Social Entrepreneurship: The Logic of Paradox

Abstract

Social entrepreneurship is a paradoxical phenomenon wherein seemingly incompatible elements such as business and social logics coexist. Previous research has been insufficient to systematically describe how social entrepreneurship organizations (SEO) try to balance these logics and why these same paradoxical elements make social entrepreneurship what it is. Using the systematic literature review method, this paper examines six major paradoxes and how they affect both the theory and practice of social entrepreneurship by furthering the nascent discussion about the role of paradoxes in SEOs. Viewed through the lens of organizational logics, this paper argues that the dynamic interplay between these paradoxes initiates and drives the innovations and changes necessary for the very existence of SEOs.

1. Introduction

Social problems are wickedly complex and unsolvable, yet understandable and addressable. This apparent contradiction shapes the way social entrepreneurs approach social problems. In fact, there is a consensus among scholars that social entrepreneurship is a paradoxical phenomenon—an amalgamation of ostensibly incompatible elements that somehow work together. How those elements work together despite their differences has been previously studied. For example, Sarwar [1] takes a prescriptive approach towards how to solve three paradoxes of social entrepreneurship—the accountability paradox, the excludability paradox, and the resiliency paradox. Peattie and Morley [2] introduced paradoxes using Haugh’s [3] template (defining the scope of social entrepreneurship, the environmental context, opportunity recognition and innovation, modes of organization, resource acquisition, opportunity exploitation, performance measurement, training education, and learning about social entrepreneurship) and called for further studies on this topic:

Whether [social enterprises] of different types and in different sectors and contexts tend to develop a hybrid position on all these organisational dimensions, or whether they create unique “mix and match” blends of characteristics which are each more typical of either commercial or non-profit sector organisations would be an interesting issue for future research to explore.

Although these studies detailed the differences between and problems caused by paradoxical elements in social entrepreneurship and tried to propose some solutions to address paradoxes, the current literature is insufficient to systematically describe how and why these same elements make social entrepreneurship what it is. As Hota, Subramanian, and Narayanamurthy [4] pointed out, “most of these studies focus only on clarifying the concept of social entrepreneurship by reviewing the definitions and contrasting it with other forms of entrepreneurship” while missing an explanation on how and why social entrepreneurship becomes what it is despite the paradoxical elements. Similarly, in their bibliometric analysis, Saebi, Foss, and Linder [5] identified three levels of analysis in social entrepreneurship research and proposed a comprehensive framework to address “a rather fragmented literature without dominant frameworks” in social entrepreneurship research. On the other hand, and interestingly, Alegre, Kislenko, and Berbegal-Mirabent [6] revealed that “contrary to what has been commonly believed, there does, in fact, exist widespread consensus within the academic community on the definition and meaning of the term social entrepreneurship and it is primarily centred on the combination of social and financial goals, community ideals and innovation.” These different observations on the nature, dynamics, processes, and definitions of social entrepreneurship deeply reflect the paradoxical nature of social entrepreneurship, as observed by many scholars [7]. Accordingly, this research argues that social entrepreneurship is characterized by paradoxes that are unavoidable and necessary for the very existence of social entrepreneurship. The dynamic interplay between these paradoxes initiates and drives the innovations and changes necessary for the existence of social entrepreneurship organizations (SEO).

The purpose of this paper is to comprehensively examine major paradoxes in social entrepreneurship and how they affect both the theory and practice of social entrepreneurship by furthering the nascent discussion about the role of paradoxes in social entrepreneurship. The research questions to be addressed in this article are how and why the paradoxical elements make social entrepreneurship what it is; how paradoxes reflect the hybrid nature of logics that cannot be completely merged; and what is the essential nature of paradoxical logics that leads to a synergistic effect. Simply stating paradoxes exist is insufficient. Harnessing the paradoxes is imperative. This paper does so by examining the relationship, or “organizational logic”, between paradoxical elements in SEOs and how these organizational logics contribute to the very existence of social entrepreneurship. This paper is structured as follows: first, it will describe the essential features of social entrepreneurship and organizational logics to lay the foundation for the discussion on paradoxes. Then, it uses a systematic literature review methodology to examine six major paradoxes in the context of SEOs’ structure and functions. Finally, it offers a new approach from the angle of organizational logics for understanding the role of paradoxes in SEOs.

2. A Definition of Social Entrepreneurship

Social entrepreneurship is a muddled concept [8,9,10,11,12] that Choi and Majumdar [13] call an essentially contested concept as defined by Gallie in 1956. Using seven criteria (see [14]), an essentially contested concept “suggests that a group of concepts exists which inevitably leads to endless disputes about the proper meanings of these concepts” [13]. Social entrepreneurship is composed of a set of such core elements that are conceptualized as follows.

First, social entrepreneurship is defined by the combination of business and social logics, which are oftentimes described as two discrete constructs functioning in some collaborative manner [13,15]. The discreteness arises from the incompatibility of the business and social logics [16]. Business logic entails making profits earned by producing goods and services for the survivability of the firm and the financial benefit of shareholders [17]. Social logic emphasizes the production of goods and services for the creation of social (or use) value and the benefit of clients [10,18]. Social entrepreneurship combines these two sets of conflicting logics either by emphasizing the centrality of social value at the expense of profitability or by emphasizing profitability at the expense of social value [11,19,20]. Therefore, SEOs create social and business value at the expense of maximizing one organizational logic over the other [11,21,22,23].

Second, innovation drives how social entrepreneurship creates social and business value. Many authors refer to innovation as a distinctive characteristic in their definitions of social entrepreneurship [10,11,13,24,25,26]. The creativity, resourcefulness, dynamism, opportunity recognition, and vision associated with innovation distinguish social entrepreneurship [27,28,29]. Yunus [30] states, “any innovative initiative to help people may be described as social entrepreneurship. The initiative may be economic or non-economic, for-profit or not-for-profit.” Consequently, social entrepreneurship draws upon organizational logics found in private, public, and nonprofit organizations [8,13,19,31] to innovatively address a social problem. Certain social issues require substantial financial capital readily available in the private sector [32,33]. Other issues are best handled by organizations with legal and political weight such as government agencies. Some issues attract nonprofit organizations that consider social value creation more important than profitability [34]. Thus, these social issues are addressed by organizations that innovatively link and balance business and social logics to enact social change regardless of their sector classification.

These characteristics—an ever-changing balance of business and social logics, innovation, and lasting social change—are frequently found in definitions of social entrepreneurship [35]. The efficacy of social entrepreneurship derives from the balance and synergy of these elements. A framework of social entrepreneurship could be synthesized that reflects a consensus of the researchers as entailing, one, that social entrepreneurship is a hybridization of various compatible and incompatible concepts, such as business and social logics; and two, that social entrepreneurship entails innovative approaches to enacting beneficial social change.

This research describes social entrepreneurship as the innovative hybridization of social, business, and other organizational logics to enact beneficial social change. Two points are implied in this definition. Firstly, organizational logics are the collection and various combinations of linkages between socially constructed assumptions, beliefs, norms, patterns, practices, rules, schemas, symbols, and tools that are put into action by organizational agents and legitimize, structure, and change an organization over time. Secondly, this definition suggests that paradoxes will emerge inevitably when seemingly incompatible logics are hybridized during social entrepreneurship. In this research, the focus will be on how these inevitable paradoxes in social entrepreneurship contribute to the very existence of social enterprises through the dynamic interactions of organizational logics.

3. Methodology

A systematic literature review was performed to identify potential themes that catalyze potential paradoxes in social entrepreneurship. A systematic literature review is ‘‘a review in which there is a comprehensive search for relevant studies on a specific topic, and those identified are then appraised and synthesized according to a pre-determined explicit method’’ [36].

The systematic review follows a search method, inclusion and exclusion criteria, and final sample size for review and extraction of findings. In this research, the following steps were used:

• The Web of Science was used to search for articles on social entrepreneurship. Articles that have “social entrepreneurship” or “social enterprise” in their topics were searched. The assumption behind this approach is that articles that have the word “social entrepreneurship” or “social enterprise” in their titles provide a confined and definitive frame of the main focus of the articles. The time span was all years; the types was articles. Using this criteria, a total of 23,359 articles from the Web of Science were generated.
• Next, the result was further filtered to retain only peer-reviewed journal articles. It is believed that peer-reviewed articles provide better objective perspectives compared to reports, conference papers, book reviews, and similar resources. The peer-reviewed journl articles were scrutinized by editors and reviewers in the field of social entrepreneurship. This filtering reduced the number of articles to 14,581.
• Then, the results were confined to Web of Science disciplinary categories in business and management categories. Other Web of Science disciplinary categories such as economics, environmental studies and sociology were not chosen because the main focus of this review is on social entrepreneurship in the business/managerial domain, rather than broader fields in academia. This step is necessary to control the scope and range of articles due to the resources and time limitation that this research could afford. This step generated a total of 4730 articles.
• Lastly, only journals dedicated to social entrepreneurship and social enterprise in the Web of Science were chosen to filter further the results. This choice reflects the confidence of the representativeness of the articles published in the dedicated social entrepreneurship journals, rather than general entrepreneurship journals that focus more on business entrepreneurship. Three journals that have the word “social enterprise” or “social entrepreneurship” in the title of the journal were selected: Social Enterprise Journal; Journal of Social Entrepreneurship; and Cambridge Handbook of Social Enterprise Law. Following this screening process, 282 articles were retained and included in the systematic review.

The authors then carefully read the 282 articles, paying particular attention to any information or themes related to conflicts, confusions, uncertainties, inconsistencies, disagreements, self-contradictions, incompatibilities, tensions, frictions, oppositions, incongruities, mismatches, and repugnancies within and between these articles. Each author read the articles and made notes by sensemaking the paradoxical themes reflected in these articles. To increase the coding reliability, the authors compared notes and their initial list of paradox categories. Based on Krippendorff’s alpha (α = 0.82), the level of agreement between authors was high and above the threshold of 0.70 [37]. The authors periodically exchanged their notes on the nature of the articles and discussed the paradoxical themes until agreement was reached. Initially, 17 pairs of paradoxical circumstances were extracted, and the number was further narrowed down to six broad categorizations by matching similar pairs that imply the same conceptualization and dropping some less significant ones. To illustrate each paradox, examples of SEOs were also used to demonstrate the “contradictory yet interrelated elements…that seem logical in isolation but absurd and irrational when appearing simultaneously” [38]. In the next section, these paradoxical circumstances will be reported and analyzed in detail.

4. Paradox 1: Incompatible and Competing Logics

Research studies that were reviewed jointly emphasized business and social logics in SEOs [11,19,20]. Though SEOs create social value to address social needs, the organization’s efforts are short-lived if the necessary business logic is absent. Survivability, not organizational mission, is the foremost concern for any SEOs. Thus, a socially driven organization must also focus on its fiduciary responsibilities, which can lead to mission drift as an SEO spends more and more resources to survive and thrive and conversely fewer and fewer resources to benefit its social missions [15,21]. The particular focus leads to SEOs maximizing either social or business value at the expense of the other due to their inherently incompatible and competing logics [11,21,22,23] and it is impossible for SEOs to maximize both logics at the same time [39,40]. A paradox emerges whereby the business logic driving survivability and thriveability interferes with the social logic used to create social values, and vice versa.

The maximization of survivability and thriveability provides economic value to business organizations by creating a financial surplus for those organizations. The most effective means to do so is the avoidance of economic inefficiencies such as the social concerns that inspire SEOs’ missions. Paradoxically, SEOs cannot avoid their social concerns because, as Trivedi and Stokols [41] have argued, certain goods and services are provided by SEOs regardless of the inefficiency of the service delivery system and a loss of profitability:

Whereas commercial entrepreneurs must justify the economic value of their goods and services, it seems that social entrepreneurs need little or no external financial or economic justification for their venture. The generation of social value is reason enough for social entrepreneurs to pursue their mission. Social value is not entirely dependent on market value, as a good or service can have social value even if there is no market value.

However, this paradox does not mean that SEOs ignore their fiduciary responsibilities in pursuit of their social mission. SEOs struggle to balance the incompatibility of social and financial concerns when making decisions based on business and social logics. The fiscal drain of serving free meals to the homeless cannot be mitigated solely by good intentions and social return. The most effective means for SEOs to do so is through innovative thinking: “What innovations will optimize the resources of the organization and the community?”; “Are sufficient resources available within the organization and community to be optimized?”; and “Are those resources sustaining both the organization and community?” [42,43,44,45].

Sun Funder illustrates an SEO trying to balance the paradox of the incompatible and competing business and social logics (http://www.sunfunder.com/). Sun Funder sustains communities as an innovative financing platform for the emerging solar market transformation in Africa and Asia. Solar energy companies tap potential investors and access new revenue streams through Sun Funder by agreeing to serve poor and underserved communities. The solar energy companies receive financing and capital from investors through Sun Funder to distribute the needed solar energy technology to poor communities. The communities make affordable payments to the solar energy companies, which in turn reimburse the original investors through Sun Funder. Profitmaking and social value creation are paradoxical, and Sun Funder has painstakingly put efforts into satisfying its business supporters and its client communities through dynamic and innovative solutions for both.

5. Paradox 2: Means-End Confusion

Business logic and social logic require organizations to take two different approaches towards their clients when furnishing goods and services. Business logic regards the clients as a means to the ends of profitability. Social logic regards profits and resources as a means to a different end: the clients’ well-being and social value creation. Thus, a paradox exists whereby the SEOs’ business and social logic leads to the clients being simultaneously both the means and the ends of SEOs’ processes, and the same is true for the SEOs’ profits.

Businesses’ success is measured by their profit maximization. Profits are the ends of the business logic and clients are a means to that end. Von Mises [46] notes:

In the capitalist system of society’s economic organization the entrepreneurs determine the course of production. In the performance of this function they are unconditionally and totally subject to the sovereignty of the buying public, the consumer.

Thus profit and loss are generated by success or failure in adjusting the course of production activities to the most urgent demand of the consumers. Profits are generated based on the demands and fallibility of the clients. A business provides goods and services for consumption and generates profits by better evaluating the transaction costs than the clients [47]. The business assigns a value to the production cost and the transaction price. The clients try to determine if the transaction price of the goods and services is favorable. The inaccuracy of the clients’ economic decisions creates an opportunity for the business to make a profit. A business generates profits by predicting the future state of the market and the costs of production more accurately than the clients (and any competing entrepreneurs). This discrepancy represents an information asymmetry between the business, as the more informed party, and the clients, as the less informed party. Businesses are entirely dependent upon the clients and their inaccurate and incomplete decision-making created by the information asymmetry to generate a profit; this dynamic is referred to as the “democracy of the market” [46]. Thus, the clients are the means to the business’ end, i.e., profit maximization.

Social logic treats clients differently. The clients are the ends, not the means, of SEOs’ goods and services. Satisfying the organization’s social mission, not profit maximization, drives the SEOs. The SEO’s social mission outlays the purpose, type, and quality of goods and services to be provided to the clients. The profits and other resources utilized by SEOs to produce the goods and services are intended to create a better outcome for the clients as defined by the social mission. Any profit or other resources generated by the SEOs as a result of the transaction process is reinvested as the means to serve future clients. Whereas the clients are the means in the business logic, they are the ends of the social logic. Paradoxically, SEOs function based on both logics, where the clients are awkwardly positioned simultaneously as both means and ends of its activities by balancing profit maximization versus providing the best possible services for the clients. In other words, SEOs must balance the surplus they need to survive with the cost of providing services to help the clients thrive.

Chrysalis epitomizes this means-ends confusion. Chrysalis provides the support and resources necessary for homeless and low-income individuals to find and retain employment (www.changelives.org). The job placement services benefit the organization’s clients via job training opportunities and work experience while also providing a workforce for its two profitmaking divisions: a professional street maintenance and cleaning service and a full-service staffing agency. Therefore, the clients benefit from Chrysalis’ job placement services while these same clients are the workforce helping to finance those services. Chrysalis is an example of the dual role played by clients and illustrates how SEOs struggle to balance the means-ends confusion.

6. Paradox 3: Conflicting Bottom Lines

The desired outcome for SEOs is the satisfaction of two bottom lines. SEOs seek financial sustainability while delivering desire social value to their clients. Therefore, SEOs need to constantly answer the question of whether they seek to maximize their profitability at the expense of social service delivery or provide valuable social services despite the risks to their profitability and thus further endanger their sustainability and survival.

Business logic’s expressed purpose is the maximization of profit [17]. Per business logic, organizations provide goods and services via a particular function to address specific, defined needs and wants of the clients. Businesses survive by generating a profit that allows the business to continue and thrive. Profits are derived from the businesses’ transactions of their goods and services with the clients. The profits are a representation of the businesses’ effectiveness and efficiency during those transactions as the profits represent the capital necessary to produce future goods and services and guarantee the survivability and thriveability of the business [48]. These relationships enable a business to survive, grow, absorb more risk, decentralize operations, innovate, and meet more demand, which all benefit the organization, satisfy the wants of the consumers, and add economic value to society [49]. Any diversion of monies, such as social service delivery, is a financially inefficient endeavor and hampers the maximization of profits—the financial bottom line for SEOs.

Social logic differs from business logic in that an exchange of goods and services exists via a series of ongoing transactions, but those transactions are intended to primarily benefit the clients. A profit is not the intended purpose of the transactions. The SEO’s purpose is altruistic, ideological, or generous, and unassociated with profit maximization [50]. For instance, the creation of social value, the satisfaction of an unmet societal need, and alleviation of the precipitating conditions may drive the social logic. These outcomes fulfill the social bottom line or “the social outcome measurement that parallels the financial bottom line” [51]. Dees [52] describes the social mission of the organization as central and the social bottom line as a reflection of the mission. Any connection between the processes of SEOs and the market are incidental and tangential as the market cannot assign value to social improvement [52]. Instead, the relationships between SEOs and the needy, underprivileged, and marginalized individuals they serve is vital as those relationships are the organization’s social bottom line.

Social logic relies on social returns, not profits, to foster survivability. Social return is the social impact of organizations’ operations relative to the investment required to create that impact [51]. Organizations providing an effective social good or service reap the social returns of their endeavors, including, but not limited to, legitimization, attracting new or additional resources, and networking and collaboration. These returns are not always explicit inputs placed back into the SEOs’ operational processes, but they are at least antecedents for the inputs. Per social logic, social returns essentially replace profits as the desired output in SEOs. Additionally, the social returns are reinvested in totality without any disbursements prior to reinvestment as occurs in businesses with their profits.

Therein lays the paradox: pursue business logic and profit maximization or embrace social logic and its social returns. Diverting resources to the social mission prevents profit maximization, and emphasizing profit-making causes the social mission to drift [15,21,53]. Resources are finite, and the tug-of-war between the SEOs’ use of business logic to earn more profits and the SEOs’ use of social logic to deliver social value and social return cause a paradoxical tension.

SEOs continuously consider their business logic, social logic, and missions as they relate to the conflicting double bottom line. Frank [44] notes:

Social entrepreneurship is embodied in an innovative action that is catalyzed by discovering an unmet need in the marketplace and capitalizing on that need…insufficient incentives exist for market provision alone. The initial investment is too significant and the potential return is too minimal to encourage the market or business entrepreneur to act. Any entrepreneur may discover the opportunity, but the social entrepreneur…will initiate a means to bring the social system into equilibrium without requiring at least a market rate of return on the initial investment.

Opportunity and innovation, not maximization of profits or social returns, motivates SEOs. SEOs position themselves within the environment relative to that opportunity such that they satisfy equitably and reasonably the financial and social bottom lines in an innovative way.

For example, Better World Books was formed based on its founders’ desire to promote literacy worldwide (www.betterworldbooks.com). By 2016, the SEO used an innovative business model to donate and sell approximately 250 million books to schools and buyers, raised over $24 million for various programs in literacy including over $10 million to support 80 literacy and education nonprofits, procured over $13 million for libraries nationwide, and donated over 6 million college textbooks, primarily to schools in Africa through Books for Africa [54]. The organization earns a profit, but those profits are balanced by its efforts to reinvest this profit into fighting against illiteracy through its wide variety of literacy programs and grants. It successfully balances the double bottom line by understanding “…the importance of running a profitable enterprise. But while most businesses answer only to their shareholders, we answer equally to all of our key stakeholders: our employees, our customers, our literacy partners, our investors and the environment” [54].

7. Paradox 4: Disjointed Performance Measurement

The business literature is rife with discussions and analyses of various measurement techniques to capture the performance of the firm (see [55,56]). This literature describes the means to collect and interpret the readily accessible and quantifiable data produced by businesses: financial performance and operational performance [56]. Financial performance entails the traditional accounting measures of earnings per share and return on investment [57]. Operational performance is a more expansive approach that considers nonfinancial factors such as customer satisfaction, manufacturing effectiveness, and business capital [55]. The operationalization of these key business terms is generally institutionalized and streamlined. Eccles [55] confirms this notion, stating “Not surprisingly, methods for measuring financial performance are the most sophisticated and the most deeply entrenched. Accountants have been refining these methods ever since double-entry bookkeeping was invented in the fifteenth century”.

SEOs successfully utilize many of these same performance measures when analyzing their business operations. However, the social logic of the SEOs confounds the process of performance measurement and creates a paradox between the ready quantification of business performance and the elusive measurement of social performance [41]. When SEOs try to measure their social outputs, they paradoxically fall back on the established and readily available financial performance measures to do so; a lack of social performance measures contributes to this decision. Austin, Stevenson, and Wei-Skillern [19] propose that “performance measurement of social impact will remain the fundamental differentiator complicating accountability and stakeholder relations”. Though innovation could be potentially measured and managed [58], social return, social impact, social value, and social change are difficult to measure given their nonquantifiability, multicausality and complexity, temporality, and perceptive differences [19,41]. However, these outputs (as well as inputs and throughputs) are important to evaluate, understand, and compare in conjunction with SEOs’ financial characteristics [21,40,59]. The absence of adequate measurement tools stymies standardized assessment of the SEOs’ overall performance, but that absence does not make the social outputs of the organization any less important [60,61]. Some researchers believe that useful measurement tools are developable if an answer is found as to how the data collected quantify the desired social measure [10,62]. Given the paucity of research establishing the success factors for social entrepreneurship, uncertainty surrounds what combination of business and social measures are even usable to assess the inputs, throughputs, and outputs of SEOs [63].

Echoing Green is a social innovation fund that attempts to capture the performance of its SEO partners in a series of mid-year and year-end reports (www.echoinggreen.org). SEOs receiving stipends self-report their performance based on the survey designed by Echoing Green. The survey is a qualitative assessment of each SEO’s performance with only one section out of nine sections on the survey asking for quantitative data [64]. Echoing Green recognizes that SEOs perform many services that cannot be readily captured by traditional financial measures and therefore avoid the paradoxical trap of trying to quantify social output using those measures. Calculated financial decisions about the release of the stipends are based on SEOs’ attempts to measure their social output. Echoing Green’s approach to evaluation exemplifies the paradox of disjointed performance measurement whereby the push to accurately measure performance is confounded by the difficulty of evaluating SEOs’ social outputs.

8. Paradox 5: Identity Crises

Organizational identity reflects the central, distinctive, and enduring characteristics of an organization [65]. SEOs are distinguished by their unique identity and organizational logics, which separate them from other business and social organizations in the private, public, and nonprofit sectors. However, an SEO also needs to identify itself uniquely by differentiating itself from other SEOs [66]. A paradox emerges when organizational identity defined by the SEO’s internal stakeholders conflicts with the organizational image perceived by the SEO’s external audiences [67,68]. No clear line demarcates when a visionary, risk-taking, innovative, or successful organization becomes an SEO [13]. Organizations may self-identify as an SEO while their external image is perceived as something different. Conversely, others may perceive an organization as an SEO while the organization self-identifies otherwise.

Identity and image paradoxes foster confusion and ambiguity about what an organization is, what it does, and why it does it. The crises are best countered via legitimization. Legitimization requires a readily identifiable and recognizable identity generally accepted by both internal and external stakeholders [69]. Dowling and Pfeffer [70] describe organizational legitimacy as “the outcome of, on the one hand, the process of legitimation enacted by the focal organization, and on the other, the actions affecting relevant norms and values taken by other groups and organizations.” Identifying SEOs is tricky as definitions and typologies of SEOs are fuzzy and conceptually contested [13]. Thus, identification as an SEO requires organizations and external entities to jointly agree upon a normative and legitimized categorization scheme [66].

Grameen Bank (GB) was founded in Bangladesh by Muhammad Yunus as a microfinance corporation and community development bank in 1983 with the original mission of alleviating poverty. GB identifies itself as an SEO: “Grameen Bank itself would be an example of such a social business enterprise, which provided microfinance related services to the designated rural poor” [71] and claimed its mission was a big success. However, this identity conflicts with the image perceived by outsiders, including researchers, regulators, and the general public. For example, the later commercialization of GB made the organization more concerned about profits, and it was accused of using exploitative lending techniques that made the poor much poorer [72]. Even Yunus was criticized by then Bangladeshi Prime Minister Sheikh Hasina Wajed for “sucking the blood of the poor” in the name of poverty alleviation through his microcredit operation [73] and was asked to be ousted from GB by Bangladesh’s financial regulators [74]. Legitimizing GB again as an SEO might be a solution to this identity paradox. However, Yunus and GB seemingly have not put efforts into relegitimizing GB’s identity as an SEO. If they had, that effort may have swayed outsiders’ perceived image of GB.

9. Paradox 6: The Growing Organization

Businesses strive to grow by utilizing more and more resources and ever-increasing market shares that further their profit maximization. SEOs struggle to grow, with their expansion muted by the dearth of resources available and their willingness to divert their resources to satisfy their social mission. Thus, a paradox arises between the urge to grow using the business logic and the inability to do so based on social logic. Whetten [75] describes the importance of organizational growth, stating:

Growth makes the organization more efficient and therefore more competitive. Growth also provides the resources for the diversification that enables an organization to spread its risk across several product lines or even industries. It also provides large organizations with the resources necessary to fund the development of new projects.

Growth and expansion provide security and stability for organizations and help organizations cope with the dynamism and complexity of the environment [76,77,78,79].

Growth is resource-dependent. Organizations grow within their existing environment or diversify into new environments to sustain their flow of resources [75]. Growth is also a response to environmental change, especially any changes associated with resource providers [80]. For businesses, the financial marketplace is used to gather resources based on the transaction and consumption of goods and services. Success in the market provides businesses the self-sustaining resources needed to survive and an overflow that promotes and facilitates growth [41,81]. Successful growth is determined by the financial, personnel, systems, and business resources available; satisfaction of the organizations’ goals; the operational and managerial abilities of the organizations’ personnel; and the ability to strategically and innovatively look toward the future [38,82,83]. Organizations benefit from economies of scale as they expand, including profit margins, transaction costs, consumer bases, employee professionalism and specialization, and product diversification. In this context, what prevents SEOs from growing?

SEOs exist in resource-starved niche markets rife with available clients who have little to no resource capacity of their own [19,41,44,60,84,85,86]. Therefore, SEOs exist in niches based on the opportunity to satisfy their organizations’ social mission knowing resources are sparse [19,81]. If SEOs could procure the necessary resources and sustain growth, they soon face problems of growth. Large organizations risk becoming too complex, rigid, impersonal, ossified, inefficient, and inaccessible. These problems are a bane to SEOs that must innovatively engage and serve needy and marginalized peoples in particular niches [75,81,87].

SEOs face internal constraints related to the retention, reinvestment, and redistribution of resources. They struggle to obtain or retain the necessary human and capital resources to maximize their service delivery. Instead, SEOs diligently make do with what they have economically and carefully balance the investment and distribution of their limited resources to attain acceptable levels of service delivery. The result is deficiencies oftentimes arising in areas such as professionalism, expertise, management, training, and technologies. Thus, the SEO’s goods and services are provided, satisfying the social mission, but questions remain about the economic efficiency and social effectiveness of the process. That is, the economic efficiency is in conflict with social effectiveness when SEOs are struggling with their growth. SEOs have less resources to allocate and fewer opportunities to grow and take off without optimization of the service delivery and reinvestment processes [87].

For instance, Solar Sister (http://www.solarsister.org/) trains female entrepreneurs in Uganda, Rwanda, and Sudan to sell and distribute solar technology in rural areas where dangerous kerosene lamps typically provide light. Their growth occurs in the context of collaboration [81] as women join the SEO in an effort to bring solar technology to their villages. The SEO and the female entrepreneurs network together and develop an economy of scale. Growth is dependent on the pooling of resources within the network. Networking with female entrepreneurs overcomes the obstacles the SEO faces when it attempts to grow on its own [61]. Trivedi and Stokols [41] note that “[w]hereas innovation, competition, and profits are the driving force for commercial entrepreneurs, social entrepreneurs foster innovation and inclusiveness [emphasis in original]”. Collaboration may enable SEOs to grow and further address social needs without losing touch with their mission and clients.

10. Discussion

When reflecting on these paradoxes summarized from the literature, two core issues should be emphasized: one is that paradoxes reflect the hybrid nature of logics that cannot be completely merged; the other is that paradoxical logics reveal a dialectic process that will lead to a synergistic effect. Combined together, these two core issues lead to the conclusion that paradoxes are the nature of social entrepreneurship and lead to the very existence of social entrepreneurship.

Despite the apparent contradictions between paradoxical organizational logics, somehow SEOs exist and function. The answer may lay with the nature of paradoxes. Smith and Lewis [88] describe a paradox as:

Contradictory yet interrelated elements that exist simultaneously and persist over time. Such elements seem logical when considered in isolation but irrational, inconsistent, and even absurd when juxtaposed…[They] are oppositional to one another yet are also synergistic and interrelated within a larger system.

Paradoxes are present in any organization, and they are a product of organizing and hybridizing the disparate organizational logics constituting the organization [89]. The persistent presence of paradoxes requires organizations to be adaptive, innovative, and flexible [90]. These traits are an inherent part of entrepreneurship and thus ever-present in SEOs, allowing them to organize accordingly.

In fact, SEOs are hybrid organizations that develop in response to the inability of conventional organizations to reconcile the paradoxical organizational logics present in arenas where inefficiency, resource scarcity, economies of scale, and risk tolerance are the norm. Hybrid organizations innovatively combine organizational logics to solve problems that each logic independently cannot address [91]. Though hybrid organizations function as an amalgamation of paradoxical organizational logics, this does not mean the logics are well integrated. Instead, the logics are continually engaged in a dialectical struggle that keeps hybrid organizations in a state of flux over time and space [92]. SEOs strive to find an organizational structure, processes, and identity that effectively balances the changing environment with the relationships between organizational logics, paradoxical or not [93].

This balance is never truly achieved. Instead, the paradoxical logics are perpetually engaged in a dialectic process of negation of the negation, or affirmation of something new [94,95]. This negation is variously described as a nothing that is something, a transformation through loss, and a unity of opposites [96]. Thus, no one organizational logic ever maintains dominance over its paradoxical counterpart in their constant struggle as one logic cannot simply negate its counterpart. The negation involves a spiraling, not cyclical, process, whereby the elements experience an ongoing devolution that continually unfolds and devolves core aspects of the paradoxical counterpart. The paradoxes function at different paces over time, creating turning points when the quantitative change in one organizational logic effects a qualitative change in its relationship with its paradoxical counterpart. That qualitative change in their relationship then cascades throughout the entire organization, changing SEOs in some efficacious, noticeable way [95,97]. Moreover, hybrid organizations such as SEOs that try to accommodate the changing relationship in a paradox risk defying an organizational logic, such as the social logic, when satisfying another one, such as the business logic [98]. The paradoxical organizational logics are never in complete balance and harmony, although they may reach a degree of stability and homeostasis for some defined period of time. Also, the logics are not completely dichotomous but share some common characteristics or linked composite elements that keep them intertwined [97,99].

The intertwining of the paradoxical organizational logics creates two emergent effects to sustain the very existence of SEOs. First, though the linked paradoxical elements cannot be separated, they are not completely merged either [99]. This discrepancy is caused by the conceptual and practical incompatibility of the paradoxes and two tensions: a tension of integration and separation and a tension of stability and change. SEOs recognize the opportunity offered by these tensions to innovatively change their forms to ones that best serve the public good [92]. Second, SEOs rely not only on the tensions created by the paradoxes over time and space but also on the synergistic effect [88] the paradoxes generate. Social entrepreneurs are the “synthesizing agents” that make different logics coalesce into a workable, functional form in hybrid organizations [99]. The synthesis is an ongoing and dynamic dialectic process that allows SEOs to be more adaptive and responsive to their internal and external environments than other organizations.

The tensions created by the paradoxes are an avenue to explore and broaden the concept of social entrepreneurship and hybrid organizations [100]. Observing how these paradoxes are reconciled and managed internally fosters creativity. Rather than analyze the paradoxes as outliers, distractions, or hindrances during organizing, they should be viewed as normal, beneficial, and powerful opportunities for learning [88]. The paradoxes presented herein encourage researchers and practitioners to constantly revisit and retool their concept of social entrepreneurship and SEOs. The contradictions and tensions associated with the paradoxes lend themselves to engaging and expansive debates about the differences in social entrepreneurship and SEOs, not stale consensus about its similarities [100].

11. Conclusions

SEOs are particularly challenging organizations to manage and research [86]. This paper used a systematic literature review method to examine six major paradoxes in social entrepreneurship and how they affect SEOs in theory and practice. This examination is about sensemaking [101] whereby ambiguity and uncertainty about the paradoxes and their potential problems are replaced with a clearer picture of how SEOs innovatively balance and utilize these paradoxes to satisfy their missions. This research has limitations. The breadth of the articles reviewed is limited to a small sample of the vast literature on social entrepreneurship. To summarize the vast literature across a multidisciplinary subject such as social entrepreneurship is ambitious, so no claims are made about the comprehensiveness of this review, nor are the insights generated from this review significant to move the field of social entrepreneurship in a decisive way. However, based on this review, a call is made for future research in three directions: one is to further investigate the dialectic processes of how hybrid logics interact with each other to generate a synergy that defines the very nature of social entrepreneurship; the second is to further examine the hybridity by shifting attention to organizational logics as the foundations of all organizations, including SEOs; and the third is to move from a theoretical discussion about “what are” the paradoxes of social entrepreneurship to a practical one about “how to” help SEOs benefit from the paradoxes.