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Journal of Social Entrepreneurship

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Analyzing Social Entrepreneurship from

an Institutional Perspective: Evidence
from Spain
a a b
David Urbano , Nuria Toledano & Domingo Ribeiro Soriano
a
Business Economics Department , Autonomous University of
Barcelona , Barcelona, Spain
b
Management Department , University of Valencia , Valencia,
Spain
Published online: 22 Mar 2010.

To cite this article: David Urbano , Nuria Toledano & Domingo Ribeiro Soriano (2010) Analyzing
Social Entrepreneurship from an Institutional Perspective: Evidence from Spain, Journal of Social
Entrepreneurship, 1:1, 54-69, DOI: 10.1080/19420670903442061

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 Journal of Social Entrepreneurship
Vol. 1, No. 1, 54–69, March 2010

Analyzing Social Entrepreneurship from an

Institutional Perspective: Evidence from
Spain
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DAVID URBANO*, NURIA TOLEDANO* &

DOMINGO RIBEIRO SORIANO**
*Business Economics Department, Autonomous University of Barcelona, Barcelona, Spain, **Management
Department, University of Valencia, Valencia, Spain

ABSTRACT In recent years, social entrepreneurship (SE) has been regarded as an important
source of social, economic and environmental wealth, and many scholars are focusing their
inquiries on this emerging area. Little is known, however, concerning the environmental factors
that affect this entrepreneurial phenomenon. In this research, we analyze how these factors affect
both the emergence and implementation of SE in the highly entrepreneurial Spanish region of
Catalonia, using institutional economics as the main conceptual framework. We also apply an
inductive theory, building an empirical approach to conducting a multiple-case study in order to
develop theoretical propositions that enhance our understanding of the phenomenon.

KEY WORDS: Social entrepreneurship, social entrepreneur, institutional economics, case

study, Spain

Introduction
In recent years, social entrepreneurship (SE) has been regarded as an
important source of social, economic, cultural and environmental wealth (e.g.
Spear 2006, Steyaert and Hjorth 2006, Leadbeater 2007, Shaw and Carter
2007). While traditionally it has popularly been known by its development in
the field of governments, nonprofit and voluntary organizations, philan-
thropy and charity, SE can also take place within or across business.
Specifically, some authors have recently stressed the emergence of hybrid

Correspondence Address: David Urbano, Business Economics Department, Autonomous University of

Barcelona, Edifici B, 08193, Bellaterra, Barcelona, Spain. Email: david.urbano@uab.es

ISSN 1942-0676 Print/1942-0684 Online/10/010054–16 Ó 2010 Taylor & Francis

DOI: 10.1080/19420670903442061
 Social Entrepreneurship from an Institutional Perspective 55
entities, or new forms of social enterprises, that use both elements of the
nonprofit sector and the for-profit sector (Fowler 2000, Borzaga and
Defourny 2001, Austin et al. 2006, Townsend and Hart 2008). Thus, the
term ‘social entrepreneurship’ is currently utilized for describing not only
the work of community, voluntary and public organizations, but also private
firms working for social rather than for-profit objectives. Therefore, the
common aspect of the social enterprises that is today stressed is that they
address the meeting of social needs, creating social value across social
innovations and, consequently, stimulating social change (e.g. Dees 2001,
Thompson et al. 2000, Guclu et al. 2002, Peredo and McLean 2006, Nicholls
2006a, Weerawardena and Sullivan Mort 2006).
Taking into account the earlier theoretical considerations, one of the
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interesting aspects regarding SE is that some socio-cultural factors of the

environment could be more appropriate than others for stimulating social
entrepreneurs and generating social enterprises. While the environmental
factors that affect entrepreneurial phenomena represents a topic of growing
interest in the entrepreneurship field (e.g. Lerner and Haber 2001, Aidis 2005,
Stephen et al. 2005, Sanchis 2006, Urbano and Toledano 2008, Toledano et al.
2009), at present we know little about these relationships in the SE area. As
Austin et al. (2006, p. 1) point out, ‘social entrepreneurship is still emerging as
an area for academic inquiry. Its theoretical underpinnings have not been
adequately explored, and the need for contributions to theory and practice are
pressing’. This article expands on the existing literature, bringing to light cases
of SE and analyzing the environmental factors that affected them. To facilitate
understanding, we turn to an institutional perspective by arguing that SE can be
facilitated and constrained by the institutional framework. According to this
perspective, a critical function of institutions is to reduce uncertainty by
establishing a stable structure for human interaction, which conditions the
actions of different agents that participate in society through a structure of
incentives and opportunities (North 1990, 2005). The institutional approach is
especially applicable to SE, as the literature has shown that social entrepreneurs
have aimed at the social problems of their institutional framework, and on
many occasions local problems that persist, despite the efforts of traditional
public, voluntary or community mechanisms. Two specific research questions
stem from this discussion. (i) How does the institutional framework affect the
emergence of SE? And (ii) how does the institutional framework affect the SE
implementation? In order to answer these questions we use an inductive-theory
building empirical approach. Specifically, we conduct a multiple-case study with
seven social entrepreneurs who created their organizations in one of the most
entrepreneurial Spanish regions: Catalonia (in the North East of Spain). We
offer a comparative analysis that identifies common features among SE in this
context, which has allowed us to develop four theoretical propositions.
Consequently, this research develops new theoretical and practical insights
concerning SE, which suggest that this topic could be developed in the future
into a new, multi-disciplinary field of scholarship.
After this introduction, the study is structured as follows. First, we present
the theoretical considerations and explain the main characteristics of the
 56 D. Urbano et al.
institutional approach. In the following section, the research design data
method is described. Subsequently, we focus on analyzing the main results as
well as on developing the theoretical propositions. Finally, the article ends
with the main conclusions and implications for future research.

Theoretical Considerations
Social entrepreneurship undertaken by social entrepreneurs has opened a new
dimension in the study of entrepreneurship, so some authors point out that it
can become a structured and separate field of research (Mair and Martı́
2006). For example, Defourny (2000, p. 11) suggests that social enterprises
might be seen ‘as the expression of a new entrepreneurship’, which is a claim
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well worth looking at more closely, but it is only slowly being taken up by
entrepreneurship scholars. Fowler (2000) and Borzaga and Defourny (2001)
also suggest that these new forms of social entrepreneurship go beyond the
current concept of the nonprofit sector and the social economy, and
recommend examining them as a new kind of social entrepreneurship and
civic innovation. In this sense, a new, multidisciplinary field of scholarship
appears to consist of a distinct mode of entrepreneurial actions, clearly
distinguishable from the more common and well-studied commercial
entrepreneurship.
In recent years, the emerging literature on SE has covered a wide variety of
definitions about the phenomenon (e.g. Dees 2001, Sullivan Mort et al. 2003,
Nicholls 2006b, Peredo and McLean 2006, Chell 2007, Shaw and Carter
2007). Although there is no consensus among academics, a key distinction of
SE that can be found in all definitions is its fundamental purpose of creating
social value rather than personal wealth (Zadek and Thake 1997), across
social innovations rather than ‘economic’ innovations (Kramer 2005, Austin
et al. 2006, Leadbeater 2007), to address social problems rather than
individual needs (Harding 2006, Westall and Chalkley 2007). In line with this
view, several scholars have also sought to define the social entrepreneur
(Thompson et al. 2000, Thompson 2002, Dees 2001, Johnson 2003, Bornstein
2004, Sharir and Lerner 2006, Shaw and Carter 2007). For example,
Thompson (2002, p. 413) notes that social entrepreneurs are ‘people with the
qualities and behaviors we associate with business entrepreneurs but who
operate in the community and are more concerned with caring and helping
than with making money’. Shaw and Carter (2007, p. 419) define them as
‘those individuals who establish enterprises primarily to meet social
objectives rather than generate personal financial profit’, and authors such
as Drucker (1999) and Leadbeater (1997) emphasize their creativity in
developing social innovations and change for improving the social context in
which the entrepreneurs operate.
Then, from a broad point of view, SE can be seen as ‘a process involving
the innovative use and combination of resources to pursue opportunities to
catalyze social change and/or address social needs’ (Mair and Martı́ 2006,
p. 40), a phenomenon ‘whose central driver is the social problem being
addressed’ (Austin et al. 2006, p. 2). In this sense, the importance of the
 Social Entrepreneurship from an Institutional Perspective 57
institutional environment is elevated, due to the fact that social entrepreneurs
are especially oriented by the unmet social needs that exist in their
environment. Hence, an institutional perspective can provide a clearer
explanation concerning the different factors that have an influence on SE. In
the following section, we analyze the main characteristics of the institutional
economics, and link this perspective with specific elements of SE.

An Institutional Approach for Social Entrepreneurship Research

The current discourses of SE allow us to understand SE as a ‘process
resulting from the continuous interaction between social entrepreneurs and
the context in which they and their activities are embedded’ (Mair and Martı́
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2006, p. 40). This perspective brings together insights from sociology,

political science, economics, and organization theory, and consequently an
interdisciplinary approach would be advisable for enriching our under-
standing of the phenomenon. In this context, institutional theory has much to
say about SE.
Early views in institutional economics specifically add social elements to
their theoretical framework, providing a more socialized explanation about
the economic system and the economic development (e.g. Veblen 1914,
Mitchell 1914, Ayres 1918, Clark 1923, Commons 1924) and entrepreneur-
ship (North 1990, 2005). Raising an interest in social aspects provides the
basis of a theoretical approach for SE.
On the one hand, one of the most interesting contributions in institutional
economic thought is related to the discrepancy found between business or
commercial efficiency and social efficiency, which is today used to explain
what happens in SE (e.g. Austin et al. 2006). Clark (1923), one of the more
recognized authors of the first generation of institutionalists, drew a clear
distinction between both types of efficiency. According to Clark (1923),
business or commercial efficiency is the efficiency of the individual business
enterprise in making profits, while social efficiency is the efficiency of the
economic system in producing ‘human’ or ‘social’ values. These social values
are values that contribute to community welfare as well as to individual
welfare. Current literature on SE is rich in inspiring examples and anecdotes
of social purposes of entrepreneurs that contrast with the traditional
objectives of the entrepreneur (maximizing their personal wealth) (e.g.
Thompson et al. 2000, Dees 2001, Thompson 2002, Austin et al. 2006,
Shaw and Carter 2007, Nicholls 2007).
On the other hand, in relation to the dominant motivation that pushes
human beings to pursue different actions and to create social value and
wealth, institutional theorists have stressed the critical function of institutions
(North 1990, 2005, Scott 1994, 1995). Specifically, from an institutional point
of view, people’s behaviors are largely shaped by the values and the
institutions of the society in which they live (Mitchell 1914). Then, the
decision to create a new enterprise is conditioned by the existing institutional
framework, which conditions the actions of different agents that participate
in society through a structure of incentives and opportunities (Veciana and
 58 D. Urbano et al.
Urbano 2008). In the context of SE, some of the institutions and their related
values induce entrepreneurs to act in what are regarded as socially desirable
ways, and in this way they are named ‘social entrepreneurs’.
Regarding the concept of ‘institution’, the most current institutionalists –
named neo-institutionalists – develop a very wide definition. North (1990,
p. 3), one of the major authors in the field, points out that ‘institutions are the
rules of the game in a society, or more formally, institutions are the
constraints that shape human interaction’. According to North (1990),
institutions can be either formal, such as political rules, economic rules and
contracts, or informal, such as codes of conduct, attitudes, values, norms of
behavior, and conventions, in short, the culture of a determined society.
North’s position is that formal institutions are subordinate to informal ones
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in the sense that they are the deliberate means used to structure the
interactions of a society in line with the norms and cultural guidelines that
make up its informal institutions. Then, whereas a governing body can
influence the evolution of a society’s formal institutions in a rather direct
way, informal institutions are much less tangible and usually fall outside the
direct influence of public policy. They can be molded, but tend to resist
change and take time to evolve towards new social norms.
Hence, based on the underlying ideas of the institutional economics and in
the most recent of North’s (1990, 2005) works, we expect that for newly
forming social enterprises, the institutional environment defines, creates and
limits social opportunities, and thus affects the speed and scope of SE.
However, due to the lack of previous inquiries in this field we know little
about how institutions affect the emergence and implementation of SE in
particular contexts. Then, we adopt an inductive approach, using a case study
methodology for obtaining new insights concerning this phenomenon.

Methodology and Research Design

We noted above that this research utilizes the logic of inductive inquiry to
investigate a complex phenomenon, such as SE, where the interaction
between the phenomenon and context are unclear (Yin 1984). The main
objective is to allow new theoretical insights to emerge through the process of
gathering data from multiple sources, analyzing data, comparing with the
previous researches, and re-examining the data into the theoretical frame-
work adopted in this research (institutional theory). This iterative process,
which requires a balance of theoretical discipline in concert with openness to
additional interpretation, will allow us to gain a fresh perspective of SE.
We particularly take a multiple-case-study approach (Yin 1984, Eisenhardt
1989) with the purpose of elaborating new theoretical propositions that
expand existing knowledge concerning SE. In this sense, we applied an
analytical rather than a descriptive approach, and used a theory-building
methodology (Eisenhardt 1989, 2007) to analyze the data collected. Case-
study research involves the examination of a contemporary phenomenon in
its natural setting (Yin 1984), and it is especially appropriate for research in
new topic areas. Moreover, multiple cases – compared with single studies –
 Social Entrepreneurship from an Institutional Perspective 59
are also generally regarded as more robust, providing the observation and
analysis of a phenomenon in several settings. In particular, the multiple-case
design allows the treatment of different cases as a series of independent
experiments, and to follow replication logic (Yin 1984).
The seven cases that are included in this research were the result of a
convenience sampling. Preliminary inquiry was carried out in order to
identify the cases. Specifically, we first met with managers of the ‘la Caixa’
Foundation, which is one of the most important foundations in Spain. It was
founded in 1991 as the institution entrusted with managing the resources that
the ‘Caja de Ahorros y Pensiones de Barcelona’ devotes to its community
projects. Their activities, which are implemented throughout Spain, endeavor
to provide a response to the needs of specific social groups, such as the elderly
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or young people, to attend to situations of risk or social deprivation through

initiatives that supplement those of other institutions, and to promote
multidisciplinary measures which bring into play various subjects and
knowledge. Recently, ‘la Caixa’ Foundation has also been promoting SE
through financial support to social enterprises that create social wealth for
the community. For this reason, in our theoretical sampling approach, we
initially selected as possible participants in the research the four cases that the
managers of ‘la Caixa’ Foundation identified as exemplary social enterprises.
After these firms had agreed to participate in our study, they were invited to
identify other exemplary social enterprises from their point of view. Then,
four new possible cases were recognized, but only three of them decided to
collaborate in this study. Therefore, social entrepreneurs willing to cooperate
in the research were also helpful in selecting the final seven case studies, which
are analyzed in a following section.

Data Collection and Data Analysis

Data were gathered using different methods and tools, applying the concept
of triangulation proposed by Yin (1984). In particular, we collected data
using interviews, observations, and secondary sources, with interviews being
our primary source.
The data collection was conducted over a six month period (December
2007 to May 2008). During this period, we visited and interviewed the
founder members (social entrepreneurs) for each selected enterprise several
times. The interviews were semi-structured so as to allow the conversation to
flow more freely according to the answers of the interviewees, and to allow an
in-depth inquiry into the nature of the issues addressed. The interview guide
used in the research was tested previously in a pilot study with two of the
seven cases included in this research (specifically, with four social
entrepreneurs), and those interviews are included in this study’s total number
of interviews (32). Nevertheless, although a study protocol was used for all
cases, it was adapted as new aspects of interest were introduced into the
research. This allowed us to develop a better understanding of the
particularities of the case studies. The overall interview questions were
related to the institutional factors that influenced the social entrepreneurs’
 60 D. Urbano et al.
decisions to create their social enterprises, as well as how they contributed to
their implementation. However, additional interview questions also resulted
from the preliminary data analysis. This overlap of phases is a key feature of
theory-building studies using cases, enabling the researchers to make
adjustments during the data collection phase (Einsenhardt 1989) and to
probe more efficiently for emergent themes. Furthermore, in order to achieve
greater richness and multiple perspectives of the phenomenon (Eisenhardt
1989), interviews with relevant organizational members both in terms of
entrepreneurship – people in charge of mainstream new business support –
and social enterprises – the CEO of ‘la Caixa’ Foundation – were conducted.
According to Eisenhardt (2007), using numerous and highly knowledgeable
informants who view the focal phenomena from diverse perspectives allows
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the mitigation of possible biases and help to reduce the ‘knee-jerk’ reaction
that is often provoked in interviews (see Table 1 for case descriptions and
characteristics of the interview respondents). All interviews were tape-
recorded and later transcribed. File notes, a means of facilitating data
analysis concurrent with data collection (Eisenhardt 1989), was another
method used for recording the interview data. Specifically, detailed notes,
which comprise both observation and analysis, were taken by a second
interviewer who was not actively involved in the interview process. The
average interview lasted for just over one hour, with the shortest taking 45
minutes, and some running for two hours.
Our secondary sources included social enterprises websites, press releases,
and information from the support institutions; and other data obtained from
reports or records of the official organizations and associations were
examined as available.
In analyzing the data, several procedures suggested by Yin (1984) and
Eisenhardt (1989) were adopted. Matrices were employed as an analytical
tool to organize and analyze data. We also used a general analytic approach
that prioritizes information through the development of categories of data
and the examination of similarities. Specifically, the detailed interview notes
and our other review and analysis articles were examined, and concepts were
identified and recorded by hand. Next, the concepts were used to develop
sub-themes and then progressively a smaller number of overall themes. This
process involved numerous discussions and reviewing of text and various
forms of tabular material, seeking both conflicting and similar frameworks.
The emerging themes are reported in depth in the following sections. These
themes are also utilized for inducing propositions and developing theory
using the theory building process (Eisenhardt 2007).

Findings and Development of Propositions

Our data, based on interviews, observations and secondary sources suggest
that, according to North’s (1990, 2005) institutional perspective, informal
institutions play an important role on the emergence and implementation of
SE in Catalonia. Additionally, formal institutions have also been revealed as
an important factor for facilitating the implementation of social enterprises.
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Table 1. Descriptive data of the cases and the interviews

Number
Casesa Purpose/Sector Legal form Locationb Founded Sizec Interviews interviewsf

A Support for women who want Association Barcelona 2005 Small FMd 3
incorporation into the labor market/
Textile industry
B Facilitate the process of incorporation Association Barcelona 2003 Small FM, BMe 5
of women into the labor market/
Services
C Support for personal and social Cooperative society Lleida 1999 Small FM 2
development of people with mental
disabilities/Agriculture
D Financial services for social Cooperative society Barcelona 1998 Medium FM, CEO 6
enterprises/Services
E Promote cycling and contribute to the Cooperative society Barcelona 2005 Micro-enterprise FM 3
environmental education of the
society/Services
F Promote regional culture/Film Cooperative society Barcelona 2000 Medium FM, CEO 4
industry
G Promote ecological consumption/ Cooperative society Barcelona 2002 Micro-enterprise FM 3
Services

Notes: a. For reasons of confidentiality, the names of social enterprises have been disguised; b. Name of provinces of Catalonia (Spain); c. Micro-enterprise 1–9 people
employed; small 10–49; medium 50–249; d. Founding members (social entrepreneurs); e. Board members; f. Four interviews were also conducted with people in
charge of mainstream new business support and three interviews with CEO of ‘la Caixa’ Foundation.
Social Entrepreneurship from an Institutional Perspective 61
 62 D. Urbano et al.
In the following paragraphs, a narrative incorporating the emergent themes
of the in-depth case study interviews is presented.

Institutional Factors Affecting the Emergence of Social Entrepreneurship

We found that SE was basically stimulated for two informal institutions,
using North’s (1990, 2005) terminology: (i) the new social values of a part of
Catalan society, as well as for the environmental culture, which have
generated the demand for products and services that is unmet by for-profit
enterprises, and (ii) the entrepreneurial and responsible social attitudes of
some people who decided to become social entrepreneurs in order to create
social wealth and value, and improve the current world. We discuss each of
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the institutional factors below.

New social values. The new values of society, which have raised major
awareness regarding the most disadvantaged groups (e.g. immigrants, women,
disabled), and the current environmental problems, are indicative of a new
demand for goods that is not met by traditional businesses. A social-market
failure is an opportunity for the social entrepreneur (Austin et al. 2006). Chell
(2007, p. 13), for instance, points out that this is similar to what happens in
conventional firms, ‘the examples where social enterprises operate in a
competitive environment suggest that they do need to pursue opportunities’.
In this sense, our case evidence revealed that a clear perception of the impact of
changing social context stimulated the creation of the social enterprises. During
an interview with social entrepreneurs of Case A, one of them affirmed that ‘we
saw the opportunity and feel the responsibility of meeting the social needs of
our community . . . the new social values were the reason-for-being of our
current experience as entrepreneurs’. Another entrepreneur pointed out that
‘we basically recognized a social need, which could become a potential demand
and potential clients’ (Case D). In Case F, a social and cultural enterprise, an
interviewee noted that ‘the awareness of the Catalan population for defending
their own identity allowed us to think in terms of a cultural project addressed to
develop Catalan films’. Additionally, three of the seven cases (Cases C, E and
G) stressed the influence of the environmental problems in their decision to
create the social enterprise. One of the founders of Case G made the following
comments concerning the repercussion of the major awareness for the
sustainable development: ‘we consider that we live in an area very sensitive to
the environmental problems and people every time are willing to pay for
services and products that respect the environment’ (Case G). By contrast, Case
B stressed the new role that women are playing in society and noted that ‘we are
a social organization that focuses on women and considers that women can
become a core part of the future economy . . . We are also helping women who
want to create their own businesses to make their dreams a reality’.
In summary, these cases show how social entrepreneurs catalyze social
transformation by meeting social needs linked with new social values that
emphasize, for instance, the importance of sustainable development. There-
fore, we found evidence to suggest that social enterprises emerge where there
 Social Entrepreneurship from an Institutional Perspective 63
are social values predominating in a society and that are generating an unmet
demand, and an opportunity for SE. In the framework of North’s (1990,
2005) institutional theory, these arguments suggest the following proposition:

Proposition 1: Informal institutions, understood as new social values of a

society, will have a positive relationship with the emergence of SE.

Entrepreneurial and responsible social attitudes. Prior research in SE has

emphasized that similar to a for-profit firm, the purpose of which is to create
superior value for its customer, the primary purpose for the social
entrepreneurs is to create superior social value for its clients (e.g. Dees 2001,
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Austin et al. 2006, Weerawardena and Sullivan Mort 2006, Leadbeater 2007,
Nicholls 2007, Townsend and Hart 2008). Our data on numerous occasions
indicates a similar result. All interviewees recognized and spoke about the
wealth generated by their enterprises in terms of benefits to community, and
stressed their social motivations and attitudes as exemplars of factors that
motivated their entrepreneurial actions. Their personal satisfaction with the
results of their actions was also evident. For example, Case G, a cooperative of
ecological consumption, pointed out: ‘I’m proud of what we are achieving with
our enterprise. We are working for achieving a better world for future
generations. The work space is also very nice; employees and entrepreneurs are
only the same person’. Similarly, cases A and B commented that their
objectives were to create benefits for women. Extending this view, Case D, a
cooperative of financial services for social enterprises, indicated that ‘from my
point of view, the creation of social value is the essence of our actions as
entrepreneurs, and it is what really motivates us for creating social enterprises’.
Nevertheless, he also recognized that ‘profitability is also important for social
enterprises, at least some income is necessary to ensure the sustainability of the
enterprise and to achieve the financial self-sufficiency’. Moreover, we found an
important environmental attitude among our case studies. In particular, cases
C, E and G showed a particular concern with issues related to sustainable
development. As a Case E interviewee said: ‘it’s imperative to save our
environment. Our enterprise was created with the purpose of contributing to
this objective. I believe that there are more people than those that we initially
think of who are concerned about the current environmental problems. What
happens is that sometimes you can’t consume products or services in ways that
are respectful of the environment because there are no businesses that offer
them. That’s why we considered it appropriate to do something like we are
doing with our enterprise’.
The above examples are all cases demonstrating that entrepreneurs’ social
attitudes are explicit and central for the emergence of social enterprises. Then,
under the light of North’s (1990, 2005) institutional perspective, we pose the
following proposition:

Proposition 2: Informal institutions, in terms of entrepreneurial and responsible

social attitudes, will have a positive relationship with the emergence of SE.
 64 D. Urbano et al.

Institutional Factors Affecting the Implementation of Social Entrepreneurship

During the implementation of social enterprises, in the context of
institutional theory, and especially according to North’s (1990, 2005)
perspective, it is interesting to note that, along with informal institutions,
formal institutions played an important role. Concretely, two kinds of
institutions were especially relevant: (i) the entrepreneurs’ social networks as
informal institutions, and (ii) the support mechanisms for promoting SE as
formal institutions. The findings of the case studies concerning these issues
are presented below.

Social networks. There is a broad agreement in recent SE literature

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concerning the importance of social networks to the entrepreneurial process.

Specifically, some previous research has noted that the social entrepreneurs
have to proactively create their own networks and invest time and effort in
constructing them for the achievement of implementing their own social
projects (e.g. Thompson et al. 2000, Sharir and Lerner 2006, Leadbeater
2007, Shaw and Carter 2007). The results from case studies support this long-
held view in the entrepreneurship field (Johannisson 1986, 1988) and reveal
that networks become key elements for the implementation of the social
enterprise. Concretely, in the seven cases included in our research, the
relevant role played by networks was stressed. None of the social
entrepreneurs had sufficient resources (human, financial, etc) for developing
their social projects, and this difficulty was overcome through their personal
networks. For example, Case G stated that some of the employees (and
friends) initially worked voluntarily. One of the interviewed who was very
clear on this issue affirmed that ‘in order to carry out the social project and
implement the enterprise the process of mobilizing resources was funda-
mental, getting others to allocate capital, labor, effort and imagination to a
project of uncertain success’ (Case G). The emphasis on networks in order to
implement the social enterprise was also noted by the Case F in the following
quote: ‘the local population was very important for the implementation of
our project . . . the people’s positions and opinions concerning the promotion
of the Catalan culture facilitated their engagement in our enterprise, not only
from an economic perspective, but also from a human effort point of view’.
Similarly, Case D pointed out that ‘the social network within which we
started to operate in Catalonia became crucial in determining whether our
project could go ahead or not’. The perception of the importance of networks
for SE in Case A was linked with the social mission underlying the social
enterprise. As one of their founders highlighted: ‘our enterprise is directly
oriented for the benefit of our community and this stimulated the local
population to play a central role in our whole entrepreneurial process’.
Correspondingly, cases B, C and E, also stressed the dependence of the social
entrepreneur on the social network for much of the action developed during
the process of implementation of the social firm.
In summary, from our case studies it is derived that there is evidence of the
influence of social networks on the implementation of social enterprises.
 Social Entrepreneurship from an Institutional Perspective 65
Hence, in the framework of institutional theory (North 1990, 2005), our
previous discussion suggests the following proposition:

Proposition 3: Informal institutions, such as social networks where people have

an intimate commitment to cooperate in solving social problems, will facilitate
the implementation of SE.

Support mechanisms. Earlier, we noted the importance of economic

resources for ensuring the survival of the social enterprise. In addition,
economic resources are necessary for developing and implementing the
social project (Thompson et al. 2000, Shaw and Carter 2007, Townsend and
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Hart 2008). In this sense, the existence of public and private initiatives that
offer support to social entrepreneurs has been emphasized by all key
informants. Moreover, five of the seven cases analyzed (cases A, B, C, D
and F) had received economic support from different entities for
implementing their social enterprises. Case E, however, displayed a more
pessimistic view in stating that ‘although there has been an increase of
funds oriented to social businesses, it is true that they are not enough for
the growing number of social enterprises that are emerging in Catalonia in
recent times’. On the other hand, the evidence from the cases showed two
clear outcomes. First, similar to the overall entrepreneurial initiatives, some
social activities were more supported than others. For example, within our
case studies the activities linked with the integration of women to the labor
market as well as the protection of the environmental were widely
supported by different Catalan institutions. Second, despite there being a
greater awareness of the governments and private institutions concerning
SE, the social entrepreneur has a need to be independent of institutional
funding because, normally, that funding was only able to support a small
part of the total project.
Thus, our cases illustrate that governments, along with other private
institutions, are becoming more sensitive regarding the social problems of the
community, and are consequently supporting the implementation of social
enterprises. Hence, from the institutional point of view (North 1990, 2005),
this leads to the following proposition:

Proposition 4: Formal institutions, understood in terms of support mechanisms

for promoting social enterprises, will facilitate the implementation of SE.

Conclusions and Implications

Over recent decades, social problems that are emerging in almost all countries
(developed and developing countries) have increased the importance of SE as
a way to solve these problems, generate social value and enhance human life
on the whole. Consequently, several scholars have begun to pay particular
attention to this phenomenon. However, to date little is known concerning
 66 D. Urbano et al.
the environmental factors that affect the emergence and implementation of
SE. In this research, our interest has focused on how the institutional
framework affects both the emergence and implementation of SE in a highly
entrepreneurial Spanish region: Catalonia. Adopting the institutional
economics (North 1990, 2005) as a theoretical framework, insights
concerning the role of institutional frameworks on the practice of SE have
been provided using a multiple-case-study methodology. Based on the
evidence from the case studies, and using a theory building methodology,
four propositions have been induced that contribute to extending our
understanding concerning SE. These propositions are synthesized in a
theoretical model that is illustrated in Figure 1.
A core conclusion of our research is that both informal and formal
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institutions, using North’s (1990, 2005) terminology, are important to the

generation of SE in Catalonia. But informal institutions have greater
importance than formal institutions due to the fact that they affect not only
the implementation of SE, but also their emergence. Then, although social
entrepreneurs, similar to other entrepreneurs, are driven by combinations of
factors rather than one single element, it is the informal institutions that are
especially important for social entrepreneurs, because they have stimulated in
great part the emergence of the social enterprises. In particular, social
entrepreneurs were driven by the new social values of the society (P1), as
well as the personal and proactive attitudes to do something to solve the
social problems of the local community (P2). Along with a focus on the social
problems of society, the community was also important for their participa-
tion in the project. The community formed part of the networks of the social
entrepreneurs and was a key factor in the implementation of the social
enterprises (P3) along with support mechanisms that offered financial help to
social entrepreneurs in carrying out their social projects (P4).
The findings here have strong implications for both practice and theory.
From a practical point of view, it is crucial that local institutions – public and

Figure 1. Model of institutional factors affecting the emergence and implementation of SE

 Social Entrepreneurship from an Institutional Perspective 67
private – recognize that SE may contribute to solving social problems of the
community as well as promoting collective well-being. They might then offer
new and innovative support mechanisms for this type of entrepreneurial
activity. It is expected that a social entrepreneur will use the support offered
by formal institutions and, consequently, social enterprises will be
implemented with greater facility. Moreover, the use of informal institutions
as financial support mechanisms, such as social networks, could be
substituted by the utilization of formal institutions. Hence, networks could
be used specifically for attracting human resources to participate in the social
projects. In addition, formal institutions also may be enacted to modify
informal institutions, such as attitudes and norms of behavior of the society
in order to promote SE.
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Regarding the implications for scholars, it is interesting to note that in SE

the use of an interdisciplinary theoretical approach, such as is offered by
institutional economics, would appear to have greater explanatory power
than economic-based theories. Specifically, informal institutions, such as the
culture of a particular society, can be utilized to fill the voids that exist in the
usual formal institutional structure. Moreover, although this perspective has
been used in this research to provide a picture at one place and time, this
approach is also appropriate for analyzing the institutional change and the
roles that not only have different institutional factors but also social
entrepreneurial activities. In this sense, future longitudinal studies developed
within an institutional framework will possibly improve our understanding
concerning these issues.
Finally, this research does have some limitations to be noted. First, the
aim of the study was to refine and extend insights concerning SE; testing is,
however, a task for future research. Second, we have especially focused on
the opinions of social entrepreneurs and people in charge of institutions,
but we have not included the local population’s perspective. Due to the fact
that the local population determine, in part, the social needs that are met
by social entrepreneurs, it would be interesting to include those populations
in future empirical studies. Third, our work was developed in an
entrepreneurial region of Spain (Catalonia), and inquiries in other contexts
might have different results. Moreover, we focused on seven specific cases
of SE. For this reason, and like other researches based on a qualitative
case-study approach, more extensive investigations are required to test the
generalization of our argument. Nevertheless, we believe that the study
presented here might provide a starting point for future research aimed at
analyzing the implications of different institutional frameworks in different
contexts.

Acknowledgements
The authors acknowledge the financial support from the Projects SEC2006-
06017 and SEJ2007-60995 (Spanish Ministry of Education and Science), and
2005SGR00858 (Catalan Government’s Department for Universities, Re-
search and Information Society).
 68 D. Urbano et al.
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