ECONOMIC PERSPECTIVE Even with the growing academic interest, the field lacks a conceptual understanding of the economic role and behavior of social entrepreneurs (Dacin et al. 2010). To move forward, well defined theories are needed to explain social entrepreneurships’ significance in the economic system (Pfeffer, 1993). In addition, externalities need to be internalized by social entrepreneurs in order to achieve optimal economic outcomes. Santos (2012) suggests that social entrepreneurship is the distributed mechanism that ensures that externalities are continuously being identified in the economic system.
Social Entrepreneurs play a significant economic role in cases where externalities exist. Social entrepreneurs are driven by and act on externalities, specifically positive externalities. Externalities arise when economic activity creates an impact that extends beyond the objective function of the agents developing the activity (Rangan et al. 2006). When positive externalities exist the outcome is often a shortage of resources such as education or employment. This under-provision of goods creates more value for society than value created for the recipient of the resources. The literature implies that the distinctive domain of social entrepreneurship consists of the social entrepreneur addressing neglected problems with positive externalities (Santos, 2012).
Social entrepreneurs are defined as individuals who start up and lead new organizations or programs that are dedicated to mitigating or eliminating a social problem, deploying change strategies that differ from those that have been used to address the problem in the past (Bloom & Chatterji 2009). Social Entrepreneurship continues to be a field of interest that crosses many academic disciplines and challenges the traditional assumptions of business development (Dacin et al. 2010). Social entrepreneurship has gained importance and relevance on a global scale. Although social entrepreneurs usually start with small initiatives, targeting local issues, they tend to have a global impact creating social value (Santos 2012).
Dees (1998) stated “Social entrepreneurs are like reformers and revolutionaries with a social cause.” Recent literature states that there are two cultures are at play in the field of social entrepreneurship: (1) a traditional culture of charity and (2) a contemporary culture of entrepreneurial problem solving. Both cultures have their origins in individuals’ psychological responses to the needs of society and reinforced by social norms (Dees 2012).
Majority of the literature on social entrepreneurship focuses on defining the concept rather than developing a testable theory (i.e. Mair & Marti, 2006; Peredo & Chrisman, 2006). In addition, most of the studies were conceptual with very few empirical studies. When reviewing the literature there seems to...