In the traditional view of markets, a distinction between two types of

organizations can be made: for-profit and not-for-profit. While the

former type of organizations has a clear principle which states that the
ultimate goal, according to classical theory, is to maximize its profits,
the latter’s focus is on providing services and products without the
need to make profit (Besley & Ghatak, 2016).

However, in modern day markets, this division is rather simplified as it

leaves out hybrid forms of these organizations. One of these types, a
hybrid form that is tied to social entrepreneurship, is the social
enterprise. The use of the term is gaining increased popularity,
however, social entrepreneurship “as a focus of academic enquiry has a
relatively brief history.” (Weerawardena & Mort, 2006).

At the beginning of this century, Dees (2001) was one of the first to
discuss the meaning of social entrepreneurship and identified five key
characteristics. At this point in time, the term meant different things to
different people. Since the late 1990s, social entrepreneurship has
gained increased attention in not only the US and EU countries, but also
in regions such as Eastern Asia and Latin America (Defourny & Nyssens,
2008).

In line with the growing number of social enterprises, attention from

academics in the field of social entrepreneurship has grown. Yet, there
is still little consensus on what the key characteristics and boundaries of
the term are. Definitions range from broad to narrow, as some opt for a
more inclusive definition, while others argue in favor of a more rigorous
definition because it would otherwise include too many activities that
cannot be regarded as entrepreneurial. The current lack of a common
definition is one of the factors that causes limitations, hinders research,
and leaves room for discussion on which activities fall under the
spectrum of social entrepreneurship (Martin & Osberg, 2007). 4
Another challenge that arises is the categorization of different
organizational types of social enterprises. Social enterprises are not
limited to merely the non-profit sector, but can also be active in the for-
profit sector (Austin, Stevenson & Wei-Skillern, 2006). It is important to
categorize different social enterprises taking into account the
organizational structure in order to allow for comparisons between
them. Besides the definitional and categorization challenges, the issue
of performance measurement in social enterprises has become a topic
of increasing interest for researchers. Since a social enterprise does not
put profit maximization as the main goal, but rather aims at social
impact, alternative models to measure their performance are needed.
Even though there has been a rise in methodologies to measure social
impact, a model that allows for systematic comparisons between
different approaches, firms and sectors is lacking. Yet, the need to do
so is increasingly gaining attention. According to Arena, Azzone and
Bengo (2015), one important reason why social enterprises should start
measuring their performances in a systemic way is to provide
accountability towards stakeholders. According to Mair & Martí (2006),
the issue in measuring social impact might not be the problem per se,
but the quantification of the outcomes is what makes measuring social
enterprise performance complicated. While traditional enterprises
often rely on monetary values and financial indicators like profits to
determine the company’s performance, social enterprises seem to lack
a key quantitative factor that indicates their performance. This is also
what causes the uncertainty in investment in social enterprises to be
higher compared to traditional enterprises (Austin et al., 2006). A final
challenge in establishing performance measurement system for social
enterprises is the comparability between multiple performances in the
social dimension. The comparison of social value creation as a
consequence of different activity or interventions has been regarded as
a great challenge by scholars (Austin et al., 2006; Mair & Martí, 2006;
Zahra, Gedajlovic, Neubaum, & Shulman, 2009). This is due to the
qualitative nature of social value and its quantification problem.