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The Dark Side of Social Enterprises

We want to feel warm and fuzzy about do-gooder start-ups. But what impact do they really have? And what unintended consequences do they trigger?

In this Insight TALKS presentation, Tina Dacin takes a critical view of social enterprises. She says social enterprises can be driven by ulterior motives or private gain rather than social good; have little or no impact on the societal problems they’re attempting to address; offer governments an excuse not to act; and undermine traditional charities. Dacin is Smith School of Business Professor and E. Marie Shantz Chair of Strategy and Organizational Behaviour, as well as Director of Smith’s Centre for Social Impact

Video Highlights

0:38    Traditional ways of “saving the world” — aid, philanthropy, grant-making — have a mixed and disappointing record. Today’s promising pathways to change include social innovation, social enterprise/entrepreneurship, and cross-sector collaboration (non-profits with governments). Internally, some organizations are practising a “new” form of corporate social responsibility, featuring employee engagement initiatives, social intrapreneurship, and “green” supply chains.

4:02    Social enterprises are all the rage. “They are like fruit flies,” says Dacin, “born to die.” But we must take a clear-eyed view of social enterprises and not assume they are all based on altruistic motives. Look beyond the “myth of impact” — is the social enterprise truly effective or does it spin a good story? — and acknowledge that such enterprises can be corrupted by conflicting motives and the pursuit of private gain.

5:58    Examples of how social enterprises can lose their way: in Jamaica, the social enterprise model has been applied to garrison housing, which has led to criminal gangs being entrenched in these communities. In the developing world, micro-finance has been co-opted and exploited for private financial gain at the expense of social needs and justice.  “As social enterprises grow,” Dacin says, “it’s harder to maintain a robust social mission.” 

11:35    Dacin offers five possible unintended negative consequences of a social enterprise: unforeseen outcomes; trade-offs between the social and profit missions; governments abdicating their responsibility to provide social services; the demonization or de-legitimization of traditional charities; and the growth of unethical behaviour following green consumption (recent research has shown that people feel they have license to do bad after they have done good).

14:57    Questions in search of answers: When do social enterprise solutions make the most sense? What are suitable boundaries and limits for social enterprises? What can we learn from failures? Where is the social enterprise located in the value chain of producing social good? Says Dacin, “The practice of social enterprise is very different from the stories we tell.”


Look for the next QSB Insight TALKS January 14, 2014: Jay Handelman on brand authenticity in a social media world.