INTRODUCTION

The purpose of this paper is to develop a conceptual framework for not-for-profit startups that use intervention programs aimed at empowering at-risk inner-city populations. There is growing acknowledgment that 1960s-type giveaway programs have fostered long-term dependency on welfare rather than encouraging recipients to become self-sufficient (e.g., Porter, 1995). There are examples of inner-city welfare families that are still dependent on welfare after three generations. The cost to society is great. Not only is there opportunity cost, but there is also a tremendous cost to repairing or containing the damage of dependency. While this is difficult to quantify, the societal cost includes a host of variables including increased welfare, crime, and incarceration costs.

There is increasing recognition that self-reliance can provide an important pathway to economic independence for some inner-city poor. A new genre of grassroots, inner-city intervention programs is attempting to empower participants rather than perpetuating dependency. Reports of success are sporadic and for the most part recent (Newsweek, 1995). The programs are started by not-for-profit organizations, which in many instances are themselves entrepreneurial startups. Little is known about these programs and how to start them. By studying five not-for-profit startups that have developed inner-city intervention programs we attempted to develop a theoretical model of not-for-profit entrepreneurship.

 

Conceptual Frameworks for Examining Not-for-Profit Entrepreneurship

We know of no theory that has been developed specifically to analyze not-for-profit entrepreneurship. Hence, we based our conceptual analysis on models that have been found to explain entrepreneurial behavior of for-profit entrepreneurs. Two of the most robust of those models are the Timmons' entrepreneur-opportunity-resources framework (1989) and Moore's model of the entrepreneurial process (1986).

The key factors in the Timmons model (Figure 1) are the entrepreneur and the founding team, the opportunity, and the resources that are mustered to start the new organization. Put simplistically, the Timmons model is normative. The key ingredient is the entrepreneur. If the entrepreneur has the right stuff, he or she will deliberately search for an opportunity, and upon finding it, shape it so that is has the potential to be a commercial success, or what Timmons calls a high-potential venture. The entrepreneur then gathers the resources that are necessary to start a business to capitalize on his or her opportunity. Explicit in the Timmons framework is the notion that the entrepreneur and the provider of capital will be rewarded with profits, and that both are commensurate with the risk and effort involved in starting, financing, and building the business. The entrepreneur usually risks career, personal cash-flow, and some or all of his or her net worth. In an ideal situation, all this is quantified in a business plan before the business is operational.

According to Bygrave and Hofer (1991) the entrepreneurial process involves all the functions, activities, and actions associated with perceiving opportunities and creating organizations to pursue them. This was explicated in Moore's model (1986) subsequently embellished by Bygrave (1995), in which the entrepreneurial process follows a somewhat predictable sequence (Figure 2). In this descriptive model, the stages of entrepreneurship are (1) innovation in which the would-be entrepreneur gets ideas for starting a new business; (2) the triggering event launches the would-be entrepreneur to seek the resources to start the new venture; (3) the actual implementation of the new business; and (4) starting, growing, and managing the business. In this model, entrepreneurship is primarily determined by situational and personal factors. Unlike the Timmons framework, the rewards are not explicit in the Moore model. Rather, it encompasses a variety of new ventures from part-time pursuits, with little or no financial rewards, to high-potential startups which are expected to produce substantial monetary returns.

In Moore's model, during the innovation stage the entrepreneur's personal characteristics combine with the environment to create opportunities. The decision of the would-be entrepreneur to strike out on his or her own is usually set in motion by a triggering event. A career path may be blocked in a person's present employment; or worse yet, a person may be fired. At that point role models, family, and networks of friends and associates are important influences on the entrepreneur. The entrepreneur then begins to search the environment for specific resources to start the new company. There are many environmental influences that hinder or facilitate the starting of the new venture. The principal one is raising capital.

 

EMPIRICAL METHOD

Our sample is comprised of four well-researched case studies about not-for-profit startups that meet the necessary requirements of serving an inner-city clientele, and provide data about the entrepreneurial process, including founders, opportunity, resources. Finding cases of this type proved to be quite a challenge. A search of 3750 cases produced by two business schools pre-eminent in the field of case development and teaching methods (Darden and HBS) yielded three cases meeting the requirements. The Babson researchers wrote a case on a social venture (D'Heilly and Taylor, 1995) that met all of the requirements, bringing the sample to four. In addition, a fifth case was selected (HBS) which provided fragmentary information on a venture launch as part of a description of an inner-city intervention program.

 

Case Profile Matrix

Organiz-ation Geo Location Case Date Start-up Phase Target Audience Intervention/

Core Program

NFTE New York, NY and Newark, NJ 1990 1988 Rapid growth Inner city, at-risk public school students Starting individual businesses, entrepreneurship training
Manchester Craftsmen’s Guild Pittsburgh, PA 1992 Late 1960s Mature

(data poor)

Inner city, at-risk public school students; economically disadvantaged artists Art programs, especially photography and ceramics
Leeway New Haven, CT 1988 N/A Pending Inner city, at-risk homeless AIDS population Intermediate health care facility
Working Capital New England 1993 1989 Rapid growth Rural and urban, low to moderate income, self-employed Micro-enterprise, uncollateralized peer-lending
Food From the ‘Hood Los Angeles CA 1993 1992 Startup Inner city, at-risk public school students Starting a business

All five organizations in our sample were structured as not-for-profit organizations; each venture focuses on the needs of at-risk inner-city populations. Three focus on minority youths. All but two of the cases were written by different people; not all emphasize the same aspects, or go into the same depth about the startup process. For the purposes of this paper, not-for-profit ventures will also be referred to as social entrepreneurship; for-profit ventures will also be referred to as commercial ventures.

Cases were content analyzed; the results reported here are based on frequency counts. The research team brings special expertise to this research based on personal experience with startups both for- and not-for-profit. One of the researchers is the founder of a highly visible, social venture lauded in the press for its success with Los Angeles inner city youth after the LA riots.

 

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Last Updated 1/15/97 by Geoff Goldman & Dennis Valencia

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