Social ventures are organizations created to exploit opportunities for social value creation (Lumpkin et al., 2011; Zahra et al., 2009). In fact, scholars argue that the main distinction between commercial and social entrepreneurship lies in the relative priority given to social wealth creation versus economic wealth creation (Mair & Marti, 2006). Given the increasing importance of social ventures, understanding the internal and external dynamics of such organizations would be beneficial for research and practice. The following three essays explore antecedents, consequences, and strategies of social ventures.
Essay 1. This essay addresses the need for research concerning environmental influences on social entrepreneurship by specifically focusing on the environmental conditions that affect social venture creation rates. Though some scholars have suggested that entrepreneurs respond to certain socioeconomic conditions by engaging in social venturing activity (e.g. Weerawardena & Sullivan Mort, 2006), compelling empirical evidence is still lacking. A prevalent explanation of social venture creation is the market failure perspective. This perspective holds that social ventures are created to address social issues that the market and the government have failed to deal with effectively (Austin et al., 2006). In this essay, I delve into the market failure perspective to explain social venture creation rates and provide an empirical test at the macro-level. The results in this essay support the market failure perspective by suggesting that social venture creation rates increase with suboptimal economic conditions and high levels of government failure in dealing with social issues.
Essay 2. Research investigating how social entrepreneurship influences commercial entrepreneurship remains scarce in the social entrepreneurship literature. Following an ecological perspective (Hannan & Freeman, 1977), Essay 2 predicts that social venture creation exerts a negative influence on commercial venture creation, as social and commercial ventures compete for similar resources at the time of founding. Previous research has also suggested that a positive relationship exists, but it has failed to account for the mechanism through which a positive influence may occur. Following the social entrepreneurship and new venture creation literatures, it is proposed that such mechanism is social value creation. That is, social ventures create better environments in which commercial ventures can be created. This effect, in turn, diminishes the negative influence suggested by population ecology. The results strongly support the hypothesized competitive relationship between social and commercial ventures. Similarly, the results suggest that social ventures, in fact, create social value that improves the wellbeing of the region in which they operate.
Essay 3. Social entrepreneurship scholars have called for research that addresses factors that may lead or prevent failure among social ventures (e.g. Haugh, 2005). Essay 3 examines a series of factors that affect social ventures’ failure at different levels of analysis, specifically at the firm- and environmental-levels. Following both Resource Dependence Theory (Pfeffer & Salancik, 1978) and the Resource Based View (Barney, 1991), I propose that nonprofit social ventures engage in strategic actions to ensure the continuous flow of resources. Such actions, in turn, reduce the probability of organizational failure. The results suggested a U-shape relationship between earned income and the probability of nonprofit failure. This relationship holds when the nonprofit social venture generates high proportions of income from unrelated business activities, but becomes an inverted-U when the proportions of unrelated business income are smaller. The availability of financial capital had a similar effect on the relationship. Some concerns are raised regarding one of the definitions of entrepreneurialism in the nonprofit sector. That is, the requirement that nonprofits generate a good proportion of their income from commercial activities. The results suggest that earned income generation is a good strategy to prevent failure among nonprofits, as long as these organizations do not over rely on this source of revenue.