Journal of World Business 41 (2006) 6–20

www.socscinet.com/bam/jwb

Gauging the success of social ventures initiated by

individual social entrepreneurs
Moshe Sharir a,*, Miri Lerner b,1
a
Ruppin Academic Center and Ashkelon Academic College, P.O.B. 9071, Ashkelon 78211, Israel
b
The Academic College of Tel-Aviv-Jaffa and Tel Aviv University, Faculty of Management, Ramat Aviv 69978, Israel

Abstract
This paper focuses on identifying the factors affecting the success of social ventures operating in social settings in Israel. An
exploratory qualitative field study included 33 social ventures, founded in the 1990s by individuals acting independently of their
positions in other organizations. The study demonstrates eight variables as contributing to the success of the social ventures,
arranged in the order of their value: (1) the entrepreneur’s social network; (2) total dedication to the venture’s success; (3) the capital
base at the establishment stage; (4) the acceptance of the venture idea in the public discourse; (5) the composition of the venturing
team, including the ratio of volunteers to salaried employees; (6) forming cooperations in the public and nonprofit sectors in the
long-term; (7) the ability of the service to stand the market test; and (8) the entrepreneurs’ previous managerial experience.
# 2005 Elsevier Inc. All rights reserved.

Keywords: Social ventures; Social entrepreneurship; Success-related factors

1. Introduction difficult for welfare states to answer social needs and

claims, on the one hand, and has broadened their reliance
The increasing awareness in recent decades of the on the activities of the third-sector nonprofit organiza-
potential contribution of social entrepreneurship to the tions (NPOs), on the other. Alongside veteran institutions
economy and society is hardly surprising in view of the that were set up in its pre-state days to provide
growing number of third-sector organizations, namely, educational, cultural and welfare services, Israel too
the segment of the economy that is made up of neither has seen issues as promoting self-help, social justice,
public nor business concerns. These organizations differ democratic education, community development, envir-
in the scope of their activities, areas of operations and onmental protection, and caring for the needs of the
the background to their formation, but the common weaker social groups—minorities, women, the elderly,
denominator is that they operate on a voluntary basis the disabled, and children (Gidron, Katz, Anheier, &
and not for the purpose of profit. Salamon, 1999).1
The trend in many countries of adopting the liberal
ideology of diminishing government involvement in the
1
economy and society has made it increasingly more A report of the Israeli Center for Third-Sector Research at Ben-
Gurion University of the Negev published in 2004 estimates a total of
244,000 full-time positions in third-sector organizations (including
universities) for 2002, on the basis of average wages in the economy
* Corresponding author. Tel.: +972 3 9652979; fax: +972 9692311. for that year. This figure does not fully reflect the employment created
E-mail addresses: [email protected] (M. Sharir), by the third-sector organizations for two reasons: the employment of
[email protected] (M. Lerner). volunteers, estimated at about 39,000 full-time positions, and out-
1
Tel.: +972 3 6408082; fax: +972 9 9587992. sourcing to subcontractors.

1090-9516/$ – see front matter # 2005 Elsevier Inc. All rights reserved.
doi:10.1016/j.jwb.2005.09.004
 M. Sharir, M. Lerner / Journal of World Business 41 (2006) 6–20 7

Even though entrepreneurship is essential to the motivated, the challenges and problems social entrepre-
functioning of the nonprofit organization (NPO), neurs face during the initiation, establishment and
whether the source is an individual or a group, little institutionalization of their ventures resemble those
research has been done on the subject. The current faced by business entrepreneurs (Edward, 1995; Piltz,
literature on nonprofit entrepreneurship focuses mainly 1995; Tropman, 1989; Young, 1986). They face
on describing nonprofit business initiatives designed to challenges of identifying opportunities and needs,
reduce dependency on outside contributions, identify- planning, acquiring support information and resources,
ing the drivers motivating entrepreneurial activities in marketing and creating demand, and constructing
the social arena and comparing them with those organizational frameworks (Young, 1986).
motivating economic entrepreneurs, and identifying Essential to the founding and establishing of any
the skills and abilities that enable entrepreneurs to social venture are the individuals and groups with the
succeed in their nonprofit ventures (Hisrich, Freeman, vision, drive and perseverance to provide answers to
Standly, Yankey, & Young, 1997; Piltz, 1995; Waddock social problems and needs, whether educational,
& Post, 1991). This paper focuses on identifying the welfare, environmental or health related. They may
factors affecting the success of social ventures operating feel the need to fill a gap in services left open by the
in social settings in Israel. Our belief is that such an public or private sectors (Anheier & Ben-Ner, 1997), to
investigation will contribute to a theoretical concep- address the needs of special populations (Tropman,
tualization of the phenomenon and at the same time add 1989; Young, 1986), to contribute of their time, skills,
to our empirical knowledge in this area. energy and assets to society (Edward, 1995; Gidron,
The main research question we pose is: What are the 1995), or have a commitment to the realization of
key factors that contribute to the success of a social ideological goals without forcing those goals onto the
venture initiated by an individual entrepreneur? The general public (Rose-Ackerman, 1997). In some
definition we use to characterize the activities of the instances, social entrepreneurs develop more than just
social entrepreneur is acting as a change agent to create one particular program or service, and their attempts to
and sustain social value without being limited to respond to basic problems and dilemmas in the
resources currently in hand. community and society may inspire the synergetic
union of many different entities. The challenge of social
2. Literature review entrepreneurship therefore rests on the entrepreneur’s
ability to furnish a forceful vision formulated in terms
For lack of a comprehensive theory for the study of of social rather than economic values (Clastkowski,
social entrepreneurship (Bygrave, D’Heilly, McMullen, Baily, & Baily, 1996; Dees, 1998; Piltz, 1995; Waddock
& Taylor, 1996), this study relies on the business & Post, 1991).
entrepreneurship literature. At the same time, the
research itself examines the applicability of business 2.2. Evaluating success
concepts and categories to social venturing, placing
emphasis on identifying the conditions unique to the Whereas the central objective of entrepreneurship in
area of social venturing. In reviewing the literature we the business sector is the attainment of economic
first briefly address social entrepreneurs and their returns, the main interest in social venturing is the added
ventures, and then focus more extensively on the criteria value and social contribution, with emphasis on the
for evaluating their success. sense of mission and service (Kanter & Summers,
1987). Dissimilarities also find expression in the social
2.1. The social entrepreneur venture’s over-dependence on external sources of
funding due to its inability to demand realistic fees
Whereas much of the research dealing with social for the services rendered to the majority of its clients
entrepreneurship and innovation has focused on existing (the direct customers), in addition to its reliance on
NPOs (Letts, Ryan, & Grossman, 1999; Light, 1998; Van volunteers and staff ready to accept below-market
De Ven, 1981; Young, 1982), the current paper focuses on wages (Bygrave et al., 1996; Emerson, 1998). There-
the process of initiation and institutionalization of new fore, it is important to emphasize that we are aware of
social ventures. Like business entrepreneurs, social the problems inherent in any attempt to estimate the
entrepreneurs establish new organizations, develop and success of a social venture. At the same time, it is
implement innovative programs, and organize or assumed that some criteria employed in evaluating and
distribute new services. Even though they are differently explaining the success of business ventures may also be
8 M. Sharir, M. Lerner / Journal of World Business 41 (2006) 6–20

applied to explaining success in the social arena. The organization, and the environment. Shane’s (2003)
challenge facing the potential social entrepreneur is to conceptual framework provides a deeper insight into the
establish an organization that is based not only on components of the entrepreneurial process and their
commitment and a sense of mission, but is also relationship with performance.
equipped with the tools required to respond to changes The conceptual framework of the present study
in the environment and the customers’ needs (Letts examined the entrepreneur dimension by analyzing
et al., 1999). socio-demographic background data, previous manage-
The challenges involved in establishing a venture, as rial experience, and the motives for choosing the
well as the characteristic uncertainty and the lack of entrepreneurial path. Included in the organizational
resources and stability that have led some researchers to dimension were variables such as the area of activity of
view survival as the prime dimension of success (Van the venture, the composition and structure of the
De Ven, 1984), are valid also in the social arena. founding team, and the capital base at the disposal of the
Furthermore, given the complexity of evaluating firm entrepreneur at the various stages of the venture, from
performance, it is often recommended to use multiple initiation, through establishment, to institutionalization.
measures of performance (Kalleberg & Leicht, 1991). The environmental dimension included variables such
Several researchers have suggested that growth (e.g., in as the venture’s social network, the acceptance of the
revenues and/or in number of employees) influences idea of the venture in the public discourse, and the
future business development, and may indicate business existence or absence of support and infrastructure
strength as well as ongoing survival and growth services. The process dimension focused on variables
(McGee, Dowling, & Megginson, 1995; Merz & such as identifying need/opportunity, planning, network
Sauber, 1995). building, creating partnerships, acquiring legitimacy
Based upon these considerations, the criteria of and resources, and ability to stand the market test. This
success of social ventures are defined here as follows: distinction between the variables according to the four
(1) the degree to which the social venture achieve its dimensions is for analytical purposes only and it is
declared goals; (2) the ability of the venture to ensure clearly not absolute.
program/service continuity and sustainability by
acquiring the resources necessary to maintain current
operations; and (3) the measure of resources available 3. Methodology
for the venture’s growth and development. The added
value of a new social venture can be examined in This paper is based on a large field study carried out by
relation to the following questions: does it lead to the the first author during the period 1999–2001,2 on the
creation of a new area of activity? Does it answer needs processes of initiating, establishing and institutionalizing
not addressed by the existing services? 33 social ventures founded in Israel in the 1990s by
individuals acting independently of their positions in
2.3. The conceptual framework other organizations. The study was exploratory in nature.
Each of the ventures was a nonprofit organization and
Following Gartner (1985) and Cooper (1993), the expressed a dimension of innovation in the idea of the
current conceptual framework comprised the relations service activities it developed or in the combinations it
of the variables found along four dimensions: the made among existing entities and resources.
individual (or entrepreneur), the environment, the Case studies were first carried out on five social
organization, and the process. According to Amit, ventures according to their potential contribution to
Glosten, and Muller (1993) and Bygrave (1993), theory, following the method suggested by Eisenhardt
success of a new venture is the outcome of reciprocal (1989). This provided the opportunity to analyze the
relations among variables relating to the entrepreneur’s reciprocal relations of organizational and the environ-
personal characteristics, skills and background, the mental variables with the activities of the entrepreneur
decisions and actions taken by the entrepreneur in the in the process of initiation, establishment and institu-
process of realizing the venture, the nature and structure tionalization of the new venture (Wortman, 1987). Data
of the organization or the service that the venture has
developed, and the organizational and environmental 2
The field study was carried out in fulfillment of the first author’s
variables of the framework in which it came about. doctoral thesis in the School of Social-Work, Ben-Gurion University
Schutzens and Wever (2000), attributed new venture of the Negev, Beer-Sheva, under the supervision of Prof. Benjamin
success to factors relating to the entrepreneur, the Gidron.
 M. Sharir, M. Lerner / Journal of World Business 41 (2006) 6–20 9

were gathered from several sources: 57 interviews with ventures, they received the market salaries for their
entrepreneurs, team members, board members, custo- work. Two of the ventures did not reach the establish-
mers and competitors, as well as participant observa- ment stage. Fourteen of the ventures developed services
tions. A comprehensive questionnaire, constructed on that stood the market test, and the rest relied almost
the basis of the pilot study and relating to the processes entirely on external financial support.
of initiation, establishment and institutionalization of
social ventures, was then filled out by the founders of an 3.2. The main variables
additional 28 ventures after conducting indepth inter-
views with them. Content analysis was carried out on An examination of the 33 social ventures according
documents and other publications of and on these 33 to the four dimensions (see the conceptual framework)
social ventures, including comparisons of the collected revealed 15 variables that may combine to contribute to
data with findings from other studies. Quantitative and the social venture success.
qualitative methods were used in the data analyses. The
present study is based on the qualitative analysis of the 3.2.1. The entrepreneur dimension
data. Previous experience was examined according to its
By comparing enterprises that differ in their back- existence or absence both in management, former
ground data, in their objectives and in their operating project initiation and the expertise in the venture area.
patterns, we were able to identify those variables that Total dedication was measured by the time invested
were present or absent in most of the cases, and which in the development of the venture, investment of the
variables were salient to explaining the success of the entrepreneur’s private resources, as well as readiness to
ventures under examination. It was assumed that an work for a long period without any financial payment.
understanding of differences as well as similarities Support received from family and friends during the
would facilitate construction of subgroups of ventures venture’s initiation stage was measured by the amount
having comparable profiles (Gartner, 1985). We also of involvement (financial and work) of family members
examined and compared our findings with those and friends.
reported in the literature surveyed.
3.2.2. The environmental dimension
3.1. Sample description Acceptance of the idea of the venture in the public
discourse assumes public awareness of the issue and the
The 33 social ventures examined operated in place assigned to it on the public agenda. It also
different areas of activity, in various geographic included the entrepreneur’s media and lobbying
locations in Israel, and were targeted at a wide range activities.
of consumers: the general public, populations with The primary social network was examined in the
special needs and/or at-risk groups. A description of the activities of intermediaries assisting the venture in
33 social ventures and their areas of operation and goals acquiring needed capital and support in the establish-
appear in the Appendix A. ment stage.
The social entrepreneurs came from several sectors Support received from public sector agencies: yes or
of Israeli society and included Israeli old-timers, new no.
immigrants, ultra-orthodox Jews and Israeli Arabs. Funding received from foundations was measured as
Fifty-eight percent of the founding entrepreneurs were the support received from at least three foundations for
women. Most of the entrepreneurs (90%) were over 40 3 or more years.
years old. Only 16 of the entrepreneurs had previous Support received from another nonprofit organiza-
managerial experience, and 21 had previous experience tion was measured according to whether it acquired
in the area in which the enterprise operated. The starting seed capital, received incubator support and/or was
capital at the disposal of the ventures at the initiation integrated within the veteran organization.
stage was as follows: 20 ventures had capital in the
range of US$ 2500; nine had capital in the range of US$ 3.2.3. The organizational dimension
50,000; and only four had over US$ 200,000. The teams Amount of budget at the establishment stage of at
were employed at the establishment stage as follows: in least US$ 50,000 acquired from all the different
six ventures, the team members worked voluntarily; in sources, at the establishment stage. As the majority
14 ventures, they received less than the market salaries of the social ventures did not have the seed money
for personnel with their skills and experience; in 11 needed for the initiation stage, we focused on the capital
10 M. Sharir, M. Lerner / Journal of World Business 41 (2006) 6–20

base at the disposal of the venture at the establishment social entrepreneurs neglected to plan in advance and
stage in relation to all the resources it managed to the functioning of board members was problematic.
mobilize from the public, philanthropic, business and
private sectors (contributions of the public at large): did 4. Main results
they exceed US$50,000, and did they enable the hiring
of a salaried team of five or more full-time and part-time Eight of the 15 variables were found to contribute to
employees? the social venture success: the social network; total
Composition of the staff at the establishment stage— dedication; the capital base at the establishment stage;
number of staff members and their employment as the acceptance of the idea of the venture in the public
salaried or part-time and the division of responsibility discourse; the venturing team; long-term cooperation;
and authority among them. the ability of the service to stand the market test;
Governing board performance was measured by the previous managerial experience.
involvement of board members in planning, decision- Examination of the 33 social ventures according to
making, personal financial investment, and expanding the three success criteria defined in this study as
the social network. explaining success showed that 13 of them met all three
criteria: they succeeded in achieving their declared
3.2.4. The process dimension goals; they were able to ensure the continuity and
Planned expansion and stabilization of the venture’s sustainability of their programs/services; and they had
social network—actions taken by the entrepreneur in the resources for further growth and development. Eight
this direction. of the remaining ventures, fulfilled the two conditions of
Preliminary planning—including preparation of a realizing aims and obtaining resources for ongoing
business plan or detailed planning regarding environ- operations, and 12 met one criterion or none at all. The
mental aspects, staffing and budgeting. majority of the ventures in the third group did not yet
Long-term cooperation with another organization have the resources for ongoing operation, and they were
was collaboration developed with another organization still far away from attaining their declared goals.
(public or nonprofit) for at least 3 years. Examining the distribution of the eight focal
Market test of the venture’s service was either variables in these three groups, we found that the
charging fees for receipt of selected services or frequency of occurrence of each of the eight variables
obtaining long-term contracts from public agencies. was higher in the group of successful ventures than in
Our decision not to include the variables governing the other two groups (see Table 1).
board performance and detailed planning regarding the
venture’s structural and operational aspects among the 4.1. The 13 social ventures that met the three
combination of variables explaining success, despite success criteria
their salience in previous research, resulted from the
finding that these two variables represent weak points of The 13 successful ventures revealed considerable
the majority of the ventures in the sample. Most of the variance with respect to the entrepreneur’s demographic

Table 1
Frequency distribution of success-related variables among the three venture groups (in percentages)
Variable Group A Group B Group C
Ventures that succeeded in Ventures that succeeded in Ventures that didn’t
meeting the three success meeting two success achieve yet the success
measures (N = 13) measures (N = 8) measures (N = 12)
The venture social network 100.0 75.0 75.0
Total dedication to promoting the venture 92.3 50.0 50.0
Capital available at establishment stage 84.6 62.5 33.0
Acceptance in the public discourse 76.9 62.5 25.0
The venture staff at the establishment stage 76.9 50.0 25.0
Long-term cooperation with other organizations 69.2 50.0 16.6
Standing the market test (e.g., charging fees or 61.5 37.5 16.0
obtaining long-term contracts)
Previous entrepreneurial and managerial experience 53.8 50.0 33.3
 M. Sharir, M. Lerner / Journal of World Business 41 (2006) 6–20 11

attributes, the venture’s target population and scope of business sectors to the problem of sick children. The
activity. Six of them operated in the area of populations previous managerial experience of the husband and wife
with special needs (Therapeutic Playschools for Autistic founders, their business background, the placing the
Children, Etgarim/Challenge—Outdoor Sports and managerial infrastructure of their business at the
Active Recreation for the Disabled in Israel. Ofek disposal of the venture, and the social network they
Leyaldeinu—National Association of Parents of Visually enjoyed at the outset and which they further expanded
Impaired Children in Israel; Natal—the Trauma Center and strengthened also seemed to compensate for the
for Victims of Terror and War in Israel. One in Nine, lack of the other focal variables.
Make a Wish—to fulfill the special wishes of children In the continuation, we will give examples of the
who suffer from a life-threatening illness.). Four of them contribution of each of the focal variables and the way
operated in the broader area of education (The Institute they found expression in the ventures that succeeded,
for Advanced Studies in Arad, By my Self—training of by providing illustrations from the entrepreneurs’
unemployed of formulating and realizing an entrepre- responses (narratives) and comparisons to findings
neurial Initiative. Fidel—‘‘alphabet’’ in Amharic— reported in the literature.
Association for Education & Social Integration of
Ethiopian Children and Youth and the Avraham Heschel 4.2. The social network
Center for Environmental Leadership and Education).
Adallah worked to protect legal rights, the House of Life The process of mobilizing resources and expertise
for Holocaust Survivors offered cultural services, and includes getting others to allocate capital, labor and
Maala ensured the social responsibility of businesses. effort to an enterprise of as yet uncertain future. Indeed,
Only two of the 13 successful ventures adopted the self- the social capital incorporated in the entrepreneur’s
help pattern (One in Nine—Women for Women with social network is in itself one of the venture’s most
Breast Cancer. and Ofek Leyaldeinu). Eleven of the important resources, and serves to supplement the
ventures developed a varied array of services at the venture’s human capital (Baron & Markman, 2000;
national level, while two operated at the local level (the Burt, 2000; Davidsson & Honig, 2003; Johannisson,
House of Life for Holocaust Survivors and the Institute 1996). The positions and actions of the focal people in
for Advanced Studies in Arad). Table 2 shows the the social network within which the entrepreneur
existence or absence of each of the eight variables in each operates are likely to be decisive in determining
of the 13 social ventures. whether the venture is supported or blocked (Aldrich
Table 2 shows only three of the 13 successful & Zimmer, 1986; Dubini & Aldrich, 1993; Roure &
ventures ranked positive on all eight of the variables Keeley, 1990). Two situations may be envisaged with
contributing to success. Of the eight variables identified regard to the social network: in the first, the
as being central in contributing to success, only two can entrepreneur starts out depending on the resources of
be defined as necessary conditions: total dedication to the network to which he belongs; in the second, the
the venture’s success and the venture’s social network. It entrepreneur proactively creates the network and has to
seems that the remaining variables are sufficient invest time and effort in constructing it.
conditions but not necessary. Several of the ventures Consider the statement made by Ayalon Schwartz,
included in the successful group lacked some variables. founder of the Heschel Center for Environmental
Thus, for example, the House of Life for Holocaust Leadership and Education:
Survivors (venture 10) had neither previous experience
‘‘When I ask myself why we succeeded, I think it
nor venture staff, and did not withstand the market test.
was because of our ability to create ties with the
However, the municipality of Holon (a town bordering
‘elite’. In addition, when meeting the founders, we
on Tel Aviv) provided the needed resources from the
always came prepared with a list of products . . . one
start: a building to house the venture, administrative
of the things I’m very good at is listening and
support and ongoing operating budgets, including the
discovering, in the course of a conversation, the point
salary of the entrepreneur. Another example is Make a
where what really matters to me touches upon what
Wish (venture 9), which is affiliated to an international
really matters to others.’’
network dedicated to fulfilling the wishes of children
with life-threatening illnesses. The success of this One in nine came about out of the need of its founder
venture in spite of the absence of the variable total to relieve her own severe distress. As a single mother
dedication to the venture’s success can be explained by without regular work and no family or economic
the sensitivity of the general public and the public and support who had undergone a mastectomy, she says:
 12
Table 2
The distribution of variables contributing to success of the 13 social ventures
Previous managerial experience The venture’s Total A budget of at Acceptance of The Long-term Standing the Previous
social network dedication least $50,000 the concept venture’s staff cooperation market test managerial

M. Sharir, M. Lerner / Journal of World Business 41 (2006) 6–20

experience
1 Avraham Heschel Center for Environmental + + + + + + +
Leadership and Education
2 Therapeutic Playschools for Autistic Children + + + + + + + +
3 Etgarim—Challenging Outdoor Sports and + + + + + + + +
Active Recreation for the Disabled in Israel
4 Maala—Business for Social Responsibility in Israel + + + + + + +
5 Institute for Advanced Research in Arad (a town + + + + + + + +
in the south of the country, near the Dead Sea)
6 Ofek Leyaldeinu—National Association of Parents of + + + +
Visually Impaired Children in Israel
7 Natal—the Trauma Center for Victims of + + + + + +
Terror and War in Israel
8 Adallah—Legal Center for Arab Minority + + + + +
Rights in Israel
9 Make a Wish Foundation Israel + + + + +
10 House of Life for Holocaust Survivors + + +
11 Fidel—Association for Education & + + + + + + +
Social Integration of Ethiopian Children and Youth
12 Association for Interdisciplinary Initiative Education + + + + +
13 One in Nine—Women for Women with Breast Cancer + + + + +
 M. Sharir, M. Lerner / Journal of World Business 41 (2006) 6–20 13

‘‘It was terribly important for me to try to get women venture capital infrastructure for the initiation stage
to do something about this disease . . .. When I (Bygrave et al., 1996; Piltz, 1995). The ability of the
checked with the women’s organizations in Israel on venture to pay the wages of its part-time and full-time
whether any of them were dealing with the issue of employees at the establishment stage is likely to be an
breast cancer, I found that none did so, though some indicator of its long-term ability to retain high-quality
focused on women’s health. So I approached the professionals.
editor of a women’s magazine. I didn’t know her, but Of the 13 successful ventures, 11 had a capital base,
I knew that she had written about the wife of the fifth mobilized from the public, philanthropic, business and
president of Israel, who had died of breast cancer, private sectors, that enabled them to employ a salaried
and she was eager to help . . .. I was networking with team at the establishment stage. The ventures without a
all sorts of women active in all sorts of areas, on the capital base depended on various sources: The House of
radio and in the press. There was a time in 1994 that Life for Holocaust Survivors was supported by the
the Knesset (Israel’s parliament) started to wake up municipal infrastructure; Ofek Leyaldeinu—the
to the issue of women . . .. Then one Knesset member National Association of Parents of Visually Impaired
was very helpful in distributing information and Children, adopted a self-help pattern of operations
promoting the subject . . ..’’ rather than developing independent services, as will be
explained in the continuation.
4.3. Total dedication
4.5. Acceptance of the venture in the public
According to Bhide (1999), total dedication to discourse
realizing the venture’s mission is one of the variables
contributing to explaining the difference between Social ventures that open up new areas of activity
successful and nonsuccessful entrepreneurs. It derives must often contend with an environment that does not
from the resolve, determination and belief of the recognize or appreciate their inherent worth or the
entrepreneurs in the importance and necessity of the contribution they are likely to make. Ventures promot-
notion they wish to realize. These people create the ing social change are also likely to face opposition from
opportunities (Sarasvathy, 2001) and bring them to bodies that control existing policy and public resources
fruition. We heard the following about Fidel’s (Sink, 1996). The value attributed to the activity of the
founder from the chairperson of the board of Fidel, venture within the framework of prevailing cultural and
who heads a research and development fund at the social norms is also likely to determine the chances of it
Weitzmann Institute of Science that invests in tech- being accepted. In any case, it is incumbent upon the
nological start-ups: entrepreneurs to reach as broad a public as possible with
their ideas (Aldrich & Fiol, 1994).
‘‘Yes, she [Fidel’s founder], is certainly a highly During an interview with Hasen Jabarin, attorney,
typical entrepreneur by her vision, and her inability founder and General Director of Adallah—the Legal
to recognize difficulties. This is a plus because if you Center for Arab Minority Rights in Israel, he made the
estimate all the difficulties in advance, a venture following comments concerning the conditions that
won’t ever get off the ground. Then there’s facilitated establishment of the venture:
commitment, even at the expense of family life,
‘‘The timing of the venture’s establishment, after the
time and other activities, and the fact that she had an
signing of the Oslo Agreements [was crucial].
idea, transformed into a project, and made it work.’’
During that same period, the subject of [the Arab
minority’s] civil rights began to be raised more
4.4. The capital base
forcibly, including its rights as stipulated in Israeli
law. In addition, the opening of several new law
The ability of a new venture to recruit and employ a
schools as well as passage of Basic Law: Human
larger number of employees with the required expertise
Dignity and Liberty (1992) prepared the groundwork
at the establishment stage indicates that it has the initial for this kind of organization.’’
capital necessary to enable a larger and more varied
range of activities (Kirchhoff, 1997). The capital at the During Adallah’s start-up period, the Ford Founda-
disposal of the founders at the establishment stages is tion had made a US$500,000 grant (covering a 3-year
doubly important in light of the fact that, unlike period). When asked what would happen after the
business venturing, social venturing still lacks the grant’s termination, Jabarin replied: ‘‘The truth is that
14 M. Sharir, M. Lerner / Journal of World Business 41 (2006) 6–20

donors compete among themselves. We’re flooded with functioning of management teams, Francis and Sand-
money, some of which I’d rather refuse.’’ berg (2000) noted the advantages that are likely to
According to the founder of Ofek Leyaldeinu—the accrue to new ventures in performance and decision-
National Association of Parents of Visually Impaired making when the relations among the members of the
Children in Israel, the reason the venture did not attract founding team (three or more) are based on friendship.
broad interest in the public discourse was the small Though undefined division of labor and overlapping of
number of blind children and lack of public awareness of functions are likely to be advantages in the initial stages,
the seriousness of the problem. The same is true for the they may endanger the continuation and become a threat
Avraham Heschel Center for Environmental Leadership to survival and success in the transition stages to
and By my self Initiative, which directs its efforts at institutionalization (Chrisman, Bauerschmidt, & Hofer,
promoting self reliance, empowerment entrepreneurship. 1998).
The majority of the entrepreneurs in the13 successful
4.6. Previous managerial experience ventures realized that consolidating a committed trained
staff, with clearly delegated responsibility and author-
The importance of knowledge and previous manage- ity, was a necessary condition for the venture’s success.
rial experience for venture performance has been The type of experience acquired by Sharon charac-
emphasized in the literature (see for example Brockhaus terizes the entrepreneur’s ability to consolidate a staff
& Horwitz, 1986; Cooper & Gascon, 1992; MacMillan, dedicated to the venture’s vision from its earliest days.
Zemann, & Subbanarasimha, 1987; Shane, 2003). Of For instance, during the interview, Sharon was asked
the 13 successful entrepreneurs, seven had previous why he rarely spoke in the first person, and usually in
managerial experience, the salience of which is patently terms of us. His response is revealing:
demonstrated in Etgarim (The Organization of Challen-
ging Outdoor Sports and Active Recreation for the ‘‘From the very beginning I worked as a member of a
Disabled in Israel). Founded by Yoel Sharon, a veteran team . . .. If there’s something I’m proud of, it’s the
of the 1973 Yom Kippur War paralyzed in both legs, quality of the people that come here. This is an enclave
Etgarim operated 20 branches with an annual budget of for those who continue . . .. They’re the country’s best,
US$2 million in 2002; its members compete in several real assets. I hire only the best instructor. The majority
events of the Special Olympics; 75 salaried instructors began as volunteers; today they receive wages. I made
and 600 volunteers deliver its services. It has also the breakthrough with these people. I have no doubt
developed a special training program for outdoor sports that our chief asset is our people.’’
instructors, and thousands of children studying in
Israel’s special education system participate in its An example of the importance of the venturing team
activities. As Sharon explained: is to be seen in the case of Natal—the Trauma Center for
Victims of Terror and War in Israel. Established in the
‘‘I came from the world of film; the Israeli film world heart of Tel Aviv, Natal also operates in peripheral areas
is an obstacle course where few survive . . .. In Israel, of the country, and is open to all who feel they have been
you produce a million-dollar movie for one hundred emotionally damaged as a result of the Israeli-
thousand. I served in a paratroop unit in the Israeli Palestinian conflict (those suffering from combat
army . . . there they teach you to be a survivor, to do fatigue, victims of terror attacks and their families).
everything necessary to endure. I applied all the Its founder, Yehudit Recanati, had no previous manage-
techniques and everything else I learned in the rial experience, but she well understood the need to
industry when I founded Etgarim.’’ invest in a strategic plan and to set up a framework of
paid professionals alongside volunteers.
4.7. The venture’s team In contrast to the preceding examples, in two of the
ventures that succeeded in reaching the institutionaliza-
The overriding importance of the composition and tion stage and developed a broad and varied nationwide
functioning of the venturing team has been emphasized array of services, the entrepreneur’s lack of previous
in the literature (Francis & Sandberg, 2000; Timmons, managerial experience was the cause of many of the
1999). The number of team members and the range of difficulties that arose in the process of setting up and
the expertise and experience they bring with them are managing the team. These ventures were By my Self—
key variables affecting the success of the venture and One in Nine—Women for Women with Breast
(Cooper, 1993). On the basis of prior research on the Cancer.
 M. Sharir, M. Lerner / Journal of World Business 41 (2006) 6–20 15

4.8. Long-term cooperation with other Letts et al. (1999), be the guiding principle at the policy
organizations level. According to Emerson and Twersky (1996), social
ventures selling services and obtaining long-term
Cooperation is a process in which individuals and service contracts may also be seen as standing the
organizations exchange information, coordinate and market test.
share resources, work, risk, responsibility and rewards The majority of ventures that succeeded had
in a synergy that strengthens all participants (Himmel- directly or indirectly identified clienteles (through
man, 1996), and gaining it is a complex process the public entities directly responsible for the care,
requiring the investment of emotional as well as rehabilitation and progress of the particular popu-
organizational effort (Huxham, 1996). lation) and acquired a core of customers able to
Nine of the social ventures achieved cooperation independently choose and invest in the product or
with other organizations. For instance, from the outset service.
the founder of Ofek Leyaldeinu created a web of In the case of Maala—Business for Social Respon-
cooperation with other organizations in the public as sibility in Israel, standing the market test has been
well as nonprofit sector: discussed and explained in business terms:
‘‘We began as partners in the development of
‘‘We are not an organization that brings nonprofit
community centers and programs for blind children.
organizations and business firms together. We help
The A.D. Gordon Elementary School [located in Tel
businesses to formulate a strategy in the area of
Aviv] is one of the main schools for blind children.
social investment . . .. We also try to work on the
During the day, the school operates as a regular
broad overall level, organizing conferences, semi-
school, with blind children studying in their own
nars and workshops, and developing materials. Right
classes. In addition, the school maintains a resource
now we are holding a forum of community relations
center and children from other areas also participate
managers. The main objective is to create a market
in the center’s activities twice a week, in the
and professional awareness of the entire issue. The
afternoon. Thanks to a contribution that we received
firms that we assist cover our expenses. For tax
from a private donor we were able to set up a
reasons, we do not for the time being accept
fantastic program. The Tel Aviv Municipality
consulting fees . . .. I believe we have created a
renovated six classrooms that were planned espe-
market . . .. I want people to make a living from their
cially for our needs. The National Insurance Institute
work in this area. I want businesses to compete with
provided special equipment through the Fund for the
each other in their social investment.’’
Disabled . . .. We don’t operate the center—that’s
done by the Ministry of Education—but we have a
4.10. Follow-up results
say in everything that happens . . .. We also send our
children to international summer camps. That’s
The focus on the group of 13 ventures that succeeded
something that government would never do . . .. To
is further validated by a follow up of the 33 ventures
acquire help for our gifted children, we affiliated
conducted in 2004 (4 years after completion of the
ourselves to the Organization of Blind Students,
processing and analysis of the data for the present
which has all sorts of funds that distribute scholar-
study). This follow up showed that the 13 ventures that
ships and grants to outstanding university students
had been included in the group that met all three criteria
and recently began giving grants to exceptional high
of success in the original study were all still active and
school pupils as well.’’
had even increased and consolidated their activities.
Some had established reputations and won prestigious
4.9. Standing the market test national awards in recognition of their work. Of the
eight ventures that had been originally included in the
Putting social ventures to the market test is to a large group that met two of the criteria of success—realizing
degree a condition for the creation of a sustainable base, aims and obtaining resources for ongoing operations,
on the one hand, and reduces their dependence on five were at the institutionalization stage in 2004. Of
government as well as on foundation grants, on the other the 12 ventures that met only one criterion or none at
(Dees, 1998; Drucker, 1985; Eadie, 1997; Light, 1998; all in the original study only three had reached the
Skloot, 1988; Tuckman, 1998). Facing the test of the institutionalization stage by 2004. Seven of them had
direct and indirect customers must, in the opinion of ceased operations.
16 M. Sharir, M. Lerner / Journal of World Business 41 (2006) 6–20

5. Conclusions infrastructure from other organizations in the public

sector or from other nonprofit organizations.
The concept of social entrepreneurship products of
recent attempts to apply business strategies for the 5.1. Practical implications
purpose of more effective confrontation with complex
social problems. On the basis of the research findings, it is The study’s findings support the assumption that
doubtful that the social entrepreneurs included in this within the framework of the social markets, foundation
research defined themselves in these terms even though investments may provide leverage for financial capacity
the majority agree, in retrospect, that they had to cope building. It is nonetheless necessary to stress that only
with the need to manage the venture as an organization. in a very few cases did foundations take upon
They developed awareness that success cannot be themselves a role similar to that of venture capital
measured simply in terms of the venture’s vision but funds in the business sector.
depends also on the ability to manage and market and that The research also revealed two weak points that
vision requires considerable investment in the develop- characterized the majority of social ventures in the
ment and improvement of organizational capacities. sample: poor governing board performance and flawed
Analysis of the findings indicated that social preliminary planning of structural and operational
entrepreneurs, like business entrepreneurs, are driven aspects. The poor board performance was particularly
by combinations of motives rather than one single glaring in light of the positive contributions made by the
motive. Common motives include the desire for self- few responsible, involved board members. The main
fulfillment, occupational independence, and opportu- reason for this phenomenon is that the social
nities for creativity. Motives unique to social entrepre- entrepreneur, who is often the originator of the venture’s
neurs include personal rehabilitation, search for idea, generally seeks to retain implementative power,
solutions to individual distress, and obligation to one’s and some of them believe that they can dismiss or
community (e.g., ethnic community) or affiliation (e.g., replace board members the moment that a difference of
individuals sharing a problem or common fate). opinion arises. Their position is supported by the fact
The findings indicate that social entrepreneurship, as that the founder’s exit is likely to trigger venture failure
opposed to business entrepreneurship, still lacks an or demise.
infrastructure providing access to capital during the The majority of the entrepreneurs in the sample
venture’s start-up stage. As government agencies and appear also to ignore the prevailing wisdom that a new
the majority of foundations made financing available venture’s success is heavily dependent on the quality of
only at the venture’s establishment stage, social planning and adherence to a business plan formulated
ventures when compared to business ventures exhibited by board members, staff, clients and consultants.
excessive dependence on external sources of funding In operative terms, there is a real need for the
and on staff ready to accept below-market wages as well establishment of incubators (supportive environment),
as on volunteers. such as those already being established within such
The analysis revealed two main groups of ventures. frameworks as The National Center for Social
The first group is of ventures that developed and Entrepreneurs in Minneapolis, USA or SSE—The
operated a wide range of services on the national or School for Social Entrepreneurs in the UK. Incubators
local level. The second group is of ventures that may fulfill an intermediary function by providing
operated in the pattern of self-help organization and/or training, technical advice, networking or financial
relied solely on volunteer staff. The first is unable to planning to compensate for the social entrepreneur’s
achieve its goals without acquiring resources, allowing limited knowledge and expertise.
recruitment of professionals who provide expertise in
the areas of management and content, allocating 5.2. Limitations
responsibility and authority, and investing in service
infrastructure. Ventures operating according to the self- Despite the relatively large number of social
help pattern are examined by their ability to work in a ventures investigated and the broad range of their
cooperative framework with other organizations. In the activities, we cannot claim external validity for the
absence of previous managerial experience and/or the results of this research. In such a research regimen,
financial resources that enable investment in infra- fittingness is the more appropriate standard to apply.
structure, these ventures can explore the possibility of The generalizability of findings to other cases remains
receiving assistance in regard to management and dependent on the reviewer’s judgment concerning what
 M. Sharir, M. Lerner / Journal of World Business 41 (2006) 6–20 17

information is liable to be meaningful and which quantitative methods. Future research might focus on
conclusions may be applicable beyond the confines of those variables identified as being associated with
the original study (Creswell, 1998; Guba & Lincoln, success on a larger number of social ventures (100 or
1981; Stake, 1995). Furthermore, in attempting to more), enabling examination of the relationships of
identify the combination of variables explaining the each variable with the criteria of success. It is also
success of a new social venture we make no claims for possible to examine the interdependencies among
causality. As in all research regimens but especially in all separate variables, thereby providing an additional
qualitative research, the researcher’s subjectivity test of the conclusions of the present study. Should
introduces an important analysis of an intervening correlation between the focal variables and the combined
variable, with personal judgment rather than clearly variables that measure success be observed, it would lend
measurable units affecting the assignment of values or further support to the current study’s findings.
cut-off points (Ragin, 1994).
Acknowledgments
5.3. Directions for future research
The authors thank the editors and anonymous
Theoretical development on the subject of the factors reviewers for their constructive feedback and the
contributing to the success of social ventures will guidelines that they provided in preparing this paper
necessitate further research using qualitative and for publication.
 18
Appendix A

The 33 social ventures

Answering the needs of Self-help organizations Education Culture—Jewish heritage *To Protecting human rights
special population establish a mutual affinity between
learning and social activity
in light of a world view
guided by the principle of
the equality of men
Etgarim—Challenging Outdoor One in Nine—Women for Fidel—Association for *Voices in the Desert Adallah—Legal Center for
Sports and Active Recreation Women with Breast Cancer Education & Social Arab Minority Rights in Israel

M. Sharir, M. Lerner / Journal of World Business 41 (2006) 6–20

for the Disabled in Israel Integration of Ethiopian
Children and Youth
Natal—the Trauma Center for Association for Victims of Institute for Advanced *The Good Circle Mixed Families—Rights
Victims of Terror and Offences Committed by Research in Arad (a town protection in which one partner is
War in Israel Neighbors in the south of the country, Jewish and the other non-Jewish
near the Dead Sea)
Make a Wish Foundation Israel Ofek Leyaldeinu—National Organization of New *In the Desert Seminar Jerusalem–Beersheba Association
Association of Parents of Immigrant Teachers for Community Legal Protection
Visually Impaired Children in Israel
Therapeutic Playschools for Organization of Sufferers from By my Self—Promoting House of Life for Youth and children
Autistic Children Speech Impediments in Israel self-reliance and Holocaust Survivors at risk *Frameworks for
empowerment by Rehabilitation of young
entrepreneurship offenders under the supervision
of the law courts
Sisters—Single Ultra-Orthodox Organization of Lupus Avraham Heschel Center for Community development *Sdeh Bar Ranch
Mothers in Jerusalem Patients in Israel Environmental Leadership and empowerment
and Education
Business social responsibility Benafsheinu—Mental Health Man and Nature in Galilee *Hokook Farm
Information and Help
Maala—Business for Social Association of Women as Sole The Jewish-Arab Community *Gadi Homes
Responsibility in Israel Association in Acre
Breadwinners in Nazareth
A Helping Hand for the Bereaved Research in the Service of the Tomer Foster Home Clusters
Community
 M. Sharir, M. Lerner / Journal of World Business 41 (2006) 6–20 19

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