GEM Social Entrepreneurship Monitor 2007 (Executive Summary)

GEM Social Entrepreneurship Monitor 2007


June 2006


The Global Entrepreneurship Monitor (GEM) has published a second report on social entrepreneurship in the UK, written by Rebecca Harding for the London Business School


Executive Summary


This report focuses on the social entrepreneurs who may grow the social enterprises of the future. It is the second Social Entrepreneurship Monitor report published by the Global Entrepreneurship Monitor (GEM) UK project. Like the first report, it uses data from a survey of 27,296 18-64 year olds randomly stratified by UK region. It measures levels and types of early stage community or socially oriented entrepreneurial activity in the UK, with a view to informing policy about this important feeder group to the overall social enterprise agenda.


The geography of social enterprise
• Social entrepreneurship is an important phenomenon across the UK, at some 3.2 % of the working age population or nearly 1.2 million adults.
• Regional differences between levels of SEA are not significant and the gap between the highest rate in London (4.7%) and the lowest in the East Midlands (2.6%) is less than the TEA (Total Entrepreneurial Activity) gap between London (8.4%) and the North East (3.9%).
• Rural locations are more socially entrepreneurial than urban regions.
• Although they do not have the highest levels of SEA, the most deprived wards in the UK do have higher levels of baby and established social enterprise managers.


Are social entrepreneurs different?
• Social entrepreneurs are a distinct group with more positive attitudes than the general UK adult population, with less positive attitudes than mainstream entrepreneurs.
• As social entrepreneurs become more experienced, it appears from the data that they become more disillusioned with entrepreneurship and see fewer opportunities, are more likely to fear failure and less likely to see it as a good career choice.


Who are the social entrepreneurs?
• Women are proportionately more likely to be social than mainstream entrepreneurs despite the fact that overall men are more likely to be social entrepreneurs than women (3.6% compared to 2.8%). The percentage of women managing an established social enterprise is marginally higher than those managing a baby enterprise, while for men there is no difference in these two activities.
• Younger people are more likely to be social entrepreneurs than any other age grouping (3.9% compared to, say 2.8% of over 55s).
• Education is a strong predictor of social entrepreneurial activity, and those in full time education are the most likely group to be SEA active (5%).
• Those who are labour market inactive are marginally more likely to be social entrepreneurs than mainstream entrepreneurs.• Black Africans and Black Caribbeans are, respectively, three times and two times more likely than Whites to be social entrepreneurs.


Structure and funding of social enterprises
• Business activity is not based at home, irrespective of age of the social enterprise.
• There is a greater likelihood that social enterprises will become not-for-profits or charities as they become more established, but even so, the majority of enterprises are not charities either at the baby or the more established stage.
• The profile of financing is similar to that of mainstream entrepreneurs. However, social entrepreneurs are proportionately more likely to have failed to gain access to finance because of the nature of their business. Interestingly, inadequate business planning is not the largest factor for established social enterprises, but unwillingness to share and the costs of finance are.


What is Social Entrepreneurship and why does it matter?
The UK government estimates that there are 55,000 social enterprises in the UK. This is some 5% of all businesses with employees and constitutes a total turnover of nearly £27 billion. Focusing just on the social enterprises which are companies limited by guarantee or industrial and provident societies, this is still 1.2% of all enterprises in the UK.


These businesses are formally constituted companies with a revenue stream from trade in goods and services. Thus, the Small Business Service defines social enterprises as businesses with “primarily social objectives, whose surpluses are reinvested for that purpose in the business or in the community, rather than being driven by the need to maximise profit for shareholders and owners” or, in short-hand, “businesses trading for a social purpose”. The essence of this definition means that any surplus or profit, is recycled for the benefits of the activity, rather than for shareholders or directors. Because of their structure and constitution, they are able to serve a triple bottom line achieving profitability, societal impact and environmental sustainability simultaneously.


This report focuses on the social entrepreneurs who may grow the social enterprises of the future. It is the second Social Entrepreneurship Monitor report published by the Global Entrepreneurship Monitor (GEM) UK project. Like the first report, it uses data from a survey of 27,296 18-64 year olds randomly stratified by UK region. It measures levels and types of early stage community or socially oriented entrepreneurial activity in the UK, with a view to informing policy about this important feeder group to the overall social enterprise agenda.


Although measurements and maps of social enterprises in the UK have improved since the first Social Entrepreneurship Monitor, the whole area of social entrepreneurship remains relatively under-researched in terms of its scope, its remit, its role in regeneration and growth. There is plenty of material to suggest that social entrepreneurship is important as a driver of social reform and there is a body of literature providing cases of how it has contributed to the professionalisation of public services such as health, education and social work and welfare programmes in the US and the UK, as well as in less developed regions of the world. There is long-standing literature that points to the importance of social entrepreneurship as a phenomenon in social life and as a feature of corporate social responsibility10 and there are cases that teach how to become a good social entrepreneur as a for-profit or a not-for-profit firm and to measure the social impact of the enterprise.


However, the process by which entrepreneurs a) decide on a socially-oriented business model and b) grow, is less well understood. One of the reasons for this is arguably because it is hard to define social entrepreneurship in such a way that isolates the relatively small-scale, often voluntary or charitable work that individuals do to make a social difference from a social entrepreneur who may go on to establish a high turnover social enterprise. Social entrepreneurs are the entrepreneurs who “recognise that a part of society is stuck and provide new ways to get it unstuck”. They act as change agents in the social sector: they innovate and act according to the desire to create and sustain social value and consider themselves to be accountable “to the constituencies they serve for the outcomes they achieve”. In short, they are “one species within the genus ‘entrepreneur’. They are entrepreneurs with a social mission”.


Such a definition captures a whole spectrum of social entrepreneurial activity, however, not all of which needs to be either generating revenues or growing and making an economic as well as social contribution over the long term. We need a definition that reflects the two critical features of a social, as opposed to a mainstream enterprise:


• The project has community or social goals rather than profit.
• Revenue is used to support the social and community goals, rather than returned to shareholders.


We derive the definition of social entrepreneurship from the definition of mainstream entrepreneurship contained in the annual Global Entrepreneurship Monitor (GEM) reports as follows:


“Social entrepreneurship is any attempt at new social enterprise activity or new enterprise creation, such as self-employment, a new enterprise, or the expansion of an existing social enterprise by an individual, teams of individuals or established social enterprise, with social or community goals as its base and where the profit is invested in the activity or venture itself rather than returned to investors.”


This is a sufficiently broad definition to allow a range of different activities to be included, but equally sufficiently narrow to exclude activities that are established without a revenue stream in mind. The importance of understanding the motivations of social entrepreneurs and the role that the enterprises they establish have to play in generating wealth in the UK in terms of jobs and income as well as in terms of welfare, cannot be understated. Entrepreneurship has tremendous power to transform and change society. The conventional view is that entrepreneurship is about mainstream start-up businesses and the contribution that they make to economic growth.


However, if we are to harness the role that all entrepreneurial activity plays, then entrepreneurship should be conceived more broadly, as it has a wider applicability to important social concerns and may even be a better driver of regeneration and employment in deprived communities than orthodox activity.


You can download the full document as a PDF on the GEM consortium site here: http://www.gemconsortium.org/document.asp?id=501