CHAPTER TWO

2. SOCIAL INNOVATION

INTRODUCTION

In today’s world, societies face complex social, economic, and environmental challenges — such
as poverty, inequality, unemployment, poor health, and climate change. Traditional approaches
(government policies, market solutions, or charity) often fail to address these issues effectively.
Social Innovation emerges as a new approach — a creative and collaborative way of solving
social problems that leads to long-lasting social change and community empowerment.

2.1 DEFINITION OF SOCIAL INNOVATION

Although there is no single universally accepted definition, the following key definitions capture
the essence of the concept:

European Commission (2013): Social innovations are new ideas (products, services, and models)
that simultaneously meet social needs more effectively and create new social relationships or
collaborations.

Murray, Caulier-Grice & Mulgan (2010): “Innovations that is social in both their ends and their
means.” This means social innovations aim at social goals and use participatory, inclusive
methods.

Phills, Deiglmeier & Miller (2008): A novel solution to a social problem that is more effective,
efficient, sustainable, or just than existing solutions, and for which the value created accrues
primarily to society rather than to private individuals.

Stanford Center for Social Innovation: Social innovation is a process of developing and
deploying effective solutions to challenging and often systemic social and environmental issues.

✅ Social innovation is about new ways of solving social problems, empowering communities,
and improving social well-being through collaboration, creativity, and sustainability.

Key Characteristics of Social Innovation

 Novelty: Introduces new or improved approaches to social problems.

 Social Impact: Aims to generate positive outcomes for society rather than private gain.
 Sustainability: Ensures long-term benefits and resource efficiency.

1|Page
Complied by AyeleT,.
  Collaboration: Involves multiple stakeholders — communities, NGOs, governments, and
businesses.
 Scalability: Has potential to expand or be replicated in other contexts.
Importance of Social Innovation

Addresses market and government failures.

Promotes inclusive growth and social justice.
Encourages citizen participation and collective problem-solving.
Supports sustainable development and resilience.

2.2 EVOLUTION OF THE CONCEPT OF SOCIAL INNOVATION

The concept of Social Innovation did not emerge suddenly; it evolved over centuries as societies
sought new ways to respond to social challenges such as inequality, exclusion, and
environmental degradation. While innovation was originally associated with technological and
economic progress, the idea of applying innovation to social change has its roots in philosophy,
sociology, economics, and political science. The evolution of social innovation can therefore be
traced through different historical periods, intellectual traditions, and policy frameworks that
shaped how societies approach change and social improvement.

1. Early Foundations (18th–19th Century): Moral and Utopian Reform Context: The rise
of industrialization, urban poverty, and social inequality during the 18th–19th centuries
stimulated reform movements and philosophical inquiry into social progress.
Key Thinkers & Movements: Robert Owen (1771–1858): Advocated for cooperative
communities (e.g., New Lanark) to improve workers’ welfare. Charles Fourier (1772–1837):
Proposed utopian societies (phalanstères) emphasizing equality and collective living. Saint-
Simon (1760–1825): Promoted the reorganization of society based on industrial and social
cooperation.
2. Early 20th Century: Institutional and Sociological Perspectives Context:
Industrialization matured; social sciences emerged as distinct disciplines (sociology,
economics, and political science).
Academic Developments: Émile Durkheim (1893, 1912): Saw innovation as a means of
maintaining social cohesion amid change. Max Weber (1904): Linked innovation to
rationalization and institutional modernization. Joseph Schumpeter (1934): Defined innovation
broadly (economic and social) as a process of creative destruction — new combinations
replacing old systems.
Shift: From moral reform → social change as a systemic process embedded in institutions,
norms, and structures. Policy Implication: Social innovation started to influence public
administration and social welfare programs (education, housing, healthcare).
3. Post–World War II Era (1945–1970s): Policy Innovation and Social Development

2|Page
Complied by AyeleT,.
 Context: Rebuilding societies after WWII; rise of welfare states and modernization
theory.
Governments experimented with social welfare innovations (universal education, health systems,
social housing). Social policy innovation became a new domain of governance and planning.
Peter Drucker (1957): Introduced “social innovation” as a managerial approach to improving
public institutions. Kenneth Boulding (1953): Linked innovation with systems theory and social
evolution. UNESCO and OECD: Promoted innovation in education, culture, and development
programs. The creation of new public education models and health delivery systems in postwar
Europe. Conceptual Development: Social innovation was understood as public sector reform—
new institutional arrangements to improve citizens’ quality of life.
4. 1980s–1990s: Rise of Social Entrepreneurship and Civil Society Context: Economic
liberalization, welfare retrenchment, and growth of the nonprofit sector. Non-
governmental actors (individuals, NGOs, social enterprises) began driving innovation for
social good.
Michael Young (1915–2002): Established innovative social institutions (e.g., Open University,
Consumer Associations). Bill Drayton (1980): Founded Ashoka Foundation; popularized the
term social entrepreneur. David Bornstein (1998): Emphasized grassroots problem-solving
through social enterprise. Conceptual Shift: From state-led welfare innovation → citizen-driven
and entrepreneurial innovation.
Examples: Grameen Bank’s microfinance innovation (Muhammad Yunus, Bangladesh),
Participatory urban development movements, Environmental and women’s empowerment
NGOs.
5. 2000s–2010s: Systemic and Theoretical Consolidation Context: Globalization, ICT
revolution, and complex social challenges (inequality, aging, environment).
The European Commission (2009–2020) mainstreamed social innovation in the Europe 2020
Strategy. The creation of TEPSIE, SIX (Social Innovation Exchange), and TRANSIT networks
advanced theory and policy.
Murray, Caulier-Grice & Mulgan (2010): Defined social innovation as “new ideas that meet
social needs and create new social relationships.” Frances Westley & Nino Antadze (2010):
Introduced “scaling social innovation” and “systemic change” concepts.
Howaldt & Schwarz (2010): Developed the network and systems theory approach to social
innovation. Nicholls & Murdock (2012): Linked social innovation to hybrid value creation and
institutional change.
Examples: Participatory budgeting (Porto Alegre, Brazil), Fairtrade and social enterprises &
Digital civic platforms and open data movements.
6. 2010s–Present: Transformative and Global Perspectives Context: Global challenges —
climate crisis, migration, digital inequality, pandemics.
Transformative social innovation: Aimed at changing entire systems (energy, education, food).
Digital social innovation: Use of technology for inclusion and empowerment (open data, AI for
good). Sustainable social innovation: Linked to SDGs and green transitions. Inclusive
innovation: Ensuring marginalized groups co-create and benefit.
3|Page
Complied by AyeleT,.
Geoff Mulgan (2019): Social innovation as a process of collective intelligence, Howaldt, Kaletka
& Domanski (2016): Social innovation as a driver of societal transformation, UNDP Accelerator
Labs Global experimentation for social innovation in developing countries. Conceptual
Integration: Social innovation is now recognized as a cross-disciplinary and cross-sectoral
phenomenon — connecting economics, sociology, governance, and technology for human-
centered development.

2.3 SOCIAL INNOVATION [Link] ENTREPRENEURSHIP VS. CRS

I. SOCIAL INNOVATION

Social Innovation refers to the development and implementation of new ideas, strategies,
practices, or organizational models that aim to address social challenges more effectively than
existing approaches. It focuses on creating social value, promoting collaboration, and achieving
systemic transformation in society.

Unlike technological or economic innovation, social innovation prioritizes human well-being,

inclusion, and sustainability rather than profit or efficiency alone. Social Innovation is the
process of developing and deploying effective solutions to challenging and often systemic social
and environmental issues in support of social progress. — Stanford Center for Social Innovation
(2010)

“New ideas that meet social needs and create new social relationships or collaborations.” —
Murray, Caulier-Grice & Mulgan (2010)

Dimensions of Social Innovation

Dimension Explanation Example

Product/Service New goods or services meeting Affordable healthcare
Innovation unmet social needs. models (Aravind Eye Care).
Process Innovation New ways of delivering social Participatory budgeting in
services or organizing local governance.
communities.
Governance New forms of public participation Citizen assemblies, open
Innovation and policy-making. data policies.
Institutional New organizational forms or Social enterprises,
Innovation cross-sector partnerships. cooperatives.
Cultural Innovation Shifting mindsets and values Environmental awareness
toward inclusion and campaigns.
sustainability.

4|Page
Complied by AyeleT,.
 II. SOCIAL ENTREPRENEURSHIP

Social Entrepreneurship (SE) combines the passion for social mission with the discipline,
innovation, and determination of business entrepreneurship. It involves individuals or
organizations who develop sustainable, market-based solutions to address social, cultural, or
environmental challenges.

Unlike traditional business entrepreneurs whose main goal is profit, social entrepreneurs
prioritize social impact, using profits as a means to sustain their mission. A social entrepreneur is
a person who pursues innovative solutions to social problems with the same drive and
determination as a business entrepreneur. — Dees (1998) Social entrepreneurship is the process
of recognizing and resourcefully pursuing opportunities to create social value.— Austin,
Stevenson & Wei-Skillern (2006)

Elements of Social Entrepreneurship

Element Description Example

The core goal is solving a social problem, Reducing poverty through
Social Mission
not maximizing profit. microfinance.
New solutions, products, or delivery Mobile education apps for rural
Innovation
systems. children.
Resource Using networks, partnerships, and social Collaboration with NGOs and
Mobilization capital. local communities.
Financially viable and operationally Reinvesting profits into mission-
Sustainability
stable. driven programs.
Expanding solutions to reach broader Franchising community health
Scaling Impact
communities. clinics.

Examples of Social Entrepreneurs

Name / Organization Country Innovation / Impact

Muhammad Yunus (Grameen
Bangladesh Pioneered microfinance for poverty alleviation.
Bank)
Bill Drayton (Ashoka
USA Supported global network of social entrepreneurs.
Foundation)
Michael Young UK Founded the Open University and numerous

5|Page
Complied by AyeleT,.
 Name / Organization Country Innovation / Impact
social institutions.
Bunker Roy (Barefoot
India Trained rural women as solar engineers.
College)
Veronica Khosa (South Developed home-based healthcare for HIV/AIDS
South Africa
Africa) patients.

SOCIAL INNOVATION [Link] ENTREPRENEURS

Aspect Business Entrepreneur Social Entrepreneur

Primary Goal Profit and wealth creation Social value creation
Beneficiaries Customers and shareholders Communities and society
Performance Measure Financial return Social impact and sustainability
Funding Source Investors, markets Grants, impact investors, hybrid finance
Motivation Personal gain Collective good

III. CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility (CSR) refers to the ethical responsibility of businesses to

contribute positively to society, beyond profit-making. It involves integrating social,
environmental, and ethical concerns into business operations and interactions with stakeholders.

CSR reflects a company’s commitment to sustainable development, balancing economic growth,

social equity, and environmental protection. CSR is the continuing commitment by business to
behave ethically and contribute to economic development while improving the quality of life of
the workforce, their families, and society at large. — World Business Council for Sustainable
Development (WBCSD, 1999). CSR means companies taking responsibility for their impact on
society. — European Commission (2011). CSR is about how companies manage the business
processes to produce an overall positive impact on society. — Baker (2004)

Theoretical Foundations of CSR

Stakeholder Theory (Freeman, 1984): Businesses must consider the interests of all
stakeholders — not just shareholders.
Triple Bottom Line (Elkington, 1997): Companies should measure success through
People, Planet, and Profit.
Carroll’s Pyramid of CSR (1991): A comprehensive model of CSR responsibilities:

6|Page
Complied by AyeleT,.
  Economic: Be profitable and efficient.
 Legal: Obey laws and regulations.
 Ethical: Do what is right, fair, and just.
 Philanthropic: Be a good corporate citizen and contribute to society.

Dimensions of Corporate Social Responsibility (CSR)

Dimension Description Examples

Creating value for shareholders and
Economic Fair pricing, innovation, job creation.
customers.
Legal Compliance with laws and regulations. Labor rights, anti-corruption policies.
Doing what is morally right beyond
Ethical Fair trade, no child labor, equality.
compliance.
Donations, scholarships, health
Philanthropic Voluntary contributions to social causes.
programs.

COMPARATIVE ANALYSIS

Social Entrepreneurship Corporate Social

Dimension Social Innovation (SI)
(SE) Responsibility (CSR)
Multi-sector (public,
Individual or organization Private corporations /
Main Actor private, community,
with social mission businesses
academia)
Systemic change and Sustainable business with Ethical and responsible
Primary Goal
social transformation social impact business conduct
Collaboration and co- Entrepreneurship and Corporate ethics and
Core Logic
creation innovation stakeholder engagement
Value
Social & institutional Social & economic Social & reputational
Creation
Innovation Policy, service, or Strategic or
Product/service-based
Type community-based philanthropic
Long-term societal Corporate sustainability
Sustainability Business-model driven
systems frameworks
Participatory governance, Microfinance, social Carbon-neutral
Example
open innovation enterprise initiatives, philanthropy

7|Page
Complied by AyeleT,.
3.3 SOCIAL INNOVATION: Key characteristics

Social Innovation (SI) is more than just new ideas—it is a process of transforming society by
addressing unmet social needs through creative, effective, and inclusive solutions. The success of
social innovation depends on certain core characteristics, which distinguish it from technological
or purely commercial innovations. Key characteristics include: Novelty, Impact, Sustainability,
and Inclusivity.

I. Novelty

Novelty refers to the originality and creativity of the idea, approach, or solution. It is not simply
a minor improvement, but a significant new way of addressing social challenges. Importance:
Differentiates social innovation from conventional solutions, Encourages creative thinking in
problem-solving, facilitates adaptation to complex social contexts. Novelty can be technological,
organizational, process-based, or policy-related, but it must meet unmet social needs.

II. Impact

Impact refers to the extent and significance of the change the innovation produces in society. It
reflects effectiveness in solving social problems. Indicators of Impact:

Number of beneficiaries reached.

Improvement in quality of life or social outcomes.
Reduction in inequality, poverty, or environmental harm

Social innovations must produce tangible and measurable benefits, not just theoretical
improvements.

III. Sustainability

Sustainability refers to the ability of the innovation to continue generating social value over the
long term. This includes financial, organizational, social, and environmental sustainability.
Sustainability ensures that social innovation is not just a temporary fix, but a lasting solution.

IV. Inclusivity

Inclusivity ensures that social innovations engage and benefit diverse groups, especially
marginalized, vulnerable, or underserved populations. Inclusivity is central to human-centered
innovation, ensuring that no one is left behind.

Characteristic Definition / Focus Example

Novelty Originality in solving social Microfinance, digital crisis mapping

8|Page
Complied by AyeleT,.
Characteristic Definition / Focus Example
challenges
Measurable improvement in social
Impact Aravind Eye Care, participatory budgeting
well-being
Sustainability Long-term value creation Solar Sister, Barefoot College
Engaging and benefiting Community health workers, digital literacy
Inclusivity
marginalized groups programs

3.4 CHALLENGES OF SOCIAL ENTREPRENEURSHIP

Social Entrepreneurship (SE) refers to the process of creating, organizing, and managing
ventures that address pressing social problems through innovative, sustainable solutions. Despite
its potential to create positive social impact, social entrepreneurship faces unique challenges that
differentiate it from traditional entrepreneurship. Understanding these challenges is key to
effective management, scaling, and sustainability of social ventures.

I. Access to Funding and Financial Sustainability; Social enterprises often struggle to

secure funding that balances profitability with social mission. Challenges include:
 Limited access to traditional investors due to low financial returns.
 Reliance on grants, donations, or philanthropy, which may be unpredictable.
 Difficulty in creating a sustainable revenue model while maintaining social objectives.
II. Measuring Social Impact

Evaluating the real-world effectiveness of social initiatives is often complex Challenges include:
Quantifying social change, which is often intangible (e.g., empowerment, education quality),
Lack of standardized metrics for social impact, Balancing short-term indicators with long-term
societal outcomes.

III. Balancing Social Mission and Financial Goals

Social entrepreneurs must maintain their social mission while achieving financial sustainability.
Challenges include: Pressure to prioritize revenue over social impact (“mission drift”), Difficulty
pricing products/services affordably while covering costs, Stakeholder conflicts between
investors seeking returns and community beneficiaries.

IV. Regulatory and Legal Barriers

Social ventures often navigate complex or unclear legal frameworks. Challenges include: Lack
of supportive legislation for social enterprises in many countries, Regulatory hurdles for hybrid
business models & Taxation policies may favor traditional profit-making entities.

9|Page
Complied by AyeleT,.
 V. Human Resource and Capacity Challenges

Social enterprises require skilled personnel motivated by social impact rather than just financial
incentives. Challenges include: Recruiting talent willing to work for lower pay, Training staff to
balance social and business goals, Retaining motivated employees in resource-constrained
environments.

10 | P a g e
Complied by AyeleT,.