The Debates On Corporate Social Responsibilities Commerce Essay


The use of the term 'entrepreneur', to describe an individual who embarks on a new enterprise, is believed to have first come into common parlance in the year 1800 when the acclaimed French economist, Jean-Baptiste Say, stated: 'The entrepreneur shifts economic resources out of an area of lower and into an area of higher productivity and greater yield.' (Dees, p. 2, 1998). Despite having been in use for over two centuries, the term 'entrepreneurship' suffers from the lack of a common and unifying definition. It has been described as the adoption of a frame of mind that places an emphasis on taking advantage of opportunities rather than focusing on the minimisation of threats (Krueger jnr. et al, 2000). Equally, however, some commentators have suggested that the term has fallen into such disrepute that it has simply become a convenient label, with little meaning, that analysts attach to any general, commercially-successful behaviour (Gartner, 1990).

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Gedeon (2010) has studied the lexicon of entrepreneurship definitions and theories from various schools of academic thought in an attempt to draw some meaningful conclusions and establish a more unified definition of what types of behaviour constitute entrepreneurship. His view is that entrepreneurship is 'a multi‐dimensional concept that includes owning a small business (Risk Theory), being innovative (Dynamic Theory), acting as a leader (Traits School), or starting up a new company (Behavioural School)' (Gedeon, p. 30, 2010). Gedeon also believes that the division of entrepreneurship into two distinct sub domains, namely 'commercial' and 'social', aides the understanding of different entrepreneurial behaviours.

'Commercial entrepreneurship' has a long history within the business environment and has usually been associated with the deployment of innovation to create value for an enterprise or an individual (Schumpeter, 1951; Drucker, 1985). Whilst the term 'social entrepreneurship' may have only come into common use in the last twenty years or so, the idea of using entrepreneurial skills to solve social problems is not new. Organisations and individuals in the not-for-profit sector, such as international charities, have been demonstrating their entrepreneurship by helping to improve the lives and social welfare of the world's most disadvantaged peoples for many decades (Dees, 1998).

In common with commercial entrepreneurship, social entrepreneurship recognises opportunities and takes action to create solutions to problems, improve existing systems, and invent new ways of doing things. However, social entrepreneurship differs from commercial entrepreneurship inasmuch as it conveys not just a business-like discipline and planned approach to innovation but also it encompasses an enthusiasm for social duty and responsibility (Thake and Zadek, 1997; Dees, 1998). The generation of 'social wealth', however, is not the main focus for commercial entrepreneurship but is regarded as a by-product of the economic value that it creates (Venkataraman, 1997). Milton Friedman (1970) supported this basic premise when he suggested that the social responsibility of businesses was simply to maximise profits. It has also been argued that the creation of organisations based on the ethos of social responsibility can be inherently unprofitable for the entrepreneur establishing such organisations. This is due to the fact that socially responsible ventures tend to have a lower market value than do traditional profit-making, commercial businesses. Also more of the costs associated with socially responsible ventures are borne by the entrepreneur rather than by the shareholders, whereas the opposite would be the case in commercially focussed ventures (Baron, 2005).

The identification of opportunities has been seen to be a common and crucial dimension of both the commercial and social entrepreneurship process and this factor plainly shows that entrepreneurial behaviour is inherently intentional in nature. For example, if an individual makes a decision to start a new commercial business, or socially responsible enterprise, it is not simply a reflexive decision but is rather based on an analysis of market and/or social conditions and the recognition of a perceived opportunity to exploit those conditions and satisfy a need (Krueger jnr. et al, 2000). Equally, there is increasing emphasis, by both academics and practitioners, on the need to construct a business plan before an entrepreneur contemplates the creation of a new enterprise (Gedeon, 2010). So entrepreneurial behaviour, whether commercially or socially motivated, does not happen by accident, it is planned. There are a number of academic theories and models that address the issue of planned behaviour. Ajzen (1991), for example, in his 'theory of planned behaviour', suggests that an action that requires any degree of planning can be predicted by the intention to adopt that behaviour. The behaviour of entrepreneurs intending to start a new venture would certainly fall within the scope of this theory. So it would appear that, according to Azjen's theory, it should be possible to predict whether or not an individual will ultimately demonstrate entrepreneurial behaviour by examining his or her intention to do so. Ajzen not only postulates that intentions, in general, depend on an individual's behavioural and normative beliefs but also that behaviour can be influenced by 'perceived behavioural control' (PBC), as shown in the diagram below:

Figure 1 : Azjen's Theory of Planned Behaviour (1991)

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Ajzen (p. 188, 1991) goes on to state that 'The relative importance of attitude, subjective norm, and perceived behavioral control in the prediction of intention is expected to vary across behaviors and situations'. In other words, where attitudes are strongly ingrained. or where the power of normative beliefs holds sway, then an individual's intentions, and ultimate behaviour, may not be able to be predicted by perceived behavioural control.

According to Shapero and Sokol (1982), the decision to make a significant change in life, such as starting a new commercial or socially responsible venture, can be occasioned by a specific and significant life event, such as being made redundant. This may motivate the individual to entrepreneurial action, albeit the individual may have held a long term desire to run his or her own business. Shapero and Sokol (1982) also believe that a deviation from an individual's established routines may trigger an entrepreneurial event. In Shapero and Sokol's 'model of the entrepreneurial event' (see below), the choice that an individual makes is seen to depend on three distinct elements, namely, how desirable the proposed behaviour is; the propensity to act on intentions; and how feasible the behaviour is perceived to be.

Figure 2: Shapero and Sokol's model of the entrepreneurial event (1982).

In this model, intentions are regarded as the single most significant predictor of entrepreneurial behaviour and help to explain, firstly, why many entrepreneurs make the decision to embark on a new venture some time before they start the process of seeking out actual market opportunities and, secondly, why entrepreneurs decide to expand their ventures at some future point. In terms of commercial entrepreneurship, this latter behavioural trait has been evidenced in a study carried out in the USA that examined over one hundred small businesses in terms of their growth intentions. The study concluded that a stated intention to grow, on the part of the owner-managers of the businesses, resulted in actual recorded growth over a four year period (Orser et al, 1998).

The banking industry is a good example of how entrepreneurship has successfully been applied in both the commercial and social sectors. Despite the popularly held belief that banks are relatively staid institutions, the global commercial banking industry has experienced dramatic change and innovation over the last thirty years. The advance in information technology has revolutionised both internal banking operations and the delivery of services to customers. The ability of commercial banks to demonstrate entrepreneurship through innovation, based on information technology, depends, to a large degree, on whether or not they have accumulated the necessary IT skills. Cohen and Levinthal (1989) refer to this accumulation of skills as 'absorptive capacity'. The more absorptive capacity a bank has then the less it has to rely on the knowledge and skills of others in order to innovate. One of the major IT led innovations in banking of the last twenty years has been direct banking i.e. banking that does not rely on branches to deliver customer services but rather deploys other channels, such as the telephone, for this purpose.

Founded in October 1989, First Direct was one of the earliest exponents of direct banking in the UK and was judged to have demonstrated entrepreneurial behaviour through innovation by a number of commentators following its launch in 1995 (Parmenter,1997;Tomkin, 1998). The then parent organisation, Midland Bank, used its absorptive capacity in IT to launch First Direct and by the middle of that year it became the UK's fastest growing bank, opening some 10,000 new accounts every month (Hamel, 1996). Midland Bank exhibited classic entrepreneurial behaviour when it planned the First Direct banking concept. This is evidenced by the fact that its launch was carefully researched and evaluated. The First Direct banking project, lead by the highly experienced banker Graham Picken, identified that bank customers were increasingly changing their behaviour and becoming more interested in banking services that were available remotely, 24 hours a day, 365 days a week (Clifton, 2009, p. 100). First Direct became an innovator in the UK banking market by meeting this consumer need and has continued to innovate and is now a multi-channel provider having, since its launch, added internet and mobile phone access to its initial telephone service offering (Devlin, 1995). This ongoing entrepreneurial behaviour has enabled First Direct to become the most successful direct banking operation in the UK (Garrett et al, 2007)

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In the social sector, so called 'community development banks' have been established to help generate economic growth in deprived areas and to serve the banking needs of people living in such communities who are not able to access services from traditional banks operating in the commercial sector (Dees, 1998). A full two decades before the launch of First Direct, a Bangladeshi entrepreneur, Muhammad Yunus, launched a community bank in his native country. Grameen Bank was established to supply credit to those individuals and businesses who could not obtain loans from any other source. It bases its social responsibility principles on the philosophy that credit is a basic human right human right and prioritises those individuals who have nothing, which is the exact opposite to the philosophy of banks in the commercial sector. The creation of Grameen Bank came about when Muhammad Yunus experienced a life changing event, one of the key factors that can lead to the creation of a new venture, as identified by Shapero and Sokol's model of 'the entrepreneurial event' (1982). Yunus had direct experience of the disastrous famine which occurred in Bangladesh in 1974. The famine was of epic proportions and resulted in an estimated 1.5 million deaths. It was this experience that played a large part in Yunus' decision to become involved in efforts to reduce poverty in Bangladesh and ultimately led to him founding the Grameen Bank (Grameen Bank Website, 2010). Today, Grameen operates over one thousand branches serving over three million financially and socially impoverished people throughout Bangladesh mainly through providing credit to small enterprises (Seelos and Mair, 2005). However, unlike First Direct, Grameen has not had the absorptive capacity in IT to enable it to continue to innovate and exploit the potential of its customer base. Grameen has had to seek partnerships with major international IT providers, such as Hewlett-Packard, which has donated thousands of computers to Grameen, to enable it to establish online links for its network of various credit programmes. By establishing this network, Grameen has been able to identify, and integrate into its systems, any relevant social project it has funded in Bangladesh. This has enabled Grameen to replicate the successful business plans for such projects in any part of the country and indeed, beyond Bangladesh in to the wider world community (Maurice, 1998). Grameen Bank has not just been successful in terms of its social programme but has also been able to operate as a commercial enterprise. Despite the fact that it lends money to high risk individuals and enterprises it has managed to achieve full recovery on such loans in over 90% of cases, a record that many lenders in the so called 'sub-prime' lending market would envy (Khandker et al, 1995, p. vi).

Global commercial and social development depends, to a large degree, on new and successful enterprises being generated by entrepreneurs. It has been seen that entrepreneurship behaviour, for both commercial and socially responsible ventures, is broadly similar inasmuch as it is borne out of planned and intentional behaviour and influenced by both major events in the life of individuals, as evidenced by the Grameen Bank case, and by significant changes in consumer behaviour, as evidenced by the First Direct Bank case. Commercial entrepreneurship and social entrepreneurship, therefore, share a lot of commonalities in terms of how such enterprises are conceived, established and managed. Also, despite their different initial goals, in terms of a monetary profit focus versus a social responsibility profit focus, commercial success is not the exclusive property of ventures established through commercial entrepreneurship. Social entrepreneurship can also succeed commercially whilst providing essential services to socially deprived communities.

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