dowser | February 1st, 2012 | By Rachel Signer
“A duo of researchers at the Harvard Business School recently set out to investigate movers in the field of social entrepreneurship beyond the big names who attract the most attention. Their study uses six years’ worth of applicants for an Echoing Green fellowship as the sample base for systematic look at where the field is now, and where it is headed. Below, Harvard Business School Associate Professor Julie Battilana shares a few of the study’s most significant findings.
Dowser: Where did the idea for the study come from?
Battilana: It’s a study on which I’ve been working with Matthew Lee, a doctoral student at Harvard Business School. The idea behind it is to be engaged in the field of social enterprise, and not just by doing theoretical work. We wanted to do the kind of study that would be helpful to social entrepreneurs themselves. We actually already knew a lot about the highly visible, very successful social entrepreneurs–and it is probably helpful to the field of social entrepreneurship that some social entrepreneurs have become very visible. But the social entrepreneurship field is so much bigger than the handful of well-publicized cases. People were asking questions about the field–who are these social entrepreneurs, what do they do, where is the field headed–but to this point, there hasn’t been a systematic approach in place to catalog information about social entrepreneurs.
What were some of the most surprising results of the study?
One interesting finding was about the diversity of projects being proposed–there is a broad range across sectors. The most-publicized examples are usually health or education projects, but there is a huge variety out there. Now, that being said, the applicants did have some points in common. The first is that, although there’s all this discussion about social entrepreneurs potentially changing the world, what’s interesting to us is that these people are not always attempting to change the world. Often, what they want to do is address a problem locally. They are looking for local solutions, and it is very clear to them that they will have to draw on local resources and partner with local organizations and stakeholders.
In terms of revenue models, some rely on donations, and on the other end of the spectrum, some rely on commercially-generated revenue, and others rely on a mix of the two. We are seeing the rise of organizations that rely on both forms of revenue as well as the rise of organizations that rely almost exclusively on commercially-generated revenue. I call the latter group of organizations “hybrid organizations” because they combine a commercial logic with a social welfare one: their primary objective is to achieve a social mission but they rely on commercial activities in order to generate the revenue that they need to sustain their operations.
Hybrid organizations have long existed in certain sectors such as education and healthcare, but they are now represented, and have been spreading, across all sectors including financial services, consulting, retailing, consumer products, apparel, food processing and software development. Digital Divide Data is one example of a hybrid organization (they were not an EG fellow). Vision Spring is another example. Among the EG fellows, Hot Bread Kitchen is an example of a hybrid organization. [According to an article about the study on the HBS website, “In Echoing Green's pool of applicants for 2006, 63.2 percent proposed business models based entirely on donations, 33 percent offered models based on a mix of donations and generated revenue, and 3.9 percent proposed models meant to run entirely on self-generated revenue. In 2011, 54.2 percent of applicants had proposed donation-only models, with 40.6 percent proposing a mixed model. And 5.2 percent intended to run entirely on revenue generated by the business.”]
The rise of hybrid organizations among social enterprises raises the issue of mission drift that Matt and I want to study. If you look at commercial microfinance organizations, which are examples of hybrid organizations, sometimes they are criticized for losing track of their social mission as they become more profitable. So, we need to help emerging social enterprises that adopt a hybrid model to figure out how they can achieve financial self-sustainability while not losing sight of their social mission.
One important caveat is that our study is not meant to be normative–I do not mean to say that all organizations should have one kind of revenue model. It makes sense for some organizations to have a commercial business model, but not all. In the social sector one has to understand that some interventions will never be commercially viable, but they are needed and it’s important to continue supporting these initiatives philanthropically through grants and other types of giving.
What do you think will be the impact of the study?
We see this study as an early step in a long-term program of research that will help the social enterprise field develop. I think social enterprise is a promising way to create both economic and social value. We as a society have a lot to do to help these organizations succeed, because they are facing a number of challenges–some having to do with funding. But things are moving in the right direction. The field of impact investing is on the rise. The rise of hybrid legal statuses, like benefit corporations and L3Cs in the U.S., have the potential to bridge the for-profit, non-profit divide, but it’s still very early so we are waiting to see what the advantages of those statuses will be.
Recently, there was a conference of leading impact investors in New York about social enterprise and about defining the field of social entrepreneurship. We were invited there to talk about our collaboration with Echoing Green because it had been identified as one of the first collaborations between an organization like Echoing Green and researchers. So we hope that our study can be a model for future partnerships between philanthropists, impact investors, social entrepreneurs, representatives of public authorities and academics. Working together will be critical to figuring out the best ways to move the field forward.
How did you design the study?
We decided to partner with Echoing Green, a fellowship organization that aims to promote social entrepreneurship. They attract applications from thousands of social entrepreneurs from around the world, and every year they fund between 15 and 20 social entrepreneurs. Together with Cheryl Dorsey and Lara Galinsky from Echoing Green (EG), Matt and I started brainstorming about the type of study we could do. It was obvious to us that the best approach was to look at the whole group that had applied. It’s not an unbiased sample, because these are self-selected people who wanted to become EG fellows. Fortunately, EG has a definition of social entrepreneur that is very inclusive. We looked at the people who applied for the fellowship between 2006 and 2011–there were thousands. Then we took a random sample of 40 percent of all the applications–that was 3500 applicants-either in the process of launching their social enterprise or getting ready to launch. We created a codebook with 100 variables—basically a list of items corresponding to qualitative factors about the applicants. For example, one has to do with the type of revenue model that these applicants might be using. We created a code for the three different kinds of revenue models—based on donations only, on commercially generated revenues only, or on the mix of the two. [Note: The study also had codes for the aims of the projects and the beneficiaries, as well as plans for legal incorporation.] Throughout the process, we had multiple researchers review each application to make sure that their interpretations were consistent. The whole coding process took over a year.”
This article originally appeared in dowser