Ventures that pursue both commercial and social value creation have grown in popularity in recent years, but a new study published in the Strategic Entrepreneurship Journal better defines four distinct types of social ventures. By training a business model lens on these social good ventures, the study offers insight on how the model choices impact a firm's value creation and value capture potential.
“Despite the popularity of the term ‘social entrepreneurship,’ not much was known about the business model of such companies yet,” says study co-author Lien De Cuyper of the University of Amsterdam. “We also thought that the business model choices entrepreneurs in such a context make are significantly different from the choices entrepreneurs in general make.”
De Cuyper and fellow authors Bart Clarysse of ETH Zürich and Mike Wright of Imperial College Business School, London, started by defining three choices entrepreneurs need to make. These included the scope of target beneficiaries of the venture, the degree of overlap between customers and beneficiaries, and how the venture communicates its social mission through its value proposition. The team then combined these choices in different ways to identify four distinct types of social business models:
The researchers were also able to determine how these different models affected the venture’s value creation and value capture. For example, Social Intermediaries are likely to have higher operating costs — compared with Social Stimulators and Social Providers — because they act as go-betweens for customers and beneficiaries. And customers of Social Stimulators have a higher willingness to pay, compared with customers of a Social Provider.
“Rather than just taking a one-size-fits-all approach to looking at social enterprises, we believe it’s important to have a more structured understanding of their heterogeneity,” De Cuyper says. “Looking at the three business model choices we identified helps you understand what type of social enterprise you’re leaning toward. This can have important implications for your cost structure, your revenue structure, but also your way of organizing.”
To read the full context of the study and its methods, access the full paper available in the Strategic Entrepreneurship Journal .
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Strategic Entrepreneurship Journal
Case study
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Doing good while making profits: A typology of business models for social ventures
5-May-2024