Dr Nadia Millington reveals the power of culture, ethics and behavioural norms for the development of social enterprises. 

Social entrepreneurship is on the rise in emerging economies. More and more, established firms and start-ups are seeking to position themselves to address the world’s most pressing problems and environmental concerns via enterprise structures that focus equally on commercial and social goals. However, much of the mainstream literature has emphasised management, innovation and investment toolkits at the expense of institutional perspectives. Institutional theories simply propose that market-based activities are significantly influenced by non-market institutional forces that comprise formal institutions – “the rules of the game” – laws, court systems, financial systems and Informal institutions – culture, ethics and behavioural norms. Whilst most social entrepreneurs instinctively recognise that formal institutional considerations are important (e.g. financial and regulatory), they often ignore or fail to significantly address the informal institutional forces comprising culture, ethics, and behavioural norms. This can have disastrous effects both with respect to enterprise success and the wellness of the disenfranchised people that they serve.

Take as an example the following vignette told by a formidable African social entrepreneur. In an attempt to address high rates of malnutrition, she produced a low cost yellow natural mango jam but failed to scale because of a predominant behavioural norm of purchasing red jam within that region. Given that behavioural norms are notoriously hard to alter and the yellow mango jam was difficult to reconfigure into a red paste without packing it with sugars and other artificial colours, she opted to discontinue the product, losing the initial investment in product development. On a much larger scale, consider the well documented case of General Electric’s failure to sufficiently address the informal institutional forces of culture and ethics when developing its low cost portable ultrasound machine. Whilst its intention was to improve prenatal healthcare in poverty prone areas, in reality, the machine’s ease of availability and usability, combined with the cultural and deeply rooted historical preferences for male children in India, inadvertently contributed to alarming rates of female feticide and sex-selective abortions. GE later introduced safeguards to try to curtail the use of the machine for sex determination, but the female “gendercide” had already resulted in the progressive skewing of the male to female ratio in places like Punjab, with many negative ensuing social consequences. Truth be told, as an educator in the field, I can site countless other similar examples where lack of explicit recognition of informal institutional forces ( such as norms, culture and ethics) resulted in uninformed responses, premature resource commitments and, in the worst case scenario, deleterious effects on the disenfranchised in emerging economies.

So, how should social enterprises recognise and deal with informal institutional forces?
Social enterprises need to take a more holistic, learning-oriented approach. One approach starts by recognising that the people who hold the informal institutional knowledge are often not your typical stakeholders like investors, suppliers etc. Beyond the clients they serve, social entrepreneurs should engage with non-traditional players including (i) expert knowledge holders like anthropologists; (ii) collective actors, such as village tribunals and community groups; (iii) social control agents, such as village chiefs/ NGOs/ Imams/ Pundits and Community organisers who are able to go beyond anecdotal knowledge about the norms, ethics and culture of the target market. These individuals can challenge the social entrepreneur’s existing mind-set and orthodoxies and help to remove some of the ivory-tower idealism about potential positive impact, product adoption and scalability. Another approach to building knowledge is to opt for immersion experiences where social entrepreneurs spend a period of time living in the context and realities of the markets which they serve. In the process of designing LSE’s MSc in Social Innovation and Entrepreneurship we adopted this approach and students are given an immersive experience in an emerging economy before designing solutions to address its most pressing needs.

Irrespective of the approach used, consideration of informal institutional forces must become institutionalised; a regular part of the operations of a social enterprise. This can simply take the form of a due diligence check list included in product development, marketing and investment decision-making meetings. Alternatively, it can be a more complex structural change such as the one employed by an Indian Multinational I was researching; who hired a sort of CIO, Chief Institutional Officer, after a series of lacklustre or failed attempts to enter poverty prone markets. The CIO’s job was to question, cajole, and otherwise instigate conversations about the impact of institutional forces on the dealings of the firm.

The bottom line is that failure to consider informal institutional forces – behavioural norms, culture and ethics – can have negative consequences for social entrepreneurs operating in emerging economies. So what can you do today to embrace a more holistic understanding of the informal institutional forces that impact your social enterprise?

Notes:

  • This article was initially published on Business Fights Poverty in 2016 and re-published on our blog with the author’s permission. 
  • The post gives the views of its authors, not the position of the Management with Impact blog or the London School of Economics.

Nadia Millington is a Senior Lecturer in Practice and the Deputy Director, MSc Social Innovation and Entrepreneurship. Dr Millington’s academic credentials include a Master’s in Management Organisations and Governance from LSE and an MBA from the University of Bath; gaining distinctions and top awards in both (noteworthy is the Academic Excellence prize, having gained distinctions in all subjects during her Master’s). Her PhD, also from LSE, is based on longitudinal qualitative research in Bangalore, India at one of the world’s most innovative companies. Here Dr Millington focused on defining the underlying mechanisms driving failure of the firm to innovate new business models for the poorest markets (often referred to as the base of the pyramid). This two-year experience of dealing with poverty in India, combined with her involvement in a social enterprise she co-founded in Brazil, further fuelled a passion to focus on the world’s most pressing problems of poverty and inequality. In this regard, Dr Millington is also a keen contributor to the LSE Innovation and Co-creation lab which aims to empower change makers and leaders to design and scale social enterprises as a force for social transformation.

Afroditi-Maria Koulaxi

About Afroditi-Maria Koulaxi

Afroditi was the editor of the Management with Impact blog between February - June 2017. In September, Afroditi is starting her PhD at LSE to investigate the mediation of migration.