Social Enterprise: Tool for Economic and Social Empowerment in Mexico

Abstract
The reasons for selecting this topic are the author’s desire to make business in Mexico
and contribute to the country’s poverty alleviation and social development. Given the
ambitions and future career perspectives of the researcher, this paper embodies an
opportunity to analyze the context, main dangers, challenges and dynamics of Social
Enterprise in Mexico. Further, this Academic Dissertation provides documented and
practical advice on how to evolve from Social Bricoleur to Social Engineer
(Wulleman & Hudson 2016). This is particularly interesting for newly graduates
aspiring to become social entrepreneurs.
The methods employed in the research methodology are sequential. First a concept
centric Literature Review (Webster & Watson 2002) provides academic evidence
concerning the economic and social impact of both Social Enterprise and NarcoEconomy in Mexico. The main findings of the literature review constitute the coding
parameters of the Content Analysis. Given the sensitivities and potential dangers
around organized crime, an anonymous online survey has been designed. The
researcher travelled to Mexico to personally call, visit and interview key Social
Entrepreneurs in the country. Detailed results, conclusions and recommendations have
been included in the last chapters of this dissertation.
ii
Executive Summary
Synopsis of the report
This paper juxtaposes the impact of Narco-Economy and Social Enterprise in
Mexican socioeconomic environment. Both institutions emerge to combat poverty
alleviation in the communities they operate. Currently, Narco-Economy provides the
best-paid employment positions in Mexican rural areas and demands no expertise in
the field. Social Enterprise, however offers legitimate means of livelihood together
with a positive, replicable and scalable social impact. The purpose of this thesis is
to gather academic and empirical evidence that shows how can Social
Enterprise be a tool for economic empowerment and an alternative to NarcoEconomy.
Nature of the problem
Mexico is a country ‘in search of solutions’ (Auvinet & Lloret 2011). Latent
opportunities
are
everywhere.
The
country’s
exuberant
natural
resources,
gigantic domestic market of 125 million people (IDB 2016) and complex variety
of social problems, constitute a paradise for Social Entrepreneurs to act.
Mexican Social Enterprise is currently on an ‘embryonic state’ and the
challenges it faces (e.g., corruption, violence and criminality) are rather
herculean. Nevertheless, the fierce resilience of the first generation of Social
Entrepreneurs and the country’s social spirit of solidarity, creativity and passion,
bear hope in high impact social transformation.
Methods adopted
The methods adopted to gather academic and empiric evidence are sequential. First a
concept centric Literature Review (Webster & Watson 2002) assembles academic
evidence concerning the economic and social impact of both Social Enterprise and
Narco-Economy in Mexico. The main findings of the literature review constitute the
coding parameters of the Content Analysis.
iii
Given the sensitivities around Narco-Economy and the risks it provides to Mexican
Social Entrepreneurs, anonymous online survey and qualitative interview have been
designed (Appendixes D and E).The researcher travelled to Mexico to personally
approach key Social Enterprises and make a direct primary research in the fieldwork.
Key conclusions
‘Reforms and economic growth in the country have been unable to lift the country out
of poverty’ (IDB 2016, p.7) Mexico is a fertile soil for Social Enterprise (SE). ‘Social
Entrepreneurship has struck a chord in Mexico: it combines a social mission with
business discipline, innovation and determination’ (Dees 2001 cited by Auvinet et al.
2015). Social Entrepreneurs will have the force to drive economic progress in the
country. The SE movement is creating a silent and diplomatic revolution that has the
potential to change the system from within. Mexican Social Enterprise is a serious
contender (and potential exit strategy) to Narco-Economy.
Key Recommendations
Since the key operational issue for Social Enterprises is the lack of funding, there is a
need to disrupt the bank system and create alternative financing forms. Social
entrepreneurs are advised to deepen their knowledge in accountancy and
financial literacy (Piazzesi 2018). They should also unite to lobby for the creation of
a dedicated Social Enterprise legal structure (IDB 2016). In order to become social
engineers (Wulleman & Hudson 2016) and create systematic, sustainable and high
impact social change, social entrepreneurs should implement two powerful
methodologies: 1) Applied Social Investigation (Castillo-Berthier 2015) and 2)
Catalytic Innovation (Auvinet et al. 2015).
iv
Acknowledgements
I would like to first extend my highest appreciation for the outstanding assistance of
my tutors: Prof. Clifford Conway (University of Brighton) and Prof. Alexander Bauer
(Wittenborg University Amsterdam). Secondly, I sincerely convey my gratitude to
Luz Elvia Juárez Tellez for lending a helping hand in contacting and booking
appointments with six social entrepreneurs in Mexico. Finally, I express my
thankfulness for the support of my beloved husband, my beloved Mexican family and
the motivation provided by my dear friend Sadie Marquardt in the accomplishment of
this work. For Mexico!
There were three main difficulties in the development of this work. The first one was
the gathering of information due to the great distance between Mexico and the
Netherlands. This challenge was surmounted through the support of the
researcher’s family and friends living in Mexico. The second difficulty was to find
a considerable amount of time to organize, analyze and process the vast amount of
information that the chosen research methodology implied. The last difficulty
was to descry relevant and veracious information about Narco-Economy. Since
this topic is considered to be potentially dangerous, academic and empiric
information about it is rather scarce.
Because of these challenges the author acknowledges that any errors or omissions
are her sole responsibility. The researcher confirms that this project is her own work
and no part of it has been previously published elsewhere other than
University of Brighton (double degree program) or submitted as part of any
other module assessment.
v
Table of Contents
ABSTRACT
II
EXECUTIVE SUMMARY
III
SYNOPSIS OF THE REPORT
NATURE OF THE PROBLEM
METHODS ADOPTED
KEY CONCLUSIONS
III
III
III
IV
ACKNOWLEDGEMENTS
V
TABLE OF CONTENTS
VI
LIST OF FIGURES
VII
GLOSSARY
VIII
vi
List of Figures
vii
Glossary
The following abbreviations have been used throughout the thesis:
Base of the Pyramid or Bottom of the Pyramid (BoP): ‘term in economics that
refers to the poorest two-thirds of the economic human pyramid, a group of more than
four billion people living in abject poverty’ (Britannica 2018)
Hybrid Company: due to the lack of dedicated legal structures for Social Enterprises
in Mexico (and worldwide), many companies opt to register both: a for-profit and a
non-profit organization. This enables them to simultaneously receive grants,
donations and to generate profit from their own sales.
Narco Economy (NE): Narco-Economy (NE) is the involvement of legitimate
governments and institutions in illegal drug trade (Sullivan 2014, McDonald 2005)
and other criminal activities.
Social Enterprise (SE): according to Bornstein & Davis (2010, p. 1), Social
Entrepreneurship is ‘a process in which citizens build and transform institutions to
bring solutions to social problems such as poverty, disease, illiteracy, environmental
destruction, human rights abuses, and corruption’ (cited by Auvinet et al. 2015). SE is
‘a mechanism for achieving a social mission that has come to the fore and a tool for
economic empowerment for the communities they serve. It is not a fundraising tool, it
is a mission fulfilment tool’. (Virtue Ventures 2013 cited by Auvinet et Lloret 2011).
Social Return on Investment (SROI): it is an outcomes-based measurement tool
that helps organizations to understand and quantify the social, environmental and
economic value they are creating. (NEF Consulting 2018)
viii
Introduction
The purpose of this paper is to analyze the context of Social Enterprise (SE) in
Mexico and to provide evidence about the ways SE empowers social and economic
growth in the country. This research also explores the possibilities of Social
Enterprise becoming an alternative, and perhaps an exit, to Narco-Economy (drugtrafficking). Due to the professional ambitions of the author (see abstract), this paper
represents an opportunity to start her career as Social Entrepreneur.
This academic dissertation aims to discover the main agents, motives, dynamics,
influences and levels of impact of both Social Enterprise and Narco-Economy in
Mexico. The research also aspires to identify the social problems that are not
addressed yet by social entrepreneurs and therefore locate new opportunities for
solutions and SE business models.
In Mexico, Narco-Economy (NE) became a very powerful industry after Colombian
Cartel’s decline in the eighties (Paternostro 1995). It currently provides the best-paid
positions in Mexico’s rural zones and the quickest ways for economic transformation
of the communities that serve it (McDonald 2009). Empiric practice shows however,
that when rural communities organise themselves and start generating economic
progress, they detach themselves from the participation in criminal activities (Piazzesi
2018).
Social Entrepreneurship has also proven to bring economic and social development to
the communities located at the base of the pyramid. Social Enterprises depend largely
on their economic, political, geographic, social, legal, cultural and historical context
(Auvinet et al. 2015). Because of its context, Mexico is a fertile soil for the
flourishing of Social Enterprise. These are the main reasons to sustain the previous
argument:
•
High levels of inequality and social problems represent an opportunity for
SE to potentially solve inequalities and corruption (Wulleman & Hudon 2016)
1
•
High levels of poverty can be endured through innovative solutions (Anaya
2015)
•
Bottom-Up VS Top-Down tendencies: ‘Mexicans appear to have a great
social entrepreneurial spirit with creativity and passion to solve their own
problems’ (Wulleman & Hudon 2016)
•
Good level of technological capabilities where Mexico specializes in motors
and electronics manufacturing (IDB 2016)
•
Availability of physical infrastructure that provides increasing access to
new markets and resources
•
Gigantic domestic market with 125 million Mexicans plus the US citizens
at the US border
•
Rich natural resources
The scope of this groundwork will not include the internal complex mechanisms of
Narco-Economy (NE). Due to the potential dangers that a primary investigation of
this nature may arise, this research is limited to NE’s economical and social
influence in the Mexican entrepreneurial arena. The research is more extensive
concerning Social Enterprise. The archetypes, reach, challenges and social impact of
Social Enterprises are included. Since the available literature is scarce about these
topics, the entire Mexico comprises the geographical scope of this study. Because of
this lack of rich literature on both topics and the importance SE and NE in
Mexican economy, this research is of high significance. As far as the researcher
could review the
literature,
this
is
the
first
dissertation
comparing
and
contrasting Social Entrepreneurship with Narco-Economy in Mexico.
This research will first present a literature review from academic and practitioner
sources. Secondly, the research methodology employed to collect and analyse the data
will be explained. Finally, after discussion and evaluation of findings, conclusions
and recommendations for new entrant social entrepreneurs in Mexico will be
formulated.
2
Literature Review
The literature review has provided an overview of the main actors and theories of
Social Entrepreneurship in Mexico. The data collection from more than 45 sources
from academic journals, newspaper articles, Mexican government websites and blog
posts (among others), has been analyzed and classified in a concept-centric matrix
(Webster & Watson 2002, p. xvi, xvii). The leading argument of this literature review
is Social Entrepreneurship as a tool for economic empowerment through Social
Engineering and an effective alternative for Narco-Economy.
Social Enterprises and Narco-Economy are an attempt to alleviate poverty. Both
serve a segment of society that is highly disadvantaged, underserved, neglected and
with no financial or political means to achieve a transformative benefit on its own
(Auvinet et al. 2015). ‘Rural decline and poverty continues to create fertile conditions
for the Narco-Economy to flourish’ (McDonald 2009). In Mexico, 55.3 million (out
of 125 million) people ‘are living under 87USD/month in rural areas’ (IDB 2016).
Nearly 10% of the population is considered to live in extreme poverty (CONEVAL,
2013 cited by Auvinet et al. 2015). Government reforms of economic growth have
been unable to lift the country out of poverty (IDB 2016).
Definition of Social Entrepreneurship (SE)
According to Bornstein & Davis (2010, p. 1), Social Entrepreneurship is ‘a process in
which citizens build and transform institutions to bring solutions to social problems
such as poverty, disease, illiteracy, environmental destruction, human rights abuses,
and corruption’ (cited by Auvinet et al. 2015). SE is ‘a mechanism for achieving a
social mission that has come to the fore and a tool for economic empowerment for the
communities they serve. It is not a fundraising tool, it is a mission fulfillment tool’.
(Virtue Ventures 2013 cited by Auvinet et Lloret 2011). Different from traditional
entrepreneurship, Social Enterprises have a ‘mission-related impact’ that becomes the
main criterion while the creation of wealth becomes a means to an end’ (Dees 2001
cited by Auvinet et al. 2015).
3
Definition of Narco-Economy (NE)
Narco-Economy (NE) is the involvement of legitimate governments and institutions
in illegal drug trade (Sullivan 2014, McDonald 2005) and other criminal activities. As
demonstrated in Mexico, Narco-Economy is characterized by: 1) ‘hyperviolence’ as
seen in Ciudad Juárez; 2) ‘Contested zones’ when the cartels begin to challenge
political mechanisms and civil society to assert their power as seen with the narco
blockades in Monterrey; 3)‘Narco-controlled’ zones as in the case of Culiacán;
and/or 4) ‘hidden financial power’ as seen in Mexico City’ (Sullivan 2017).
Paternostro (1995) devises the danger of NE’s becoming Narco-Democracies.
The Economic & Social Impact of Narco-Economy in Mexico
According to the United States Drug Enforcement Administration (DEA), Mexico
earns more than $7 billion USD a year from drug trafficking. Narco-Economy is a
significant employer: there is roughly 200,000 to 300,000 people earning a living
growing drug crops (Andreas 1998). McDonald (2009) states that NE implies far
more than only drug production, it conveys a vast array of other jobs generated both
directly (e.g., transportation, security, banking, and communication) and indirectly
(e.g., construction, the service sector, and spin-off businesses). ‘As Andreas (1998)
poignantly observes, NE provides poor people with a kind of economic exit option’
and it constitutes the best-paid employment alternative in many regions (McDonald
2009). ‘In Mexico it is estimated that 40% of municipalities are under daily threat
from drug cartels. This threat has resulted in over 1,200 municipal employees, at least
43 mayors and hundreds of police’ (Sullivan 2017).
The economical benefits or ‘material manifestations’ that Narco-Economy brings to
their communities catalyzes a deep social and cultural change. Rural communities and
cultures are reshaped in subtle and drastic ways. Narcos become the new elite’s
cultural colonizers (McDonald 2009) where the average citizens ‘resist’ by not
engaging in the newly established and modern rituals of consumption (e.g., big
houses, fancy cars, cock fights, gambling, etc.). These citizens are however,
constantly reminded of what they lack (De Certeau 1984 cited by McDonald 2009).
4
This deprivation constitutes a form of cultural exclusion (McDonald 2009) and a
powerful social pressure utensil to ‘normalize the aberrant’ (Whiteford, 2002, p. 108
cited by McDonald 2009). If the inhabitants of the rural communities surrender, they
end up providing ‘social protection’ to the organized crime (Gil 2010).
As fig. 1 shows, there are about eight main Drug cartels in Mexico. The most
dominant ones in 2010 were Cartel de Sinaloa and Los Zetas. Los Zetas were renown
by their extreme cruel violence and the exposure of their activities through Blog del
Narco (2018). Seven years later, due to the Drug-Trafficking war, los Zetas lost more
than half of their territory to Cartel Jalisco Nueva Generación (CJNG). CJNG is
today the new, most dangerous and rapid growing cartel of Mexico (Nájar, BBC
2017). Narco Cartels in Mexico operate like Financial Multinational Enterprises: they
are professional drug entrepreneurs (Nájar 2017)
FIG. 1.1: EVOLUTION OF DRUG CARTELS IN MEXICO FROM 2010 TO 2017
The following map illustrates the dominance evolution of Drug Cartels in Mexico:
Source BBC (2017)
Social Enterprise: tool for economic empowerment and alternative to
Narco-Economy
Just as Drug Cartels have the economic capacity to influence their communities
socially and economically, social entrepreneurs have the force to drive economic
progress too (Martin & Osberg 2007). ‘Entrepreneurs are agents of change in the
5
economy’ (Say 1971 & Schumpeter 1950). ‘Social entrepreneurs are agents of change
in the social sector: by adopting a mission to create and sustain social value (not just
private value)’, they catalyze and innovate economic & social progress (Dees 2001
cited by Auvinet et al 2015).
In Mexico, Social Enterprise is creating a ‘new frontier’, a Silent Revolution (Auvinet
et Lloret 2011) where solutions for poverty alleviation emerge bottom-up without
government intervention.
Key Players in the Mexican Social Enterprise Ecosystem
There are four key players in the Mexican SE Ecosystem: 1) Specialized
Intermediaries, 2) Academia, 3) Financial Support Programs and 4) Social Enterprises
(IDB 2016). In Mexico, Social Enterprise exists already more than thirty years. Table
1.2 shows SE’s key milestones from 1986 to 2015:
TABLE 1.2: KEY MILESTONES IN SOCIAL ENTREPRENEURSHIP AND SOCIAL INNOVATION IN
MEXICO
Source: Inter-American Development Bank, IDB (2016)
Archetypes of Social Enterprise in Mexico
Social Enterprise is booming in Mexico (Wulleman & Hudson 2016). Zahra et al
(2009 p.3) introduce the Archetype of Social Enterprises as distinct typologies that
6
evolve in a dynamic manner depending on the resources and ambitions of the Social
Entrepreneurs. These archetypes are: Social Bricoleur, Social Constructionist and
Social Engineer.
Social Bricoleur
The term ‘Bricolage’ was introduced by Lévi-Strauss in 1967 and refers to building
something from the available means. Social Bricoleurs are social entrepreneurs who
build with what is at hand, refuse to be constrained by limitations and improvise in
reaction to resource-scarcity. Social bricoleurs are committed to solve local issues
with financial autonomy (Wulleman & Hudson 2016).
Social Constructionist
Social Constructionists create formalized scalable solutions suitable for addressing
problems in different contexts (Smith & Stevens 2010; Volkmann et al 2012; cited by
Wulleman & Hudson 2016). They serve overlooked clients and develop innovative
products, goods and services at a small to large scale. Social Constructionists adapt to
the scale and scope of the social needs they seek to address. To achieve their social
mission they require however, considerable financial and human resources often hard
to find (Wulleman & Hudson 2016).
Social Engineer
‘Social Engineers tackle existing social structures by addressing large-scale issues.
Prior knowledge in the field is not crucial in order to identify a problem (Smith and
Stevens 2010). Social engineers address issues from outside through a revolutionary
change that replaces the system itself in order to make it newer and more efficient
(Zahra et al. 2009). Resources are of considerable importance to them, as is popular
support. These may already exist and be held by the institutions they are seeking
to replace. The most important resource for them is the legitimacy of the masses and
the associated political capital, which provides access to existing/required
resources’ (Smith and Stevens 2010, p. 581). That is the reason why social
engineers act at a very large scale (national, transnational and global) to address
social problems in a systematic fashion.
7
Social Engineers develop and implement lasting reforms in the system (Volkmann,
Tokarski, & Ernst 2012 cited by Wulleman & Hudson 2016).
Appendix A contains a table summarizing the characteristics of each SE typology.
The following diagram illustrates the transition from Social Bricoleur to Social
Constructionist to Social Engineer:
DIAGRAM 1.3: ARCHETYPE OF SOCIAL ENTREPRENEURSHIP MODELS
Source: Wulleman & Hudson (2016 p. 180)
According to the study of Wulleman & Hudson (2016), most Mexican SE’s start as
Social Bricoleurs or as Social Constructionists. The majority of them possess the
ambition of becoming Social Engineers and create disruptive and impactful change in
the social system. The transition from Bricoleurs to Constructionists, can only take
place
when
the social
entrepreneur
demonstrates
enough
ambition
and
determination to gather the necessary financial and human resources to achieve
successful operations at a larger scale.
Challenges & Obstacles encountered by Mexican Social Entrepreneurs
Violence, corruption & Criminality
Criminality, corruption and violence are the major challenges of Social Enterprise. In
2006, Mexican President Felipe Calderón declared War against Drug Cartels.
From this point in time, the levels of criminality and violence in the country increased
dramatically.
8
Between 2010 and 2013, insecurity became the mayor worry point for Mexican
citizenship (Carreón y de la Cruz 2012 & Rodelo 2014 cited by Muñiz et al. 2015).
One of the main Narco violence manifestations against entrepreneurs was extortion
and the request of a tribute called ‘cobro de piso’ (use of ground fee). According to
the National Institute of Statistics and Geography, INEGI (2013), use of ground fee
was the second highest crime in Mexico after robbery and street assault. These
criminal actions affected entrepreneurial dynamics in the country to the point of
bankruptcy for many entrepreneurs. Other entrepreneurs closed their businesses
and
many
others
migrated
to
the
US
(Muñiz
et
al.
2015).
For the entrepreneurs that stayed in the country, Muñiz et al. (2015) identified four
main strategies that they used to face Narco’s violence and extortion:
1. Consent: acceptance of institutional pressure and adherence to the new
imposed norms (like use of ground fee) voluntarily or involuntarily
2. Evasion: an entrepreneurial attempt to evade extortion through actions of
under covered inconformity (buffering) by acting behind a façade of
acceptance (Pache & Santos, 2010).
3. Challenge: the most active form of resistance of the four, it implies the
creation of entrepreneurs’ own self-defense organizations parallel to the police
or the army (Rios 2014 cited by Muñiz et al. 2015)
4. Manipulation: an active trial to influence and exert power over the Narcos
with the aim to neutralize institutional opposition and increase entrepreneurs’
legitimacy through dominance of the extortion components (Henrekson &
Sanandaji 2011; Oliver 1991 cited by Muñiz et al. 2015).
Lack of Proper Legal Structure for Social Enterprise
One of he main operational issues for Social Enterprise in Mexico is the lack of a
legal structure that enables to simultaneously accept tax-deductible donations and
collect income from the sales of the enterprise's products and/or services (IDB 2016).
In order to face this challenge, Mexican Social enterprises form three possible
modalities: 1) the lucrative, whose profits are divided between the shareholders; 2)
Non Profit (NPOs), whose profits are all reinvested in the social mission; and 3)
hybrid social enterprises consisting of two organizations, one lucrative that shares
9
profits and one non-profit that focuses on social objectives and receives donations.
Hybrid social enterprises are currently predominant in Mexico.
In 2005, Mexico became one of the first countries to attempt to implement a specific
law for social enterprises through the Law of Social and Solidarity Economy (LESS).
Unfortunately, the initiative never came to fruition and was reformed to return to the
previous situation. This reduced the sector’s capacity to make progress and define a
public policy (Conde Bonfil 2013 cited by Wulleman & Hudson 2016).
Table 4 shows an overview of the possible legal structures for social enterprises in
Mexico:
TABLE 1.4. LEGAL STRUCTURES FOR SOCIAL ENTERPRISES IN MEXICO
Source: IDB (2016 p. 10)
Lack of Funding & Government Support
The lack of funding is the main challenge for social enterprises not only in Mexico
but also in other countries like the Netherlands (Dutch Nieuws 2017).
In Mexico and in Latin America, the funds for start-ups and early stage businesses are
scarce (IDB 2016). There are emerging financing alternatives like Kiva (2018)
which collects financing for entrepreneurs through international crowd-funding
platforms. Since the Government and Private Sector in Mexico are unable to offer
financial services to the Base of the Pyramid, social enterprises often look for (and
build) financial platforms to serve their BoP clients.
10
Social entrepreneur Flor Cassassuce reported in an interview for Wulleman & Hudson
(2016) that the triple bottom line concept (people, planet & profit) of Social
Enterprise is ‘severely misunderstood by government and public opinion’. Due to
the corruption history in Mexico, there seem to be a cultural taboo around
money. ‘Mexican people think that if you are running a NGO, you are doing it
because you love doing it. If you are charging money, people think it is cynical’,
says Andrea Alcántara Alcázar, Co-Founder of Techamos una Mano to
Wulleman & Hudson (2016). This misconception creates the conviction that
social enterprises that earn money should not have access to government support.
Social Enterprise Business Strategies for Success
Applied Social Investigation
Social Enterprise requires the design and implementation of a solid business strategy
for the achievement of social and economic success. Dr. Castillo-Berthier (2015)
developed a method called Applied Social Investigation to study and understand a
large group of people belonging to the BoP (like Mexican youth at risk gangs) by
‘becoming one of them’ on a daily basis. This method is very effective in
obtaining relevant information about their problems, needs and behaviors. Once a
social problem has been identified and researched, a clear Social Vision and Mission
most be developed. Deep knowledge about the context and a clear definition of the
client provides great competitive advantages for the Social Enterprise (Auvinet
et Lloret 2011). This knowledge results in a product differentiation that meets
unmet needs. What makes a Social Enterprise truly successful is its ability to
‘scale & replicate’ solutions at different levels (Auvinet et Lloret 2011).
Effective Business Models
Sargent (2015 p. 18) analyses effective business models of the most successful
companies in Mexico (profit and non profit). According to Sargent’s research, these
are the must successful business strategies in the country:
11
•
Industry Distribution methods adjusted to Mexican Market (e.g.,
Avon’s direct selling strategy)
•
Provision of capital and training to facilitate new product development
(e.g., Fairtrasa 2018)
•
Addressing unmet needs in education (e.g., ENOVA, IPETH)
•
Use of innovative business models (e.g., Barared, MiMoni)
•
Focus strategies combined with process efficiencies (Clínicas de
Azúcar, Sala Uno)
Catalytic Innovation (CI)
Catalytic Innovation (CI) has been proven to be one of the most impactful business
strategies for social enterprise. Catalytic Innovation is an innovative way to deal with
large groups of people and address their social problems in a ‘fundamentally new
way’ by creating scalable, sustainable and transformative system solutions that create
great social impact. ‘Catalytic Innovation can transcend the status quo by delivering
adequate solutions to inadequately addressed social problems’ (Christensen et al.
2006, cited by Auvinet et al. 2015).
In order for CI to exist, the following five qualities must be present (Auvinet et al.
2015):
1. Creation of Systemic Social change through scaling and replication
2. Fulfillment of a need that is either over served (current solution is more
complex than what people need) or not served at all
3. Offering of products and services that are simpler, less costly than existing
alternatives
4. Generation of resources that are initially unattractive to competitors like
donations, grants, volunteer manpower or intellectual capital
5. Disparagement or encouragement from existing competitors that avoid or
retreat from the market segment because the business model is considered
unprofitable or unattractive to them (Christensen et al., 2006, p. 3).
12
Conclusion Literature Review
Due to the severe levels of poverty in Mexico where 9.8% of the total population lives
in extreme poverty and the government has been unable to lift the country out of this
state (IDB 2016), innovative poverty alleviation initiatives are emerging from bottom
up.
Narco-Economy and Social Entrepreneurship are the principal institutions
combating pauperdom. Narco-Economy offers the best-paid employment in rural
areas so far, however Social Entrepreneurship is emerging as a ‘silent revolution’
(IDB 2016) to transform the system from within (Auvinet et Lloret 2011). Mexican
Social enterprises have achieved major social results like paradigm breaking, new
forms of social cohesion, new methods for labour education, violence
deterritorialization, and new effective, scalable & replicable high impact business
models for Social Enterprise (Castillo-Berthier 2015). Social Entrepreneurship is a
powerful weapon to combat inequalities and corruption in Mexico.
13
Research Methodology
This section will explain the research methodology used to collect, analyse and
evaluate the information that seeks to provide evidence of Social Enterprise as a tool
for economic empowerment and a potential alternative to Narco-Economy in Mexico.
The methods of Triangulation, Content Analysis, Qualitative Survey and Interview
will be examined.
Triangulation
Denzin (1978: 291) defines Triangulation as "the combination of methodologies in
the study of the same phenomenon" (Jick, 1979). Thurmond (2001) states that
triangulation can provide a ‘clearer understanding’ of the problem since the analysis
is performed from different perspectives and the process can uncover unique findings.
From the five types of triangulation, methodological triangulation has been chosen for
this research. Also called multi-method or mixed-method, multiple research methods
are applied to decrease the ‘deficiencies and biases that stem from any single
method’. They also create ‘the potential for counterbalancing the flaws or the
weaknesses of one method with the strengths of another’ (Mitchell, 1986, p. 19 to 21).
The main disadvantages of using Methodological triangulation are however, the
amount of time, data and planning required to perform it and the questionable belief
that all the sources can lead to the ‘Only One Truth” (Thurmond 2001).
For this research, the methodological triangulation consist of three data collection
procedures: 1) literature review as research’s starting point, 2) content analysis of 25
websites of Mexican Social Enterprises and 3) online qualitative Survey and/or
interview to Social Entrepreneurs in Mexico. Diagram 2.1 illustrates this
methodological triangulation.
14
DIAGRAM 2.1: METHODOLOGICAL TRIANGULATION
Source: Triangulation method sketched by the author of this paper (Lizarraga 2018)
Content Analysis of 25 Mexican Social Enterprise Websites
The most recurrent and relevant theories retrieved from the literature review have
been chosen to be the key frequency terms in the content analysis. Holsti (1969)
offers a broad definition of content analysis: ‘any technique for making inferences
by
objectively
and
systematically
identifying
specified
characteristics
of
messages’ (p. 14). From the two main types of content analysis: inductive and
deductive (Elo & Kyngäs, 2008), the deductive approach serves better the
methodological
triangulation
process
employed
in
this
research.
This
is
because deductive content analysis “is often used in cases where the researcher
wishes to retest existing data in a new context (Catanzaro 1988 cited by Elo &
Kyngäs, 2008). Besides deductive, the content analysis is also directed (Hsieh &
Shannon, 2005) because the study starts from theory gathered at the literature
review as basis for the ‘codes’ that are defined before and during data analysis.
15
The elaboration of the coding scheme (Bryman & Bell, 2011 p. 311) is based on a
previously prepared categorization Matrix (Elo & Kyngäs, 2008) including the
main findings of the literature review (see Appendix B). After the set up of
mutually exclusive units of analysis, the researcher has proceeded to the elaboration
of a coding scheme (strategic data organization), then a coding manual (describing the
rationale of the data coding) and the coding schedule (progressive order analysis of the
websites), (Bryman & Bell, 2011 p. 311). The literature review unveiled 25 names
of successful Mexican social enterprises. The websites of these enterprises conform
the study of this deductive and directed content analysis.
In order to ensure a systematic and accurate analysis of data, the researcher has used
the computer-aided system suggested by Bryman & Bell (2011): IBM SPSS.
Following the steps explained in the authors’ book Business Research Methods, the
researcher has created frequency tables and charts that organize, visualize and
summarize the findings (see Appendix C).
In the next section, advantaged and disadvantages of the content analysis
methodology will be discussed. Webb et al. (1966), refer content analysis as an
‘unobtrusive method’ that allows the cultural study of organization on a transparent
way. Due to the big distance between Mexico and the Netherlands, content analysis
method has granted high flexibility and broader applicability since the analysis of
websites can be performed from anywhere in the world (Bryman & Bell, 2011
p.313). Nevertheless, the main disadvantage is that the quality of the research depends
on the quality of the websites. Furthermore, another challenge is the language barrier
given that not all websites have an English equivalent. Even if the researcher’s mother
tongue is Spanish, there may be some bias present while translating the manifest
content. The latent content suggest meaning subconsciously attached to individual
perception.
Qualitative Survey & Interview: Serendipitous Discoveries
The results of content analysis demonstrated the lack of information concerning the
attitude of Social Entrepreneurs towards criminality, violence and Narco-Economy
16
extortions. Therefore a qualitative survey has been designed to bridge this
research’s answer gap.
Creswell (2003, p.153) defines a qualitative survey as a ‘survey design that provides a
quantitative or numeric description of trends, attitudes or opinions of a population’. In
the same fashion of the content analysis, the qualitative survey uses a deductive and
pre-structured approach (Jansen 2010). Due to research gap detected first in the
literature review and then in the content analysis, open questions have been created to
obtain t h e m i s s i n g qualitative information concerning NE. The design of the
Survey and its execution in Survey Monkey (2018) can be retrieved in Appendix D.
Since the researcher traveled to Mexico to interview at least three successful Social
Entrepreneurs, and one Social Enterprise that could not advance the project,
four open questions have been designed for a 30 min. interview (Appendix E).
During the open interviews, a process of Serendipity in Research (Ricciardi 2005) has
been adopted. Ricciardi (2005) defines a Serendipitous discovery as more than a
discovery made just by luck or chance: ‘it is an active process that requires
curiosity, openness to unexpected and previously unseen observations, and the
flexibility in thinking that frees you to explore new directions’.
Therefore, the Serendipity research strategy proposed by Ricciardi (2005) builds on
established
knowledge
and
a
willingness
to
constructively
exploit
any
circumstances that may be encountered. In the case of this research, the literature
review, content analysis and triangulation have provided the researcher with
solid
background knowledge about Social Enterprise and Narco-Economy in
Mexico. The employment of the right Social Enterprise terminology and the
explanation of the purpose of the research (Empower Mexico) to the interviewees,
favored open minded and warm-hearted conversations. In these interviews, the
researcher has made several fascinating serendipitous discoveries. In this freedom of
wander, the author has wondered about the findings. Ricciardi (2005) quotes the
words of Joseph Henry: “The seeds of great discovery are constantly floating
around us, but they only take root in minds well prepared to receive them.”
17
Primary Research Findings on IBM SPSS (Appendix C)
The Content Analysis’ results are visualized and summarized through frequency
tables and charts (see Appendix C). The study of 25 Mexican websites of Social
Enterprises reveals that 68% of the Social Enterprise founders are men, 4% are
women and 20% of the enterprises are founded by both genders together. Further,
56% of the founders are between 35 and 55 years old and 88% have a professional
education (Bachelor and/or Master Degree). Concerning the enterprise itself, 96% of
the enterprises have a social mission & vision, 48% present a Strategic Business
model and 68% follow the principles of Catalytic Innovation presented by Auvinet et
al. (2015).
Wulleman & Hudson (2016) explored the archetype of social entrepreneurship
models. In the researched sample, 8% of the Social Enterprises are Social Bricoleurs,
60% are Social Constructionists, and 32% are Social Engineers. Since the research
was performed to the most successful SEs in Mexico, these percentages reveal that
the very successful enterprises (Social Engineers) represent nearly 30% of the sample.
The rest of the SEs are thriving for success and are currently on a scaling stage. Only
less than 10% of the Mexican SEs have not scaled their operations yet, partly due to
the fact that they refuse to adopt the hybrid modality (Wulleman & Hudson
2016) where they can generate profit from the sale of their products instead of
relying mostly on donations and grants.
All the sampled enterprises tackle a variety of social problems identified by
themselves via opportunity identification (Felix-Gonzalez 2017). In this direction,
44% of Mexican social enterprises devote their work to economic development, 20%
promote a better Citizenship, 16% develop products and services to improve the
environment, 12% support the health quality and 4% are trying to revolutionize the
education system from within. Another parameter studied was the measurement of
social impact or Social Return on Investment (SROI). Results show that 48% of the
social enterprises impact Poverty Alleviation and measure their SROI in terms of
18
families, individuals or small business supported by them. Concerning health
improvement,
the
percentage
decreases
to
16%
;
environmental
improvements (pollution reduction for instances) represent 12% of the sample,
education boost and infrastructure creation 8% and 4% of the SEs work for social
cohesion.
More than half (56%) of the social enterprises in the content analysis, serve the Base
of the Pyramid (BOP) segment. The rest of these companies serve the middle
class (32%) and only 24% have products or services that are relevant for all
socioeconomic levels. Concerning the legal structure, 40% of the enterprises are
hybrid (operation of both for profit and non-profit organizations), 36% are
registered as ‘for-profit’ even when they clearly state their social mission, 16%
are non-profit and 8% are cooperatives.
Concerning the Geographical analysis, 36% of Social Enterprises operate on a
country level (all Mexico), 32% operate in the poorest and most marginalized regions
of Mexico (Chiapas, Oaxaca y Guerrero), the other third (24%) is established in
Mexico City and the rest of the enterprises (8%) are spread in the rest of the country
(north and centre mostly).
Even if this content analysis revealed fascinating information about the nature,
the motives and the modus operandi of Social Enterprises in Mexico, it provided
scarce information about the way these companies deal with criminality problems like
Narco traffic use of ground fee extortion (Muñiz et al. 2015). Questions around
this issue have been addressed via an online qualitative survey and personal
interviews performed by the researcher during her trip to Mexico (April 2018).
19
Analysis & Discussion of Findings
The methodological triangulation has provided a general picture about the Social
Enterprise scene in Mexico and its impact in the economic and social growth of the
country. This research has revealed the profile of a young Mexican entrepreneur,
highly educated, passionate and committed. A question mark is though, the
participation of women in the Social Enterprise arena. Currently men own the SE
stage in Mexico. An explanation to this can be Mexico’s high level of Masculinity.
‘In Masculine countries people “live in order to work”, managers are expected to be
decisive and assertive, the emphasis is on equity, competition and performance and
conflicts are resolved by fighting them out’ (Hofstede 2018).
Analysis of Content Analysis Results
Having a closer look at Mexican Social enterprises through the content analysis
method, the majority of them operate with a hybrid legal structure. This means that
the Social Entrepreneur has to register two different companies (for-profit and nonprofit) to be able to receive donations and generate profit from sales. Interesting is
the analysis of the social mission. All the enterprises in the sample were originated
from a social problem (or need) that strongly motivated the founder to act. Wulleman
& Hudson (2016) make a great contribution to the analysis of the evolution of Social
Enterprises in Mexico: from Social Bricoleur (Sarasvathy et al. 2014 p.76) to Social
Constructionist to Social Engineer.
Some social enterprises, like Flying Circus (rescuing youth-at-risk from engaging
in Narco-Economy), have become social engineers through the development of
strategic and empirical business models developed over time through ‘Blind
Variations’ or trial and error practices (Félix González 2007 p.215). Flying Circus
Business and intervention model is shown in Fig. 3.1 (Castillo-Berthier 2015).
Castillo (2008) has created a Social Intervention Business Model based on
the findings from his Applied Social Investigation method.
20
This model has helped him to approach marginalized ‘at –risk youth’ and provide
them with employment through the organization of cultural events:
FIGURE 3.1: FLYING CIRCUS SOCIAL INTERVENTION BUSINESS MODEL
Source: Castillo-Berthier, H. (2015).
This example reveals that the business models of Mexican Social Enterprises are
unique
and
directly
related
to
the
personality
and
motivation
of
the
Social Entrepreneur and to the social problem he or she is committed to solve. For
example, Peter Bloom, founder of Rhizomatica, specialist in rural development
(Rhizomatica 2018b) is developing a creative legislation system to provide
telecommunication services to the poorest and most isolated communities of
Oaxaca Mexico. Other inspiring examples are Carlos Anaya with Parkimovil, ‘the
next Uber emerging in Mexico’ which is the first digital parking system in the
world (Parkimovil 2018). Jorge Camil from Enova is revolutionizing Mexican
education system from within the current system (Enova 2018).
Even when there are wonderful examples of change driven social enterprises, there
are other initiatives where the social impact is less evident. Banco Compartamos for
21
example (currently the biggest microfinance institution in Latin America), is
suspected of being managed by a Narco organization called ‘Los Legionarios de
Cristo’, The Christ Legionaries (Zocalo 2014). This Social Enterprise is accused
to take advantage of people’s goodwill and religious beliefs to get rich. Their
motto seems to be: "there is no better business than the poor" (Zocalo 2014).
Speculation or not, the content analysis revealed that the website of Banco
Compartamos is not operating properly. This lack of transparent information leads to
suspicious thinking.
Analysis of Qualitative Online Survey and Interviews Results
Fieldwork has demonstrated the difficulty to obtain respondents for the Survey. In
Mexico there are a lot of formalities to follow and an initial sense of mistrust to
spread the survey of a student from a foreign university. S u r p r i s i n g l y , the
process to obtain a face-to-face interview is easier. Once the researcher
establishes a rapport with the interviewee, then the respondent is more willing to
share the survey with their network.
Even if SE New Ventures (2018) has accepted to share the online survey via their
social media, there has been only one respondent. This result was below
expectations, however, six qualitative interviews have been booked (above
expectation). Five successful Mexican Social Enterpreneurs have been interviewed:
1) Francesco Piazzesi founder of Échale a tu Casa; 2) Xunaxi Cruz from Sistema
Biobolsa; 3) Dr. Héctor Castillo Berthier from Circo Volador, 4) Omar Morales,
Commercial Director from Capital Coworking México and 5) Raúl Maldonado
founder of ENOVA. One Social Entrepreneur that could not advance his Social
Enterprise was also interviewed: Koen Houwen ex director of Fundación
Renacimiento and current CEO of Empresa Dulce Dam. A brief summary and
discussion of the interviews will be presented in the following paragraphs. The
companies were interviewed about five mayor points: 1) purpose of social
enterprise, 2) process of development of the project, 3) systems in place to
measure the SROI, 4) challenges encountered along the way (specifically with
organized crime and Narco Economy) and 5) recommendations to future social
entrepreneurs willing to follow this path.
22
All the interviewed Social Enterpreneurs have granted their permission to share
the information of the interview in this paper.
1. Interview Échale a tu Casa
Echale a tu casa is a Mexican Social Enterprise that contributes to community
development, integrating families to the self-production of decent and ecological
housing, thus generating employment and triggering sustainable economic growth
in the community. The company has designed and implemented a self-production
program of assisted living where low-income communities are empowered to access a
home.
The founder, Dr. Francesco Piazzesi is devoted in accomplishing the mission of his
Social Enterprise: ‘Build the homes of the families with the families’. Echale’s vision
is to ‘Provide a decent home for all families’ (Echale 2018). This vision emerged
during Dr. Piazzesi’s childhood when his father took him and his brothers to the
experience the reality of the most marginalized communities. During the interview,
Francesco shared all information like an ‘open book’. Information about
Echale’s operations, business models, strategies and challenges has been shared
with the researcher.
Within the abundance of information and tacit knowledge obtained in this interview,
it is pertinent to open new research channels that are more specific in terms of Social
Enterprise methodologies in Mexico and worldwide. However for this academic
dissertation is important to note that this particular social enterprise initiative is
born from a question: ‘How is it possible that the people that possess the
knowledge and workforce about house building, would have difficult access to a
decent home?’ The reflection on this question leads Mr. Piazzesi to break a
paradigm and develop a system to start working on a different way. After careful
analysis, market research and a doctorate study devoted to this cause, Echale found
the pillars of its business model: ‘savings, credit and subsidy’.
Savings relate to the development of the habit of saving money of Echale’s
customers. Without this habit, says Francesco, participants cannot build a sustainable
home. Échale offers counseling to the families and provides training in money,
garbage and health management.
23
The company has found a direct relation between garbage, money waste and junk
food with poverty. This type of interventions have proven to be very effective in the
social impact that the company has achieved in Mexico (Piazzesi 2018).
Concerning the sensitive topic of the influence of Narco Economy in the
advancement of Social Enterprise projects in the country, Dr. Piazzesi has been
willing to share his experience on this matter. With more than twenty years of
operations in the field, Francesco explains that even Narco organizations respect
their work as soon as they understand the social nature of it. In this sense both, Narco
traffic organizations and social enterprises have coexisted in the same territories
and the secret of this coexistence is to ‘not interfere in each other businesses’. They
let each other be. ‘Only the individuals who have a tear tattoo on their face should
be avoided’ says Dr. Piazzesi. This is the advice provided by the local communities
to Échale: ‘every tear represents one person killed’. Échale has therefore made a
major empirical discovery: as soon as a community starts to have economic
progress
through
organized
work,
it
disengages
and
even
rejects
the
involvement in criminal participation. This revelation provides hope in the future of
Social Entrepreneurship in the social and economic development of Mexico and many
other countries in the world.
PODCAST 3.2 INTERVIEW FRANCESCO PIAZZESI FROM ÉCHALE A TU CASA
Source: Dropbox Échale a tu casa (Lizarraga 2018a)
24
2. Interview Sistema Bio
‘Sistema.bio is a hybrid reactor bio digester that transforms the manure of animals
into biogas and a potent, natural fertilizer’. By inputting the manure in the system on a
daily basis, farms, slaughterhouses and community centers are able to: develop and
grow their farm activities, improve levels of energy security, and protect the
environment. ‘By transforming animals’ manure into resource, Sistema Bio
provides a better quality of life!’ Sistema Bio (2018).
Alex Eaton (US) and Camilo Pagés (MX) founded Sistema Bio in 2008. The vision
of both entrepreneurs is to help small farmers increase the effectiveness of their
resources management and to protect the environment. Sistema Bio granted a 45 min.
interview with Xunaxi Cruz, the communication manager of the company. Xunaxi
revealed to the researcher the system that the company employs to measure their
SROI. First, Sistema Bio measures the CHG emissions from farming activity before
and after the implementation of the bio digester. A significant reduction on these
emissions is a significant component of the company’s SROI. Secondly, the
enterprise measures the economic savings that the farmers have by using their
own gas (produced and collected by the bio digester). This results in significant
household cost reduction and therefore, economic improvement to the families.
Finally, the water use and sanitary incidents are also measured in order to
demonstrate the improvements in the farm’s effective resource management. The
following image summarizes the social, economical and ecological return on
investment of Sistema Bio:
FIGURE 3.3: SISTEMA BIO’S SOCIAL, ECONOMICAL AND ECOLOGICAL ROI
Source: Sistema Bio (2018)
25
Concerning the business model, Sistema Bio has developed a three step system:
1. Technical feasibility study
2. Economical proposal: financial situation of the family and financial plan
3. Subsidy analysis: Sistema Bio is a hybrid company (for and non profit)
Finally, Biobolsa provided valuable recommendations to future social entrepreneur:
‘work with passion and clarity on “for whom do you want to do it ?”. For us what
works is to realize that we are part of a global soul.
We embrace Systemic
Thinking and Neo- Liberalism. Our secret is consistency, persistence and
tenacity. We believe that it is easier not to look at than to face the problems’ (Sistema
Bio 2018). The company has accepted their challenge.
PODCAST 3.4: INTERVIEW WITH XUNAXI CRUZ FROM SISTEMA BIO
Source: Dropbox, Sistema Bio (Lizarraga 2018b)
3. Interview Flying Circus (Circo Volador)
Circo Volador (Flying Circus) is a Social Enterprise devoted to empower
socially, economically and emotionally marginalized
youth-at
risk.
Hector
Castillo-Berthier, Flying Circus' founder, is a social researcher who specializes in
base of the pyramid and low-income communities. His previous work includes a
fifteen-year project with garbage sorters in Mexico City where he leaded them
to organize a cooperative and improve the quality of their lives.
26
After
this
highly
impactful
Mexican government
to
project,
study
young
Castillo-Berthier
gangs
in
the
was
hired
most
by
the
marginalized
neighborhoods of the capital. Following his own developed Applied Social
Investigation method, he immersed himself in the young gang's words until
becoming ‘one of them’. Dr. Berthier engaged in a listening process where he
could detect the needs, worries, cultures and motives of the young individuals in
Mexico City. His famous radio station ‘Only for Gangs’ united several layers of
society through music. This intimate interaction with marginalized gangs forms
the foundation of his social enterprise Circo Volador.
Just as the two previous examples, Flying Circus is a hybrid company too and it is
registered with two legal structures (profit and non profit) in t h e Mexican
Chamber of Commerce. Besides the acceptance of donations and grants, this
social enterprise organizes national and international music concerts in their own
theatre venue. Flying Circus theatre emerged from an abandoned building in a
dangerous neighborhood in Mexico City. Since the building was not in use and
in decadence, the Mexican government allowed Hector Castillo to occupy the
building as Flying Circus’ headquarters. Dr. Castillo explains the ‘nightmare
state’ in which the building was received and the challenging lack of funding
and resources his company had to endure. The theatre emerged from people’s
goodwill and voluntary work. ‘Young people brought their friends to help and
there was always somebody that knew somebody who could help with the
plumbing, electricity, etc. for free’ (Castillo-Berthier 2018).
As previously presented in the content analysis discussion, the Flying Circus Social
Intervention Model (Figure 3.1) includes the methodology the company utilizes
to reach its social impact as well as to measure it. The purpose of this model is
to achieve the reconstruction of a social system through social integration.
Castillo-Berthier’s (2015) Social Intervention model is synthesized by three
converging lines (or realities): line A represents an underprivileged society
where
poverty,
unemployment
and
social
desertion,
addictions
family
violence,
disintegration,
are unfortunately, a reality. Line C depicts an
integrated and privileged society that has access to private schools, travels, clubs,
fashion, recreation and secure employment and/or entrepreneurship.
27
The third line (line B) summarizes Dr. Castillo’s proposal to integrate line A and line
C through institutional empowerment. This proposal includes a diagnosis of specific
situations and strategies for community involvement, the creation of effective
social policies, community programs and institutional support networks among
others.
Circo Volador is a clear example of a Social Enterprise with fearless hands on
mentality whose serendipitous activities provide empirical evidence of entrepreneurial
effectuation principles (Sarasvathy al. 2014). Even if this method is also seen in the
commercial entrepreneurial world, the social element provides a much higher impact
and complexity to the organization by adding new layers to its operations.
4. Interview Capital Coworking
Capital Coworking is a professional incubator and acceleration company in Mexico
City. The company assists High Impact startups in the materialization and realization
of their social and business objectives. Capital Coworking’s Commercial Director,
Omar Morales, granted the researcher one-hour time interview. Remarkable is the fact
that Omar is a very young professional (mid-twenties) who is very knowledgeable
about the start-up process from seed to acceleration. Not only is Omar aware of the
technical and complex development process of enterprises, he is also highly
skilled in human dynamics: the motivations, behavioral mechanics and blind spots of
the entrepreneur.
The strength of Capital Coworking relies in its network infrastructure and capabilities.
The company connects experts in the field, to investors, entrepreneurs and
government officials in order to stimulate the growth and realization of business
ideas.
Further, Capital Coworking ‘owns’ a whole building and devotes each floor to a
specific startup stage. For example: floor nr. 1 is for seed startups, floor nr. 2 are for
companies looking to scale up, floor nr. 3 is destined to women entrepreneurship,
floor nr. 5 are for accelerators, etc.
28
5. Interview Enova
Enova is a Mexican Social Enterprise leader in educational technology. The company
provides impactful learning experiences that are effective in this constantly changing
working environment. Raúl Maldonado, one of Enova’s founders, granted the
researcher with a 45 min. open question interview. The interview (in Spanish) has
been published on Dropbox (Lizarraga 2018).
Maldonado reveals that Enova’s purpose is to transform Mexican education system
from within. Enova believes in the power of education as a tool for economic and
social empowerment. Enova started 10 years ago when its founders Raúl Maldonado,
Jorge Camil and Mois Cherem were traveling around Mexico and experience
tremendous inequalities and lack of opportunities in the country. Then they gathered
strengths to perform several market studies that revealed serious educational gaps.
From there they started to develop diverse several educational and complementary
programs. Innovation and technology are part of Enova’s DNA since they are early
adopters of the machine learning technology for adaptive learning. Further, the social
enterprise has adopted a serendipitous modus operandi that develops diverse
modalities as they go.
Ten years later, the company operates nationally and it has obtained the
acknowledgement of the Mexican Ministry of Education (Secretaría de Educación
Pública SEP). Raúl Maldonado has also revealed his personal entrepreneurial success
secrets to the researcher. ‘Systemic thinking - Maldonado says - allows to process
reality in a non categorical way that breaks the chains of linear thinking. It provides
an understanding of the relativity of the problems’. Systemic thinking process has
enabled to company to create new educational opportunities as well as the provision
of ethics and life purpose to its stakeholders.
To measure its SROI, Enova has created its own technological evaluation
platform where they track the progress of the students knowledge. Knowledge is
the main valuation parameter in the company at the moment.
As recommendation for aspiring social entrepreneurs, Raul Maldonado encourages to
have a vision on economies of scale. Not in the sense of the traditional profit
29
maximization but rather the awareness that ‘the work of today will be useful
tomorrow’. He advises entrepreneurs to work on themselves in order have
the capacity to face greater challenges and generate real changes. Raúl also talks
about the importance of networking, express the social enterprise idea in a
‘shameless’ and fearless way. Only then the entrepreneur can detect blind spots,
delineate a solid vision and generate collaboration.
VIDEO 3.5: ENOVA’S INTERVIEW BY THE AUTHOR OF THIS PAPER (30 MIN.)
Source: Dropbox ENOVA (Lizarraga 2018c)
6. Interview Fundación Renacimiento
Fundación Renacimiento is ‘a private assistance institution operating since 1992 that
contributes to the integral and interdisciplinary development of girls, boys,
adolescents and young people in social abandonment, in order to contribute to
their social reintegration and achieve a dignified life’ (Fundación Renacimiento
2018).
Ex-founder Koen Houwen (NL) granted a 45 min. phone interview to the researcher.
In this interview, Mr. Houwen shared the history of his participation in
Fundación Renacimiento from foundation to decline (split up) with stakeholders.
30
This is a case where the original entrepreneur could not advance the Social
Enterprise project due to cultural differences and political challenges within the
social enterprise.
Mr. Houwen is a Dutch entrepreneur owning a high level of education (two master
degree titles from prestigious Dutch Universities). In one of his trips to Mexico, Koen
was charmed about the country and realized the social and economical
differences between privileged and underprivileged levels of society. It was then
when Koen Houwen decided to leave the Netherlands and invest his life savings
(one hundred thousand Euros) in starting a social enterprise in Mexico. The
company provided work to (mainly) drug addicts in making ‘stroopwaffels’ (Dutch
sweet cookies).
The Social Enterprise was rapidly gaining popularity and fame for its impact and
fearless pursuit in supporting youth living on the streets. Due to his connections,
Mr. Houwen reached international exposure. Everything seemed to work fine
until political conflicts and coalitions within the company, originated the expulsion of
Mr. Houwen from his CEO position.
The exact nature of the conflict was not revealed to the researcher. Mr. Houwen
referred to them as ‘political issues’. The overall tone of Koen’s experience as a social
entrepreneur in Mexico was rather unfavorable. Besides the political stakeholder
confrontations, the second biggest challenge for Koen Houwer was the
lack of professionalism of the employees at the workplace. Severe informality and
work inconsistency were the main traits of the employees (drug addicts). In the midst
of all these hardships, Koen had however one big satisfaction: ‘under the effect of
drugs, these young people would not remember their own names, but they would
remember mine’, said Mr. Houwer on the phone interview. According to his
experience, the most gratifying was the social impact, benefit and family feeling that
his social enterprise brought to the young people. That is what he is the most proud
of.
Currently, Mr. Houwer only preserves his for-profit organization called Dulce Dam.
When the researcher asked him if he would start a social enterprise project again,
Koen Houwer replied with a determinant No. The entrepreneur expressed his desire to
have a profitable business in order to live calmly and happily with his family 'in
this country that I love'.
31
Comparison, contrast and discussion of interviews
One of the main interview findings is the high degree of involvement of the social
entrepreneur in the field where he or she is working. Francesco Piazzesi, Alex Eaton
and Héctor Castillo (from Échale, Bio Bolsa and Circo Volador respectively) have
been working for more than a decade in the industry of their Social Enterprise. This
devotion and commitment demonstrate their love and passion for the cause that they
represent. All the successful founders affirm to ‘just h a v e started’ with their
social enterprise and that the business and social model has been shaped and
perfectioned through time.
These social entrepreneurs serve the Base of the
Pyramid, break paradigms and develop high impact social enterprise solutions.
The main challenges that these entrepreneurs found in the advancement of their
projects are the lack of funding and the lack of support from the Mexican government.
In order to overcome these challenges these entrepreneurs have started their
own funding structure, a financing system based in three pillars: ‘savings, credit
and subsidy’. This system provides a very specific client profile that shows
commitment and willingness to work. Concerning the government’s subsidy
inconsistency, these enterprises have started important litigation processes that
enables them to continue expanding their products and services nationally and
internationally (Sistema Bio 2018).
In order to achieve economic sustainability, these SE’s have developed their own
unique, tailor made and innovative business models. All the founders coincide that
a good and effective team is essential for the success of the social venture. Since
the Social Enterprise scene is Mexico is still in an ‘embryonic phase’, the
entrepreneurs know each other from diverse events like competitions, pitch
events and funding rounds. Social Entrepreneurship in Mexico appears to have a
very open, supportive and heart-warming atmosphere.
Concerning clashes with Narco Cartels, these entrepreneurs are rather discrete in
sharing information. It is a sensitive topic and the anonymity of their comments is
32
guaranteed in this paper. One of the entrepreneurs shared the experience of
having friction contact moments with the cartels (operating in their territory).
The social entrepreneur reveals that when explaining the triple bottom nature of
the Social Enteprise, the drug cartels even offer assistance. There are though some
dangerous individuals to stay away from. These individuals can be recognized by a
‘tear tattoo’ that they place in their face. This tattoo means that this person has
killed somebody: one tear per kill.
In general terms all of the entrepreneurs are highly passionate and motivated
to continue with their social enterprises. This enthusiasm extends to all the
participating shareholders. There was however one less positive experience that
stopped the continuation of Fundación Renacimiento. Mr. Houwen, a Dutch
citizen who moved to Mexico City, founded a social enterprise that aimed to
provide employment to young drug addicts in Tepito, one of the most
marginalized and criminal zones in Mexico City. He succeeded for seven years until
political and cultural internal complications provoked the dismissal from his own
Social Enterprise. Currently Mr. Houwen preserves only his profit-oriented company.
33
General Conclusions & Recommendations
Mexico is a fertile ground for Social Enterprise (IDB 2016). The tremendous level of
inequality in the country enables the flourishing of innovative ideas aiming to solve
social issues. These ideas that emerge as ‘bottom-up’ strategies (Auvinet & Lloret,
2011) w h i c h a r e constantly developed, tested and perfected in a fieldwork that
it is ‘just outside home’ (Anaya 2015). Mexico’s optimal level of technological
capabilities (positioning itself as manufacturer of motors and electronics) enables
the creation of technological
opportunity
for
start-ups.
This
represents
a
tremendous
social enterprises offering innovative solutions to 50% of the
Mexican population living in poverty. Social Enterprises can obtain economic
sustainability by serving the BoP and also the general domestic market of 125 million
persons plus the market at the border with USA (IDB 2016).
Even when there are great opportunities, there are also great challenges. The public
and the private sector are not working together. The lack of a proper legal structure
for Social Enterprises in Mexico is a clear manifestation of this problem. Further,
‘there is not much in terms of regional support system. There is room for more crosssectorial engagement’ (IDB 2016). Besides the criminality and violence, CastilloBerthier (2015) points out other challenges for social entrepreneurs within the
Mexican political system: ‘caciquismo’ (corrupted political chiefs), political parties
striving for their own interest, informality, corruption and ‘indolence of people
that don’t care’. Mexican people are so disappointed about their leaders until the
point that culturally, earning money has become a ‘cynic’ activity: ‘if you are
charging money, people think it is cynical’ (Wulleman & Hudon, 2006). This
represents an extra cultural challenge for the social entrepreneur to overcome.
In general terms in can be concluded that Social Enterprise in Mexico is in a
developing and expanding phase where the opportunities for fieldwork validation
are abundant (Anaya 2015). There were two questions stated in this academic
dissertation:
How
can
Social
Enterprise
be
a
tool
of
economic
and
social empowerment? Is social enterprise a serious alternative to NarcoEconomy?
34
The research
facilitated
the
answer
to
these
questions:
First,
empirical
practices demonstrate that Social Enterprise is already a tool for social and
economic empowerment. Secondly, the researcher has discovered that the
engagement of communities in criminal activities declines as soon as the community
starts experience economic development (Castillo-Berthier 2015 and Piazzesi 2018).
Finally, the secret ingredients of a successful Social Enterprise seem to be: true
passion
and
vocation,
applied
social
investigation,
catalytic
innovation,
systemic thinking, behavioral change interventions and a strong team.
Further Research Advice:
This research paper has contributed to the analysis of Social Enterprises in Mexico
from different perspectives: academic and practitioner. The third angle of study is the
Narco-Economy perspective where not so much research has been done due to the
dangers that such a study may convey. The limitations of this research have been the
big distance that exists between the researcher and Mexico and the time required
to collect and analyze all the data from the Methodological Triangulation. Due to
these limitations, the researcher has succeeded to identify the following research gaps:
•
How does Applied Social Investigation methodology (Castillo-Berthier, 2008)
precede Catalytic Innovation (Auvinet et al. 2015)?
•
How can Social Enterprises accelerate the process of becoming Social
Engineers and become high impact change agents of the current social system?
(Wulleman & Hudon 2006)
•
What are the Challenges and strategies used by entrepreneurs against
criminality? (Muñiz et al. 2015)
•
What does it take to create effective and impactful behavioural change?
(Piazzesi 2018)
•
What is the relation between the resilience in the personality of the
entrepreneur and the success factors of the enterprise? (Houwen 2018)
35
Recommendations
Based on the previous conclusions, the researcher has elaborated the following
suggestions to social entrepreneurs and the Mexican Government. First, the
content analysis has revealed a source of social problems that need to still be
addressed:
•
Obesity (food, nutrition, exercise)
•
Lack of funds for Social Enterprises
•
Lack of stable and constant Internet Access
•
Health services still too expensive and unavailable
•
‘Reduction in forest coverage, water consumption efficiency, stagnation in
developing non-polluting energy sources’ (Lobato-Calleros et al. 2016)
The researcher recommends that the main Institutions of Social Enterprise
in Mexico (Ashoka, Endeavor, Inadem and New Ventures) promote the
development of innovative solutions to these problems and encourage a
wider
involvement
and
participation
of
women.
In order for the Social Enterprise to be skyrocketed in Mexico, the
researcher recommends three strategies: 1) Creation of an Alternative
micro financing system (like Banco Compartamos) that safeguards social
mission and adds entrepreneurial training and support. 2) Give impulse to
the use of crowd funding platforms among the Mexican public sector so that
the projects can be funded among the population. 3) Development of smaller
financial products by investors to meet the needs of social entrepreneurs in
early stages (IDB 2016).
The second most important recommendation is to ‘lobby to create a
social business legal status’ (Wulleman & Hudon 2006 p.21) like the
Low-profit Limited Liability Company (L3C), Benefit Corporation (B Corps)
and Social Purpose Coorporation (SPC) in the USA and the Community
Interest Company (CIC) in the UK (Wulleman & Hudon, 2006, p.8).
Further, Mexican Academia should establish an official social business
diploma like in the UK, where specific education and networking skills are
provided to the social entrepreneur.
36
Finally, the researcher has detected the need of more and stronger Social
Engineers that use Catalytic Innovation (Auvinet 2011 or 2015) to disrupt the
social system. However due to the limitation of growth that catalytic innovation
implies, it is necessary for the social entrepreneurs to apply the Schumpeterian
concept of ‘creative destruction’ (Wulleman & Hudon, 2006) so that the Social
Enterprise remains relevant, innovative and a constant change maker.
Closing comments
Mexico is ‘a country in search of solutions’ (Auvinet & Lloret, 2011, p.3) where the
level of collaboration is outstanding (IDB 2016, p.21). Latin America is a continent of
hope; social enterprise can turn this hope into reality.
37
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APPENDICES
Appendix
A:
Categorization
of
the
three
types
entrepreneurs
Source: Wulleman & Hudon (2016)
Appendix B: Concept Centric Matrix Literature Review
Source: Matrix made in Excel by the author of this paper
45
of
social
Appendix C: Content Analysis Data Results in IBM SPSS
Table C.1: Impression of the Coding Methodology used in this Content
Analysis
Source: Excel table made by the researcher of this paper
Table C.2: Data View Coding Scheme in SPSS
Source: Coding scheme made by the author of this paper on IBM SPSS
46
Overview C.3: IBM SPSS Frequency tables and Data Charts
47
48
49
50
Appendix D: Qualitative Online Survey
Made in Survey Monkey by the researcher: https://www.surveymonkey.com/r/MS6S5XV
51
Appendix E: Four Open Questions for Qualitative Interview
1. Please tell us who you are and how was your Social Enterprise born.
2. What are the main challenges that you have encountered in the development of your
project?
3. How does your business model looks like and how do you achieve financial
sustainability?
4. Have you encountered problems with the Narco Cartels? If so, how have you solved
them?
These open questions are developed from the missing information from
literature review, content analysis and online survey.
52