74 3,69 ** (S.E.=0,167) (S.E.=0,182) 11.Persuasiveness 79 3,37 74 3,53 n.s. (S.E.=0,184) (S.E.=0,152) 12.Adaptability to 79 4,41 74 3,96 *** change (S.E.=0,145) (S.E.=0,153) ****p