Are There Really Differences Between Social and Commercial Entrepreneurship in Developing Countries?: An Institutional Approach

Are There Really Differences Between Social and Commercial Entrepreneurship in Developing Countries?: An Institutional Approach

Luis F. Hidalgo (Universitat Autonoma de Barcelona, Spain), Josep Rialp (Universitat Autonoma de Barcelona, Spain) and David Urbano (Universitat Autonoma de Barcelona, Spain)
DOI: 10.4018/978-1-7998-2097-0.ch017

Abstract

The objective of this chapter is to determine the probability of starting social or commercial entrepreneurship in developing countries using the institutional approach as the theoretical framework. The study tests the hypotheses through a binomial logistic regression based on a sample of 10,598 entrepreneurs obtained from the Global Entrepreneurship Monitor (GEM). The main findings demonstrate that a higher level of education (formal institution) and a positive perception of personal values (informal institution) increase the probability of being a social entrepreneur. Also, the study shows that the interaction between informal institutions causes changes in the likelihood of being a social or commercial entrepreneur. This research advances the discipline by providing new information on the institutional environmental factors that influence social entrepreneurial activity.
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Introduction

The concept of entrepreneurship has been increasingly applied to the context of social problems and development challenges. The past decade has seen limited action taken by the public sector to confront social problems, which are increasing and becoming complex challenges in the economic and social development of countries. For this reason, new private initiatives have emerged intending to develop proficient organizations that can deal with social issues. Recently, socially motivated forms of entrepreneurship have gained attention because of their promise to alleviate social problems and provide products or services that are attended to neither by the government nor the market. Social entrepreneurship is increasingly recognized as an element in economic and social contributions (Stevens, Moray, & Bruneel, 2015).

However, social entrepreneurship and its performance within the economic system remains fuzzy, including how social entrepreneurship might interact with commercial entrepreneurship. What makes social entrepreneurship different from commercial entrepreneurship is that the former focuses on social benefit, and this becomes the most important factor (Dees, 1998b; El Ebrashi, 2013; Mair & Noboa, 2006; Martin & Osberg, 2007; Nicholls, 2006).

As a result of the rise of social and environmental problems in developing countries, researchers and politicians have seen social entrepreneurs as agents for changing this situation by offering innovative entrepreneurial solutions (Bornstein, 2004; Maclean, Harvey, & Gordon, 2013). Considering the differences between social and commercial entrepreneurship in terms of their goals and how value is created, some environments and abilities may need to be different in order to succeed. However, there is a limited understanding of the role played by the institutional context in influencing the entrepreneurial process, for instance, the study of how institutional factors affect (promote or inhibit) the emergence of entrepreneurial activities. Questions arise about how institutions relate to entrepreneurial activity and which institutional factors are most important in explaining the different types of entrepreneurship (Urbano, 2006; Urbano & Alvarez, 2014).

Institutional economics provides a theoretical framework for understanding these factors, arguing that human behavior is influenced by the institutional environment (North, 1990, 2005). Institutions are the humanly devised constraints that structure political, economic, and social interactions (North, 1990). Some studies have emphasized the prevalence of weak institutions and the importance of investigating them, especially in developing countries (Mair & Marti, 2006; Parmigiani & Rivera-Santos, 2015). However, several authors consider social and commercial entrepreneurs to be more common in societies with strong institutions (Estrin, Korosteleva, & Mickiewicz, 2013; Estrin, Mickiewicz, & Stephan, 2013). Hence, the decision to start entrepreneurship is also determined by the institutional context in which it occurs.

The use of institutional theory in understanding social entrepreneurship research is limited (Muralidharan & Pathak, 2017). This study intends to open up the exploration of social entrepreneurship and to present a comparative empirical analysis of the extent to which economic institutions apply to commercial entrepreneurship and are transferable to social entrepreneurship in developing countries. The objective of this chapter is to determine the probability of starting social or commercial entrepreneurship in developing countries using the institutional approach (North 1990, 2005) as the theoretical framework. The study tests the hypotheses through a binomial logistic regression based on a sample of 10,598 entrepreneurs obtained from the Global Entrepreneurship Monitor (GEM).

Key Terms in this Chapter

Developing Countries: A nation with a lower living standard and low Human Development Index, relative to other countries. There is a general reference point, such as a nation's GDP per capita, compared to other nations.

Global Entrepreneurship Monitor (GEM): A global research source that collects data on entrepreneurship around the world.

Social Entrepreneurship: This refers to efforts toward the creation of a business that prioritizes the creation of social value.

Change Agents: An individual that helps a society transform, participating in activities that improve the lives of individuals and communities.

Commercial Entrepreneurship: The activity toward the creation of a business that prioritizes the creation of economic value.

Institutions: Some restrictions structure human interaction in a society with rules, regulations, culture, customs, and traditions.

Social Welfare: It is created when at least one person is better, as long as their environment is not affected or maybe can prosper.

Entrepreneurship: The action and process of creating and developing a new enterprise.

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