Schumpeter’s Second Act: Market Disequilibria in a Macro-level Theory of Social Entrepreneurship

This paper advances a theoretical model for how Schumpeterian social entrepreneurship catalyzes systemic change. We shift attention from micro (the hybrid identity of social entrepreneurs) and meso (the management of hybridity in social enterprises) phenomena to macro-level perspective of social entrepreneurship. At this level social entrepreneurship does not just require an understanding of the direct impact created by a social enterprise, but more importantly, by its indirect impact when transforming market and non-market environments. By drawing on Schumpeter’s definition of entrepreneurship we conceive of social entrepreneurship as the discovery and exploitation of economic opportunities through the generation of market disequilibria that initiate the transformation of a sector towards an environmentally and socially more sustainable state. We discuss why such transformative impact creation begins with the recognition of market failure due to the presence of antagonistic assets and the identification of opportunities to transform these into complementarities. Three such strategies are discussed and suggestions for future empirical work are proposed.