Entrepreneurs as Social Innovators? Think Twice, Says Professor Sergey Anokhin

Social innovation and social innovators

Social innovation – a concept that generates much public debate of late – is a very elusive entity. Few people seem to agree what it is. Even fewer know how to measure it. Still fewer can identify with certainty who is responsible for the introduction of social innovations. An international group of researchers from Kent State University and Sweden’s Lulea University of Technology has tried to put the boundaries on this concept and engaged in a careful analysis of the role that social and commercial entrepreneurs play in improving the quality and quantity of life for the members of the society.

Entrepreneurs as social innovators

Sergey Anokhin, an Entrepreneurship Professor from Kent State University, who was a part of the group, explains that the economic tradition places the honor of introducing social changes at the feet of entrepreneurs. When entrepreneurs create new products or services, we are told, everybody wins. Quality of life improves, and entrepreneurs themselves – or even their industries – rarely if ever capture all the benefits. The world becomes a better place. When social entrepreneurs take the baton, things look even brighter, because they are never after their own interests in the first place. All they want to do is changing the world for the better, one step at a time.

The study

Appealing as these beliefs are, the reality looks markedly different. A careful analysis of the effects that social and commercial entrepreneurs have on social innovation reveals a more nuanced picture. The study was conducted in a sample of all 88 counties in the State of Ohio over a 12-year period. Indeed, social entrepreneurs tend to bring about social innovation, and the quality of life improves as a result of their actions. This includes economic wellbeing, access to healthcare, family life, education, and crime. Commercial entrepreneurs, on the other hand, subtract from rather than add to the quality of life in their regions when looking from the macro level perspective. Both effects manifest stronger in poor areas. Contrary to the classic beliefs, commercial entrepreneurs target their own agenda at the cost to regions where they operate, and poor areas are especially vulnerable. The much-discussed spillover of benefits to the area’s residents simply does not occur when profit-seeking entrepreneurs enter the picture, observes Dr. Anokhin.

Why does it happen?

The primary reason for the negative impact of commercially-minded entrepreneurs on social innovation, explains Professor Anokhin, is their preoccupation with deriving the maximum value from their activities followed by providing the best outcome for those immediately affected by the success or failure of their ventures – employees, family members, etc. Social welfare enters their calculations as an afterthought. Even if the organization pursues socially desirable objectives – as is the case with microlending and other activities that greatly rose to prominence lately – the underlying motivation of profit-seeking entrepreneurs is just that – their own bottom line. When they do address social ills, they primarily target the symptoms and not the true causes of the problems they claim to be solving. When the area where they operate is under stress, entrepreneurs have even less leeway in channeling their efforts outside of what matters for their business as such. Raising funds, getting resources, accessing high-quality networks are much harder to accomplish in distressed environments. As a result, entrepreneurs who choose to operate in such regions often overcharge their clients. Poor pay more. While entrepreneurs may occasionally provide solutions to isolated problems, on balance they deprive poor regions they serve of the benefits that the society has come to expect from them.

What it all means

In practical terms, suggests Dr. Anokhin, the study results indicate that entrepreneurs are not created equal when it comes to helping the environments where they operate. Only select few – the ones that explicitly put social welfare before their own bottom line – could be the true engines of social innovation. We call them social entrepreneurs. For a region that tries to improve the well-being of its residents, the implications are clear: With the limited resources it has, finding ways to support and promote social entrepreneurs is the best strategy.

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