Prof. Savita Shankar, University of Pennsylvania, formerly of Keio Business School, takes a deep dive into social businesses in Asia and analyses the difference between Asian and Western social enterprises.   

Social Entrepreneurship: Looking beyond the buzzword by CoBS Editor Afifeh Fakori. Related research: Shankar, Savita, Social entrepreneurship in Asia: a literature review. International Journal of Small and Medium Enterprises and Business Sustainability. 1. 131 – 155.

The dawning of a new era

When Bill Drayton, the founder of Ashoka (a non-profit organisation to support a global network of social entrepreneurs) used the term “social entrepreneurship” during the 1980s, literature around the concept began to take shape. But truth be told, social enterprises have been in existence from much before the time when the term was formally coined.

Asia, in particular, has benefitted tremendously from social entrepreneurship in the 1970s and 80s. Grameen Bank, for instance, has been providing financial services to low income women in Bangladesh for decades now, while the Aravind Eye Hospital in India has been providing cataract surgeries to the poor at a cost that’s only a fraction of that in developed countries.  The emergence of such entities ushered in a new era where increasingly more emphasis is put in the creation of social value. Yes, economic value creation still continues to be essential, but merely as a means to ensure the sustainability of the venture.

However, empirical research in the field of social entrepreneurship is still in an embryonic phase. This is probably because a large majority of countries are yet to formulate a legislative definition of ‘social enterprise’. As a result, not all organisations with social missions call themselves social enterprises. This makes the task of identifying social businesses in these countries quite challenging, as some may be “de facto” social enterprises as opposed to the ones that are “de jure.”

On top of this, a lot of the debates in social entrepreneurship literature have been rendered irrelevant to Asian contexts as they are framed in Western terms. As such, contributing to research in an Asian context is challenging without first redefining some of the theoretical concepts and restating the underlying assumptions.

Transforming Asia, one social enterprise at a time

Sixty percent of the world’s population lives in Asia – a region with rampant pressing unaddressed social problems, market failure, government failure and inadequate public budgets. No wonder that Asian countries are the front runners when it comes to social entrepreneurship. Bangladesh is a striking example where non-profit organisations have been flourishing as an aftermath of the liberation war in 1971. The Grameen Bank founded by Nobel laureate Muhammad Yunus in 1976 is one of the pioneering social enterprises in Bangladesh.

It’s a similar story in Indonesia where a relationship seems to exist between the growth of social enterprises and the social movement for independence. Pre-independence Indonesia was characterised by a quest for educational and economic empowerment. Today, social entrepreneurship in Indonesia is fuelled on by the perception that social enterprises promulgate economic empowerment, and to a certain extent, by the Islamic identity of social enterprises.

China started moving towards social entrepreneurship ever since market reforms were introduced in the late 1970s. This was a time when the government was expected to provide social protection alongside public services such as health and education. The private sector, too, began to take an active interest in CSR with a lot of international players aiming to foster social entrepreneurship in China

Moving further east to South Korea, it is interesting to observe that the concept of social entrepreneurship was rooted in civil society before finding a place in the government agenda. But the government eventually enacted the Social Enterprise Promotion Act in 2006. Today, one of the popular types of social enterprises recognised by the South Korean government is the “work integration enterprise” where at least 50% of the employees are disadvantaged.

In Japan, the first generation of social enterprises dates back to the period from 1900 to 1975 when neighbourhood organisations with strong social orientation emerged. The second generation of enterprises appeared after the Great Kobe earthquake of 1975 and had a wider geographic scope. The third generation which emerged post 2000, is distinct from the first two owing to its greater market orientation and higher degree of innovation. The Takurojos or elderly care institutions in Japan are an innovative form of non-profit social enterprise in Japan. Unfortunately, though, unlike in Western countries, traditionally not-for-profit organizations in Japan do not enjoy much trust from the general public and are generally deemed to be less professional than private or government entities.

Social entrepreneurship through the lens of the developed world

The challenges faced by a society differ vastly based on the extent to which a country is developed. While the developing countries in Asia have challenges of poverty, unemployment and health to address, in developed countries, social enterprises have a role to play to address other social problems such as long-term care for the aged.

In developed countries social enterprises are credited with addressing social problems caused by market failures. In the United Kingdom for instance, social enterprises have been acclaimed for helping with social exclusion while in Australia, they are applauded for providing employment opportunities to marginalized individuals. The analysis becomes a tad more complicated for developing countries where there are often multiple market failures. Similarly, the political debates in Western countries regarding whether the government is using social enterprises in order to shirk its welfare responsibilities are irrelevant in developing countries with minimal welfare policies.

The funding for social enterprises in developing countries often comes from foreign sources, which changes the political equations considerably. Another stark difference between the two contexts is that while in Western countries there is debate about whether social enterprises can balance their social and financial goals, in developing countries the more important question is about the extent to which market-based approaches can be used to address the large development challenges.

Socio-economic context is key

It is interesting to note that despite close geographic proximity, Hong Kong and Taiwan have very different notions of social entrepreneurship. In Hong Kong, social enterprises emerged subsequent to the Asian financial crisis in 1997 when unemployment levels shot through the roof. Subsequently, these social businesses are very market oriented in line with the capitalistic nature of society in Hong Kong. In Taiwan, however, the civil society is very strong. As such, the interest is more skewed towards community development than towards business-oriented enterprises.

A study has revealed that the number of social enterprises that obtain their revenues from sale of products and services is substantially higher in Hong Kong than in Taiwan. For Taiwan, the bigger source of revenues was government grants as their government entities are required to prioritise purchase from such enterprises. It was found that Hong Kong enterprises were more focused on financial independence than their Taiwanese counterparts. This goes to show that even within Asia, the nature of social entrepreneurship varies depending on the socioeconomic context in each country.

Social Enterprise: Miles to go

The evolution of social enterprises in a country appears to be closely related to historical events in the country. But the ultimate model depends a lot on the country’s socio-economic circumstances, cultural factors and regulatory environment. While in Western Europe, social enterprises can be said to be located “at the crossroads of market, public policies and civil society” in East Asia, they are currently located mainly at the intersection of state and the market.

Currently, most of the social entrepreneurship literature is from the business and entrepreneurship perspective. More research needs to go into the evaluation of the impact that social enterprises have on development indicators. In developing countries, the social entrepreneurship debate needs to include sociological and public policy perspectives in order to ensure a richer understanding of Asian social enterprises and their potential role in society and the economy.

Useful links:

• Link up with Savita Shankar on LinkedIn
• Read a related post: Social Enterprise: 21st century jigsaw
• Visit the Keio Business School and University of Pennsylvania websites
• Download the special Global Voice magazine Asia-Pacific focus.

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