The Social Entrepreneur’s Dilemma: Entrepreneurial Strategy and Charter School Performance

Abstract

When starting and running a social venture, social entrepreneurs pursue the dual goal of concurrent economic and social value creation. In this study, we introduce the notion of “the social entrepreneur’s dilemma,” that is, social entrepreneur’s strategic choices that lead to enhanced economic performance tend to negatively affect social performance, or vice versa. We focus on two choices related to the fundamentals of business strategy, choice of the scope of activities, and choice of two types of competitive advantage (i.e., differentiation vs. cost-leadership). Using panel data of charter schools in Texas (1997-2007), we find evidence that both a broader scope strategy and a differentiation strategy improve a school’s academic (social) performance, but hurt its economic performance. The trade-offs from the opposing effects become even more salient in a more turbulent environment: the positive impact of differentiation on academic performance would vanish, whereas the negative impact of scope expansion and differentiation on economic performance would increase even further.