Terminology and Definitions in the Context of this Paper

The following definitions are intended to clarify the meanings of terms used in this paper. They are not meant to integrate all meanings that might be given to these terms in other contexts, and their lack of concurrence with other meanings should not be construed as an objection to their use.

Social enterprise - socially-oriented venture (nonprofit/for-profit or hybrid) created to solve a social problem or market failure through entrepreneurial private sector approaches that increase effectiveness and sustainability while ultimately creating social benefit or change.1 For more information, refer to the Social Enterprise Typology.

Social enterprise methodology – the methods and organizing principles underlying the study of social enterprise.

Social sector – the part of the economy characterized by organizations whose goals and responsibilities are the maintenance and development of the common/public good through the acquisition, transformation and allocation of public property, goods and services.

Private sector – the part of the economy characterized by businesses whose goals and responsibilities are the maintenance and development of private wealth through the acquisition, transformation and trading of personal property. In most legal environments, they can adopt generic “for-profit” legal structures meant to regulate ownership rights and responsibilities among stockholders and creditors as well as general liability.

Social impact – the addition, preservation, or reduction of value for a common good and/or target beneficiary. (In social sector literature, social impact is mainly used to connote a positive benefit.)

Business practices – the methods by which private-sector businesses intervene through market mechanisms in order to shape market forces to their advantage.

Market Failure – the failure of a more or less idealized system of price-market institutions to sustain desirable activities (broadly defined) to cover consumption as well as production. The desirability of an activity is evaluated relative to the solution of values of some explicit or implied maximum welfare problem.2 In social enterprise literature, “social market failure” is used to describe a malfunction of government to render social services (i.e. health, education, utilities, transportation, etc.).

  • 1Alter, Kim, Social Enterprise Definition, Virtue Ventures, 2005
  • 2Francis M. Bator in “The Anatomy of Market Failure,” The Quarterly Journal of Economics (1958), reprinted in Social Entrepreneurs: Correcting Market Failures, Stanford Graduate School of Business, Case: SI-72A, 2005.