03 Jul 2008Working Paper Summaries

The Future of Social Enterprise

by V. Kasturi Rangan, Herman B. Leonard and Susan McDonald

This paper considers the confluence of forces that is shaping the field of social enterprise, changing the way that funders, practitioners, scholars, and organizations measure performance. The authors trace a growing pool of potential funding sources to solve social problems, much of it stemming from an intergenerational transfer of wealth and new wealth from financial and high-tech entrepreneurs. They further examine how these organizations can best access the untapped resources by demonstrating mission performance, and then propose three potential scenarios, outlined below, for how this sector might evolve. Key concepts include:

Consolidation: In this scenario of sector evolution, funding will keep growing in a gradual, linear fashion, and organizations will compete for resources by demonstrating performance, with a focus on efficiency. The sector will consolidate.
Entrepreneurial: In a more optimistic future, existing and new enterprises will apply strategies to achieve and demonstrate performance, improving efficiency and effectiveness and attracting new funding sources.
Expressive: Rather than focusing exclusively on performance, funders and organizations may view their investment as an expressive civic activity.

Author Abstract

The Future of Social Enterprise considers the confluence of forces that is shaping the field of social enterprise, changing the way that funders, practitioners, scholars, and organizations measure performance. We trace a growing pool of potential funding sources to solve social problems, much of it stemming from an intergenerational transfer of wealth and new wealth from financial and high-tech entrepreneurs. We examine how these organizations can best access the untapped resources by demonstrating mission performance and then propose three potential scenarios for how this sector might evolve: Consolidation: In this scenario, funding will keep growing in a gradual, linear fashion and organizations will compete for resources by demonstrating performance, with a focus on efficiency. The sector will consolidate, with some efficient organizations gaining scale, some merging and then growing, and some failing to achieve either scale or efficiency and eventually shutting down. Entrepreneurial: In a more optimistic future, existing and new enterprises will apply strategies to achieve and demonstrate performance, improving efficiency and effectiveness and attracting new funding sources. More organizations will enter a reformed, competitive field of social change with new entrepreneurial models, established traditional organizations, and innovative funding strategies fueling widespread success. Expressive: Rather than focusing exclusively on performance, funders and organizations may view their investment as an expressive civic activity. As much value is placed on participating in a cause as on employing concrete measures of impact or efficiency. In this scenario, funding will flow as social entrepreneurs experiment with new models based on a range of individual priorities and relationships.