Abstract
This paper advances the field of social entrepreneurship by developing a basic economic model of the social entrepreneur as a profit-deviating firm. We then demonstrate how profit deviation lowers the effective operating costs of the firm, allowing social entrepreneurs to recognize, evaluate, and exploit previously unconsidered opportunities. In doing so, social entrepreneurs may generate knowledge spillovers by providing valuable ex-post entry information regarding the expected costs of a venture, thereby providing a public good to latent entrepreneurs in the commercial sector. Based on this new information, the latter may then enter markets previously considered unprofitable, leading to market development and growth. We illustrate the range of market conditions that are relevant for the social entrepreneur and provide one industry- and one company-focused case study to illustrate the model. The model and evidence provide a complementary role for the social entrepreneur beyond the production of collective goods.
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