Outline

V i z i o n e 39 / 2022

393

UDC 334.72:364-3].01 Goran GOLUBOVSKI, PhD∗ Marina KANTARDJIEVA, PhD∗ Irena ASHTALKOSKA, PhD∗

BARRIERS THAT AFFECT THE SOCIAL ENTREPRENEURSHIP

Abstract: This paper is focused on the barriers of the social

entrepreneurs and their social enterprises experience during their activities. The social entrepreneurship represents an alternative approach in solving the social problems in the society. Hence, the social entrepreneurship is a hybrid of its social mission and its business approach needed to support the mission. This hybridization produces a complex model and its complexness can be seen through analysis of the barriers that social entrepreneurs face during the execution of their social aims. The barriers of the social entrepreneurship can be of economic, socio-cultural and institutional nature and often they represent an opportunity for the social entrepreneurs. This ability of seeing the barriers as opportunities by the social entrepreneurs is a result of their embeddedness in the local communities and their knowledge of the local formal and informal relationships.

* AUE-FON, Skopje [email protected] * AUE-FON, Skopje [email protected] * [email protected]

V i z i o n e 39 / 2022

394

Keywords: social entrepreneurship, social entrepreneurs, social barriers, institutional barriers

Introduction Conventional business strives towards economic gain in the form of

profit or increased market share. Recently, a new paradigm has taken the place of this established view. Social enterprises and social entrepreneurs are representatives of this new paradigm and they strive to create sustainable social value in addition to economic value. In fact, they use economic gain to achieve social goals by undertaking activities such as economic integration of people with special needs, ethical agriculture in which farmers are paid fairly, activism, environmental protection, etc.

From the above we can say that social entrepreneurship has a dual mission that aims to create social and economic value. The very intention to realize this dual mission is more complex in its nature than the mission of conventional businesses and business entrepreneurs who strive to realize only economic value. Because of this complexity embedded in the identity of social entrepreneurship they face equally compound and complex barriers (Davies, Haugh & Chambers, 2019:1616-1617).

Barriers as opportunities for social entrepreneurs The entire economic activity takes place within a social and

institutional structure that inevitably affects all actors. Social entrepreneurship is no exception because it deals with activities that fall within the framework of social and economic (Robinson, 2006:101). This institutional structure, as well as the culture in which the institutions function, creates barriers, but also opportunities for market entry and further development of social enterprises.

Even more than a century ago, authors such as John Bates Clark, as far back as 1907, wrote about the barriers that prevent competition from taking over the market. Since then, many authors have dealt with this field of study, but certainly the most famous, according to Robinson (2006), are Sherer and Porter, who in the 80s of the last century clearly specified the barriers to market entry and which are studied today in the subject of strategic business management and entrepreneurship.

In countries with weak institutional capacities, the provision of social goods and services by the state is ineffective. This inefficiency is an opportunity for social entrepreneurs to put themselves in the position of distributors of goods that are not in supply. Barriers are challenges and opportunities for social-entrepreneurial action. Unfortunately, there is no

V i z i o n e 39 / 2022

395

substantial literature addressing entry barriers in social entrepreneurs. This is also noted by Krueger, Schulte & Stamp (2008) who explicitly state that there is a lack of research on the role of barriers in social entrepreneurs.

Robinson (2006:100) is the most cited author who deals with the analysis of barriers in the context of social entrepreneurship, and he believes that entry barriers are the “antonym” of opportunities, but these same obstacles, depending on perception, can also represent opportunities. Business entrepreneurs often use the analysis of these entry barriers as a criterion for evaluating opportunities. Their perception of these entry barriers influences the final decision to enter a particular market.

In this context of the duality of the term barrier, which can also represent an opportunity, Krueger, Schulte & Stamp (2008) provide a general cognitive picture of barriers, emphasizing that barriers are at the same time triggers of socially entrepreneurial action. Thus, they distinguish between push and pull barriers, depending on the entrepreneur's perception.

In this context, some positive events can push the entrepreneur to establish a company, while for social entrepreneurs it is mostly about negative events that create frustration and dissatisfaction with the current status quo situation in his contextual environment and hence the desire for social entrepreneurial action is born.

Types of barriers in social entrepreneurship Robinson (2006) suggests that it is best to view social

entrepreneurship opportunities in the context of the social and institutional factors that create them. From there, Robinson lists three categories of entry barriers that affect social entrepreneurs and their social businesses. He divides these entry barriers into:

• Economic barriers • Social barriers • Institutional barriers

In the context of economic barriers, Robinson (2006) uses already established definitions that focus on entry barriers that the company itself creates to prevent competition. This implies investments in the development of technology, resources, etc., which creates a competitive advantage to the level that will create a problem for the competition. Lower cost advantage, product differentiation, need for capital investment, customer or product switching cost, investment in technology as well as investment in research and development are examples of economic barriers. Obviously, these "scarecrows" are of a financial (economic) nature.

V i z i o n e 39 / 2022

396

On the other hand, Dacin, Dacin, & Matear (2010:49) provide a striking analysis regarding social entrepreneurs and competitiveness. They believe that it is precisely the characteristic approach to competitive advantage that defines and exposes true social entrepreneurs. Social entrepreneurs do not establish competitive barriers, like traditional businesses, but they, above all, share their knowledge and use resources in a cooperative way (Davies, Haugh & Chambers, 2019).

Based on the findings so far, we can say that economic barriers are one of the biggest challenges for social entrepreneurs due to the lack of a legal framework in many countries for them to register and access formal capital. That is why innovation comes into play when collecting funds and resources from a variety of possible sources, with which social entrepreneurs become flexible and responsible, above all to their stakeholders (Wildmannova, 2018).

Social barriers follow that prevent entrepreneurs from using social networks that exist in the market. When we consider that communication takes place through these networks which can be formal and informal, then it is clear that they significantly influence the performance of an organization.

Robinson (2006:101) lists five categories of social networks that can represent entry barriers: business owners, business organizations, civic organizations, political infrastructure, and an attractive labor market. Lack of access to these social networks can be fatal when entering the market, especially for new companies that lack experience and knowledge of the new market.

The impact of social barriers is best seen through the consumer behavior of the products and services of social entrepreneurs compared to those of conventional businesses. While conventional businesses convey messages such as price and quality, social entrepreneurs convey messages such as fair treatment throughout the entire production chain, sustainability, environmental protection or investing in the community. These messages are more complex than those of conventional businesses to be conveyed and absorbed by consumers (Davies, Haugh & Chambers, 2019:1637-1638).

Wildmannova (2018) in her study of social enterprises in the Czech Republic notes this barrier and suggests that the message emitted by social entrepreneurs should be spread in a targeted promotion to the public by introducing courses on this type of innovative business in the curricula for secondary schools and colleges.

On the other hand, although social entrepreneurs have a complex message to convey, through their rootedness in the community they get easy access to informal networks that are outside the established

V i z i o n e 39 / 2022

397

business/economic circles. In relation to civic society organizations, political infrastructures and access to the labor market, they have an advantage due to their ideological and political direction, which finds support in the mentioned circles.

Finally, Robinson (2006:102) says that institutional entry barriers prevent the entrepreneur from getting to know or adapting to the rules, norms and values that are part of the culture and behavior of the market, industry and society.

Bornstein & Davis (2010:71) provide a very interesting retrospective analysis of the source of institutional barriers. These authors point out that with the industrial revolution there is a division of labor into different sectors which are further institutionalized through the action of isomorphic forces, that is, through the creation of standards and norms which are characteristic of that industry and which lead to progress. But also, Bornstein & Davis (2010:71) emphasize that this institutionalization leads to divergence between different sectors and institutions, creating barriers: “At the same time, institutional and conceptual barriers that separate fields, industries and sectors create the difficulty of giving a single solution (for socio-economic problems in the society)”.

These barriers appear at multiple levels and dictate the relationship between the company and customers and between the company and society, hence Robinson further divides institutional barriers into:

• Formal, that is, public institutional barriers and • Informal, cultural barriers

Every system consists of rules and norms that are necessary in order to be part of the same. The system of government, law and legislation, financial markets and institutions are codified and formalized institutional structures that level the transactions between the participants in the system itself, that is, the market.

Formal institutional barriers can deter new market entrants if the market lacks adequate institutions to encourage entrepreneurial activity. Organizational development depends on legal, political and financial institutions, but on the other hand, the development of social entrepreneurship is conditioned and encouraged precisely by this institutional deficiency that produces socio-economic problems. Even when we have established institutions, their inefficiency becomes fertile ground for social entrepreneurs, in which they see an opportunity in line with Schumpeter's creative destruction. The problem does not lie in the availability of existing institutional resources, even when they are scarce, but that the real task lies in the ability of social entrepreneurs to create resources that will cope with the

V i z i o n e 39 / 2022

398

problem of lack of institutions in a given context (Dacin, Dacin & Matear, 2010:50).

For example, if the market opportunity is located in countries in transition from public ownership to private ownership, then irregularities and carelessness around property rights represent entry barriers for entry into that market.

Furthermore, some markets do not have active financial markets. Some entrepreneurs would not consider these markets as an entry opportunity because they do not believe they can overcome these institutional barriers to create a social enterprise. In this context, perhaps the biggest barrier for social entrepreneurs is the lack of staff that can develop a business plan and then adapt it in an organization whose main goal is a social mission (Bornstein & Davis, 2010:50; Dacin, Dacin & Matear, 2010:50; Robinson, 2006:103; Dacin, Dacin & Matear, 2010:50).

Simply put, in underdeveloped economies and regions entrepreneurs face underdeveloped infrastructures, corruption, financial crime and racketeering, lack of banking institutions and so on, which represent institutional entry barriers (Davies, Haugh & Chambers, 2019).

On the other hand, cultural barriers are informal in nature. We know that culture is a set of informal, norms, customs and rules characteristic of a certain group of people. Knowledge of these informal “institutions” such as language, slang, dress and behavior are often of paramount importance to a company’s success in securing goodwill and trust among stakeholders. These forms represent a barrier, but at the same time they also represent the so-called cultural capital (Robinson, 2006; Vuković, Kedmenec, Postolov, Jovanovski & Kornet, 2017).

When we talk about values and principles Davies, Haugh & Chambers (2019:1630) give a nice example of ethical value barriers that explain the disagreements between the principles of the social enterprise and the other stakeholders. They talk about cases where social entrepreneurs do not accept a financial grant, bank loan or promotional materials from a supplier because the organization providing it does not share the same values and principles with their organization. Social enterprises see this as a threat to their authenticity and their social mission.

Social entrepreneurs are, above all, local experts and most often come from within the affected community, so the knowledge of cultural circumstances, which can later be used as cultural resources, is of great importance for the success of social-entrepreneurial operations.

Social entrepreneurs are mostly conceptually dependent on the location and culture of operation, and it is very likely that a certain practice

V i z i o n e 39 / 2022

399

of social enterprises in underdeveloped countries cannot be used in developed countries, where consumers have different expectations for services. The context of underdeveloped countries allows the development of low-cost solutions that allow social entrepreneurs to focus more on results rather than on standards that are often the occasion of cultural norms (Staber, 2005 and Robinson, 2006 cited in Dacin, Dacin & Matear, 2010: 49).

Social entrepreneurs operate within local problems, so cultural capital and barriers are particularly important in the relationship between social business and residents in a social sector market where many norms and rules exist. Naturally, these informal institutions are much clearer for those who are already integrated into that culture than for those who come from outside, so successful social entrepreneurs usually come from within the specific culture. Any lack of mutual understanding due to a cultural gap can be a serious entry barrier for the interested entrepreneur.

In line with this thinking, we will mention the perceptual-cultural barrier mentioned by Borzaga & Defourny (2003:363-364). This barrier isolates the psychological-perceptual bias that is characteristic, most of all, in countries with a high degree of competitiveness and which refers to the perceptive capacities of social businesses in dealing with social problems.

In Europe, or especially Germany, as Borzaga & Defourny (2003:363-364) conclude, only organizations that generate income through commercial activities, serve the interest of the owner and bring him profit have an exclusive right to the term “enterprise-business”. Hence, social businesses and entrepreneurs are viewed with distrust due to the widespread belief that for-profit businesses and good public policy of state administration can effectively solve social problems, while the third sector, and more recently social businesses, are only auxiliary and not so important tools in case of occasional inefficiencies of social public policy.

Conclusion Lienet al.,(2002), cited in Krueger, Schulte & Stamp (2008:3),

highlight that the barriers can explain the different behavior among the people. Hence, the social entrepreneurship behavior is also influenced by different barriers and if we want to encourage and promote the social entrepreneurship and its actions as an innovative solution for the social, economic and environmental problems we have to research these barriers.

By using the above-mentioned framework that describes the concrete barriers we believe that we can more easily deconstruct the phenomena of social entrepreneurship.

V i z i o n e 39 / 2022

400

Firstly, the social entrepreneurship is not just a process which can help us to solve the societal problems by using entrepreneurial strategies. It is a process that navigates us across the social and institutional barriers. The social entrepreneurs are successful because they are capable to navigate throughout the obstacles (Robinson 2006:105).

Dacin, Dacin & Matear (2010:48) in a same manner state that the social entrepreneurship, in contrast to the conventional entrepreneurs, do not allow the external factors and barriers to dictate them if they are going to start a social business. The social entrepreneurship develops creative mechanisms and they overcome the external obstacles.

In addition, the social entrepreneurs explore the opportunities inside the local communities which they know and understand. In comparison, the globalized conventional business models strive to homogenize the markets despite their different cultural specifics (Robinson 2006:105-106).

Finally, we can conclude that the formal institutional barriers and the informal cultural barriers have a biggest influence on the social entrepreneurship. They are of biggest importance because they are the reason behind the societal problems that the social entrepreneurs strive to solve.

This conclusion is a logical derivative because of the sole nature of the social entrepreneurship that emerges as an alternative to the institutions that are dealing with the socio-economic problems (multicultural organizations, state agencies, non-governmental organizations and the corporative social responsibility programs) but cannot solve them because of their top-bottom strategy that frequently is not well acquainted with the local context of the community.

Reviewers (Recenzentes) Prof. Dr. Mirko Tripunovski Prof. Dr. Savo Ashtalkovski

References - Bornstein, D. & Davis, S. 2010. Social Entrepreneurship: What Everyone

Needs to Know. New York: Oxford University Press. - Borzaga, C. and Defourny, J. 2003. Conclusions: Social Enterprises in Europe:

a diversity of initiatives and prospects. In C. Bozaga and J. Defourny (eds.). The Emergence of Social Enterprise. New York: Routledge, pp. 350-371.

- Dacin, A.P., Dacin, T.M. and Matear, M. 2010. Social Entrepreneurship: Why We Don’t Need a New Theory and How We Move Forward from Here.

V i z i o n e 39 / 2022

401

Academy of management Perspective, 24(3): 37-57. Available from: https://journals.aom.org/doi/abs/10.5465/amp.24.3.37/. [20 June 2022].

- Davies, I., Haugh, H. & Chambers, L. 2019. Barriers to Social Enterprise Growth. Journal of Small Business Management, 57(4): 1616-1636.

- Available from: https://www.researchgate.net/publication/323394376_Barriers_to_Social_Ente rprise_Growth/. [17 June 2022].

- Krueger, N., Schulte, D.W. & Stamp, J. 2008. Beyond Intent: Antecedents of Resilience & Precipitating Events for Social Entrepreneurial Intentions and ... Action. SSRN Electronic Journal: 1-16.

- Available from: - https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1155264_code759776.pdf

?abstractid=1155264&mirid=1/. [20 Jun 2022]. - Lien, N. et al. 2002. Applying theory of planned behavior to fruit consumption

of young adolescents, American Journal of Health Promotion, 16: 189-197. - Robinson, J. 2006. Navigating social and institutional barriers to markets:

How social entrepreneurs identify and evaluate opportunities. In J. Mair, J. Robinson, & K. Hockerts (Eds.), Social entrepreneurship. Basingstoke, UK: Palgrave Macmillan, Ch. 7.

- Staber, U. 2005. Path dependency or regional breakthrough? In G. Fuchs & P. Shapira (Eds.), Rethinking regional innovation and chang. New York: Springer, pp. 107–126.

- Vuković, K., Kedmenec , I., Postolov, K. Jovanovski, K., & Kornet, D. 2017. The role of bonding and bridging cognitive social capital in shaping entrepreneurial intention in transition economies. Journal of Contemporary Management Issues, 22(1): 1-33.

- Available from: https://hrcak.srce.hr/file/270513/. [20 February 2022]. - Wildmannova, M. 2018. Barriers and Opportunities for the Development of

Social Entrepreneurship: Case Study of Czech Republic. Journal of Economic and Social Development (JESD), 5(1): 51-57.

- Available from: http://www.jesd- online.com/dokumenti/upload/separated/Vol_5_No_1_Paper6.pdf

- [15 June 2022].

Copyright of Vizione is the property of Intellectual Association Democratic Club and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use.