1. UNDESTANDING SOCIAL CHANGE THROUGH CATALYTIC INNOVATION: EMPIRICAL FINDINGS IN MEXICAN SOCIAL ENTREPRENEURSHIP
Caroline Auvinet & Antonio Lloret
Instituto Tecnológico Autónomo de México
School of Business
November, 2014

2. Social entrepreneurship research
In the study of social entrepreneurship few empirical studies have been conducted, leaving the research of this phenomenon in an “embryonic” phase (Short, Moss & Lumpkin, 2009)
Academics have:
Analyzed their organization and behavior,
Created theories suggesting strategies to achieve their objectives more effectively.
One of these theories is the Catalytic Innovation, from Christensen, Baumann, Ruggles & Sadtler (2006).
In Mexico there are also few empirical studies that allow us to understand the phenomenon. For this purpose, we conducted a survey to 278 Mexican social entrepreneurships (SEs) with the following objective:

3. Objectives
Examine whether Mexican SEs show signs of catalytic innovation
Additional to this objective, we wondered if catalytic innovations could increase the economical success of organizations, besides the social impact.
We determine that, in Mexico, catalytic innovations occur within the SEs, and by using this strategy not only they can maximize their social impact, but can also maximize their profits, to a certain level.

4. What is a Social Entrepreneurship?

5. Literature Structure: For-profit, non-profit, hybrids
The theory surrounding social entrepreneurship is still evolving. Reviewing the literature that define SE, we found that authors doesn´t seem to agree in what should be considered a SE an what is not. Several discussions have arisen around the:
Structure: For-profit, non-profit, hybrids
Importance of the Mission
Role in the value- added chain
Measurement of the impact generated
But authors seem to agree that a SE should:

6. Have a social mission, which is to solve social problems

7. Have an entrepreneurial spirit

8. Use INNOVATION to achieve a sustain social change

9. Christensen & Innovation
Sustaining Innovation
Disruptive Innovation
Catalytic Innovation
Improvement of existing products, processes or services
They provide better quality or additional functionality to the most demanding costumers
New features to the existing products
More expensive
Have a limit: users no longer perceive the new features as differential advantage
Cause a rupture within the market
The product lack some of the feature of the existing products, but are judged good enough
They are simpler, more convenient, less expensive, so they attract new or less demanding costumers
They often led to social change in the process, although that is not their ultimate goal
Subset of Disruptive Innovation distinguished by a primary focus on social change
They transcend the status quo by delivering adequate solution to inadequately addressed problems
Sustaining Innovation
Disruptive Innovation
Catalytic Innovation

10. According to Christensen Catalytic Innovations must create…
Scalable
Sustainable
System-changing solutions

11. Searching for a strategy
Christensen et al. argue that catalytic innovations must:
Create a systemic social change through scaling and replication
Meet a need that is either over-served or not served at all
Offer products and services that are simpler and less costly than existing alternatives
Generate resources, such as donations, grants, volunteer manpower or intellectual capital
They are often ignored by competitors for whom the business model is unprofitable or unattractive.

12. Hypothesis
Within Mexican social entrepreneurship there are signs of catalytic innovations, a strategy that allows not only to maximize the social impact, but also to increase the economic success of the organizations.

13. Methodology to test our hypothesis:
Data collection
We sent a survey to those organizations that publicly claimed to fulfill a social or environmental purpose. Therefore, the survey was sent to members of:
The FONAES (Fondo Nacional de Apoyos para Empresas Sociales)
ECODIR (Environmental directory)
Páginas Verdes (Environmental and social organizations directory)
Latin-American Impact Investing forum
278 enterprises answered the survey. After a thorough review, we discarded those responses that were incomplete or did not meet the profile we were looking for, obtaining 219 completed surveys.

14. Measurements Social entrepreneurship and its organization
Social and environmental impact
Qualities of Catalytic Innovation
Economic success

15. Variables Measure of economical success
Measure of social and environmental impact
Based on: type of impact desired, number of problems addressed, beneficiaries, sector of the population reached, and if they had a method to measure their impact or not.
Measure of economical success
Based on profits the organization achieved in the last year, cash flow, number of employees, life cycle and age of the organization, evolution in number of products and services offered, number of employees, and size of the organization since its inception.
Measure of Catalytic innovation
Based on Christensen et al. qualities of catalytic innovations

16. Control Variables Stage the organization is in
Socioeconomic strata they address
Number of full-time employees
Sector in which they operate
Technology
Age of the organization

17. RESULTS:
Model 1. Regression results for catalytic innovation determinants
-SE who pursue CI have adopted a hybrid structure,
-They focus on the middle and lower socioeconomic sectors,
-They are guided by resources generations such as grants, scholarships, volunteers or intellectual capital
There are signs of CI in social entrepreneurship

18. RESULTS:
Model 2: Regression results for catalytic innovation and economic success components
SEs that do catalytic innovation, and are economically successful must:
Have achieved a certain level of growth
Have used different components of catalytic innovation
And have aimed to create social impact

19. RESULTS:
Model 3: Probit regression of the probability of having a greater social impact
- The probability of having a greater social impact increase when they have catalytic innovation, and economic success.
- It is likely to happen more often in the primary sector and with hybrid organizations.

20. RESULTS:
Model 4: Regression results between economic success, social impact and catalytic innovation, in relation with time, size and age of the organization
Organization that use CI have a correlation with economic success and greater social impact:
There is a direct relation between social impact and CI. The greater the CI the larger the social impact.
Younger and smaller organizations had more social impact that the older and bigger ones.
There is a relation between CI and economic success, but we saw that, initially, greater CI will produce greater economic success, but once it reaches a certain point, the excess of CI makes economic success decrease at decreasing rates.

21. Figure 1. Relation of economic success and the social impact inside social
Entrepreneurship with catalytic innovation
SEs that do catalytic innovations are economically successful, but there is a point were declining growth rates become present.
SEs that use catalytic innovations have a greater social impact.

22. Conclusions
Catalytic innovation is a viable strategy for those organizations seeking social and economic success.
Therefore, the social entrepreneur must:
Structure as an hybrid organization so they can generate money and receive support such as donations or volunteering at the same time.
Conduct activities in a sustainable manner in the first sector
Choose a target population located within the middle and lower socioeconomic levels
Take advantage of the initial phase of the organization for catalytic innovations
Enable expansion and scale innovation, but with awareness of not growing too much the organization.
However, economic success will be limited and growth rates could start declining if the following points are not taken care of:
Products or services should not be to simple or sold too cheaply that they no longer meet the needs of the customers.
If organizations grow to much, it could be disrupted at his turn.

23. THANK YOU