In this YouTube clip, the incomparable Sheila Jasanoff mentions the Grameen Bank as a promising form of innovation that could only have emerged from the Global South. I find her statements very prescient. They are, incidentally, aligned with the conclusions of many science and technology policy scholars, for example Dan Sarewitz in his prodigious book Frontiers of Illusion: Science, Technology, and the Politics of Progress.

Social business models, popularized by Muhammed Yunus, point to new horizons, but their current manifestations (in micro-credit and poverty alleviation enterprises) do not nearly exhaust the possibility space of social business model innovation. For my master’s thesis I am tinkering with S&T policies that could explore this possibility space at various scales (community-driven, state-level, national, supra-national).

What are the basic features of social business models?

First, these are for-profit, non-dividend enterprises. That is, these are not non-profits, and not classical economic firms (although a corporation could have a subsidiary that is a social business.) Nations with poor infrastructure and debilitating social problems (malnutrition, disease, poverty) such as Bangladesh have been the most likely sites for social business, partly because these sites have a history of targeted philanthropy and international civil society action. Efforts to apply social business models (mostly micro-credit) in other settings (New York City, for example) have met with some limited success.

Funding streams for social businesses may come from large corporations (Danon, Coca-Cola, etc), philanthropists, and states, but typically not from bottom-up social movements.

Organizational structures of social businesses require exceeding discipline from board management. Product distribution to wealthier consumers typically extracts maximum profit for redistribution to producers, distributors, and consumers in poorer locales. In this way, social businesses attempt to attenuate the effects of uneven geographic development.

Managing such a system well takes talented management. This need for talent presents a tension, as most talented managers are likely to desire maximum personal income returns for their efforts, which social businesses do not provide.

If social business model innovation is to increasingly explore possibility space, a new managerial class seems to be required. The chicken and the egg problem ensues. Perhaps, though, a new managerial class is already present and merely settling for the pursuit of maximum personal income returns, lacking a more attractive alternative?

There is a tension in the classic corporation between managers and owners — a tension often termed a Principal-Agent problem. Managers, on one hand, have a responsibility to ensure the long-term viability and growth of the corporation. They also have a responsibility to take care of their employees, their employees’ families, and increasingly, the broader community, which frequently includes the environment. These long-term responsibilities are thought to be in tension with short-term demands from dividend-driven shareholders (owners).  To address this gap, managers are typically offered short-term incentives in the form of stock-options and performance-driven bonuses to align their behaviors with the short-term interests of shareholders. This does not, of course, negate the long-term responsibilities, which to a considerable extent are also responsibilities of the shareholders.

Because of these dynamics, managers and owners are thought not to have financial incentive to innovate social business models that tackle intractable (social and ecological) sustainability problems. While there is often significant incentive to gain credibility and public support through corporate social responsibility, responsible innovation, “making the planet smarter,” et cetera, these intractable problems are currently addressed through increased efficiencies, new technology applications, philanthropic and charitable subsidiaries and initiatives. Some things are changing and that’s wonderful! But there is in fact room to maneuver; and that’s where I want to position myself.

Companies that offer employees opportunities to contribute to social business subsidiaries may improve the morale of the labor force, and some examples of this are available in Yunus’ books. But alas, these efforts do not trigger targeted experimentation with social business model innovation. The potential of such incremental institutional learning goes untapped.

Where is a good place to seek such innovation? I’m convinced that the nation-state has a role to play. Specifically, I think there are places within S&T policy domains that are optimal for small pilot projects in social business model innovation.

There are important reasons why the nation-state is a likely candidate for fostering social business model innovation. When I was a teenager I happened to read the famous book by Daniel Bell called The Cultural Contradictions of Capitalism. The final chapter of that book, as I recall, deals with the “sociology of finance,” which hinges on federal budgetary spending and tax policy. Bell pointed out that states have a number of public service obligations that require lots of funding, while also having obligations not to over-tax citizens or corporations. Bell also points out the crucial role that science and technology have in increasing productivity and growing the economy, which are crucial aspects of a sound budget process and tax policy. Well, from studying science & technology policy at the graduate level, it is clear that states are currently working hard to connect budget inputs in research and development, for example, with specific outcomes — not just increased productivity and economic growth, but improved quality of life, resilient communities, and sustainable energy systems. For me, it seems hard to believe that achieving these outcomes will happen without experimenting with new business models. That’s why I’m working to develop the concept of “social business model innovation” or SBMI.

I suspect that social business model innovation could offer a new managerial class pathways to fame, fortune, and maximum historical impact in the annals of capitalism, while also contributing to resilient communities, a strong middle class, and reduced poverty. If that sounds rather quaint and naive, you aren’t the first one to think so. My professors have written for the Wall Street Journal and Washington Post for decades, and they need significant convincing. This is an on-going research project, and this blog is where I go to clarify my thoughts on the subject.