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Canadian Journal of Administrative Sciences

Revue canadienne des sciences de l’administration


32: 238–251 (2015)
Published online in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/CJAS.1353

Understanding social change through catalytic


innovation: Empirical findings in Mexican social
entrepreneurship
Caroline Auvinet* Antonio Lloret
Instituto Tecnológico Autónomo de México Instituto Tecnológico Autónomo de México

Abstract Résumé
Christensen, Baumann, Ruggles, and Sadtler (2006) proposed Christensen, Baumann, Ruggles et Sadtler (2006) proposent
that organizations addressing social problems may use cata- que les organisations qui s’occupent de problèmes sociaux,
lytic innovation as a strategy to create social change. These peuvent utiliser l’innovation catalytique comme une stratégie
innovations aim to create scalable, sustainable, and systems- visant à créer un changement social. Ces innovations
changing solutions. This empirical study examines: (a) whether cherchent à créer des solutions évolutives, durables, et qui
catalytic innovation applies to Mexican social entrepreneur- changent le système. Cette étude empirique examine : (a) si
ship; (b) whether those who adopt Christensen et al.’s (2006) l’innovation catalytique peut s’appliquer dans le domaine de
strategy generate more social impact; and (c) whether they l’entrepreneuriat social mexicain; (b) si les entrepreneurs
demonstrate economic success. We performed a survey of 219 qui adoptent la stratégie de Christensen et al. (2006), donne
Mexican social entrepreneurs and found that catalytic innova- lieu à un impact social; et (c) si elle démontre engendrer un
tion does occur within social entrepreneurship, and that those succès économique. Nous avons effectué un sondage à 219
social entrepreneurs who use catalytic innovations not only entrepreneurs sociaux mexicains et avons constaté que
maximize their social impact but also maximize their profits, l’innovation catalytique se produit au sein des entreprenariats
and that they do so with diminishing returns to scale. Copyright sociaux, et que les entrepreneurs sociaux qui utilisent des
© 2015 ASAC. Published by John Wiley & Sons, Ltd. innovations catalytiques maximisent non seulement l’impact
social, mais aussi leurs profits et qu’ils le font avec des
rendements à échelle décroissante. Copyright © 2015 ASAC.
Published by John Wiley & Sons, Ltd.

Keywords: social entrepreneurship, catalytic innovation, Mots-clés : entrepreneuriat social, innovation catalytique,
strategy, Mexico, social change stratégie, Mexique, changement social

Poverty and inequality in the world are the source of Entrepreneurship itself, of course, is not a new mecha-
serious social problems. Traditionally, governments and nism; historically, entrepreneurship has been related to eco-
philanthropists have been responsible for finding solutions nomic growth (Landes, Mokyr, & Baumol, 2010). In the
to such social problems, but their efforts have been ineffec- 18th century, J.B. Say defined the entrepreneur as one who
tive (Prahalad, 2010). Social entrepreneurship, as a new transfers resources from an area of low productivity to high
mechanism created by civil society to address the most productivity and return (Say, 1971). Centuries later,
pressing social problems, has struck a chord; it combines a Schumpeter described the entrepreneur as the innovator of
social mission with business discipline, innovation, and the processes of “creative destruction” of capitalism
determination (Dees, 2001). (Schumpeter, 1950): the entrepreneur identifies a commer-
cial opportunity and organizes a venture to implement it.
Successful entrepreneurship will provoke a series of reac-
The authors wish to acknowledge support by Asociación Mexicana de tions, encouraging other entrepreneurs to emulate and spread
Cultura, A.C. innovation to reach “creative destruction,” a state in which
*Please address correspondence to: Caroline Auvinet, Instituto Tecnológico
Autónomo de México, Business School, Río Hondo No. 1, Col. Progreso
the new venture and all related ventures render existing
Tizapán, Del. Álvaro Obregón, Mexico City, 01080 Mexico. Email: products, services, and business models become obsolete
caroline.auvinet@me.com (Schumpeter, in Martin & Osberg, 2007). The entrepreneur

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SOCIAL CHANGE THROUGH CATALYTIC INNOVATION AUVINET AND LLORET

will have the force required to drive economic progress, context, where 45.5% of the population lives in multidimen-
without which the economy would remain static, sional poverty, of which 9.8% is considered extreme poverty
immobilized structurally, and subject to decay (Martin & (CONEVAL, 2013). As far as we can determine, this study is
Osberg, 2007). Entrepreneurs, according to Say (1971) and the first of its kind, and aims to move beyond the case-study
Schumpeter (1950), are agents of change in an economy— approach to offer a theory of social entrepreneurship based
the catalysts and innovators behind economic progress on empirical data.
(Dees, 2001). Social refers to everything that belongs to a community or
When talking about social entrepreneurship, the word society (Kickul & Lyons, 2012). Entrepreneurs, according to
social adds a new component to the definitions given above. Dees, Emerson, and Economy (2002, p. 4), “are innovative,
A social entrepreneur shares the characteristics of a conven- opportunity-oriented, resourceful, value-creating change
tional entrepreneur, but has the specific challenge to solve a agents.” Social entrepreneurs, therefore, seek to create social
range of social problems. (Alvord, Brown, & Letts, 2004). value as a main objective.1
For the social entrepreneur, the mission-related impact Apart from their aim of creating social value, social en-
becomes the main criterion while the creation of wealth trepreneurs share certain characteristics with conventional
becomes a means to an end (Dees, 2001). The social entre- entrepreneurs. Entrepreneurship describes a context that
preneur seeks to generate social value in scale with transfor- combines an opportunity, a set of personal characteristics
mational benefits; these benefits serve a segment of society required to identify and pursue this opportunity, and the cre-
that is otherwise underserved, neglected, or highly disadvan- ation of a particular outcome. In the case of social entrepre-
taged and has no financial or political means to achieve a neurship, social entrepreneurs are agents of change in the
transformative benefit on its own (Martin & Osberg, 2007). social sector: adopting a mission to create and sustain social
Social entrepreneurship, according to Bornstein and value (not just private value); recognizing and tirelessly pur-
Davis (2010, p. 1), is a process in which citizens build and suing new opportunities to serve the mission; engaging in a
transform institutions to bring solutions to social problems process of continuous innovation, adaptation, and learning;
such as poverty, disease, illiteracy, environmental destruction, acting boldly without being limited by resources they have;
human rights abuses, and corruption. Creating a new social and displaying a high level of accountability to the constit-
equilibrium is not easy. As a response to this challenge, uencies served and the results achieved (Dees in Praszkier
Christensen, Baumann, Ruggles, and Sadtler, (2006) proposed & Nowak, 2012).2
the catalytic innovation strategy to create scalable and sustain- In addition, the term social change is important because
able social change that provides systems-changing solutions. it refers to a long-term and sustainable social change that is
The subject of social entrepreneurship has gained the result of social innovation (Praszkier & Nowak, 2012).
importance within the international academy. Multiple Mulgan, Tucker, Ali, and Sanders (2007, p. 7) defined
authors have studied different aspects of social entrepre- social innovation as "new ideas that work to meet pressing
neurship: its origins; what makes these organizations dif- unmet needs and improve people’s lives." Scholars have
ferent from other enterprises; their goals; the structures defined social entrepreneurship in many different ways,
they adopt; and the parts of the value chain in which they but all agree that social entrepreneurship has a social mission,
are involved. In addition to the growing body of research which is to solve social problems sustainably for the long term.
on its organization and behaviour, theories are also emerg- To achieve this, social entrepreneurs use business mechanisms
ing that suggest strategies to help these companies achieve to seek new solutions to old problems through social innova-
their goals more effectively. One of those theories is tion. Social innovation is indeed one of the key elements for
catalytic innovation, from Christensen et al. (2006). This the success of social entrepreneurship.
theory suggests that to be more efficient, a social entrepre-
neur should seek innovations that are scalable, sustainable,
and promote system change.
Although social entrepreneurship research has been de- Innovation in Social Entrepreneurship
veloping over the last twenty years, it remains in an "em-
bryonic" phase because of the lack of empirical studies In a globally competitive business world, innovation is
(Short, Moss, & Lumpkin, 2009). We address this gap in a critical tool necessary to ensure a company’s market
the research with an empirical study examining whether share. In the context of social entrepreneurship, as opposed
Christensen et al.’s (2006) catalytic innovation theory ap- to that of business enterprise, innovation is not about im-
plies to Mexican social entrepreneurs. Our results show that proving competitiveness but rather about seeking different
catalytic innovations do occur within social entrepreneur- approaches to the major social challenges of the 21st cen-
ship in Mexico, and that those social entrepreneurs who tury (Vernis, 2009). Civil society organizations must seek
use catalytic innovations not only maximize their social im- innovative approaches to unresolved social problems and
pact but also maximize their profits at diminishing returns to investigate and propose answers for the new social chal-
scale. Our study has significant implications for the Mexican lenges that lie ahead (Vernis, 2009). Social innovation

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SOCIAL CHANGE THROUGH CATALYTIC INNOVATION AUVINET AND LLORET

can occur as a process or a product that is adopted, devel- impact on the structures of many sectors and have often
oped, or disseminated by an organization that aims to create led to social changes in the process, although that is not
lasting social change.3 their ultimate goal. Such innovations can bring social, en-
vironmental, and/or economic impact. Social changes
Sustaining, Disruptive, and Catalytic Innovation caused by disruptive innovations are mostly unintentional;
they are simply the by-product of pursuing a business
There are different approaches to innovation within an opportunity.
organization, whether it is for a social or business purpose. Catalytic innovation. Social entrepreneurs are facing
Christensen (1997, p. xv) argued that businesses have two great challenges in creating innovations that produce social
options when wanting to innovate: sustaining innovation or change. How can they ensure social impact that is scalable,
disruptive innovation. sustainable, and that secures a systemic change?
Sustaining and disruptive innovation. Sustaining In expanding his 1997 theory of disruptive innovation,
innovation has to do with the improvement (either radical Christensen et al. (2006) considered organizations address-
or incremental) of existing products and processes within ing social problems in a fundamentally new way and creat-
the value chain of an organization. The innovations with ing scalable, sustainable, and transformative systems
this approach usually do not disrupt the current business solutions. Their method of catalytic innovation shares its
model. Most innovations are sustaining products and main features with the disruptive innovation model. These
services; they provide better quality or additional function- authors explained that the problem with traditional
ality to the most demanding customers of an organization. approaches to social problems is that they are often very
Some sustaining innovations are incremental improve- focused projects that cater to small groups of the population.
ments, while others are more revolutionary products or It is necessary, therefore, to find an innovative way to deal
services. with large groups of people so that the social impact is
When faced with competition from new entrants, com- greater (Christensen et al., 2006, p. 1).
panies that are leaders in the market often react by adding Catalytic innovations can transcend the status quo by
new features to the product to make it different and more so- delivering adequate solutions to inadequately address social
phisticated while also obtaining a higher sales margin. An problems. They are disruptive innovations that challenge
example of this is the case of mobile phones, increasingly established players in an industry by offering simple alter-
sophisticated in terms of functionality and increasing prices. natives sufficient for a group of underserved customers.
Manufacturers have been introducing successive sustained These catalytic innovations are a subset of disruptive inno-
innovations in the design of the terminals to maintain their vations, distinguished by a primary focus on social change,
market leadership and increase the profitability of their busi- often at a national level. For catalytic innovations, social
ness. But this sustaining innovation strategy reaches its limit change is the main objective. According to Christensen
when users no longer perceive the new features of the et al. (2006), an innovative idea cannot survive without a
product as a differential advantage (because they do not solid business model.
need them). Having reached this point, leading companies The catalytic innovations share five qualities:
are vulnerable, and not only because the price becomes the
1. They create systemic social change through scaling and
main decision criteria when choosing which product to
replication.
buy. The worst threat comes from other disruptive innova-
2. They meet a need that is either overserved (because the
tions, which compete with more established technologies
existing solution is more complex than many people
(Christensen, 1997).
require) or not served at all.
Disruptive innovations cause a rupture within a market.
3. They offer products and services that are simpler and less
Although in the short term, they offer a worse performance
costly than existing alternatives, which may be perceived
than the product or process they replace. In the long term,
as having a lower level of performance, but which users
they triumph as a result of their increased capacity for evolu-
consider adequate.
tion. Although in traditional sense disruptive innovations do
4. They generate resources, such as donations, grants,
not meet the needs of existing customers as well as the prod-
volunteer manpower, or intellectual capital, in ways that
ucts and services currently available (e.g., these disruptive
are initially unattractive to incumbent competitors.
innovations may lack certain features or capabilities of
5. They are often ignored, disparaged, or even encouraged
existing products), they are judged adequate for those people
by existing players for whom the business model is
that were underserved. They are simpler, more convenient,
unprofitable or otherwise unattractive and who therefore
and less expensive, so they attract new or less demanding
avoid or retreat from the market segment (Christensen
customers (Christensen, 1997).
et al., 2006, p. 3).
This kind of innovation, by definition, will not
emerge from the usual channels within the organization. Generally, both catalytic and disruptive innovations
Some of these disruptive innovations have had a major emerge from new players; existing players find disruptive

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SOCIAL CHANGE THROUGH CATALYTIC INNOVATION AUVINET AND LLORET

innovation too costly, or more commonly, they do not want This leads us to the development of the following
to sabotage their current offerings with a simpler, less expen- hypotheses:
sive, and more accessible service. Considering these con-
straints, it is almost impossible for existing businesses to H4: Social entrepreneurs who pursue catalytic innova-
disrupt themselves. tion and economic success have social impact.
Catalytic innovations can help to serve those cus-
tomers who are not target customers of established players: H5: Social entrepreneurs use different components of a
they can bring new benefits to more people. Consider the catalytic innovation to pursue their goals.
large number of people worldwide, and specifically in
Mexico, living in poverty at the base of the economic pyr- H6: The probability of having greater social impact
amid. This segment of the population is largely under- depends on having both catalytic innovation and eco-
served and would offer a large market for businesses nomic success.
practicing catalytic innovation. The social impact generated
by businesses that target this population with this type of In Mexico, there are several examples of catalytic
long-term catalytic innovation may be greater than that innovations. One is Iluméxico, a social enterprise that seeks
generated by already established products and services. Re- to solve the lack of electrification in low-income communi-
gardless of the structure social entrepreneurship adopts ties through renewable energy, specifically using solar en-
(whether nonprofit, for-profit, or hybrid), catalytic innova- ergy. In Mexico there are 640,000 households without
tion can offer a higher return on social impact because of access to electricity, so they continue to rely on candles
the sheer number of people it can reach. and kerosene for light at night (Iluméxico, 2012). Electrifi-
This leads us to hypothesize: cation in remote areas would be the best possible solu-
tion, but electrifying all these areas represents a high
H1: Social entrepreneurs who pursue catalytic innova- cost that the government has not covered. Through the
tion have adopted a hybrid structure. use of solar cells, Iluméxico fills a need not previously
covered. They provide communities with a simple and
H2: Social entrepreneurs have focused on lower socio- adequate solution for the lack of electricity, generating
economic levels of the population. systemic change. This innovation allows communities to
have evening activities (doing homework, household
H3: Social entrepreneurs are guided by resource gen- chores, or handicrafts). It is a cheaper solution—it works
eration such as donations, grants, volunteers, and intel- through a solar energy system so there are no electrical
lectual capital in such ways that are unattractive bills, and it is a model replicable for the entire country.
initially by established competitors. This project is not considered a competitor for electric
companies, for whom the electrification of isolated areas
In 2011, Westley added that: represents an unattractive business.
Another example of hybrid social enterprise is Biodent,
which has taken the traditional dental clinic and evolved it
When a social innovation has a broad or durable into a dental health authority in marginalized communities
impact, it will be disruptive and catalytic (Christensen
et al., 2006); it will challenge the social system and in Oaxaca, México (Ashoka México y Centroamérica,
social institutions that govern people’s conduct by 2014). Dental care in México has long been an important
affecting the fundamental distribution of power and re- health issue because dental care is limited to higher eco-
sources, and it may change the basic beliefs that define nomic classes in society and because of the lack of dental
the system or the laws and routines which govern it. health education. As a result, a shocking 61.8% of children
While many smaller innovations are continually intro-
duced at all scales, it seems most important to consider in Mexico are in need of cavity repair by the age of six; by
those innovations that have the potential to disrupt and the age of 60, 80% of all adults with extremely poor dental
change the broader system. To do so, a social innova- hygiene have less than ten teeth. The Biodent methodology
tion must cross multiple social boundaries to reach expands the reach of dental clinics through public educa-
more people and different people, more organizations tion, broadening access, and changing the infrastructure in
and different organizations, and organizations nested
across scales (from local to regional to national to the dental sector. It thereby reduces the need for extensive
global) and linked in social networks. The capacity of dental care and makes high-quality dental care more acces-
any society to create a steady flow of social innova- sible through its franchise network of low-cost dental clinics
tions, particularly those which re-engage vulnerable located in poor rural areas (Ashoka México y
populations, is an important contributor to overall so- Centroamérica, 2014; López, 2014). Biodent gives a
cial and ecological resilience. In the broadest sense,
social innovation is urgently needed to solve the com- cheaper, simpler, and more convenient solution for people
plex social-ecological problems facing the world. at the base of the pyramid that were unserved in dental
(Westley, 2011, p. 4) health.

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SOCIAL CHANGE THROUGH CATALYTIC INNOVATION AUVINET AND LLORET

Globally, there are many other examples such as: economic success of an organization, despite it not being
Swayam Krishi Sangan (SKS), a microlender in India for its primary purpose? We therefore hypothesize:
the poor unbanked sector (Mohan & Potnis, 2010);
LifeSpring, a network of hospitals centered in maternity H8: Social entrepreneurship that uses catalytic innova-
services offering affordable high-quality services to low- tion has greater social impact and economic success in
income communities in India (Andrade, 2011a); KickStart, diminishing returns.
a social enterprise that provides affordable tools to increase
the productivity and profitability of rural microentrepreneurs Considering the relevance of social entrepreneurship,
in the East and Central African Region; and Asembis, a so- and the fact that catalytic innovation has shown signs of a
cial enterprise that provides medical services to Costa Rica plausible strategy at the case level, we aimed to test whether
through call centre technology and affordable pricing catalytic innovation is actually embedded in firms with a
(Andrade, 2011b). These social enterprises focus on social mission in Mexico. In particular, should these firms
emerging markets, have products or services that are use catalytic innovation strategies, we would like to assess
cheaper, simpler, and more convenient, and use resources their economic and social impact. Therefore, we developed
such as donations, grants, volunteer manpower, or intellec- the following research question to guide our analysis: In
tual capital in ways that are initially unattractive to incum- Mexican social entrepreneurship, are there signs of catalytic
bent competitors. This leads us to the development of our innovation, a strategy that not only maximizes potential
next hypothesis: social impact but also increases the economic success of
the organizations?
H7: Greater social impact is likely to happen more often
in the primary sector and with hybrid organizations.

Hypothesis Development
It is important to consider the limitations of catalytic
innovations. Taking into account the different existing
In the development of our hypotheses, our main goal is
types of social entrepreneurship, and the different struc-
to understand what the drivers of catalytic innovation in
tures that can be adopted, not all social innovations can
Mexican social entrepreneurs are. Given the several types
adopt this business model. According to Kickul and Lyons
of firm structure (for profit, nonprofit, or hybrid), the degree
(2012), not all social entrepreneurship can or should be
of development phase (from emergent to declining) and the
scalable. Certain entrepreneurship covers very local needs
type of sectors they attend (Dees & Battle, 2002, p. 4) allow
or is very focused on a certain context (Kickul & Lyons,
us to know the likely structure of firms and their main drivers.
2012). On the other hand, social innovations are not merely
This knowledge then provides an understanding as to how
cheap products to be sold to those in greatest need: there are
these firms have used the five attributes of a catalytic innova-
technological innovations, products, and processes that can
tion from Christensen et al. (2006): (a) They create systemic
create a social impact, regardless of their price (Morales
social change through scaling and replication; (b) They meet
Figueroa, 2012). However, if social entrepreneurship is
a need that is being overserved (because the existing
looking to obtain the greatest social impact by creating sys-
solution is more complex than many people require) or not
temic change, the model proposed by Christensen et al.
served at all; (c) They offer products and services that are
(2006) can be a good strategy.
simpler and less costly than existing alternatives, and that
One of the points that led Christensen et al. (2006) to
could be perceived as offering a lesser performance, with
devise the catalytic innovation strategy was the fact that dis-
users considering it adequate; (d) They generate resources
ruptive innovations had originated unintentional social
such as donations, grants, volunteer manpower, or intellectual
changes in the process:
capital in ways that are initially unattractive to established
competitors; (e) They are often ignored, disparaged, or even
Disruptive innovations have had a major impact on encouraged by established competitors for whom the busi-
industry structures, from travel to computer retailing to ness model is not profitable or attractive (labelled T1 to T5
communications, and have often given rise to social
change in the process. But the social changes caused in the scheme) (Gundry, Kickul, Griffiths, & Bacq, 2011).
by disruptive innovations are largely unintended; they We assessed whether there is a statistically significant relation
are simply the by-products of pursuing a business between the catalytic innovation strategies and the level of
opportunity. With catalytic innovations, however, social success, either economic and/or social, in social entrepreneur-
change is the primary objective. (Christensen et al., ship firms.
2006, p. 3)
Figure 1 shows how these hypotheses help us under-
stand how catalytic innovation creates both social and
This leads us to ask whether there is a correspondence economic value in the context of Mexican social
in the other direction: can catalytic innovation increase the entrepreneurs.

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SOCIAL CHANGE THROUGH CATALYTIC INNOVATION AUVINET AND LLORET

Figure 1. Hypothesis development for catalytic innovation in Mexican social entrepreneurship

Method The final number of accurately completed surveys was 219.


We obtained responses from most regions in Mexico and
To test our hypotheses, we surveyed Mexican social from different sectors and types of organizations (for-profit,
entrepreneurs whose activities were shown to have some nonprofit, hybrids). The 219 responses were compiled and
level of sustainability, social impact, or environmental sheltered on a secure database on a server to protect the con-
impact. These organizations were distributed across all fidentiality of participants.
regions in the country, from different economic sectors
and with a for-profit, nonprofit, or hybrid structure, and Measures
all with business strategies in place to achieve a social or
environmental mission. This sample was considered to be We constructed measures of social and environmental
our population under the general definition of social impact, measures of catalytic innovation strategies, and mea-
entrepreneurship. sures of economic success of the organizations as follows
To test our methodology, we conducted a pilot survey of (see Appendix):
45 social entrepreneurs during the XIII National Social
Enterprise Fair, Expo FONAES 2011.4 During our test we • The social impact: The social impact was measured by
fine-tuned the appropriate questions to ensure that the identifying what kind of impact the organizations sought
responses gave us the information we were seeking. After to achieve (social or environmental), clarifying the main
testing the survey, we sent it to 2967 social entrepreneurs: objectives of the organization, and asking who benefited
members of the “Páginas Verdes,” a directory of organiza- from their products or services. The main objective of
tions with an environmental or social oriented mission these questions was to understand what impact they sought
(Páginas Verdes, 2011); members listed in ECODIR, an en- to generate, how they tried to do it, and whether seeking
vironmental business directory (ECODIR, 2011); organiza- that impact was their main purpose. For each of the ques-
tions supported by FONAES, (Fondo Nacional de Apoyo a tions, entrepreneurs had to answer how much they agreed
Empresas Sociales,5FONAES, 2011); participants in the or disagreed with the statements that were represented on
Latin American Forum on Impact Investing (Foro a five-point Likert scale (1 = Strongly Agree, 5 = Strongly
Latinoamericano de Inversión de Impacto, FLII, 2011); and Disagree). This gave a total composite score for shaping
other social entrepreneurship organizations that met some the index measuring social impact (Auvinet & Lloret,
level of sustainability. Of the 2967 surveys sent, 17% of the 2011).6 An overall composite score of all the characteris-
emails were returned due to incorrect or nonexistent email tics to comprise social impact was then developed and used
addresses. We received 278 completed surveys, which is in subsequent analyses.
considered significant, with a confidence level of 90%. After • Catalytic innovation score: In order to detect possible
a thorough review of the responses, we discarded those sur- catalytic innovations solutions to social problems that
veys that were incorrectly completed or that showed clear are not effectively addressed by existing organizations
evidence the questions had not been answered accurately. using traditional methods, we relied on the five attributes

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SOCIAL CHANGE THROUGH CATALYTIC INNOVATION AUVINET AND LLORET

of a catalytic innovation from Christensen et al. (2006): Control Variables


(a) They create systemic social change through scaling
and replication (T1) ; (b) They meet a need that is being We used control variables that could influence social
overserved (because the existing solution is more com- entrepreneurship with catalytic innovations, as follows:
plex than many people require) or not served at all
• Developmental stage of the organization: Whether the com-
(T2); (c) They offer products and services that are more
pany is in a stage of introduction, development, consolida-
simple and less costly than existing alternatives, which
tion, maturity, or decline influences the innovation capacity.
could also be perceived as offering diminished perfor-
• Socioeconomic status: To which sector of the population
mance while still being considered adequate (T3); (d)
the company directs its products or services. To create
They generate resources such as donations, grants, volun-
systemic social change according to the catalytic innova-
teer manpower, or intellectual capital in ways that are ini-
tion, ideally a company targets low and middle socioeco-
tially unattractive to established competitors (T4); (e)
nomic levels in order to have a greater impact and a
They are often ignored, disparaged, or in contrast, en-
greater number of people.
couraged by established competitors for whom the busi-
• Size of the firm: As measured by the number of full-time
ness model is not profitable or attractive, and therefore
employees.
who avoid or withdraw from the market segment (T5).
• Sector in which the firm operates: Whether primary, sec-
For each of the characteristics, entrepreneurs had to
ondary, or tertiary, the sector in which it concentrates its
answer how much they agree or disagree with the state-
activities may have an impact on social innovation.
ments that were indicated on a five-point Likert scale
• Technology: The level of access to technology influences the
(1 = Strongly Agree, 5 = Strongly Disagree). This gave a
level of impact achieved. By technology we mean website
total composite score for shaping the index measuring
capabilities, online presence in social networks, and so forth.
all the characteristics necessary for a catalytic innovation
• Age of the organization: Younger organizations may be
(Gundry et al., 2011).
more likely to generate catalytic innovations than older ones.
• The economic success of organizations: In order to iden-
tify which organizations were more successful economi-
cally and test whether those with more catalytic Assumption Analysis
characteristics have greater economic success, we devel-
oped several questions related to the growth and stability To tests for the robustness of the models and validity of
of the organization (Auvinet & Lloret, 2011). An overall the results, we performed tests for multicollinearity, autocor-
composite score of all the characteristics to comprise eco- relation, heteroskedasticity, and normality. We found no
nomic success was then developed and used in subsequent signs of strong correlation among the variables as shown
analyses. in Table 1.

Table 1
Correlation Coefficients

Variables 1 2 3 4 5 6 7 8 9 10 11 12 13

1 Catalytic innovation 1
index
2 Emergent 0.038 1
3 Developmental 0.0570.273** 1
stage
4 Consolidation stage 0.0640.458** 0.458** 1
5 Maturity stage 0.0160.170* 0.170* 0.285** 1
6 Hybrid 0.1110.015 0.053 0.014 0.011 1
7 For profit 0.071 0.019 0.019 0.059 0.106 0.264** 1
8 Higher 0.1150.172* 0.089 0.043 0.073 0.104 0.192* 1
socioeconomic
market
9 Employees 0.0590.226** 0.024 0.093 0.195 0.075 0.064 0.181** 1
10 Age 0.0440.343** 0.180** 0.157* 0.375** 0.065 0.077 0.049 0.385** 1
11 Secondary sector 0.023 0.078 0.053 0.104 0.043 0.038 0.026 0.032 0.020 0.078 1
12 Terciary sector 0.0190.043 0.066 0.086 0.046 0.088 0.080 0.116 0.081 0.077 0.742* 1
13 Technology 0.0720.011 0.093 0.030 0.102 0.120 0.042 0.215** 0.009 0.187 0.043 0.087 1

*Correlation significant at 0.01 **Correlation significant at 0.05

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SOCIAL CHANGE THROUGH CATALYTIC INNOVATION AUVINET AND LLORET

We performed Park homeoscedasticity tests for the T1 – T5, as discussed in the Catalytic Innovation subsec-
models and confirm that the variance errors are indepen- tion. (See Table 2).
dently distributed. Because our survey was collected at a To test for these determinants, we regressed the cata-
specific point in time, there was no need to perform autocor- lytic innovation score with each of the catalytic innovation
relation tests. Finally, and to verify that the errors are inde- components and found that T3 and T4 seemed to be the main
pendently and normally distributed, we performed the components of the different elements of catalytic innovation.
Kolmogorov-Smirnov test on all our models and found that We analyzed T4 with several independent and control vari-
nondichotomous variables were independent and normally ables and found that both structure and the targeted socio-
distributed. economic market are significant. The resources and
donations component is consistent in most models.
We then concluded that there were indeed features of
catalytic innovation in Mexican social entrepreneurship.
Analysis These companies adopted a hybrid structure and targeted
consumers in the medium to low socioeconomic levels.
To test H1, H2, and H3, we modelled catalytic innova- The driver of such catalytic innovation is the generation of
tion with a regression as a function of social entrepreneur de- resources such as donations, grants, volunteer manpower,
velopmental stage, structure, sector, technology, size, and or intellectual capital in ways that are initially unattractive
age of the firm as control variables. In the model, we found to incumbent competitors.
a low tolerance level of some variables in the collinearity Next we tested H4 and H5 to know whether firms that
tests; we concluded that there was multicollinearity, and thus use catalytic innovation and show economic success have
we ran the analysis again without the collinear variables. social impact as well. We constructed a model using an in-
Once we corrected for collinearity, including control vari- dex of economic success and catalytic innovation as depen-
ables, the only significant variable was hybrid structure. dent variables as a function of the components of catalytic
All other variables did not have a clear role in the determi- innovations, the social impact index, and control variables.
nants of catalytic innovation; however, the fact that the As shown in Table 3, we found that for an organization to
hybrid structure is significant suggests that there are some be economically successful and use catalytic innovation
signs of catalytic innovation in Mexico, as indicated in the simultaneously, it must have achieved a certain level of
results shown in Table 2, Column 1. growth, used different components of catalytic innovation,
Next, to find more detail about the determinants of and aimed to create social impact.
catalytic innovation, we broke down the different compo- In H6 and H7, we tested for the probability of having
nents of catalytic innovation into components numbered greater social impact given catalytic innovation and economic

Table 2
Regression Results for Catalytic Innovation Determinants

Catalytic
innovation Catalytic innovation Catalytic innovation Catalytic innovation Catalytic innovation Catalytic innovation
Variables Index component T1 component T2 component T3 component T4 component T5

(Constant) 70.383* 15.621* 12.509* 13.753* 16,660* 13.613*


Emergent .424 .105 .165 .629 .445 .527
Hybrid 2.617* .001 .087 .875* 1.366* .046
For profit 2.643 .178 .194 .571 1.909* .400
Higher 2.103 .824* .649* .862* .922* .104
socioeconomic
background
Employees .441 .140 .081 .026 .579 1.059*
(ln)
Age .004 .004 .026 .004 .030 .038
Secondary .259 .046 .004 .543 1.154 .643
sector
Terciary sector .333 .229 .054 .426 .474 .221
Technology 2.369 .103 .356 .910* 1.221* .242
R2 .043 .021 .034 .052 .102 .071
R2 adjusted .002 .020 .007 012 .063 .030

*Correlation is significant at 0.1

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SOCIAL CHANGE THROUGH CATALYTIC INNOVATION AUVINET AND LLORET

Table 3 Finally, in H8 we tested for the interaction among cata-


Regression Results for Catalytic Innovation and lytic innovation, social impact, and economic success. We
Economic Success Components constructed three different models: (a) we aimed to compre-
hend the interaction among economic success, catalytic inno-
Economic success index by Typified vation, and control variables; (b) We constructed a model to
Variables catalytic innovation index coefficient test for catalytic innovation, size, and age of the organization
as control variables; (c) we modelled interaction amongst so-
(Constant) 2124.170*
cial impact, catalytic innovation, and control variables.
Employees 9.391* 0.515
Our results in Table 5 show that the level of catalytic in-
Technology 46.802 0.052
Secondary sector 13.658 0.16
novation invested in a firm has decreasing returns to scale in
Terciary sector 51.174 0.065 the level of economic success. Therefore, catalytic innova-
Social impact index 2.683* 0.105 tion is effective as we increase it, but has limitations; that
T1 302.558* 0.157 is, catalytic innovation allows social entrepreneurs to
T2 193.125* 0.099 achieve greater success, but the economic success has a
T3 238.056* 0.161 maximum level at which additional catalytic innovation will
T4 432.303* 0.255 decrease economic success.
T5 9.207 0.006 Furthermore, we noticed that there is an optimum age
R2 0.569 for organizations to present economic success via catalytic
R2 adjusted 0.548 innovation, which starts to decrease as time passes. Social
*Correlation is significant at 0.1 impact tends to decrease over time or when the organizations
start becoming too big; however, the more catalytic innova-
success, as Table 4 shows. We found that greater social impact tion, the more social impact firms achieve.
is likely to happen more often in the primary sector and with These results support Christensen et al.’s (2006) theory
hybrid organizations. The model used was a probit regression that argues it is usually new actors who generate both cata-
in which we constructed a (0,1) measure of social impact lytic and disruptive innovations; it is too costly to implement
based on the social impact score. The new variable served a catalytic innovation for established actors (or actors of a
as a dependent variable regressed as a function of catalytic certain age) because it would be disruptive to the company
innovation, economic success, and control variables. In (Christensen et al., 2006, p. 3). We can also conclude that
addition, we observed how social impact increases when those organizations that use catalytic innovation have a cor-
entrepreneurship achieves economic success with catalytic relation with economic success and a greater social impact.
innovation in place. Impact tends to decline as firms grow We observed a direct relation between social impact and
and or belong to the secondary and tertiary sectors; that catalytic innovation: the greater the catalytic innovation, the
is, those organizations that focus on the primary sector larger the social impact. Initially, greater catalytic innovation
are more likely to have social impact as they use catalytic will produce greater economic success, but once it reaches a
innovation. In addition, hybrid organizations have more im- certain point, the excess catalytic innovation decreases eco-
pact than for-profit organizations. nomic success at decreasing rates. On the other hand, we

Table 4 Table 5
Probit Regression of the Probability of Having a Regression Results between Economic Success,
Greater Social Impact Social Impact, and Catalytic Innovation

Coefficients (a) Economic Social impact Social impact


Variables success index index index
Independent variables Coefficients z P > IzI
(Constant) 0.365 27.212 35.274*
(Constant) 1.628941 1.88 0.06* Catalytic innovation .397* .712 .477*
Catalytic innovation index 0.0241061 2.41 0.016* index
Economic success index 0.046302 1.85 0.064* Catalytic innovation .002* .002
Employees 0.0224447 3.28 0.001* index 2
Secondary sector 0.7046422 2.11 0.035* Age .469* .890* .885*
Terciary sector 0.967311 3.08 0.002* Age2 .007* .018* .018*
For profit 0.2833027 0.9 0.370 Employees .109* .106* .106*
Hybrid 0.4498694 2.33 0.02* R2 0.521 .136 .136
R2 adjusted 0.509 .116 .120
*Correlation is significant at 0.1 a.Dependent variable: Social Im-
pact Index *Correlation is significant at 0.1

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SOCIAL CHANGE THROUGH CATALYTIC INNOVATION AUVINET AND LLORET

observed that the younger and smaller the company, the decrease of economic success. (T1: Create systemic social
more social impact it will have; as it grows in size and change through scaling and replication; T3: Offer products
age, its social impact will decrease. and services that are simpler and less costly than existing al-
Using the information displayed in Table 5 and based ternatives and may be perceived as having a lower level of
on our data, we constructed a model that summarizes our performance, but which users consider adequate.). In this
main finding that economic success and catalytic innovation sense, if an organization grows too much and sells products
can be expressed in a quadratic form as: or services too simple or inexpensive, its economic success
will be compromised.
Economic success index ¼ 0:397 IC þ 0:002 IC2

And by merging the information from Column 3 in


Table 5, we can affirm that the correlation between social Discussion
impact and catalytic innovation can express itself with an
equation in the form of: Summary

Social Impact index ¼ m þ 0:478IC We observed that the organizations most successful in
implementing catalytic innovations are hybrid organizations
We have interpreted the figure to demonstrate that eco- that are dedicated to the primary sector, focused on the mid-
nomic success factors significantly for for-profit organiza- dle and lower socioeconomic levels, and guided by resource
tions. For them, economic success is more important than generation such as grants, scholarships, and volunteer or in-
the social impact they can generate. On the other hand, tellectual capital in ways that are initially unattractive to
nonprofit organizations strive for social impact with little established competitors. The success of catalytic innovation
to no importance placed on economic success. There are also depends on the size of the firm; as a firm grows larger,
also hybrid organizations, which seek both a social and social impact tends to decline, whereas economic impact in-
economic benefit. Along the horizontal axis of Figure 2, creases. Social entrepreneurs that have catalytic innovation
all combinations are possible. An organization must choose in place and experience economic success also have a social
for itself which combination best meets its goals. impact. Despite not being included in the first sector, both
In trying to explain the reason for this decrease in cata- Iluméxico and Biodent illustrate our findings. They focus
lytic innovation, we examined its different components. We on lower socioeconomic levels and use resource generation
observed that the continued growth of social impact is due to such as grants, volunteers, and intellectual capital in ways
T4 (T4: Generate resources, such as donations, grants, that are unattractive to established competitors. They are cre-
volunteer manpower, or intellectual capital, in ways that ating a big social impact and also have economic success
are initially unattractive to incumbent competitors). On the (Ashoka México y Centroamérica, 2014; Iluméxico, 2002).
other hand, T1 and T3 are characteristics that explain the This leads us to conclude that catalytic innovation strategy
applies to the Mexican case.
In addition, our findings support the results found by
Gundry et al. (2011) who argued that while innovation ecol-
Figure 2. Relation of economic success and the social ogy is associated with Catalytic Innovation, it is mediated by
impact inside social entrepreneurship with catalytic the role and degree of bricolage “using what’s at hand to do
innovation good” (Gundry et al., 2011, p. 6) that is characteristic of
social entrepreneurs. That is, bricolage, as implemented by
16 180
social entrepreneurs, results in novel approaches to attracting
14 160
and distributing resources, identifying overserved or un-
140 served market segments, and offering products and services
Economic success

12
that are simpler, less costly, and “good enough” (Gundry
Social Impact

120
10
100 et al., 2011, p. 17).
8
80
6
60 Contributions to Scholarship
4 40
2 20 The poverty and inequality that exist in Mexico are a re-
0 0 sult of deficiencies in education, health, housing, and food.
0 20 40 60 80 100 120 140
Catalytic Innovation Economic Success
Social Impact
At the beginning of the century, social entrepreneurship
For-Profit Hybrid Non-profit
emerged in Mexico as an alternative solution for addressing
unresolved social problems and ensuring the sustainability
of organizations seeking to generate social or environmental

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SOCIAL CHANGE THROUGH CATALYTIC INNOVATION AUVINET AND LLORET

impact. Today, social entrepreneurship is a growing global Limitations and Future Research Directions
phenomenon with the potential to make great impact, but
the scarcity of empirical studies leaves research on it in an While this research contributes in important ways to the
"embryonic" phase (Short et al., 2009). study of social entrepreneurship, it is not without certain
Our work contributes to the developing field of social limitations. We would like to increase the sample size and
entrepreneurship in three ways: find greater representation in the north of the country.7 We
were also limited by the lack of adequate, standardized mea-
1. To the best of our knowledge, we are the first to provide surements of social and environmental impact for the field
empirical proof that Christensen et al.’s (2006) theory of social entrepreneurship. The impact measurement system
does work. is in an early phase, and although there are initial methods to
2. We are the first to study social entrepreneurship in Mexico. measure social and environmental impact in place, these dif-
Previous work has focused on Latin America as a whole. ferent methodologies have not yet standardized the indices.
3. We have sought to expand the case study to offer a theory Additionally, organizations must adopt those methodolo-
of social entrepreneurship strategy based on empirical data. gies with the aim of checking results and identifying possi-
ble improvements.
The study of social entrepreneurship is emerging and so
Applied Implications there are many opportunities for future research. Social en-
trepreneurship depends largely on its economic, political,
Testing our hypothesis shows that catalytic innovation geographic, legal, social, cultural, or historical context.
represents a viable strategy that allows social entrepreneurs Much research has yet to be done on how these contextual
to achieve both greater economic success and greater social pressures affect the decision making of social entrepreneurs
impact. One of the main results in our research has been that as they balance their objectives between economic success
social entrepreneurs using catalytic innovation have greater and the creation of social or environmental impact.
social impact and increased economic success, but that such
economic success decreases as more catalytic innovation is
used. This means that from an economic standpoint, cata- Notes
lytic innovation has a limit; beyond this limit, economic
success decreases. This decrease occurs when the product 1 Several authors define social entrepreneurship in that way. Ac-
cording to Bill Drayton, founder of Ashoka, the main feature of
or service is too simple and inexpensive, or when the a social entrepreneurship is to have new ideas to solve critical
organization has grown too much. We then found that the social problems (Praszkier & Nowak, 2012). For Bornstein
younger organizations have greater social impact. The orga- and Davis (2010), social entrepreneurship is a process by which
nization must be able to stay agile in order to adopt future citizens build and transform institutions to bring solutions to so-
innovations and prevent disruption from new players. cial problems, such as poverty, disease, illiteracy, environmen-
tal destruction, human rights abuses, and corruption, with the
Our results suggest that the best way to find balance goal of creating a better life for many. Academics, practitioners,
between social impact and economic success is through the and philanthropists describe it as a profession, field, and motion
hybrid structure of the organization. As observed in Figure 1, (Bornstein & Davis, 2010). According to Alvord, Brown, and
social entrepreneurs can focus on achieving social impact, Letts (2004), the challenge of social entrepreneurship is to
albeit at the expense of economic success, and then adopt solve a whole range of social problems through the sustainable
reduction of health, education, economic development, and po-
a nonprofit structure. On the other hand, social entrepreneurs litical issues, as well as cultural factors associated with long-
who focus more on economic success will lose social term poverty (Alvord et al., 2004).
impact. 2 According to Martin and Osberg (2007), entrepreneurs are skilled
For organizations seeking both social and economic at detecting and acting upon opportunities and at thinking outside
success, we suggest that they adopt the following catalytic the box in order to create or produce something new in the world
(Martin & Osberg, 2007). Kickul and Lyons (2012) also ex-
innovation strategies: plained that a social entrepreneur uses processes, business tools,
and techniques from business entrepreneurs, identify with their
1. Structure as a hybrid organization to generate money and entrepreneurial spirit. They seek a growth strategy in order to
receive support such as donations or volunteering at the expand market reach and increase the benefits of their business.
Social entrepreneurs are strategic in how they build networks
same time. among their investors, suppliers, and customers in order to
2. Focus their activities in the primary sector, that is, on the achieve their business goals. While they are not necessarily risk
exploitation of natural resources such as agriculture, live- takers, they are certainly risk managers; this ability to manage
stock, forestry, fishing, and hunting. risk enables them to withstand greater risks than most business
3. Choose a target population located within the middle and people (Kickul & Lyons, 2012). Alvord et al. (2004) added that
social entrepreneurs create innovative solutions to immediate
lower socioeconomic levels. social problems and mobilize the ideas, skills, resources, and so-
4. Enable expansion and scale innovation while being cial arrangements required for sustainable social transformation
aware of pitfalls of significant expansion. (Alvord et al., 2004).

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SOCIAL CHANGE THROUGH CATALYTIC INNOVATION AUVINET AND LLORET

3 Phills, Deiglmeier, and Miller (2008, para. 3) defined social in- CONEVAL. (2013). Medición de la Pobreza en México y en las
novation as "a new solution to a social problem that is more ef- Entidades Federativas. Retrieved from http://www.coneval.
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For his part, Mulgan et al. (2007, p. 8) defined social innovation EJECUTIVO_MEDICION_POBREZA_2012.pdf
as "innovative activities or services that are motivated by the
Dees, J.G. (2001). The Meaning of “Social Entrepreneurship”.
aim of covering a social need and are predominantly developed
and diffused through organizations whose primary purpose is Durham, NC: Center for the Advancement of Social Entrepre-
social.” The Ministry of Quebec (Canada) for research, science, neurship. Duke. Fuqua School of Business. Reformatted and
and technology defined social innovation in 2000 as "… any Revised, May 30, 2001. Retrieved from https://centers.fuqua.
new approach, practice or intervention, or any new product cre- duke.edu/case/wp-content/uploads/sites/7/2015/03/
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been adopted by institutions, organizations or communities" (as Dees, J.G., & Battle, A. (2002). Blurring sector boundaries: Serv-
quoted in Ponce & Airola, 2007, p. 2). ing purpose through for profit structures (CASE Working
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Dirección Estratégica, the business magazine of ITAM, Social Entrepreneurship. Duke University. Fuqua School of
September 2011, or in the page: http://direccionestrategica.
Business.
itam.mx/?p=2058&page=2
Dees, G., Emerson, J., & Economy, P. (2002). Strategic Tools for
5 FONAES (now INAES) is a federal government agency and a
subdivision of the Treasury that supports social enterprises Social Entrepreneurs. Enhancing the performance of your En-
such as business projects, finance rural population, peasant terprising Nonprofit. New York, NY: John Wiley & Sons, Inc.
and indigenous groups, and urban social sector. ECODIR. (2011). Directorio Ambiental. Retrieved from http://
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the best social and environmental enterprises. (New Venture Retrieved from http://www.inversiondeimpacto.org
México, 2011). (http://www.nvm.org.mx/formulariobreve.html) FONAES. (2011). Fondo Nacional de Apoyo para Empresas en
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Appendix
Measurement Indexes

Indexes Criteria

Catalytic Innovation[1]
T1: Creating systemic social change through “Our approach allows us to serve potencially large groups of people.”
scaling and replication “The individuals or groups we serve have traditionally been underserved by alternative
services or organizations.”
“We are able to serve people whose access is otherwise limited.”
“We are able to improve our offerings by expending market reach.”
T2: Meeting a need that is either overserved or not “Our services or solutions meet our clients´needs in ways more traditional providers did not.”
served at all “Our offerings are simpler and therefore more effective as solutions than others that
were traditionally avialable.”
“Our clients were not served at all by traditional offerings.”
T3: Offer products and services that are simpler “Our products and services are less complex than existing alternatives.”
and less costly than existing alternatives, and are “Our products and services are less complex than existing alternatives.”
considered “good enough” “Our products and services are perceived as more convinient to new clients.”
“Our products and services are perceived by new clients as less costly than alternatives.”
T4: Generate resources, such as donations, grants, “We are able to attract donors and funding based on our business model.”
volunteers, or intellectual capital ways that are “We would decline funding that requires us to alter our business model.”
unattractive to incumbent competitors We are able to attract grants for our business model.”
“We are able to attract volunteers to our organization.”
“Organizations with more traditional offerings would not be likely to obtain the
knowledge or information (intellectual capital) that we have obtained.”
T5: They are often ignored, belittled or even “Business that offer more traditional services tend to ignore our business, or its
encouraged by established players for whom the services.”
business model is not profitable or attractive, and “Existing players have encouraged us to provide offerings for our market segment.”
therefore avoid or withdraw from the market “Existing players disparage the work we do because they believe it is unprofotable.”
segment
Economic success Year of creation
Local, regional, national, national and intenational opearation
Stage of Organization: Introduction, development, consolidation, maturity, decreasing
Number of employees
Evolution since its inception in size of the organization, number of employees, number of
products or services.

(Continues)

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SOCIAL CHANGE THROUGH CATALYTIC INNOVATION AUVINET AND LLORET

Appendix
(Continued)

Indexes Criteria

Profit in the past 12 months


Cash flow
Dependence of the organization of the entrepreneur
Social Impact[2] Social, environmental or economic focus of the organization
Social objectives of the organization (energy, financial services, education, affordable
housing, capacity building, community development, prevention and mitigation of
specific diseases, employment generation, providing food security, providing heath,
increase productivity and income)
Environment objectives of the organization (conserve a protected area, conserve energy
and fuel, Conserve natural resources, provide efficient water managment, use of
sustainable energy, land use in sustainable manner (sustainable tourism, certified
practices, reforestation, organic agriculture, habitat regeneration)
Main beneficiaries of the product or service
Method for measuring social or environmental impact
Sector of the population wich products and services are addressed

Can J Adm Sci


Copyright © 2015 ASAC. Published by John Wiley & Sons, Ltd. 251 32(4), 238–251 (2015)

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