On the frontiers: the implications of social entrepreneurship for international entrepreneurship.
The field of international entrepreneurship (IE) has made important contributions to our understanding of how new ventures affect our world, particularly in terms of financial wealth creation (Coviello, McDougall, & Oviatt, 2011; McDougall & Oviatt, 2000). With the phenomenal growth of research worldwide, questions have arisen about the boundaries and the level of analyses of IE research (Zahra, 2005). IE researchers, for instance, have focused on profit-making companies, especially those that operate in developed economies, while largely overlooking emerging economies. We believe that emerging research on social entrepreneurship (SE) (Austin, Stevenson, & Wei-Skillern, 2006; Drayton, 2002; Emerson, 2003; Nicholls, 2010; Weerawardena & Mort, 2006) and sustainability (1) (Esty & Charnovitz, 2012; Kanter, 2012; Larson, 2011; Patzelt & Shepherd, 2011; Shepherd & Patzelt, 2011) can help us rethink the definitions, assumptions, boundaries, and research foci of the IE field.
A pivotal concept of focus in SE is that of blended value (Bugg-Levine & Emerson, 2011; Emerson, 2000, 2003). It suggests that, contrary to the exclusive focus on economic measures of success in traditional analyses, organizations pursue blends of financial, social, and environmental values, but the difference lies in how much value is created and destroyed across the types in different business models. Focusing on the notion of blended value, with its assumption of holistic blending of different value types, offers an opportunity for IE research to flourish and make substantial intellectual as well as societal contributions.
In this article, therefore, we ask: How can the field of SE enrich the study of IE? We address this question by noting the significant opportunities overlooked in current IE research because of the limiting assumptions and definitions adopted in the field. Further, we reflect on the monumental changes taking place in the global economies (Narula, 2012; Peng, 2012) and the promise they hold for more innovative and impactful IE research. These fundamental shifts also necessitate a different set of priorities where entrepreneurship in general and IE in particular can become major sources of value creation, although this value is defined more broadly than commonly used in existing studies. As a result, intersecting SE and IE can bring greater research focus to the creation and distribution of blends of value.
In particular, we show how intersecting SE and IE can prompt a revision of the definition, boundaries, and levels of analyses currently used in IE research. Our article also shows how wealth creation in IE could be expanded to reflect the notion of blended value in an increasingly connected, fast changing, and complex global economy. We underscore the fast growing role of international social ventures (ISVs) in the global economy, whether these companies are founded by independent entrepreneurs or existing companies (Chen, 2012; Munoz, 2010; Zahra, Rawhouser, Bhawe, Neubaum, & Hayton, 2008). By proposing changes in the definition, boundaries, and levels of analyses, we identify key areas worthy of future IE research.
We define IE as "the recognition, formation, evaluation, and exploitation of opportunities across national borders to create new businesses, models, and solutions for value creation, including financial, social, and environmental," consistent with the literature (Oviatt & McDougall, 2005; Zahra & George, 2002). If the essence of IE is the discovery, creation, and exploitation of opportunities in a global context (Coviello et al., 2011; Oviatt & McDougall), then our definition goes beyond the age and size of international ventures. These ventures, whether commercial or social, can be small or be part of large enterprises. Our IE definition also applies to born globals and rapidly internationalizing firms, as well as established companies expanding in pursuit of entrepreneurial opportunities. Our definition also covers multinational as well as mini-national companies.
The remainder of this article progresses as follows. First, we discuss why SE is important to IE. With this backdrop, we then elaborate on both IE and SE, defining their respective domains and research foci. Completing this, we will more specifically discuss how SE can contribute to IE. Our discussion suggests a revised set of assumptions for the IE field based on insights gained from SE. These revised assumptions suggest a rich research agenda that explores how IE contributes to the development of "global sustainable well-being," a holistic index of quality of life (Stiglitz, Sen, & Fitoussi, 2010). We conclude by exploring the implications of our discussion for the future study of IE, shifting attention from a purely economic focus to the development of the globally sustainable well-being.
The Value of Intersecting IE and SE Research
When two fields intersect, they retain many of their original foci while generating a new space where new questions are posed, theories are developed, and new territories are introduced and defined (Zahra & Newey, 2009). We see two levels of analysis as representing priority research areas at the intersection of SE and IE: public policy and the firm. In terms of public policy, SE calls for the consideration of ethical values and equity in IE practices, explicit attention to the social consequences of IE activity, the need for international/global (2) evaluations of the equitable distribution of economic and social outcomes, the consideration of institutional implications for achieving international/global outcomes from IE, and the view of global sustainable well-being as a key dependent variable for future IE research. Global institutions (e.g., transnational organizations) are important in the evolving web of relations and exchanges across borders, affecting IE and those social ventures that have international missions and operations; we call these ventures "international social ventures," consistent with the literature (Chen, 2012; Munoz, 2010; Zahra et al., 2008).
In contrast to the usual international firms that have been the ambit of IE research, ISVs have several distinct features. ISVs pursue social concerns on a global scale (Figure 1). These ventures are also international in scope; are entrepreneurial in their orientation to financial, social, and environmental opportunities; and exhibit a greater balance of earned versus contributed income (Boschee, 2006)--which differentiates them from nonprofits. Specifically, in balancing a company's social mission and profit margin, entrepreneurs would routinely favor its overall mission (Lynch & Walls, 2009). What sets ISVs apart as entrepreneurial ventures is that ISVs pursue financial profitability in order to make a sustainable social impact. As such, ISVs have an explicit emphasis on social impact and change capabilities, which further distinguishes them from for-profit enterprises. For-profit ventures may have a social impact, but do not invest in social impact and social system change capabilities as a core business.
At the firm level, SE suggests that IE opportunity recognition, formation, evaluation, and exploitation should also encompass social issues on a global scale, and this would entail both economic and social cost/benefit analysis. The concept of blended value highlights how the costs can be large for the IE field if it ignores developments in the arena of SE. Emerson (2000, 2003) suggests that the different types of value--financial, social, and environmental--are indivisible, and that part of the reason why the fields of SE and sustainability have arisen is because commercial (i.e., profit making-centered) decisions have historically been made with purely financial criteria. In this new milieu, ISVs become an important vehicle for pursuing blended value on a global scale. As Figure 1 shows, IE activities could center on traditional profit making or social issues, both in the domestic and international arenas. The intersection of international and social business activities promotes international social entrepreneurship (ISE), which is usually carried out by ISVs that emphasize blended value creation and social change as their goals.
Intersecting SE and IE makes clear the inseparability of different value types. Ignoring the intersection among these values has three implications for the study of IE. First, the externalities resulting from current ways of doing business can no longer be overlooked. The recent global financial crisis has shown how an increase in financial value creation in one narrow sector of a domestic economy (e.g., innovations in housing loans in the finance sector) can also cause large international social costs (e.g., economic recession, unemployment, bankruptcy, disposition to crime, civil discord, and international power disequilibrium). This suggests a broader redefinition of IE's research boundaries and agenda.
Second, large social and environmental costs can have a reciprocal linear relationship with economic costs. For example, increased weather extremes, such as earthquakes, rising tides, excessive rainfall, and flooding because of global warming, can destroy crop yields and raise prices because of undersupply. There can also be significant loss of material assets and uncertain outcomes regarding insurance, leading to economic and social costs, such as reduced taxation revenue, increased need for government support, and exacerbated family stress. These domestic effects in advanced economies can cause major global disruptions as key export/import markets shrink. Higher social costs can adversely affect commercial IE activity.
Third, as some have argued (e.g., Stiglitz, 2010), the failure to consider the social and environmental costs of project and asset values in accounting equations can cause worldwide price distortions of environmental resources (e.g., coal, oil, and gas). These distortions in the market mechanism can lead to the excessive and sometimes wasteful consumption of these resources in an unsustainable way. Without changes in thinking and practice, the potential long-term consequences can be disastrous.
Beyond the costs of oversight though, an added incentive to IE scholars is that SE research can expand the opportunity recognition scope for IE. Traditionally, social opportunities may have been deemed unsuitable or outside the radar for profitable IE activity. Yet, with emphasis on blended value, the field of SE offers research examples of social entrepreneurs using their insights and talents to turn social issues into profitable opportunities (Bornstein, 2007). Undertaking IE without regard for social ramifications can encourage short-sighted profit seeking while ignoring the negative effects on social and environmental wealth. As a result, the wider community has to assume greater responsibilities for these other costs. The interaction among different types of values calls upon scholars to examine the implications of the notion of blended value for the IE field.
Having discussed why SE is important to IE, we now look more closely at each research field, highlighting key concepts that can serve as a locus for intersection. These concepts also have the potential to shape future IE scholarship.
IE and SE: Definitions, Boundaries, and Research
Broadly, entrepreneurship is the scholarly examination of how, by whom, and with what consequences opportunities to create future goods and services are recognized, formed, evaluated, and exploited (Shane & Venkataraman, 2000). We, thus, situate IE and SE within an opportunity-centric view of entrepreneurship (Alvarez & Barney, 2007, 2010; Alvarez, Barney, & Anderson, 2013; McMullen & Shepherd, 2006). Opportunities are those situations where competitive imperfections exist in product or factor markets (Alvarez et al.). These imperfections can be either discovered (Shane, 2003) and/or created (Alvarez & Barney, 2007), setting the stage for gains from entrepreneurial alertness and proactiveness. Even though both IE and SE are anchored in this broad domain of entrepreneurship, they indicate different research territories that have the potential for intersection while retaining their own distinct identities.
IE: Definition, Boundaries, and Research
Monumental changes have occurred in the global economy in recent years. First, the economy of the 1990s and 2000s, when most of the original contributions to the IE literature were written, is vastly different from today's and tomorrow's economy. Business ecosystems have become global, compelling companies to meet increasingly international standards. These worldwide ecosystems, which have become the norm, are the hotbeds of global opportunities that companies of all size and age seek to exploit. Innovation networks are also now globally dispersed, and the production of knowledge is a worldwide enterprise (Cantwell & Mudambi, 2005; Zander, 1999). These networks allow companies to build on innovations developed by others around the globe, or join in the creation and discoveries of new products and technologies. Businesses are also increasingly expected to tackle challenges that face the whole planet, including energy consumption and climate change. These developments have enabled entrepreneurs operating in countries with varying levels of economic development to seize "global" opportunities that have a worldwide appeal.
Second, value chain activities that once existed domestically in the knowledge production-consumption function (along with other types of resources) have also become global. The emergence of "global opportunities" may require global distribution and coordination of value chain activities to tap into such opportunities. This creates an abundance of opportunities for new firm creation (serving as suppliers, consultants, consolidators, and intermediaries) and other entrepreneurial activities (e.g., new forms of transacting and network building) around the globe. Similarly, the supply of capital (e.g., microfinancing) has become more globalized (Iriyama, Li, & Madhavan, 2010; Kenney, Haemmig, & Goe, 2008). (3) With these developments, entrepreneurs, their ideas, discoveries, and connections routinely cross international boundaries with growing ease. These changes fuel IE activities in pursuit of opportunities.
Third, participants in global markets have also changed, with the growing entry of companies from emerging markets (Li, Li, & Shapiro, 2012; Zahra, Abdel-Gawad, & Tsang, 2011). These companies have developed their own products and brands, business models, systems of organization and coordination, production and distribution systems, and targeted parts of the global markets that have long been neglected by multinational companies. These companies' entrepreneurial capabilities have made it relatively easier to enter new markets and compete well. In turn, multinationals from advanced economies have learned to collaborate with, and create room for, mini-nationals from emerging markets.
Finally, there is a growing worldwide recognition of the power of entrepreneurship in addressing social issues while creating economic wealth (Austin et al., 2006; Zahra et al., 2008). The notion of "blended value" (Emerson, 2003; Nicholls, 2009) offers a holistic approach toward creating financial, social, and environmental value. It also underscores the need to revise our notion of IE and its boundaries as we can no longer accept creating economic wealth as the sole criterion of company performance in global markets.
The study of IE has grown rapidly over the past two decades, generating worldwide interest in examining how born global firms compete and define their identities (McDougall & Oviatt, 2000; Oviatt & McDougall, 1994). The concept of IE itself has undergone major changes over the past two decades (for reviews, Coviello et al., 2011; McDougall & Oviatt; Zahra, 2005), moving away from exclusively covering born global companies to recognizing that IE activities occur also in well-established companies. Another important change has been the reframing of IE around the notion of opportunity (McDougall & Oviatt). As such, current IE research includes three dimensions (Jones, Coviello, & Tang, 2011): entrepreneurial internationalization, international comparisons of entrepreneurship, and comparisons of entrepreneurial internationalization across countries.
Our redefinition of IE, stated in the Introduction section, indicates a need to identify multiple sources of novelty in international ventures. Our attention to novelty in terms of not only new revenue sources but also new business models and solutions is intentional as we hope to better capture the dynamic and constantly evolving global marketplace. Finally, our definition underscores SE and its growing role, prompting us to rethink what we perceive as entrepreneurial opportunities found across national borders. It also compels us to expand our metrics of value creation beyond the financial to include the social and environmental as well, as discussed next.
SE: Definition, Boundaries, and Research
Classical economic theory has long recognized social (societal) outcomes as key aims of entrepreneurship. Entrepreneurs spot opportunities to move the status quo to a new equilibrium, and thus improve the standard of living for all through new products and services. Schumpeter (1942) saw entrepreneurial ventures as allocators of social wealth. The field of SE represents a maturing of how we understand how to create as well as allocate social wealth and the recognition of the limitations of past approaches. Definitions and expectations regarding social wealth are changing rapidly, along with our understanding of the limitations of markets to achieve social wealth creation and distribution for all (Stiglitz, 2010). Social wealth creation requires distinct knowledge and skills in its own right. As a result, definitions of social wealth are shifting from the classic "social welfare" doctrine espoused by economists for generations to improving the quality of human existence and global sustainable well-being. These dynamics spur entrepreneurial energy that induces transformative system change (Martin & Osberg, 2007).
The developments just noted have legitimized the emergence and growth of SE as a research stream within the broader field of entrepreneurship. Specifically, key theoretical contributions of emerging SE research include the concept of blended value, issues to do with the "social" as a mission priority, recognizing organizations' balance of social value creation and destruction, social impact and system change as distinct organizational capabilities, and new dependent variables like global sustainable well-being, as we discuss next.
SE is a young field of study (Austin et al., 2006; Bornstein, 2007; Drayton, 2002; Harding, 2004; Hemingway, 2005). As a result, definitions of SE abound (Dacin, Dacin, & Matear, 2010; Mair & Marti, 2009; Martin & Osberg, 2007; Shaw & Carter, 2007; Short, Moss, & Lumpkin, 2009; Zahra, Gedajlovic, Neubaum, & Shulman, 2009). To us, the term "social" centers on the creation of social wealth as a goal, whereas "entrepreneurship" emphasizes the creation of new businesses, models, and solutions. We, thus, view SE as the "recognition, formation, evaluation, and exploitation of opportunities to create new businesses, models and solutions with a focus on achieving blended value." This definition parallels that of IE (McDougall & Oviatt, 2000; Zahra & George, 2002). Equally important, this definition means that SE goes beyond the traditional concepts of corporate social responsibility (CSR) (Baron, 2007; Harrison & Freeman, 1999) and "base of the pyramid (BOP)" (Prahalad, 2006). CSR and BOP activities typically start with what companies do and decide how to target it better to their different stakeholders and make a profit. In contrast, SE begins with compelling social needs that also represent profitable opportunities, and then organizes resources and talents to develop creative solutions to these needs.
As mentioned earlier, SE highlights a blended value approach that asserts that all organizations create and destroy multiple value types--financial, social, and environmental. These values are indivisible. Companies such as Apple, Samsung, Alibaba, Medtronics, 3M, Microsoft, and many others create social value. However, the tipping point for why a company would be viewed as a social venture is whether in its total decision making it prioritizes social outcomes over financial ones. This would be enshrined in social ventures' mission statements and constitutions.
Social ventures are dedicated to promoting social wealth, which refers to a community or society's overall well-being (Zahra et al., 2009). It is the outcome of managing and cultivating those assets and resources owned and controlled by that community--not only those owned by individuals, companies, corporations, or governments. Social wealth, thus, combines gains from independent and corporate social ventures besides those created through community resources, assets, and other endowments. Key endowments that contribute to social wealth include natural (e.g., the environment), human (e.g., happiness, and growth opportunities), social (e.g., cohesion, harmony, connectedness, volunteerism, and security), and cultural (e.g., shared destiny, common values, and identity) resources.
Social ventures also differ from both for-profits and not-for-profits by their deliberate investments in social impact and social system change capabilities. Social impact capabilities are the bundle of knowledge, skills, and routines necessary for achieving measurable social impact on a target client. For example, a firm that specializes in homelessness can develop social impact capabilities to innovatively transform this social problem and alleviate, if not eradicate, its negative effects. These capabilities are underpinned by a theory of change (Brest, 2010), that is, evidence-based practices for moving someone or something from a dysfunctional state to a more desired state. As such, social impact capabilities are heterogeneous across social ventures as some theories of change are more efficacious than others in creating desired social impact. Just as research and development (R&D) firms come to specialize in the fields of scientific and technological knowledge, social ventures establish capabilities on a foundation of social science knowledge and research.
In contrast to a traditional nonprofit outlook, SE is about transformative social system change (Kania & Kramer, 2011). Because of this, social ventures often need to develop social system change capabilities. Social system change capabilities are underpinned by particular knowledge, skills, and routines involved in having to change the social system built around a social problem/opportunity. The social system includes the set of actors who are active in addressing a social problem/opportunity, and who govern the prevailing narrative and behavior around how the social problem is perceived, understood, and addressed. Following the earlier example, a social venture's innovative approach to homelessness may require cooperation from an ecosystem of government, education institutions, nonprofits, employment agencies, etc. Yet each of these may be stuck in a particular paradigm of understanding homelessness, which serves as a barrier for the social venture to create its social impact. The social venture needs social system change capabilities to help persuade, incentivize, and guide the ecosystem stakeholders through a process of change. The more transformative and systemic the proposed social impact, the more social ventures need to develop accompanying social system change capabilities.
Social system change capabilities, thus, entail knowledge, skills, and routines related to changing a social system that forms the institutional and organizational context around a social problem/opportunity. Social impact capabilities, on the other hand, embody knowledge, skills, and routines dedicated to achieving a particular social impact on a particular client (e.g., individual, community, region) with a particular social problem/opportunity. Social impact capabilities are contingent on the organization's social system change capabilities. Inability to change the ecosystem can impede social impact, and therefore social wealth creation.
Social ventures also differ from nonprofits by their deliberate inclusion of an entrepreneurial culture and orientation (Boschee, 2006). This entails a major cultural shift in transitioning from a traditional nonprofit orientation (e.g., bearing all costs of services offered to clients) to thinking and acting entrepreneurially (i.e., finding ways to develop a new revenue stream). Social ventures usually have an entrepreneurial orientation that employs innovative approaches to both social impact and the generation of earned income.
To further delineate the domain of social ventures, Table 1 compares businesses along a spectrum of their missions: socially oriented public/not-for-profits, primarily profit-oriented, and dual mission (i.e., combining social and economic goals). Socially oriented public/not-for-profits focus typically on a niche such as dealing with homelessness in a local community or a broad set of social causes (e.g., addressing teenage pregnancy in a country). They are constitutionally constrained as to how they can dispense surplus economic value. Given their emphasis on pursuing social wealth as the goal, nonprofit organizations and nongovernment organizations differ significantly from social ventures, which explicitly place a premium on making a profit and experimenting with various debt/equity finance structures to leverage a wider access to capital markets (Nicholls, 2009).
Equally important, our discussion highlights that SE is not just about helping the disadvantaged, as emphasized in some definitions (see Dacin, Dacin & Tracey, 2011, for a review). This emphasis restricts the scope of SE and fails to appropriately perceive the opportunities for social wealth creation across the world. (4) Economically advanced societies also benefit from SE, which seeks to commercialize social innovations that enhance the psychological well-being and/or community development of their citizens. Social wealth creation opportunities, thus, involve lower and higher order human needs for the underprivileged and privileged.
Despite the growth of research on SE, the lack of theoretical development continues to handicap the literature and theory building efforts (Short et al., 2009). The dearth of empirical research further limits the progress of SE research, especially in a global business environment (Short et al.). Still, as stated earlier, the SE research stream has developed a niche set of concepts and perspectives that have implications for how we view IE, which we discuss next.
How SE Can Inform IE Research
A vital part of SE is community development, the process by which different members of the community organize their activities to address issues of common interest and enrich the common good. From a business perspective, community development skills can be effective in building a market and improving product sales. Social capital is needed to earn the trust of foreign communities that may be anxious about the intentions of newcomers and the ways they do business. Social capital is present in the networks, norms, and trust inherent in associations whose members work together in concerted collaborative action (Mathie & Cunningham, 2003). Community development recognizes these social relationships as aspects as well as a means to potentially leverage other community assets.
Some models of community development offer a warning to a new entrant going into a foreign market with the intention of "selling" or even imposing a technical solution on a community (Mathie & Cunningham, 2003). Imposing solutions can strain relationships with locals, potentially harming sales and limiting the success of social impact strategies. In contrast, asset-based community development models emphasize the need for building social capital while allowing the community itself to lead change (Kretzmann & McKnight, 1993; Mathie & Cunningham). These skills facilitate market penetration as well as enhance trustworthy transactional norms for the establishment of commercial relationships. These social and community development skills complement the commercial focus of IE activities. Further, as commercial objectives are achieved, attention should be given also to empowering the community to achieve the desired social change. These skills and empowered problem solving enable the community to overcome social problems while creating value.
SE also underscores the importance of intentions and ethics in gaining an influence, particularly in the face of perceptions that rich Western developed countries impose their values on others (Grenier, 2006). Moreover, resentment that the West has engineered the world in its favor can create barriers to trade. SE can effuse particular moral sentiments that are genuinely concerned with addressing inequality while encouraging social ventures to behave above pure self-interest. This is replaced by a spirit of mutual benefit, equity, and honesty. This reveals that continuation of inequitable distribution of wealth and benefits can be eschewed in deal negotiations, where relationships are defined in broader terms than profit. Indeed, the rise of what is known as anti-systemic movements (e.g., "Take Wall Street") signals a backlash against rising inequality, which could raise the bar of expectations for IE where blended value becomes more the norm (Smith & Wiest, 2012).
Our discussion makes clear that SE can broaden how IE opportunities are recognized and evaluated. Traditionally, and particularly in some for-profit contexts, social contributions are often perceived as more of a cost than a profit-making endeavor. Instead, SE researchers appear to view communities as captive markets. Part of building social capital can involve collaborating with communities as participants in R&D and design of technical solutions. Such R&D and design activities are then adapted to local peculiarities, such as weather, custom, and social hierarchies. Thus, SE skills create new entrepreneurial pathways that previously may have been perceived as unattractive, promoting opportunity recognition and evaluation skills.
SE can also enrich IE research by bringing attention to institutional change through proactive institutional entrepreneurship (Mair & Marti, 2009). Institutional entrepreneurs are those agents who mobilize resources to influence or change existing rules or even establish new ones (Dacin et al., 2010). Similar skills are necessary in SE to effect social change. Indeed, social ventures can spur the emergence of new ecosystems that involve the creation of new institutions with new institutional logics consistent with the desired social change. The link between institutional entrepreneurship and the notion of ecosystems accentuates the complex and multi-agent nature of social change and how social ventures need to collaborate with institutions in different countries that regulate, incentivize, and coordinate new socially desirable practices.
The intersection of SE and IE also has implications at the international policy level of analysis. To some, the existing structure of the global economic system means that some countries are poised to benefit more from IE than others (Ocampo, 2011; Stiglitz, 2007). This leads to economic and social inequities that fuel the landscape of international for-profit and SE activity. For example, Held (2004) reports that the 900 million people who live in the Western world enjoy 86% of the world consumption expenditures, 79% of world income, 58% of world energy consumption, and 74% of all telephone lines. In contrast, the poorest 1.2 billion of the world's population share only 1.3% of the world consumption, 4% of world energy consumption, 5% of world fish and meat consumption, and 1.5% of all telephone lines. Also striking is that 70% of the 1.2 billion people living on less than a dollar a day are women. These disparities reveal patterns of inclusion and exclusion in today's world economy, and the size of the gap between the empowered and the disempowered. Studying these patterns can expose the morality and equity of existing international economic systems (Dunning, 2003), and whether IE activity is efficient (i.e., making the best use of resources) or whether more ISE activity can address economic system inequities. SE brings focus on these issues in the international arena.
ISE can become a catalyst for economic and social change. Stiglitz (2007) advances that a more equitable global economic system would be more pro-development, favoring developing countries instead of holding them in a disadvantaged status. This can be achieved by changing global economic policies and governance (Held & McGrew, 2007). Without this, much ISE activity focuses on assisting disadvantaged countries. The opportunity cost of ISE activity is that resources could have been deployed elsewhere, if changes were made to the global economic and political system. Current transnational regimes are structurally limited in their ability to balance global efficiency and equity. Past development strategies have also been dominated by classical economic theory without regard to institutional and cultural contexts (Stiglitz). From this perspective, ISE can promote a balanced perspective on economic and social changes (Figure 1).
In summary, at the firm level of analysis, IE does not occur in a social or ethical vacuum. The success of IE is affected also by how well for-profit entrepreneurship is conducted with the benefit of social capital and community development efforts that espouse values of mutual benefit rather than self-interest. Successful SE and IE depend on institutional entrepreneurship that fosters socially desirable behaviors. At the international policy level, SE has implications for the design of the global economic system, deciding who benefits from IE, determining ISE activity needed in different parts of the world, designing efficient economic systems (Dunning, 2003), and introducing institutional reforms that promote global economic, political, and social equity.
Research Implications From the Intersection of IE and SE
In this article, we have sought to connect SE and IE and identify the implications of their intersection for wealth creation. An important implication of this intersection is that SE prompts a redrawing of the boundaries of IE. The IE field will be better placed to understand how entrepreneurship contributes to international economic and social outcomes by adopting a broader, yet focused, set of additional assumptions within its domain. These assumptions emerge from considering potential areas of mutual enrichment made possible by intersecting SE and IE. In Tables 2 and 3, we distill key assumptions at the firm and international policy levels of analysis, with an eye on defining the boundaries of IE.
Figure 2 presents a theoretical framework of key relationships at the intersection of IE and SE, reinforcing the assumptions outlined in Tables 2 and 3. As we reflect on Figure 2, it would appear that research opportunities at the intersection of IE and SE and at the firm level would include how opportunities are recognized and evaluated, and what types of capabilities are needed to recognize, evaluate, and exploit those opportunities. In Figure 2, the boxes "opportunities" and "capabilities" capture the inputs that contribute to potential firm-level IE. The box labeled "firm-level IE activity" represents the actual realized IE activities from those inputs. Table 3 then identifies key variables at the policy level. Here, we propose that firm-level IE interventions are constrained or enabled to the extent that they affect global sustainable well-being based on existing international institutional and governance systems.
Our discussion throughout this article also reinforces the merits of considering financial and social metrics when evaluating the implications of IE. This would improve future research but still fails to connect different types of value. A more promising approach is to emphasize "global sustainable well-being" (Stiglitz et al., 2010), which is a composite of economic, social, and environmental conditions and indicators of value. It includes factors such as material living standards, health, education, personal activities like work, political voice and governance, social connections and relationships, and the natural environment (Stiglitz et al.). It also captures the equity and sufficiency of how well the world is balancing economic, social, and environmental values, an issue that lies at the intersection of IE and SE.
As Figure 2 indicates, achieving global sustainable well-being requires vigorous firm-level IE activity as well as international institutional governance systems. For IE research, global sustainable well-being provides a needed focus as we probe how international entrepreneurial activity leads to a range of outcomes affecting the world. Focusing only on profit-making activity can be short-sighted because it ignores how social and environmental costs can come to have longer term financial repercussions for international economic, social, and political systems. Next, we identify major research opportunities that arise from our discussion. We begin with firm-level issues and then proceed to discuss policy questions in today's economy.
Future Research at the Firm Level
SE Opportunity Formation and Exploitation. Table 2 underscores a need for substantive research into ISVs' opportunity discovery, creation, evaluation, and exploitation. Among the questions to study are the following: How do social ventures internationalize? What factors push social ventures to internationalize? Will a focus on global social and environmental issues facilitate the internationalization of new ventures? To be sure, these issues have a major global impact, be it climate change and energy depletion that tend to have a "public good" nature on a global scale, or localized issues such as air pollution and water degradation in a community that nonetheless represent challenging issues to other countries. Accordingly, does the pattern of internationalization vary based on the type of global issues of concern? Under what conditions are such global endeavors undertaken by independent rather than corporate ventures? When and how can social ventures collaborate across national borders to address these issues?
Other key questions that require attention include the following: how do entrepreneurs conceptualize and evaluate potential ISE opportunities? How does the formation and exploitation of ISE opportunities differ based on discovery versus creation processes (Alvarez et al., 2013)? How much do social conditions and personal values affect these evaluations? How do entrepreneurs learn and develop metrics to identify and measure the attractiveness of ISE opportunities? More research is also needed to create ways of measuring social value creation, as well as the corresponding economic and social costs and benefits (Nicholls, 2009). Further, what are the factors that influence entrepreneurs' choice of the scale of ISE opportunities? Answers to these questions might be grounded in national cultures that imprint entrepreneurial cognition. They might also reflect national systems of innovations and prevalent institutions (Li & Zahra, 2012).
The role of independent ISVs (Figure 1) deserves further research. As we have proposed earlier (Table 1), ISVs differ from nonprofit organizations that focus primarily on social missions and social wealth creation. Our discussion identifies several questions for future research on ISVs. For example, how do individual entrepreneurs "convert" social issues into opportunities? How do they define their domain in nascent fields? How do they combine different strands of knowledge to weave a coherent notion of the ISV? Is the process of resource assembly for ISVs similar to those depicted in the literature for traditional for-profit ventures? Should we expect more informal and public investors to play a greater role in funding ISVs? Finally, how do entrepreneurs cultivate social innovations as they develop ISVs? How do they incorporate these innovations into the ISVs' ongoing operations?
Research is also needed on corporate ISVs (Table 1 and Figure 1). Specifically, how do corporations define opportunities for their ISVs? Do these processes differ from those followed by independent ISVs? What metrics do corporations use to determine the need for new ISVs? What are the social and business goals of corporate ISVs? How do corporations connect their ISVs to ongoing CSR and BOP programs? Where do corporations house their newly created ISVs? How much autonomy do ISVs have? Do the new ISVs follow the strategies of existing divisions or business units? How do corporations create capabilities to pursue internationalization through ISVs? What metrics do corporations use in evaluating their ISVs' contributions?
Emerging Economies. Most prior IE research has been done in the context of developed countries or companies from those countries with little attention to the challenges of different economies (Kiss, Danis, & Cavusgil, 2012). Yet measuring global sustainable well-being requires a broader global focus that includes research into the processes and consequences of IE in different economies--developed/underdeveloped, emerging/advanced. While the need for social ventures is increasingly evident in many developed countries (Zahra et al., 2008), many of the world's most intractable problems persist in emerging and underdeveloped economies. Emerging economies house billions who are at the "base of the pyramid" (Bruton, 2010; Bruton, Ahlstrom, & Obloj, 2008; London & Hart, 2004; Prahalad, 2006; Webb, Kistruck, Ireland, & Ketchen, 2010). Concurrently, companies from emerging economies are going international, prospecting for and exploiting opportunities outside their national borders (Li et al., 2012; Zahra et al., 2011). Still, we do not know how often social ventures established in these economies enter markets in other emerging or developed economies. It is also unclear how the process of ISV formation might differ between emerging and advanced economies. Given the dearth of empirical studies on entrepreneurship in emerging economies, studying ISVs could offer an important setting in which we could test key IE theories and establish their robustness (Kiss et al.).
National Culture and Institutions. Another key issue to examine in future research is how national cultures and institutions influence SE. Short et al. (2009) observe that although empirical SE studies are diverse in terms of the countries from which data are collected, most are concerned with finding generalizations of SE independent of national culture. Two areas of future research can profitably incorporate national cultures and institutions. First, for ISVs, how do these cultures and institutions influence entrepreneurial practice and performance? Second, future research may conduct comparative analyses of SE and ISVs across countries.
Social Capital and Community Development. Table 2 also encourages future ISE research into social capital and community development. Is social capital an antecedent to successful and profitable ISE? Social capital usually accumulates from a focus on social relationships and trusted norms. One hypothesis is that IE firms with SE focus and social capabilities will perform better financially than those that have a pure for-profit focus. This, it can be argued, would hold because an ISE focus exposes the venture to more markets and opportunities, and helps build the requisite social capital skills that foster business relationships and trade.
Another question is whether community development is a critical capability for profitable ISE. ISE research would benefit from a more explicit connection with the community development literature. Presently, there are competing views of community development (Mathie & Cunningham, 2003). One view espouses a technical assistance approach where an external entity attempts to implement a technological solution on a community. This is a needs-based view of a community. In contrast, the asset-based model has a starting assumption not of what a community needs but rather what are the existing assets within a community that can be mobilized to achieve the desired social change (Kretzmann & McKnight, 1993). The needs-based view usually imposes a solution from outside, whereas the asset-based model seeks internal problem solving and ownership. How do these competing models affect capability development? What are the performance consequences for ISEs in terms of both social and financial measures?
There is a need to recognize and capitalize on the social role that new, especially social, ventures play in today's global environment. Both social ventures and society at large can win by understanding this role. This role (e.g., pursuing SE) can stimulate IE, creating different types of value. Future researchers need to better conceptualize and define this social role, which is likely to be multidimensional. Once researchers have succeeded in clarifying these dimensions, the mechanisms by which they inspire new business creation, with an international mission, could be better articulated. This role will have informal (e.g., counseling nascent entrepreneurs) as well as formal (e.g., participating in setting industry standards) dimensions, and both dimensions require recognition and careful study.
The future study of IE is likely to thrive if we recognize and examine the social role of entrepreneurship. Different countries place different values on social, economic, and environmental wealth. Consequently, comparative studies conducted across different levels of economic development can clarify how these differences might influence financial and social wealth creation. We can also better understand how entrepreneurs in different societies weigh these values differently as they develop their companies' goals and missions. These fine-grained analyses can help in understanding the international nuances of entrepreneurial opportunity exploitation, and thus contribute to global sustainable well-being.
Future Research at the International Level
Benefit Distribution of IE Activity. In Table 3, we propose that the IE field would be enriched by considering the distributional equity of for-profit IE activity. A question to pose, therefore, is: Do some countries benefit more than others from for-profit IE? If so, what are the social consequences? Is there a social cost to some for-profit IE activities, and if so where? A hypothesis that is worth exploring concerns whether countries that benefit more from for-profit IE would also conduct more ISE activity. The assumption is that economic wealth generates generosity and/or moral compunction. Also, the type of ISE activity may vary depending on the wealth of a country. ISE activity in wealthy countries may be more about the spread of self-actualizing innovations, whereas this activity in poor countries involves more lower order needs. Such cross-country comparisons are underscored by a perspective that can help guide and assess the efficiency of overall IE activity, and how it might contribute to global sustainable well-being.
Institutional Governance. Several researchers propose that an unrestrained global economy of market liberalization often creates inequities (e.g., Ocampo, 2011; Stiglitz, 2007). They also observe that existing institutional mechanisms (e.g., United Nations, World Bank) are not engineered to act in the interests of global sustainable well-being. Instead, voting systems render these international institutions captive to the interests of superpowers, leading to issues of how the world is being constructed and whose interests it serves (Held & McGrew, 2007). By marrying the study of institutions and IE, we are better equipped to probe the entrepreneurial processes that lead to the evolution of these institutions in the first place. Many of these activities are international in their focus and scope.
Table 3 also shows a need for research into the institutional governance mechanisms that oversee the global economic system. These mechanisms may moderate the relationship between firm-level IE and global sustainable well-being, as we suggest in Figure 2. Achieving equitable and sustainable global economic and social outcomes requires not just firm-level activity but also international governance and institutional mechanisms. Developing and sustaining these institutions and mechanisms require careful negotiations among multiple parties, with different goals and capabilities. As these goals and capabilities change, international governance institutions and mechanisms should be revisited and synchronized.
The research issues we have just presented (Figure 2) infuse the IE field with explicit consideration of the mission of ISVs and their role in creating social wealth. This should encourage researchers to examine the equity of current IE activity: Why do some countries benefit more than others? Is there a case for more equitable IE opportunities across nations? The framework also draws attention to the global social costs of IE activity: How does IE activity harm/enable global social improvement? Who bears the costs associated with IE activities?
The intersection of SE and IE offers an important, rich, and timely but often overlooked opportunity to creatively revisit our conceptions of the broader field of entrepreneurship, and IE in particular. This intersection highlights the fruitful dialogue that can occur between the social and financial goals of entrepreneurship, while recognizing the growing globalization of entrepreneurial activities that individuals and firms alike undertake. For decades, researchers have equated charitable contributions, financial success, and business creation with the social role of entrepreneurship. As our discussion makes clear, this role is much larger, more profound, and more impactful than traditional views would suggest (Shepherd & Patzelt, 2011). This expanded role does not change what entrepreneurs actually do as they pursue IE; it more accurately captures their contributions to social, environmental, and economic wealth creation. Recognition of these varied, profound, and impactful contributions can also connect future IE research with practice and public policy globally, with a focus on "blended value" creation and global sustainable well-being. These valuable contributions make international entrepreneurs truly catalysts and agents of social change that uplifts the quality of the human existence worldwide.
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Shaker A. Zahra is Robert E. Buuck Chair of Entrepreneurship at the Department of Strategic Management & Organization, and Academic Director of the Gary S. Holmes Entrepreneurship Center, Carlson School of Management, University of Minnesota, 321 19th Ave. South, Minneapolis, MN 55455, USA.
Lance R. Newey is Senior Lecturer in Entrepreneurship & Innovation at UQ Business School, Level 4 Colin Clark Building, University of Queensland, St Lucia, Brisbane, Qld 4072, Australia.
Yong Li is Associate Professor of Strategy & Entrepreneurship at the School of Management and Academic Director of the Entrepreneurship Academy, State University of New York at Buffalo, 326 Jacobs Management Center, Amherst, NY 14260, USA.
We dedicate this article to Les Boby, Salouha El Sayed El-Khalifa, and Judy Sena, in remembrance and undying gratitude. We have benefited from discussions on the social role of entrepreneurs at the University of Twente (Netherlands); EGEPE Conference in Brazil; the Gary S. Holmes Center for Entrepreneurship (University of Minnesota); Tsinghua University (China); and RENT Conference in Bodo, Norway. We appreciate the suggestions of the participants of the Glasgow Workshop on High Potential Concepts, Phenomena and Theories in International Entrepreneurship Research, especially those by Patricia McDougall, Marian Jones, and Manuel Serapio, as well as the help of the anonymous reviewers. We are also grateful for the special help of Rod B. McNaughton in guiding our thinking through the issues we cover in this article.
Please send correspondence to: Yong Li, tel.: (716) 645-2522; e-mail: YL67@buffalo.edu, to Shaker A. Zahra at firstname.lastname@example.org, and to Lance R. Newey at email@example.com.
(1.) By sustainability, we mean issues pertaining to the natural environment. For the purposes of this article, we include sustainability as part of our SE focus, based on the concept of "blended value," as discussed next in our article.
(2.) In this article, we use the term international to refer to cross-national phenomena, while the term global encompasses the whole planet and the problems encountered on that scale. Thus, the term international suggests problems that are present in multiple countries but are localized (e.g., water pollution), while global suggests problems that impact everybody on Earth (e.g., climate change).
(3.) For example, commercial cross-border debt and equity invested in microfinance surpassed U.S.$11 billion in 2009, representing an estimated 20% of the funding base for specialized microfinance providers (CGAP, 2010). According to an Ernst & Young (2012) report, about 20% of VC firms in Brazil, India, Israel, and the UK invest outside their home countries, and many more VC firms in Canada (69%), France (82%), Germany (92%), and the United States (49%) invest internationally.
(4.) The European Commission (2013) defines social innovations as those that are "social in both their ends and their means--new ideas (products, services and models) that simultaneously meet social needs (more effectively than alternatives) and create new social relationships or collaborations. They are innovations that are not only good for society but also enhance society's capacity to act."
Table 1 Organization Mission and Types Organizational mission Socially oriented Primarily Type public/not-for-profit profit-oriented Independent Niche causes via charity Traditional new ventures and volunteerism Corporate Charitable foundations Traditional business firms (Chen, 2012) Organizational mission Type Dual: social and economic Independent Social ventures Corporate Bottom of the pyramid (Bruton, 2010; London & Hart, 2004; Prahalad, 2006; Webb et al., 2010); corporate social responsibility (Baron, 2007); social ventures (Chen, 2012; Munoz, 2010; Zahra et al., 2008), for example, those with a focus on sustainability Table 2 Firm-Level Revised Assumptions for International Entrepreneurship (IE) Prevailing assumptions Revised assumption Implications Viable IE opportunity Besides financial Opportunity-based recognition, wealth, IE definitions of evaluation, and opportunity entrepreneurship, exploitation are recognition, especially IE, determined by the evaluation, and should be extended potential financial exploitation should to include the wealth to be also encompass "social." created. social and environmental wealth. Conventional IE opportunity Pursuit of blended accounting and analysis should value (financial, financial measures include both social and determine the economic and social environmental cost benefit wealth) is key to analysis. determining the viability and success of IE activities. potential viability Some profitable HE Because of of IE opportunities. opportunities may differing foci, be approved because some IE activities of economic value will remain purely creation but later domestic while be discounted others will be because of social international. costs and vice versa. Pursuing social issues Pursuing social Social not just a represents a major missions can also cost but also an cost item. be a profitable area that calls for endeavor. and promotes IF activities. Market selection, In addition to Trust can precede competitive market selection, international positioning, and competitive business aggressive marketing positioning, and transactions. are key to aggressive profitable IE marketing, activities. community development and social capital as key capabilities for business/ profit generation. Financial returns are "Sustainable global Composite measures the key dependent well-being" is the are needed to variable when primary measure of capture different measuring the value created by types of values and value-added of IF IE. wealth being activities. created when evaluating the contributions of IE activities. Table 3 Policy-Level Revised Assumptions for International Entrepreneurship JE) Prevailing assumption Revised assumption Implications IE activities are Distributional Uneven bargaining concentrated in equity of IE power/distribution certain (i.e., rich practice. of wealth between and advanced) parts nations in of the globe. international economic system. International Explicit Does IE also keep entrepreneurs consideration of some countries enrich their social locked countries by consequences of IE into underdeveloped creating wealth activities. status? Does IE (financial). allow all nations to develop? National endowments The need for Need to adopt a and power positions international/ view of determine the global evaluations international distribution of of the equitable interest not just wealth created by distribution of national. IE activities. economic and social outcomes of IE activities. National Consideration of Need for institutions of the institutional for international home market (and achieving governance company's strategy) international/ mechanisms to determine relative global outcomes ensure social and gains from IE from IE not just economic system activities. firm or national efficiency and benefits equity at international level.
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|Author:||Zahra, Shaker A.; Newey, Lance R.; Li, Yong|
|Publication:||Entrepreneurship: Theory and Practice|
|Date:||Jan 1, 2014|
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