Social Entrepreneurship and Commercial Entrepreneurship: Similarities and Differences

The vocabulary of “entrepreneur” originally came from French economics, which means someone undertakes a significant project or activity. Jean Baptiste Say indicates that entrepreneurs especially be used to describing venturesome individuals who advanced economic progress using new and better ways of doing things. Joseph Schumpeter identifies entrepreneurs are change agents in the economy, who drive the process of capitalism. Both Say and Schumpeter regard entrepreneurs as someone engaged in new, profit-seeking business ventures, through which serving its responsibilities.

Social Entrepreneurship and Commercial Entrepreneurship

While contemporary management and business hold a broader view of entrepreneurs. According to Drucker, entrepreneurs are those who search for change, responds to it, and exploits it as an opportunity. Howard Stevenson says entrepreneurs do not only see and pursue opportunities but also have the capability to mobilize the resources of others to achieve their entrepreneurial goals. Thus, the definition of entrepreneurs is not limited to business start-ups, and it can be applied both in the private sector and the social sector.

Definition of Social Entrepreneurship

The social entrepreneur is an individual who addresses a serious societal problem with innovative ideas and approaches that have not been tried successfully by private, public, or nonprofit sector entities. Social entrepreneurship combines the passion of a social mission with an image of business-like discipline, innovation, and determination. Social entrepreneurship is the creator of new models that provide products and services that directly meet the basic human needs that are still unsatisfied in current economic or social institutions. Another point of view is that social entrepreneurship is about construction, evaluation, and the pursuit of opportunities for social change. Social entrepreneurship is a group of innovative and effective activities. Its strategic focus is to solve social market failures, systematically using new resources and organizational forms to create new opportunities, increase social values, maximize social impact, and achieve change. Social entrepreneurship is also expressed as innovative, social value creation activities occurring within non-profit, commercial and/or public/government sectors or across sectors.

Based on the above definitions it can be inferred that social entrepreneurship is mission-oriented and the social mission lies in the central, their objective is improving society rather than wealth creation. It combines business and social causes together with aim of resolving the existing issues in society in an innovative way, thus improve the living conditions or life quality of human beings. Social entrepreneurship is hybrid combining of profit pursue and non-profit pursue, it should balance social goals and market success in some way. What is more, the value of social entrepreneurship is determined by the social impact and social value it has created.

Definition of Commercial Entrepreneurship

Traditional entrepreneurs seek to take advantage of entrepreneurial opportunities, new products, services, raw materials, markets and organizing methods so as to enable enterprising individuals create value that exceeds economic growth. Entrepreneurship is defined as seeking opportunities outside of the tangible resources that you currently control. Entrepreneurship is a procedure of adding something new and something different with the purpose of creating wealth for individuals as well as adding value to society. Commercial entrepreneurs do benefit society through new and valuable goods, services, and professions, and can produce transformative social impacts. Commercial entrepreneurship refers to the ability to create or identify business opportunities from the perspective of value creation.

From above definitions, it can conclude that commercial entrepreneurship is motivated primarily by profit, they seek economic growth by providing valuable goods or services to the individuals and society. The objective of commercial entrepreneurship is creating wealth and adding value to society, the value of commercial entrepreneurship could be measured by the monetary terms, which is much easier than that of social entrepreneurship.

Impact of Social and Commercial Entrepreneurship

Both social entrepreneurship and commercial entrepreneurship are very important to society since they can generate social impact which is beneficial to society from different aspects. To some extent, their goal is the same, make the world a better place.

Commercial entrepreneurs are trying to meet people’s needs, satisfying people by offering superior products or services, further making the life of people better. A good commercial entrepreneur could bring significant positive impact to society, such as curing disease using advanced medical technology, for example, the hepatitis B virus vaccine reduced HBV infections at a large scale. The Internet makes communication much more convenient than before, which has boosted the global economy dramatically. It is undeniable that there are many social issues that the public sector has not been able to solve thoroughly, such as poverty, unemployment, pollution etc. It is social entrepreneurs who are willing to take risk to resolve social problems, improving society. Although the wealth created by social entrepreneurs might less than commercial entrepreneurs, the social impact could not be neglected.

Similarities and Differences Between Social and Commercial Entrepreneurship

Social entrepreneurship is the whole procedure of an individual or organization using new and innovative ways to resolve social problems. There are similarities and differences between social entrepreneurs and commercial entrepreneurs. Similarities are both of them have the ability to find opportunity and make a significant impact on society. Differences are commercial entrepreneurs try to meet people’s needs, while, social entrepreneurs seek to reduce the needs. The difference can be described as ‘giving a man a fish’ versus ‘teaching a man to fish’. Social entrepreneurship differentiates from the non-profit organization. Because social entrepreneurs seek social change and finance sustainability at the same time, it is hybrid management between profit pursuit and non-profit pursuit. Social entrepreneurship contains social programs and social enterprises, and various models including giving back to society, giving work opportunity to disadvantaged people, innovating new idea/ways to resolve existing social issues.

Similarities

  1. Entrepreneurial process – Both commercial and social entrepreneurs focus on vision and opportunity, as well as the ability to persuade and empower others to help them turn their ideas into reality. They are willing to put effort and take the risk to make the idea come true. Identifying opportunities and transforming big vision into manageable, achievable operations is a quality that every entrepreneur should possess. First of all, entrepreneurs need to find out the social needs and market demand. Sometimes people feel inconvenient or dissatisfied with something, but they just can’t tell what exactly the problem is and how to solve it. Entrepreneurs need to identify public pain points and provide effective solutions.
  2. Seek outcomes – Second, both the commercial and social entrepreneurs seek outcomes that can be measured and quantified. According to them, entrepreneurs seek returns on investment which is a percentage return on the monetary investment in a venture; while, the achievement of social entrepreneurs could be measured by metering the social return on investment, which is calculated in financial perspective that expresses the value of the enterprise to society.
  3. Both belong to entrepreneurship field – Third, social entrepreneurship is sub-species of entrepreneurship. As mentioned above, social entrepreneurship is doing business with social goals. They also pursuit profit to make sure social enterprises could have sustainable development in the future.

Differences 

  1. Market-driven and mission-driven – The biggest difference between social entrepreneurs and commercial entrepreneurs is ‘the nature of the immediate return each trend to seek’. It is said commercial entrepreneurs are market-driven, by contrast, social entrepreneurs are driven primarily by an organizational mission. Social entrepreneurs pay more attention to social roles and commercial roles being accessory. As mentioned above, the mission-related impact is the central standard of social entrepreneurs rather than economic value. Furthermore, social entrepreneurs will reinvestment the majority of profit in social mission rather than distribute them to stakeholders. By contrast, even commercial entrepreneurs integrate the social responsibilities, they don’t give it the top priority. Commercial entrepreneurs are bound by market discipline, and it is market discipline determines if firms creating value. If they do not generate value, they are often driven out of the business. Here, market-driven could be understood as profit-driven. Commercial entrepreneurs have to profit-driven because the sufficient economic value could help firms grow.
  2. Outcomes measurement – The outcome of commercial entrepreneurship could be simply measured by monetary and tangible terms. For commercial entrepreneurs, wealth creation is a way of measuring value creation. Thus, the performance of commercial entrepreneurship could be measured by the market share, the market value of the firm, net profit, customer satisfaction, quality, and firm’s assets etc. On the other hand, for social entrepreneurship, the mission-related impact becomes the central criterion, not wealth creation. Hence, the performance of the social entrepreneurship could be gauged by social impact and social change. Such intangible and soft outcome creates a big challenge for measuring the outcome of social entrepreneurship, because of the non-quantitative, multifactorial, temporal dimensions, and different perception of social change.
  3. The approaches – There will be widespread differences between the two approaches in terms of the way in which human and financial resources are mobilized and managed. In order for a company to be competitive in the market and grow steadily, commercial entrepreneurs typically employ competitive and promising employees and pay them accordingly. Remuneration is recognition of their work, and employees are attracted to the company because of competitive rewards. In addition, the company’s interests will be distributed to all stakeholders and invested in new projects. However, human resource of social entrepreneurship could contain full-time staffs, part-time staffs, and volunteers. Majority of social entrepreneurs could not compensate employees with competitive wage compared to commercial entrepreneurs because of their venture and they are usually small, resource-constrained. Also the employees of social entrepreneurship value more on non-monetary compensation obtained from work. What is more, social entrepreneurs will reinvest in the social mission when they have a surplus than distributing to all stakeholders. So there is a big difference between social and commercial entrepreneurs when it comes to managing finance and human resource.

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