Toward a realistic theory of social entrepreneurship (NGOs) grounded on microfinance research: Selling dreams to society

• DOI: http://doi.org/10.1002/jsc.2272
• Published date: 01 July 2019
• Date: 01 July 2019
• Author: Arvind Ashta

RESEARCH ARTICLE

Toward a realistic theory of social entrepreneurship (NGOs)

grounded on microfinance research: Selling dreams to society*

Arvind Ashta

Burgundy School of Business - Université

Bourgogne Franche-Comté, CEREN, EA 7477,

Dijon, France

Correspondence

Arvind Ashta, Burgundy School of Business -

Université Bourgogne Franche-Comté,

CEREN, EA 7477, 29 rue Sambin, 21000

Dijon, France.

Email: arvind.ashta@bsb-education.com

Funding information

Banque Populaire; Conseil Régional de

Bourgogne Franche Comté

Abstract

Social entrepreneurs sell dreams of solving a socialproblem of a segment of society to

entice a broadersegment of society to subsidizetheir ventures. They aremotivated by a

combination of passion and compassion, need for creativity, problem solving, and

esteem.They sell their dreams by storytellingand narratives in orderto obtain subsidized

resources. In order to achieve their goals, they need to demonstrate the impact for the

continuanceof subsidies. Too much financialprofit leads to withdrawal of subsidies.

1|INTRODUCTION

Microfinance is considered the exemplar of social entrepreneurship (SE).

Impact investors provide over half of their funds to the microfinance

industry. Therefore, it would be expected that SE theory has incorporated

all the findings from the academic literature on microfinance. But has it?

Definitions of SE have proliferated. A recent survey lists 37 definitions

(Dacin et al., 2010). While most of these definitions mention that SE is

about combining social purpose and entrepreneurship, about half of the

definitions also include a reference to innovation or change. However,

most of the definitions ignore key aspects such as social problem, pro-

posed solutions, and target beneficiaries, all of which are key aspects stud-

iedinmicrofinance.Moreover,mosttheoriesonSEdonotindicatewhen

a SE ceases to be a SE. Some theories of SE (e.g., Santos, 2012) suggest

that all entrepreneurs create value, but that commercial entrepreneurs

capture this value for themselves, while social entrepreneurs are not inter-

ested in capturing this value. But why would anyone leave money on the

table? The behavior of microfinance actors suggests that they do this to

entice other stakeholders to participate in their dream and their venture.

By doing so, I am building on the existing theory to establish a realistic the-

ory, regrouping the work on motivation from SE theory as well as incorpo-

rating other motivations grounded on observations from microfinance.

These observations include a few stylized facts that are evident to the

microfinance researcher and practitioner. First, entrepreneurs in

microfinance NGOs have a dream of ending poverty. Second, microfinance

institutions (MFIs) engage in a lot of storytelling. Third, microfinance NGOs

are subsidized. Fourth, too much profit in the microfinance industry does

not rhyme well with the subsidization of SE. Fifth, considerable attention is

given to the proof of social impact, often elusive. Our theory incorporates

these realities of microfinance into a plausible theory for SE. While some of

these elements have already captured in studies of SE, we put them

together into a theoreticalframework.

Researchon SE is important because socialenterprises are becoming

more common.In France, enterprises in the economicand social solidar-

ity sector(associations, cooperatives,mutualistic firms, andfoundations)

constitute about11% of the French economy in terms of employment.

The work ofnetworks such as the Ashoka, Schwab,Skoll, and the Aspen

Institute has made the concept visible. Social enterprises are having an

importantrole in economic development.Therefore, the sound develop-

ment of theoryis important, both for furthering researchand teaching in

the classroom.

Recently, a lot of work is being done on hybrids (Battilana and

Dorado,2010; Battilana et al., 2012; Jay,2013). However, these hybrids

are amalgamations of SE and commercial entrepreneurship. Without a

clear theoryof both, the work on hybridscannot be clear. Therefore,this

theoreticalarticle has taken a stepback from hybrids and lookedagain at

not-for-profitSE. To retain clarity, we are limitingourselves to NGOs. In

what follows,the broad methodology of this theory buildingis outlined,

followed by a reviewof the literature of extant SE theories, confronting

themwith microfinance, highlightingunanswered questions.

*JEL classification code: M13.

DOI: 10.1002/jsc.2272

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