Social entrepreneurs' strategies for addressing ... - Inderscience Online

European J. International Management, Vol. 11, No. 3, 2017

Social entrepreneurs’ strategies for addressing institutional voids in developing markets Raghda El Ebrashi* and Menatallah Darrag The German University in Cairo, P.O. Box 11835, Fifth Settlement, New Cairo, Cairo, Egypt Email: [email protected] Email: [email protected] *Corresponding author Abstract: Institutional theory is used in literature to explain entrepreneurs’ behaviours in forming new institutions or changing existing ones to overcome institutional voids in developing countries. Social entrepreneurs address these voids as opportunities serving their interests alongside other beneficiaries’. This article tackles the theoretical underpinning of social entrepreneurship, creating a venue for reviewing the formal market institutional voids that social entrepreneurs face in developing countries. Grounded theory is employed in five developing countries’ contexts, studying twenty social entrepreneurs to address and develop operational definitions per market void. This research proposes a holistic categorisation for formal market institutions, as well as a context-related informal institutional one. Moreover, the research moves forward by projecting a taxonomy of strategies employed by social entrepreneurs to tackle the earlier voids addressed. Keywords: social entrepreneurship; institutional theory; institutional entrepreneurship; institutional voids; developing countries; strategies. Reference to this paper should be made as follows: El Ebrashi, R. and Darrag, M. (2017) ‘Social entrepreneurs’ strategies for addressing institutional voids in developing markets’, European J. International Management, Vol. 11, No. 3, pp.325–346. Biographical notes: Raghda El Ebrashi is currently an Assistant Professor of Strategic Management at the German University in Cairo (GUC). She earned her Bachelor degree in Business Administration from the American University in Cairo (AUC), and acquired her Master degree in Professional Development from the AUC as well. She acquired her PhD in Strategic Management of Social Enterprises from the GUC. She has got extensive academic and practical experience in the field of social business management, corporate social responsibility programs, community development, and NGO management. She has got various academic publications on social entrepreneurship, and works as a professional consultant as well. She received numerous social entrepreneurship awards including Ashoka Fellowship, Synergos Fellowship, Young Global Leader, Youth Action Net Fellowship, and others. She is the Founder and Chairperson of Alashanek ya Balady Association in Egypt, and a former board member of the International Youth Foundation in the USA. Menatallah Darrag is currently an Assistant Professor of International Business at the German University in Cairo (GUC), Egypt. She earned her Bachelor

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R. El Ebrashi and M. Darrag degree in Business Administration from Ain Shams University in Cairo, Egypt and acquired her Master degree in International Business and Human Resources from the GUC. She acquired her PhD in Corporate Social Responsibility from De Montfort University (DMU) in Leicester, UK. She has assorted academic publications on corporate social responsibility and international human resource management, and works as a professional consultant as well.

1

Introduction

Institutional theory has well established how organisations evolve and change, and explained the continuation, stabilisation, or even destruction of institutional processes (Arthur, 1988; Berger and Luckmann, 1967; DiMaggio and Powell, 1983, 1991). Institutional entrepreneurs play an important role in the process of institutional change (DiMaggio, 1988; Fligstein, 2001; Maguire et al., 2004) by pooling resources to effect changes or abolish current institutional structures (Fligstein, 1997; Hargadon and Douglas, 2001; Maguire et al., 2004; Lawrence and Phillips, 2004). One form of an institutional entrepreneur is the social entrepreneur, who develops new business models or systems like institutional entrepreneurs, deviating from already existing institutional structures (Battilana et al., 2009; Mair and Marti, 2006). Social entrepreneurs are like their business counterparts, who discover a fit between certain needs and resources (Kirzner, 1979), establish an innovative venture (Gartner, 1985; Schumpeter, 1934), work on the venture’s growth, and pursue more opportunities to continuously innovate in the venture (Bygrave, 1997; Moore, 1986). While social entrepreneurs might be interested in generating profits out of their social ventures like business entrepreneurs (Austin, 2006; Mair, 2006; Robinson, 2006; Yunus, 2006; Wang et al., 2015), what really distinguishes social entrepreneurship from their commercial counterparts is that the former focuses on social and institutional change, and this becomes the utmost important factor in defining success of social ventures (El Ebrashi, 2013; Martin and Osberg, 2007; Nicholls, 2006; Young, 2006; Perrini and Vurro, 2006; Mair and Noboa, 2006; Thompson et al., 2000; Dees, 1998). In order to create change, social entrepreneurs tackle social and institutional barriers (Robinson, 2006) or institutional voids (Mair and Marti, 2007), which are non-existent or weak arrangements in the prevailing institutional frameworks that prevent certain community members from participating in market activities (Mair and Marti, 2007). Although some studies emphasised the prevalence of institutional voids and the importance of investigating them in developing countries (Mair and Marti, 2007; Webb et al., 2010; Parmigiani and Rivera-Santos, 2015), few studies investigated the role of social entrepreneurs in tackling these voids (see for example: Mair and Marti, 2006; 2009; Mair et al., 2012). Social entrepreneurs have the capacity of converting institutional voids perceived as barriers from the vantage point of their commercial counterparts (Baker et al. 2005) to opportunities employed for their and beneficiaries’ benefits (Mair and Marti, 2009). In addition, most of the research focused on voids in formal institutions and how informal institutions replace them (Mair and Marti, 2006; Webb et al., 2010; Parmigiani and Rivera-Santos, 2015) and the importance of informal institutions for business

Social entrepreneurs’ strategies for addressing institutional voids

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operations and social cohesion (De Soto, 2000; Mair et al., 2012; Weldon, 2006). However, there is still a need to address voids that may arise in informal institutions, and thus cause social problems (Blumer, 1971; Mair and Marti, 2009). Though many studies investigated different strategies social entrepreneurs adopt in developing markets (see for example Mair and Marti, 2009; Mair et al. 2012; Nicholls, 2006; Austin, 2006; Dacin et al., 2010; Bornstein, 2004), these attempts had not attained the crystallisation of these strategies according to the different types of voids faced. This research aims at identifying the various formal and informal institutional voids in developing countries, and constructing a taxonomy of strategies addressing each type of void. A grounded theory methodology (Glaser and Strauss, 1967; Strauss and Corbin, 1990) is adopted through observing and interviewing 20 social entrepreneurs across five developing countries. Accordingly, a newly developed categorisation of the two earlier mentioned institutional fronts had been identified by the researchers within developing countries’ contexts under study, as well as the employed strategies undertaken by the social entrepreneurs had been identified and clustered into a taxonomy.

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Social entrepreneurship, institutional theory, and institutional entrepreneurship

Institutional theory explains how groups and organisations conform to rules and norms of institutional environments (Meyer and Rowan, 1991; Scott, 1995). Scott (2008) summarised three categories for institutional forces guiding behaviours. The first category is the regulative pillar, where institutions guide behaviours based on sanctions and conformity to governmental legislation and industrial agreements such as constitutions, laws, and property rights (North, 1990, 1991; Bonchek and Shepsle, 1996; Fligstein, 1997). The second category is the normative pillar, which is less formal and includes behaviours that are guided based on the social obligation to comply (Jepperson, 1991; Fligstein, 1997). These standards are established by professional and trade associations, business groups, and alike. The normative pillar constitutes values (what is preferred or considered proper behaviours) and norms (how things are to be done) (De Soto, 2000). Finally, the cognitive category represents the subjective individual understanding of society’s culture and language (Carroll, 1984; Jepperson, 1991) and taken for granted assumptions (Meyer and Rowan, 1991; Zucker, 1977). Institutional entrepreneurs tend to challenge current institutional structures despite pressures toward keeping the current status (DiMaggio and Powell, 1983, 1991; Holm, 1995; Seo and Creed, 2002). Institutional entrepreneurship is ventured as a promising way to understand the role of social entrepreneurs in influencing and changing norms and structures of current institutions, or even creating new ones (Mair and Marti, 2006; Battilana et al., 2009). Social entrepreneurs also create new systems, institutions, or business models like institutional entrepreneurs, where their solutions deviate from existing institutional structures (Battilana et al., 2009; Mair and Marti, 2006; Maguire et al., 2004). For example, Grameen Bank was introduced as a new institution that was able to change the norms of banking institutions such as money cannot be loaned without collateral, the poor are not bankable, and the like (Mair and Marti, 2006). Nicholls (2006) emphasised that social entrepreneurs may tackle current institutional failures, and thus may change current institutional structures and innovate through current institutions rather than create new ones. For example, Bornstein (2004) gave the example of

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Veronica Chose, who introduced a new program in Tateni AIDS centre (an existing centre in South Africa) to train young people on counselling AIDS patients to build their capacities to find employment opportunities. Like institutional entrepreneurs, social entrepreneurs leverage resources to create change and solve social problems (Dacin et al., 2010; Mari and Marti, 2006; Mair and Schoen, 2007). DiMaggio (1988) mentioned: “new institutions arise when organised actors with sufficient resources see in them an opportunity to realise interests that they value highly” (p.14). Social capital is one of the valuable resources for social entrepreneurs, which facilitates the acquisition of resources and gaining influence and support through social relations and networks (Aldrich and Martinez, 2001; Adler and Kwon, 2002; DeCarolis and Saparito, 2006; DeCarolis et al., 2009). Institutional resources are also crucial resources for social entrepreneurs, which are the available political, legal, and institutional infrastructure (Dacin et al., 2010). For example, current philanthropic organisations may provide the needed funds for social entrepreneurs (Hockerts, 2006).

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Institutional voids facing social entrepreneurs in developing markets

Institutions refer to the “rules of the game” (North, 1990), which enable and support market activities (De Soto, 2000; Greif, 2006). As institutions become absent or weak, “institutional voids” take place (Khanna et al., 1997), which reinforce social inequality, create problems in market access and opportunity (Crow, 2001; Rodrik, 2007; Mair and Marti, 2007), and hinder market formation, economic growth and development (Khanna et al., 1997; Webb et al., 2009). In developing markets, formal institutional voids exist, and thus informal institutions of trust, group power, and support lead the scene (Kostova and Zaheer, 1999; Fligstein, 2001; Ricart et al., 2004; Scott, 2008). Informal institutions can have strong influence on behaviours even more than formal institutions (DiMaggio, 1994). According to Webb et al. (2010), developing markets are characterised by voids in the formal capital market. Businesses usually encounter difficulties obtaining credit, and small and medium enterprises usually reside to less formal funding sources like family support and personal savings. As for labour market voids, the workforce is generally uneducated and unskilled, and there is a high asymmetry in labour matching (Parmigiani and Rivera-Santos, 2015). Webb et al. (2010) adds contractual institutional voids, so called “rules of exchange” (Fligstein, 1996), which is the lack of formal written contracts (Khanna et al., 1997) and their enforcement are determined by group norms and power, and thus informal governance mechanisms rule over formal institutions (Parmigiani and Rivera-Santos, 2015). Trust and social networks play roles here, where agreements are established informally among community members (De Soto, 2000; Mair et al., 2012). Also, property rights’ protection is not existent in developing markets (Webb et al., 2010), which hinders entrepreneurship activities (Puffer et al., 2009). This void is replaced by the informal institution of trust and social networks, where private property is informally recognised by community members (Mair et al,, 2012). Another type of void is failure in product markets (Parmigiani and Rivera-Santos, 2015), where consumers in developing markets experience lack of information and product understanding derived from low education and literacy levels (Viswanathan et al., 2008). Wolf (1987) referred failures in addressing externalities and the provision of


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public goods, which are poorly managed and under produced – or not produced at all – by governments and the private sector in developing countries as a part of the product markets voids (Holcombe, 1997). Examples of positive externalities are education and research and development, while examples of negative externalities include noise pollution and environmental degradation (Wolf, 1987). Webb at al. (2010) mentioned that public goods not provided by the government, such as public infrastructure, are usually supported by local communities. Parmigiani and Rivera-Santos (2015) had also identified regulatory institutional voids. Developing markets are usually isolated from formal institutions, and most of the times rules are unpredictable and changing all the time (Khanna et al., 1997). Accordingly, community-based decision makers, such as religious figures and elders, regulate and decide the rules to govern local communities (Mair et al., 2012). One last void is identified by Fligstein (1996) as the conception of control, which is the lack of local knowledge (Geertz, 1983), specifically about the forms of market hierarchy, relevant power of firms in the market, and tactics for competition and cooperation. The lack of local knowledge can diminish the ability of individuals to access networks with social, business, and political organisations (Robinson, 2006), which is deemed important to access trust networks (Uzzi, 1997; DeCarolis et al., 2009), gain market access, and do business (Burt, 1992; Ingram and Simons, 2000). The earlier voids are considered formal market institutions’ voids (Parmigiani and Rivera-Santos, 2015; Mair et al., 2015), and social entrepreneurs are interested to address these voids – or market failures (Nicholls, 2006) – as they might be the root causes of social problems that need to be solved (Mair and Marti, 2004; Yunus, 2006; Alvord et al., 2004). However, social problems can also originate from voids in informal institutions. Accordingly, when voids take place in both formal and informal institutions, social problems are even more exaggerated. For example, as mentioned before, trust is an informal institution that is crucial for local communities to survive and to overcome certain formal institutional voids such as property rights and contractual agreements. One may expect that community members who have challenges trusting each other will not be able to establish or create business relations. Social support (or group support) is an informal institution, which refers to the belief that a person is cared for, loved, valued, and belongs to a network or group of people (Cobb, 1976). Solving voids in such an informal institution is important to overcome capital market voids by providing needed funds to start a business as mentioned before (Parmigiani and Rivera-Santos, 2015). For example, social support is used as a mechanism by microfinance institutions to receive microloans, as when a group member is not able to pay back the loan, other group members would pay it back for him/her (Yunus, 1998). Moreover, social acceptance and tolerance are informal institutions whose voids can affect social cohesion and general satisfaction (Weldon, 2006). Social acceptance is defined by DeWall and Bushman (2011) as signalling that people are willing to include a certain person or group of persons in their groups and relationships, and comprises tolerance and close relationships. Social acceptance is crucial even for markets with no labour market voids. For example, if a society does not accept certain ethnic minorities, this would alienate minorities from accessing the labour market (Weldon, 2006). Voids in formal market institutions or informal institutions are considered opportunities for social entrepreneurs (Mair and Marti, 2009; Baker et al., 2005) as the lack of institutions or institutional voids trigger social entrepreneurs to revamp or change institutions (Dacin et al., 2010); unlike conventional entrepreneurs who consider those

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institutional voids as barriers to their businesses (Mair et al., 2007; Robinson, 2006). To address these voids, social entrepreneurs extend opportunities to those who live in developing markets and face the previously mentioned institutional voids (Mair and Marti, 2006, 2009; Mair et al., 2012). Few researches investigated the role of social entrepreneurs in addressing institutional voids in developing markets (see for example Mair and Marti, 2009; Mair et al., 2012). However, there is a need to study the institutional setting of multiple countries in relation to entrepreneurship to wider applicability (Bruton, 2010), which is recognised in few studies such as Zackarakis et al. (2007) and Manolova et al. (2008). Accordingly, this research aims at studying the institutional context of developing countries’ institutional voids, and the strategies of social entrepreneurs in addressing them. The main research questions are: RQ(1): What are the formal market institutions’ voids in developing countries? RQ(2): What are the informal institutions’ voids in developing countries? RQ(3): How do social entrepreneurs address formal market and informal institutions’ voids?

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Methodology

This study employs Grounded Theory research, which is defined as a theory derived from data that has been collected and analysed using an iterative process of considering and comparing earlier literature, data, and the emerging theory (Glaser and Strauss 1967; Strauss and Corbin 1990). Grounded theory studies values, perceptions, and motivations that underlie certain behaviours (Strauss and Corbin, 1990; 1998), and is recommended to draw theories about social entrepreneurship in specific (Robinson, 2006; Nicholls, 2006) and entrepreneurial cognitive and behavioural research in general (Neergaard and Ulhøi, 2007; Bygrave, 2007). The study of Mair et al. (2012) as well employed grounded theory to analyse the situational context in Bangladesh and institutional voids. Thus, this research is an exploratory inductive qualitative research based on the grounded theory methodology developed by Glaser and Strauss (1967), and procedures developed by Strauss and Corbin (1990, 1998) with a constructivist stance (Mills et al., 2006; Schwandt, 2003). Findings from the grounded theory research are integrated into the existing research on institutional theory and voids to build and advance existing theories (Strauss and Corbin, 1990; Whetten, 1989). The categorisation of institutions proposed by Scott (2008) into formal and informal institutions is adopted to categorise emerging codes. The research investigates the types of voids under the main formal market and informal institutions studied, and it also explores the different strategies adopted by social entrepreneurs in developing countries for each void. Informal institutions and their voids addressed by social entrepreneurs in developing countries are “constructed” (Strauss and Corbin, 1998) from data and their operationalisation is provided. As for formal market institutions, the categorisation of voids is adopted from the literature, while operationalisation was constructed according to the coding of data.


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4.1 Sampling This research considers rigorous purposive and theoretical sampling techniques that are suitable for grounded theory research (Strauss and Corbin, 1990; Coyne, 1997; Glaser, 1978; Neergaard and Ulhøi, 2007). Grounded theory research usually starts with purposive sampling to maximise the possibility of obtaining data from information rich cases (Coyne, 1997). After coding and analysis of early cases, theoretical sampling takes place, as codes emerging help in identifying which data to collect next (Suddaby, 2006). When individual codes are saturated, elaborated upon, and fully integrated into the emerging theory, the researcher can stop collection of data (Glaser, 1978). Table 1

Background about social entrepreneurs involved in the research

Social entrepreneurs/companies interviewed Name Place of the interview Area of work Ashoka 1) Dina A. Wahab, Egypt Cairo, Egypt Disabilities’ education 2) Ehaab Abdou, Egypt Cairo, Egypt Social enterprises’ incubator 3) Magda Eskandar, Egypt Cairo, Egypt Home care and nursing 4) Maher Bushra, Egypt El Menya, Egypt Quarry workers support 5) Salah Arafa, Egypt El Sharkyya, Egypt Community development 6) Tandiar Mosaad, Egypt Cairo, Egypt Nurses capacity building 7) Hisham El Rouby, Cairo, Egypt Promotion of Egypt volunteerism 8) Sameh Seif, Egypt El Menya, Egypt Water and sanitation support 9) Bright Simons, Ghana Washington D.C., Medical care and USA technology 10) Nnameka Ikegwonu, Washington D.C., Agriculture and media Nigeria USA 11) Zeinab El Momany, Amman, Jordan Female farmers’ Jordan support 12) Rabee Zureikat, Jordan Dead Sea, Jordan Volunteerism and tourism 13) Kamel El Asmar, Jordan Amman, Jordan Promotion of volunteerism 14) Rawan Barakat, Jordan Amman, Jordan Education Beirut, Lebanon Food and agriculture 15) Kamal Mouzwak, Lebanon Schwab 16) Ibrahim A.Aish, Egypt Sharkyya, Egypt Organic agriculture Foundation 17) Laila Eskandar, Egypt Cairo, Egypt Informal sector support Arab World Social 18) Ezzat Naem, Egypt Cairo, Egypt Garbage recycling Innovators Program 19) Paul Abi Rashed, Beirut, Lebanon Culture and (Synergos) Lebanon environment 20) Sameh El Halawany, Alexandria, Egypt Culture and Egypt infrastructure Supporting organisation

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This study starts with two social entrepreneurs (purposive sampling) who are Ashoka fellows, and then the selection of the rest followed until data saturation (theoretical sampling). The first group of social entrepreneurs is selected from Ashoka as this foundation is regularly cited in the social entrepreneurship literature (see for example Bornstein, 2004; Nicholls, 2006; Shaw and Carter, 2007), and thus it can help in generating data for developing the next sample. It is insured that social entrepreneurs are selected from different sectors to provide different insights about various types of voids. The research involves 20 social entrepreneurs from different developing countries and supporting organisations as shown in Table 1.1 To insure data triangulation (Strauss and Corbin, 1998; Eisenhardt, 1989; Coyne, 1997), all of the 20 social entrepreneurs were interviewed and most of them were directly observed. This research included both direct and indirect observations. Direct observations included attending their meetings with their staff, beneficiaries, as well as business meetings. Indirect observations include reviewing histories and profiles of social entrepreneurs on the Internet. Only two social entrepreneurs were not interviewed in their home countries – and thus not observed - due to time and financial constraints.2 The interviews were kept semi-structured to allow for data emergence. E-mails were sent to all of the social entrepreneurs listed on Ashoka, Synergos, and the Schwab Foundation databases in respective countries, and interviews were carried out with all who conveyed interest in participating in the research. After coding the data of the first group of social entrepreneurs from Egypt, more social entrepreneurs were reached from other countries and supporting organisations. The coding procedures involved writing memos starting with open coding, which is the process employed to breakdown, examine, compare, conceptualise and categorise the data. Axial coding then followed, where connections between categories were employed. Then, selective coding was carried out, which is the process of selecting the core category, relating it to other categories systematically, validating such relationships earlier created, and filling in categories that need further refinement and/or development. Afterwards, process followed to link actions or interactional consequences altogether. The conditional matrix was also used to link the spectrum of conditions and consequences in relation to the phenomenon under study (Strauss and Corbin, 1990; 1998).3 The research involved moving across literature to enhance theoretical sensitivity (Strauss and Corbin, 1990) and implementing open coding and axial coding to tackle new categories. As such, the research had been going back and forth between data and the literature until data saturation was attained (Strauss and Corbin, 1990; 1998). This implies that the 20 interviews conducted had not been planned, but depended on the data saturation attained at that number. In addition, certain theories and concepts were constantly added to the literature based on categories emerging. To conclude, the time plan of the research was not pre-determined. The whole research consumed six months.

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Research findings: the taxonomy of social entrepreneurship strategies

As per the adopted grounded research coding, a respective operationalisation by social entrepreneurs is targeted to address the market and informal institutional voids tackled by them. The following section highlights the research findings and follows this by presenting, categorising, and explaining a research-proposed taxonomy of strategies based on each type of void.


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5.1 RQ (1) and (2): market and informal institutions addressed Though findings showed that social entrepreneurs address the seven market institutional voids presented earlier in the literature; it also became evident that two of these voids need to be redefined from the contextual perspective of social entrepreneurs. In the literature, capital market voids meant that community members cannot access formal sources of funding. In our research, social entrepreneurs defined this void as the inability to access any “organised” source of funding; be it formal or informal. On one hand, organised formal sources of funding include microfinance institutions, grants, and funding through registered cooperatives. For example, Zeinab El Momany is mobilising community funds through a formal cooperative. She mentioned, “the community in Al Sakhra needed a formal institution to coordinate among themselves, but the funding had to come from the people themselves to feel the sense of ownership… A registered cooperative is the right solution” (El Momany, personal interview, April 2014). On the other hand, our findings concluded that organised informal sources include community cooperative funding mechanisms, which is a mechanism by which community members trust each other (without a formal process or a formal institution) to invest as a group in a certain project and take back what they invested with or without returns from projects’ proceeds. As an example, Sameh Seif designed a community funding mechanism to finance the establishment of low cost sewage system. He said, “villagers just needed a designed mechanism to follow in order to fund the new sewage system. We didn’t find a cooperative; all depended on cooperation and trust in following the designed system. The new sewage system is much cheaper, and villagers got convinced that it is better to divide the cost among them rather than waiting for the government to solve their problems, […] and also gain money out of it (Seif, personal interview, November 2013). Similarly, product markets’ voids in our research findings meant more than what was offered in the literature that defined it as the lack of information and product understanding, and the lack of certain public goods. In this research, social entrepreneurs mentioned that it is not only about the unavailability of public goods, but also about their quality. For example, Tandiar Mosaad from Egypt stated; “the public nursing system and education exist in Egypt since ages, but it is not about the existence of the system; it is about what comes out of the system. The quality of nursing education and system in public hospitals need to change” (Mosaad, personal interview, November, 2013). Accordingly, voids in product markets include asymmetry of information, the lack of certain public goods, and also the inability to access quality public goods. Table 2 shows the final operationalisation for the formal market voids in comparison to the literature. As for informal institutions, three informal institutions evolved from data, which are: social acceptance, trust, and social support. These informal institutions, as stated previously in the literature, can help overcome certain formal institutional voids, and thus voids in these informal institutions can increase the intensity of the social problem. Social entrepreneurs addressing voids in the informal institution of social acceptance believe that certain groups of people are suffering because they are not tolerated by other members in the community. Certain groups are alienated, and thus excluded from group membership. This also applies to accepting the endorsement of a certain idea such as environmental sustainability proposed by Paul Abi Rashed from Lebanon and volunteering in community projects proposed by Hisham El Rouby from Egypt. For example, Rabee Zureikat from Jordan is addressing the problem of social acceptance for

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dark skinned Jordanians (so called black Jordanians), who live in tribes on the mountains in Jordan away from the centre of the city, and are usually alienated from mainstream market and societal activities. According to Rabee, there are major stereotypes about black Jordanians’ capabilities that need to be addressed (Zureikat, personal interview, December 2014; Ashoka Website, 2015). Another example is Dina Abdel Wahab from Egypt, who is also addressing the same informal institution of alienating children with disabilities from mainstream education (Abdel Wahab, personal interview, June 2014; Ashoka Website, 2015). Table 2

Formal market institutions and their operationalisation based on grounded research

Market Institution

Operationalisation of Voids

1. Capital market

Inability of community members to access organised sources of funding; be it formal or informal.

2. Labour market

Status – compared to earlier identified in the literature Changed from: Inability of community members to access formal sources of funding (Webb et al., 2010)

Stayed the same The workforce is generally uneducated and unskilled, and there is a high asymmetry in labour matching (Parmigiani and Rivera-Santos, 2015; Webb et al., 2010).

3. Contractual agreements and enforcement

The lack of formal written contracts and their enforcement (Webb et al., 2010; Fligstein, 1996; Khanna et al., 1997).

Stayed the same

4. Property rights

A person has property rights depending on private ownership of property (Puffer et al., 2009).

Stayed the same

5. Product markets Lack of information and product understanding, lack of certain public goods, and the inability of community members to access quality public goods.

Changed from:

6. Regulatory

Isolation from formal institutions, and/or rules are unpredictable and changing all the time (Khanna et al., 1997).

Stayed the same

7. Conception of control

The lack of local knowledge, specifically about the forms of market hierarchy, relevant power of firms in the market, and tactics for competition and cooperation (Fligstein, 1996; Geertz, 1983)

Stayed the same

Lack of information and product understanding, and the lack of certain public goods (Parmigiani and Rivera-Santos, 2015; Wolf, 1987; Webb et al., 2010)

The second informal institution is trust. Social entrepreneurs in this study are trying to convey that their beneficiaries (be it organisations or people) are reliable and honest, or to induce trust, confidence, and faith among different community members. For example, Salah Arafa from Egypt introduced the Basaysa model to promote trust among different villagers to collaborate on different projects; starting from brainstorming, solving


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problems, and to collecting funds targeting the establishment of community ventures (Ashoka Website, 2015). According to Salah, “when I first came here, people were unwilling to cooperate or put their money together to solve their own problems. They were searching for external help rather than depending on themselves” (Arafa, personal interview, September 2014). The same goes for Ehaab Abdou, who is addressing the lack of trust in start-up social enterprises (Ashoka Website, 2015). The third and last social institutional void detected is social support. Social entrepreneurs addressing this void believe that there are certain people who are deprived from social networks, and thus they do not receive adequate support and care. This support could be intergroup or external support. For example, Nnaemeka Ikegwuonu from Nigeria addresses the deprivation of small holder farmers from intergroup support, which leads to the inability of farmers to gain market knowledge such as crop prices and weather forecasts (Ikegwuonu, personal interview, August 2014; Ashoka Website, 2015). Hisham El Rouby from Egypt is also working on the lack of external support for poor slums in Egypt (Ashoka Website, 2015). Based on the earlier discussed research findings, Table 3 shows the three informal institutions tackled by social entrepreneurs and the operationalisation of their voids. Table 3

Informal institutions and their operationalisation based on grounded research

Informal Institution

Operationalisation of Voids

1. Social acceptance

The inability of community members to willingly accept a phenomenon or group of persons and/or tolerate their differences.

2. Trust

The belief that a person or an organisation is undependable, weak, or incompetent.

3. Social support

The inability of community members to gain intergroup or external support and access social networks that provide assistance and help when needed.

5.2 RQ (3): the categorisation of strategies for formal and informal institutions’ voids To address the formal market and informal institutions’ voids, social entrepreneurs employ unique strategies in order to address each type of void. Table 4 shows this research’s proposed taxonomy of strategies for each void based on the categorisation of data. These are all explained as follows: 

Capital market voids: o

Networking for funding: social entrepreneurs are not directly involved in the provision of funding for their beneficiaries, but they search and connect their beneficiaries with opportunities for funding. An example is Ehaab Abdou from Egypt, who is supporting incubated social enterprises by connecting them to donors, investors, and others.

o

Creating informal cooperative mechanisms: social entrepreneurs design mechanisms for community members to invest their money in social projects that are beneficial to their communities, and to get back their money with or without a return. These mechanisms depend on community trust rather than

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R. El Ebrashi and M. Darrag being formalised. Zeinab El Moamany from Jordan uses this mechanism so that female community members can share in financing various agricultural projects for their own benefit. o





Microfinance and formal cooperatives: when community members do not have access to formal capital markets, some social entrepreneurs reside to offering microfinance services; especially if microfinance institutions are not even there. Some other social entrepreneurs formalise a cooperative headed by community members to manage the cooperative funding mechanisms. Sameh El Halawany from Egypt offers microfinance to the residents of Al Maxx community to start their own projects. It is known that this community in Egypt is marginalised and deprived from basic services which include funding.

Labour market voids: o

Expanding the labour pool: while specialised labour exists in the market, they are not enough to meet consumer demands. Social entrepreneurs train more labour on certain vocations to meet certain needs. An example is Dina Abdel Wahab, who trains new teachers on education techniques for disabilities, and thus can spread in different schools across Egypt.

o

Creating a new vocation: based on market need, social entrepreneurs introduce new vocations into the market to satisfy a need that is unmet by current vocations. For example, Magda Eskandar introduced the vocation of home care in Egypt, where its labour are not nurses but professionally trained and certified care givers. They carry out basic nursing tasks, and act as supporters for elders at home.

o

Building capacities: social entrepreneurs are involved in the capacity building of labour when they lack the needed market skills. Capacity building for labour takes place in both the formal and the informal markets. Maher Bushra from Egypt trains quarry workers in the informal sector on life skills as well as on employer negotiation skills to be able to gain their economic rights. Tandiar Mosaad trains nurses in public hospitals on state-of the-art nursing skills to alleviate their professional standards.

o

Labour matching: social entrepreneurs connect community members with possible employment or business opportunities. For example, Laila Eskandar from Egypt designs business models to connect informal service providers and manufacturers (such as garbage collectors and construction workers) with business opportunities available at local and multinational companies.

Contractual Agreement and Enforcement: o

Act as a mediating contractor: as major difficulties arise between two agents in creating contracts; social entrepreneurs intervene to mediate the relationship as the main contractor, while beneficiaries are recruited as sub-contractors. Magda Eskandar mediates the relationship between home care givers and seekers. All contracts are done with her organisation, and she is the one who manages the process of recruiting and organising care givers (sub-contractors). This strategy is crucial for social entrepreneurs to make sure those beneficiaries are not abused, and that the quality of service provision is up to standard.






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o

Negotiating contracts: informal workers suffer from the non-existence of contracts, and thus some social entrepreneurs intervene to negotiate with employers the contractual agreements. For example, Maher Bushra negotiates with quarry employers to set up workers’ contracts with fair working conditions.

o

Creating inclusive contracts: micro and small entrepreneurs are deprived from participating in contractual agreements with big companies, and thus they are usually alienated from major supply chains. Some social entrepreneurs work on including micro and small businesses in fair trade agreements in local and export markets. Ibrahim Aboul Aish includes small holder farmers in supplier contracts with major exporters of organic food in Europe.

Property Rights: o

Formalising organisations: in order to protect enterprises’ ownership, social entrepreneurs help other organisations to register and have a legal identity. Ehaab Abdou supports incubated social enterprises to register as a legal entity, be it an NGO or a company, and provides the necessary legal knowledge to access respective ministries.

o

Facilitating ownership: some community members may suffer from the inability to legally own certain facilities or utilities, although they are informally recognised as theirs. Social entrepreneurs intervene to help those community members to access this legal right. Zeinab Moamany helps small holder female farmers in Jordan to reclaim their lands previously controlled by their male relatives through community education, and negotiations with community members and the government.

Product markets: o

Provision of public goods: when there is a direct void in the provision of public goods from the side of the state, social entrepreneurs intervene to provide access to these goods through some incremental innovations. Sameh Seif innovated a cheap form for sanitation units that can be easily installed by community members in Egypt.

o

Renovating public service: though sometimes public service is already provided, the quality of this service might not be up to the standard or designed in a way that prohibits the accessibility of certain community groups. Accordingly, social entrepreneurs intervene by introducing new techniques to revamp the service. Rawan Barakat in Jordan changed how public education is carried out across Jordan by introducing new curricula that rests on imaginative and listening skills rather than visuals only. This allows students who are visually impaired to access current formal public education.

o

Information dissemination: social entrepreneurs tackle the problem of information asymmetry among groups who are usually deprived from reaching certain information. Bright Simons created a system in Ghana, whereby patients in poor areas can send SMS with a bar code number written on medical drugs to a central organisation verifying if a certain medicine is a counterfeit or not.

338 



R. El Ebrashi and M. Darrag Regulatory: o

Creating a new organisation: certain community groups are isolated from regulatory institutions that are core for obtaining their rights and organising labour. Social entrepreneurs address this problem by creating a regulatory organisation in the form of syndicates or unions. For example, Ezzat Naem coestablished the first syndicate for garbage collectors in Egypt to acknowledge the vocation, organise labour, and gain market access.

o

Lobbying: some social entrepreneurs address voids in market regulations by lobbying or negotiating with the government to change laws in favour of marginalised groups. Zeinab El Moamany was able to lobby the government in Jordan to change the farmers’ union law, by which she allowed smallholder female farmers to become members after being deprived from membership.

Conception of control: o





Infusing market understanding: social entrepreneurs directly address the lack of knowledge about market structure and hierarchy through spreading relevant market information, to allow for community members to know who to do business with and in which markets. Nnameka Ikegwonu created the community radio, which disseminated daily market information about suppliers of crops, seeds, prices, demand on certain commodities, new competitors, and other relevant information.

Social acceptance: o

Inclusion: social entrepreneurs tackle the problem of marginalisation of certain group members from the society and being rejected through the strategy of inclusion. Social entrepreneurs integrate the marginalised community members in business deals and social gatherings with other groups in the society. Rabee Zureikat was able to integrate dark skinned Jordanians in the society through business cooperation, where they started to receive tourists interested in indigenous cultures and local art.

o

Capitalising on specialised potential: some social entrepreneurs shed the light and market the skills of the marginalised so they would be appreciated by the society. Instead of calling for giving respect to garbage collectors, Laila Eskandar started to showcase how garbage collectors can be of benefit for multinational corporations to protect their products from counterfeit and recycle materials necessary for manufacturing.

o

Raising awareness: some other social entrepreneurs tackle this void by directly increasing the awareness of the society regarding a certain phenomenon. Paul Abi Rashed introduced songs for children in public schools in Lebanon, focusing on the environment and the need for protecting nature. These songs act as awareness material for children to change their behaviours.

Trust: o

Market-driven strategies: to be labelled as trustworthy and thus ensure support, some social entrepreneurs focus on developing business models and modes for business cooperation among community members or beneficiaries and


339

businesses. Ezzat Naem was able to repackage garbage collection in a way that seemed more professional and organised than before. Businesses started to work with local garbage collectors because they are prompt, offer professional service, and look neat and tidy. o



Promoting community collaboration: social entrepreneurs intervene in intergroup relations on the community level to spread trust among them through regular collaborative projects involving different sects. Salah Arafa was able to include all members of the community with different ages, gender, and income in the planning and implementation of the solar energy unit, as well as the first community agri-market. After these two projects, community members trusted each other to collaborate on different other levels involving investment of their own money with each other in various projects.

Social support: o

Promoting the culture of giving: in order to bring support to community members, social entrepreneurs intervene by bringing in external support from other members in the society. Kamal Mouzwak was able to receive support from various constituencies for the first small holder farmers’ markets in Lebanon through selling the idea as an opportunity to show solidarity with poor farmers who need income.

o

Creating support groups: some other social entrepreneurs play on intergroup relations through creating sub-groups from the community devoted to providing support in a certain aspect. Nnameka Ikegwonu created a support group for smallholder farmers from among the farmers themselves in order to navigate electronic data about relevant information needed by farmers and disseminate this information to them.

Table 4

Taxonomy of social entrepreneurship strategies for tackling institutional voids in developing markets

Strategies Social Addressing Support Informal Trust Institutions Social acceptance Strategies Conception of addressing Control Market Institutions Regulatory

Promoting the culture of giving

Creating support groups

Market driven strategies

Promoting community collaboration

Inclusion

Capitalising on specialised potential

Raising awareness

Infusing market understanding Creating a new organisation

Lobbying

Product Markets

Provision of public goods

Renovating public service

Property Rights

Formalising organisations

Facilitating ownership

Information dissemination

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Table 4

Taxonomy of social entrepreneurship strategies for tackling institutional voids in developing markets (continued) Contractual Agreement, Enforcement

Act as a mediating contractor

Negotiating contracts

Labour Market

Expanding the labour pool

Creating a new Building vocation Capacities

Capital

Networking for funding

Creating informal cooperative mechanisms

Market

6

Inclusive contracts Labour matching

Microfinance and formal cooperatives

Conclusion

This paper is an original attempt to build on previous research on institutional theory and social entrepreneurship, specifically in developing markets. While the role of social entrepreneurs in addressing institutional voids gained much attention in the past years (Mair and Marti, 2009; Mair et al., 2012; Parmigiani and Rivera-Santos, 2015), there is still a need to direct more research in this aspect. This research tackled social entrepreneurs’ role in addressing institutional voids in developing countries, and has successfully developed a divergent framework for formal market institutions derived from literature. Further, an operationalisation of the earlier framework is developed resting on grounded theory’s empirical findings. It is evident that social entrepreneurs under study either introduce new institutional forms parallel to existing ones, or tend to deconstruct and revamp current institutional structures (DiMaggio and Powell, 1983, 1991; Fligstein, 1997) to create social change (Mair and Marti, 2006; Mair et al., 2012). Establishing new institutional structures is presented in strategies such as creating new organisations, provision of public goods, formalising organisations, and creating a new vocation. Examples for strategies that revamp current institutions include lobbying, inclusive contracts, renovating public service, and infusing market understanding. In addition, an identification of the informal institutional voids is presented out of the grounded theory’s empirical work, which is yet an untapped domain in studying social entrepreneurs’ influence on developing markets. Previous research focused on formal institutional voids, while little attention is given to how social entrepreneurs induce social change by reorganising informal social institutions. As mentioned previously by DiMaggio (1994), informal institutions may have influence on the behaviours of local communities’ more than formal ones. Social entrepreneurs in the current study reorganise weak informal institutional structures in local communities represented in social support, trust, and social acceptance, which are all necessary for various business relations and running day-to-day social and market activities. Finally, strategies for tackling formal and informal institutional voids are presented, which introduce a novel taxonomy of strategies employed by social entrepreneurs in addressing each institutional void. Yet, there are limitations identified in this research. As main data had been collected from Egypt, this might represent a limitation, resulting in a bias of the data. Nonetheless, this had resulted from participants’ willingness to take part in the research. In addition to that, the 20 participants had originated from four developing countries only. This low diversification in the number of countries, alongside having 18 participants from Arab-


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originating cultures might have had its toll on the institutional frameworks and voids, more specifically the informal ones. Further to that, this research had mainly focused on the formal market institutions and their voids, rather than other formal institutional voids, though not in the scope of this research. This research represents an early milestone in addressing gaps studying social entrepreneurship and institutional voids in developing contexts. Other formal institutional frameworks rather than the market one studied in this research, like the political or legal could be used to expand the span of knowledge on the topic. Moreover, studying the implication of societal perspective based on cultural principles on the informal institutional frameworks and voids poses itself as a venue for future research as it is expected to affect how social entrepreneurs manoeuvre their strategies according to the different cultures they operate within. An interesting area of research as well is to explain the conditions under which institutions are revamped or deconstructed, and how informal institutional structures can influence changes in formal institutional structures.

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Notes 1

2 3

Check full profiles from Ashoka website (https://www.ashoka.org/fellows), Schwab foundation website (http://www.schwabfound.org/entrepreneurs), and Synergos website (http://www.synergos.org/fellows/). Those are Bright Simons and Nnameka Ikegwonu who were interviewed in Washington DC in a conference. Refer to Appendix A for examples for the coding procedures implemented in this research.

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Appendix A Open and Axial coding example (without narrative) Code note # 10.1: Formalising Organisations and its Properties and Dimensions Causal Condition

Phenomenon (Category)

Voids in Property Rights

Formalising Organisations

Properties of Property Rights Voids

Specific Dimensions of Formalising Organisations

Inability to protect private ownership Inadequate information about legalities

Prior structure: informal

Lack of access to resources

Stage of the organisation: incubation Type of the (to be) organisation: NGO or company

Formalising Organisations Context Under conditions where formalising organisations is: Formalising an informal idea, turning an incubated idea into an organisation, considering the organisation as an NGO or company, then: Strategies Adopted for Formalising Organisations Social networks for funding Provide technical support Increase legal knowledge Go through legal procedures Intervening Conditions Problems in property rights institutions Fear of registration Consequence Registration of incubated ideas