In many aspects of life where we come from influences where we go next. This also applies to social entrepreneurs: how they transition into social enterprise can play a big role. This blog explores how different starting points matter for the development of social enterprises.

Together with Professor Paul Tracey and Reader Neil Stott from the Centre of Social Innovation, I am currently studying the experiences of the entrepreneurs of Cambridge Social Ventures. It has been – and continues to be – fascinating to talk with the inspiring individuals who join the incubator as budding social entrepreneurs in this ongoing research project. One observation (that is beyond our main research focus) has struck us: social entrepreneurs often have very different experiences, depending on how they enter social enterprise. Management scholarship offers us two types that capture this distinction: de alio versus de novo entry [1].

De alio entry: transitioning their organisation

Those who enter social enterprise de alio seek to turn their existing organisation into a social enterprise. Their motivation for this is to fulfil their mission more effectively or sustainably in the case of some charities, or to pursue a social mission more centrally in the case of some businesses. Having been running a charity or a business for years, these budding social entrepreneurs can often draw on experience, contacts and financial resources.

While this wealth of valuable resources might seem ideal, it can easily be an “embarrassment of riches” with a twist: the embarrassing challenge does not arise for the entrepreneur because of an excess of resources, which is rarely the case, but because of a perceived shortage of options. This arises because these resources come with strings attached. For example, seasoned employees of for-profit businesses may struggle to get on-board for the new social enterprise mission. Similarly, charity trustees may be reticent to support a transition to social enterprise as they fear the imminent onset of mission drift or excessive commercial risk-taking.

Sometimes social entrepreneurs who enter de alio confess envying the blank canvas and the seemingly endless possibilities with which their de novo colleagues start.

De novo entry: starting from scratch

Those who enter social enterprise de novo start on their own. They come armed with ideas and passion but lack an existing organisation. They are eager to tackle a social problem but need resources and supporters to turn their dream into reality. De novo entrants can easily find their first foray into social enterprise a rather solitary pursuit as they leave the harbour of employment or education to venture out into the open sea. While their future may appear to be full of endless possibilities, the immediate present is initially often characterised by a time-consuming quest for money, expertise and their first customers. Gaining these is often critical to getting the venture properly established and on an even keel.

Different approaches to community

Both de novo and de alio entrepreneurs benefit from joining communities of like-minded social entrepreneurs, such as Cambridge Social Ventures as well as social enterprise networks. However, interestingly, they often do so in different ways. De alio entrepreneurs particularly benefit from joining communities of social entrepreneurs through gaining an alternative perspective to the worlds from which they came – be it business or charity, and by being able to fill the specific gaps that prevent their effective transition. For example, they may need training in creating impact or in thinking more commercially. In this case, communities support the entrepreneurs in helping them to broaden their options and horizons to embrace social enterprise more fully.

In contrast, de novo entrepreneurs particularly benefit by, firstly, receiving emotional support as they go through the highs and lows of founding a venture; secondly, by adopting structured work routines; thirdly, by gaining valuable knowledge about the sectors that they intend to enter. For example, they may swap skills with peers or benefit from useful introductions to sector insiders by their business advisers. In this case, communities support the entrepreneurs in gaining the coveted money, expertise and first customers for turning their exciting idea into a promising venture. Given their distinct backgrounds and approaches, de novo and de alio entrepreneurs interact with communities differently but can learn much from each other.

Know your path to reach your destination

The type of entry into social enterprise influences the initial path that entrepreneurs take. By being aware of the opportunities and challenges of each entry route and by managing these, social entrepreneurs are more likely to reach their desired destination. It turns out that where we come from does not need to determine where we can go. However, knowing your starting point can help you to get there.

Christian Hampel, [email protected]

Christian Hampel is an Assistant Professor of Entrepreneurship and Strategy at Imperial College Business School. Prior to joining Imperial he completed his PhD in Management at Cambridge Judge Business School and was a Research Fellow at the Centre for Corporate Reputation at the University of Oxford’s Saïd Business School. Christian’s research interests lie at the intersection of entrepreneurship and organisation theory. In particular, he focuses on how new ventures experience and manage social evaluations (e.g., stigma, legitimacy, identity) as they grow.

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References

[1] For a recent study see York, Jeffrey G., and Michael J. Lenox. “Exploring the sociocultural determinants of de novo versus de alio entry in emerging industries.” Strategic Management Journal 35.13 (2014): 1930-1951. The article is freely accessible through Wiley.