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Research Friday: The Functions of Government in Social Entrepreneurship

Welcome to Research Friday! For this week’s post, we welcome Dr. Gordon Shockley, who describes the work he and colleague Peter Frank are doing on social innovation. As always, we welcome your comments, feedback and suggestions!

Government has a rich legacy of social entrepreneurship. In the 20th century, it orchestrated large-scale social change when it had the capacity — the resources, expertise, and available political, social, and economic institutions — to do so. Consider some examples from American policy history. In response to the Great Depression in the 1930s, President Franklin Delano Roosevelt’s administration enacted the nation’s first-ever social policy with the programs of the Social Security Act. The U.S. federal government’s social innovations reached new heights with President Lyndon B. Johnson’s Great Society programs of the 1960s. The U.S., as well as the national governments of much of the developed world, robustly practices variants of high-capacity governmental social innovation today, such as the myriad programs countering the global Great Recession.

There is also a distinguished history of social innovation in the U.S. from the private, non-governmental civil society partnering with government. For example, many of the reforms from the Progressive Era in the early 20th century depended on action from both government and charities. As Camilla Stivers (2000) puts it, “Women reformers recognized that private philanthropy was ill equipped to cope with the scale and seriousness of urban problems; charities had neither the public authority nor the necessary financial resources” (p. 93).

The social innovation of hospice care was imported from the United Kingdom in the 1960s, but not institutionalized in the U.S. until the federal government became involved, most notably by making it a reimbursable service under Medicare. In more developed nations with high levels of state capacity like the U.S., government has often been the originator, implementer, or adapter and promoter of social innovations. In these instances, government drives much of the process of social entrepreneurship. Across the globe there are many recent and well-known cases of social entrepreneurship that follow this pattern of independent sector or civil society working with government, such as Muhammad Yunus’ Grameen family of ventures and Fazle Abed’s BRAC in Bangladesh.

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In our research article soon to be published in Regional Science Policy and Practice, my colleague Peter Frank and I explore a sequential, process-based relationship between higher or lower levels of state capacity and the origination of social entrepreneurship from the bottom-up or the top-down.

Social entrepreneurship is a demand-side process of responding to social needs that leads to large-scale social change. In our paper we conceptualize a functional theory of social entrepreneurship and articulate the “classical view” of entrepreneurship in economics of Israel Kirzner and Joseph Schumpeter — namely, utilizing Kirzner’s and Schumpeter’s enduring theories of entrepreneurship that recognize that entrepreneurship is ubiquitous in all human endeavors and that the process of entrepreneurship takes priority over individual entrepreneurial actors.

We then extend the Kirznerian and Schumpeterian classical view to social entrepreneurship theory-building. We adapt Kirznerian and Schumpeterian theory to social entrepreneurship, firstly, in order to move beyond viewing social entrepreneurship as simply a cross-sectoral phenomenon and make the stronger claim that entrepreneurship is a universal phenomenon. Secondly and thirdly, we also require Kirznerian and Schumpeterian theory to conceptualize social entrepreneurship as a function or process above all else that produces observable, systemic effects (i.e., large-scale social change).

We then develop a typology of state capacity and origination of social entrepreneurship to describe the primary functions of government in social entrepreneurship. In nations with lower levels of state capacity, government intervention in social entrepreneurship can be different. Social innovation in countries with less developed state capacity seem to follow an opposite, bottom-up path in which social entrepreneurship comes from outside of government. Governments in these nations become involved, if at all, much later in the process of social entrepreneurship. They often become enabling institutions, that is, providing resources, and policies in order to amplify the effect of local, bottom-up social innovations and make them large-scale.

Governments in nations with lower levels of state capacity perform more imitative or replicative functions instead of the originating, implementing, and promoting functions of governments in countries with higher levels of state capacity. Thus the relationship between social entrepreneurship and state capacity is an important one in achieving social change.

We specify four functions of government in social entrepreneurship: 1) government as originator and implementer (higher state capacity/top-down social entrepreneurship); 2) government as bungler (lower state capacity/top-down social entrepreneurship); 3) government as imitator and adopter (lower state capacity/bottom-up social entrepreneurship); and 4) government as adapter and promoter (higher state capacity/bottom-up social entrepreneurship). Each of these governmental functions demonstrates a different role of government intervenes in social entrepreneurship in enabling or, indeed, inhibiting large-scale social change.

Gordon E. Shockley, Ph.D., is Assistant Professor of Social Entrepreneurship in the School of Community Resources and Development at Arizona State University. His teaching and research interests include non-market entrepreneurship and the politics, economics, and sociology of the arts and humanities. He recently co-edited with Dr. Peter Frank and Dr. Roger Stough Non-market Entrepreneurship: Interdisciplinary Approaches (Edward Elgar).

^ [1] Gordon E. Shockley and Peter M. Frank (2011). “The Functions of Government in Social Entrepreneurship: Theory and Preliminary Evidence.” Regional Science Policy and Practice, vol. 3, no. 3, pp. 181-198.


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