SOCIAL ENTREPRENEURSHIP IN THE FIELD OF RECYCLING: HOW TO

DEVELOP PROFITABLE BUSINESS WITH SOCIAL IMPACTS?

Ulla Lehtinen
University of Oulu, Department of Industrial Engineering and Management
Box 4610, 90014 Oulu University, Finland
Tel: + 358 8 553 2934, Fax: + 358 8 553 2904
Email: Ulla.Lehtinen@oulu.fi

Kaarlo Paloniemi
University of Oulu, Department of Management and Entrepreneurship
Box 4600, 90014 University of Oulu
Tel:+ 358 8 553 2983, E-mail: Kaarlo.Paloniemi@oulu.fi

Sauli Pajari
University of Oulu, Department of Management and Entrepreneurship
Box 4600, 90014 University of Oulu
Tel:+ 358 8 553 2927, E-mail: Sauli.Pajari@oulu.fi

Kari Poikela
Elker Ltd, Särkiniementie 3, FI-00210 Helsinki, Finland.
Tel: +358 10 2491702, E-mail: Kari@elker.fi

ABSTRACT

This paper discusses the problematic of social entrepreneurship in the field of

recycling. The adoption of European Union’s directive on Waste Electrical and
Electronic Equipment (WEEE) has created hinders and barriers but also opened new
business opportunities for social enterprises. The paper aims to increase the
understanding of social enterprises; How new business is generated in a social
enterprise context. In this preliminary paper we focus on the entrepreneurial process
and use the selected social enterprise as an explorative case to test our revised
theoretical framework. In Finland social enterprises are for-profit by legislation
However, the case discloses how the double-edge goal of both social impacts and
profit-seeking business is possible to fulfill by developing innovative business
models. The paper presents one case study; a social enterprise that operates in a form
of an association and is quite large and an important pre-treatment station of WEEE.
In the paper we first discuss on corporate and social entrepreneurship and
entrepreneurial process in social enterprise context based on the literature. Second we
present the case “EcoMary”; the development and key decisions during the
entrepreneurial process are discussed and further analysed based on theoretical
framework.

1
1. INTRODUCTION

Social enterprises were introduced officially in 2004 and today there are 95 registered
social enterprises in Finland. According to Ministry of Labor a social enterprise is
above all a business just like any other. Its purpose is to make a profit by providing
products or services for all market. A social enterprise can operate in any sector at all.
To be accepted into the register of social enterprises, a company must fulfill the
following criteria:
• at least 30% of the company’s personnel must be disabled persons or a mix of
disables persons and long-term employed persons;
• all employees must paid the salary due to a fully capable employee as per the
relevant collective bargaining agreement;
• the company has not violated any laws in its business, has not acted contrary
to good business practice, and has not defaulted on its taxes, social security
contributions or social insurance contributions.
Social enterprises are on an equal footing with other businesses as regarded private
and public financing. However social enterprises may be paid employment subsidies,
combined subsidies and labour market project subsidies out of employment
appropriations on terms different form those for other companies. (Ministry of
Labour, 2007)

The adoption of European Union’s directive on Waste Electrical and Electronic

Equipment (WEEE) has created hinders and barriers but also opened new business
opportunities for social enterprises. In Finland electrical and electronic equipment
producers and importers have formed producer co-operatives that act as coordinators
of recycling for its members. Five associations (SERTY, SELT, FLIP, ICT and
NERA) have been established so far. Elker Ltd is established by SELT, Flip and ICT
in 2004 for the purpose of organizing the collection and recycling of WEEE. Within
the supply chain of WEEE, various tasks like collection, transportation, sorting and
disassembly of products and storage and selling of material fractions as well as
reusable products and parts are conducted. The producer co-operatives are sourcing
the reverse logistics from regional operators; usually from social enterprises or public
institutions. About 25 social enterprises are operating as pre-treatment stations of

2
WEEE. They have also their own charity shops where they sell reusable equipment.
These pre-treatment points are in general owned by social enterprises or local
associations of the unemployed. The entry to recycling business has changed the
business environment of these social enterprises and has created growth opportunities.

This paper discusses the problematic of social entrepreneurship in the field of

recycling. The paper is based on an on-going Sytrim-project including eight firms
which tries to find best practice models for social entrepreneurship in the field of
recycling in Finland. In this paper presents one case study; a social enterprise that
operates in a form of an association and is quite large and an important pre-treatment
station of WEEE. This paper is the first step within the project to describe and
analysis the complex and challenging field of social enterprises in entrepreneurial
research context. The research purpose of the paper is formulated in following way:
How new business is generated in the context of social enterprise?

2. ENTREPRENEURSHIP

The academic literature on social entrepreneurship is limited. This is not surprising

because there is still a disagreement among scholars in the field of entrepreneurship
over how to define entrepreneurship. Thus there is a disagreement over how to define
social entrepreneurship, in particular 1 . However, the recent studies have gone a long
way in describing the entrepreneurial phenomenon, and today the picture is seen more
clearly in the field as the entrepreneurial personality, the creation of a new
organization, or as the entrepreneurial process (Stam 2002). In this study we focus on
the latter research stream, the entrepreneurial process, because the former stream of
research of entrepreneurial personality lacks a theoretical credibility in emphasizing
the role of entrepreneurs as individual actors and their entrepreneurial traits (Gartner
1989). However, this is not to say that entrepreneurs are of importance in
entrepreneurship. On the contrary, entrepreneurs’ role as a key actor in the
entrepreneurial process is crucial, as we will state below. In addition, we see the
creation of new organizations and the entrepreneurial process in the field of
entrepreneurship as the same issue but from different viewpoints. Both of these

1
See a review of different definitions, for example, in Mair and Marti (2004) and Light (2005).

3
streams are focusing on to effect a new economic activity 2 . In other words, it is quite
common to see the exploitation of developed business opportunities in real-life
situation as new economic organization like a firm or as sales to existing firms on the
markets 3 . The creation of a new organization is depicted as outcome of the
entrepreneurial process (e.g., Gartner 1985).

Although the widely shared definition of entrepreneurship is still emerging, only very
few are denying the role of entrepreneur 4 as a key actor in the entrepreneurial process
(e.g., Davidsson 2005; Shane 2003). However, there is also a great variation between
different interpretations of the content of the entrepreneurial process and the definition
of business opportunity 5 . In this study we see the entrepreneur as an actor who is
deeply embedded into the society, and who is responsible for the decision to start the
entrepreneurial process. In addition, we argue here that the (nascent) entrepreneur do
not simply recognize or discover the business opportunity but intentionally develops it
during the process. Thus we focus on how to develop feasible business opportunity
from the initial ideas to able to exploit it as new economic activity in the context of
new firms 6 , already existing firms, or other type of organizations, and on the markets.

There are several paths to go and different ways to behave during the course of
developing new economic activities, in other words, developing new business
opportunities in the entrepreneurial process. According to literature in
entrepreneurship there is at least two different theories to follow: one is the rational
choice theory, and the other is theory of creative thinking. Dunham and
Venkataraman (2002) argue that, although, the rational choice theory has served as
the basis for models of human action across the behavioral sciences, and also in
entrepreneurship, for decades, however, it has also awaken growing criticisms. These
criticisms have, for example, focused on the theory’s inability to deal with various
specialties of human action. In their working paper Dunham and Venkataraman

2
For example Davidsson (2003) provides the definition of entrepreneurship as new economic activity.
3
See more about modes of exploitation of business opportunities in Shane and Venkataraman (2000,
224).
4
Depending of the context entrepreneur is seen here as a nascent entrepreneur (Reynolds 2000),
corporate entrepreneur (Burgelman 1983), and as social entrepreneur (Light 2005). Also, the concept
includes both includes both single individual and several individuals (i.e. a team behaving as
entrepreneur).
5
Read more about different types of opportunities in Davidsson (2003).
6
Firms can be for-profit, or non-profit firms.

4
manage to differentiate between action taken by “rational actor” and “creative actor”
during the entrepreneurial process. In the entrepreneurial process context the
distinction between rational actor and creative actor is clear; on the one hand, the
goals-oriented rational actor focus on selecting among already given means to achieve
the already defined goal; and on the other hand, means-oriented creative actor focus
on generating new alternatives. This is consistent with effectual rationality (see e.g.,
Sarasvathy 2001). See Table 1 for an illustration.

Table 1: Comparison between rational and creative actor (Source: Dunham and
Venkataraman 2002)
Rational actor Creative actor
Is guided by well-ordered, stable sets of preferences, and Seeks to forestall closure around a
compares alternative choices and selects the alternatives that goal, because this might cut off
best improve their situation fruitful avenues of exploration,

The goal-oriented nature of the process (i.e., rational actors Creative actors are largely focused
are focused on selecting among choices already given). on generating new alternatives.

Dunham and Venkataraman (2002) ideas are parallel to Sarasvathy’s (2001)

theorizing between effectual and causal rationality. Together they disclose an
interesting question concerning the entrepreneurial process: if one chooses effectual /
creative approach rather than causal / rational, how does it affect the entrepreneurial
process. This question is important for the purposes of this study because in the
context of social entrepreneurship entrepreneurs have to tackle with several aspects
during the entrepreneurial process (i.e., during the developing new economic
activities). One of the most challenging aspects deals with the outcome of the
entrepreneurial process which should include both social and economic aspects. But
before we go further with this we discuss about social entrepreneurship and what kind
of relationship there is between entrepreneurship and social entrepreneurship. Reed
more on this issue in “Entrepreneurial process and social entrepreneurship”-section.

2.1. Entrepreneurial process and corporate entrepreneurship context

As noted above the entrepreneurial process exists in the context of individual(s) as

well as in the context of existing organization. In the latter case we are talking about

5
corporate entrepreneurship (see for example, Burgelman 1983, and Covin and Miles
2007). According to Burgelman (1983, 1363): “Based on the observation that
organizations if they want to continue to be viable must support a degree of
entrepreneurial activity within them, the paper has attempted a conceptual integration
through the idea of “corporate entrepreneurship.”

Burgelman (ibid.) emphasizes the need for activities which allow for “entrepreneurial
activity-diversity-to be transformed into new organizational activity” (Burgelman
1983, 1363). As depicted in Figure 1 these new content can be incorporated into the
organization’s strategy: firstly, if it is done by “induced strategic behaviors” the
current concepts of strategy is used directly in enhancing the generation of new
business opportunities in the enactable environment 7 ; and secondly, if it is done by
“autonomous strategic behaviors” the introduction of new possible categories is used
indirectly for the development of new opportunities in new environments.

Figure 1 A model of the interaction of strategic behavior, corporate context, and

concept of strategy (Burgelman 1983)

Through the corporate strategy both the induced behaviors of the actors inside of the
organization and structural context can be manipulated by top management. However,
it is not possible to manipulate directly the autonomous behavior but only through
manipulating structural context directly and if there is favorable changes in structural

7
In the last analysis, the ”environment” rejects or confirms the soundness of the judgments about it, but
the relevant environment is not an objective fact discoverable before the events (Penrose 1968, 41;
cited in Burgelman 1983, 62)

6
context it will have an indirect effect on the strategic context of the organization.
According to Burgelman (ibid.) it is possible to provide guidance for further
entrepreneurial initiatives at the operational level. In other words, middle level
managers will link the autonomous strategic initiatives into the corporation’s concept
of strategy. Thus, the process in which the strategic context intervenes between
autonomous strategic behavior and concept of organization strategy is important in the
context of corporate entrepreneurship.

One of the most used applications of corporate entrepreneurship is corporate

venturing 8 . Covin and Miles (2007) argue that despite the importance of corporate
venturing there is a still absence of a shared understanding of what it means to venture
strategically, that is what kind of relationship there is between corporate venturing and
business, or organization’s strategy.

According to Covin and Miles (2007) corporate venturing includes several ways to
enhance the parent organization’s performance; it can leverage organization’s core
competencies within product–market arenas operationally or strategically related to
the firm’s existing business; it can be used to build new competencies that can extend
the firm’s reach into “new-stream” opportunities previously outside the firm’s scope
of operations; it can used to “creates a platform for organizations that makes the
search for new and relevant business ideas a part of the company’s day-to-day
strategy.”; and finally, it can used as a way to “leapfrog” out of declining businesses,
transporting these corporations into new core businesses with better opportunities for
growth. (Covin and Miles 2007, 183)

Drawing on literature review 9 Covin and Miles (2007, 185-189) suggests generic
models of how CV and BS may coexist in organizations. The illustration of the
models is depicted as five models in Figure 2. The key attributes of these generic
models are following: firstly, in model 1 corporate venturing (CV) and business
strategy (BS) are only weakly linked or unrelated; secondly, according to model 2

8
Corporate venturing involves entrepreneurial efforts used to invest or create new business inside the
established organization, outside the parent organization’s organizational domain, or together with
another established parent organization (Covin and Miles 2007).
9
For example journals like Entrepreneurship Theory and Practice, Journal of Business Venturing, and
Strategic Management Journal

7
business strategy (BS) drives corporate venturing (CV); thirdly, in contrast to model
2 in model 3 corporate venturing (CV) drives business strategy (BS); fourthly, in
model 4 corporate venturing (CV) and business strategy (BS) are reciprocally
interdependent; and fifthly, according to model 5 the corporate venturing (CV) is the
business strategy (BS). Drawing on the categorizing presented here it is evident that
each model has unique theoretical implications for the competitiveness and long-term
viability of organizations that employ CV. The key attributes and ramifications of the
models are outlined in the succeeding discussions.
Model 4
Model 1

CV BS CV BS

Model 2

Model 5
CV BS

BS
Model 3
CV

CV BS
CV= Corporate Venturing
BS = Business Venturing

Figure 2 Possible configurations of the Corporate Venturing–Business Strategy

Relationship. (Covin and Miles 2007, 186)

The effective integration of corporate entrepreneurship and corporate venturing in the

organizational context is essential in revitalizing the organization and exploiting new
business opportunities.

2.2. Social entrepreneurship

An interesting phenomenon in entrepreneurship research is the question of the

relationship between entrepreneurship (i.e., originally as an economic phenomenon)
and what happens in social or non-economic areas of society (see Swedberg 2006). It
is a common knowledge in entrepreneurship literature that entrepreneurship has
various definitions; the situation with social entrepreneurship is the same. Although,

8
the concept of social entrepreneurship 10 is quite new in the literature of
entrepreneurship, however, in the recent years the interest on this area of research is
growing (Gentile 2002). According to Hockerts (2006) 11 the term social
entrepreneurship emerged in the literature in late 1990s in the U.S. and in the UK.
However, as Mair and Marti (2004) emphasize, examples for social entrepreneurship
can be found around the globe. According to the literature, in the context of social
entrepreneurship the role of entrepreneurs can be seen as community leaders, activists
in non-profit organizations, and as governmental employees (Hockerts 2006, 4). Of
course, “ordinary” entrepreneurs can be seen in this role, if they identify and
implement whatsoever innovation that creates social wellbeing in society direct or
indirect through their new or already established organizations. Thus, it is clear that
like in the context of economic entrepreneurship in which it is possible to behave
entrepreneurially in the context of already existing organizations, we are expecting
here that the same is to happen also in the context of social entrepreneurship.

Although the social entrepreneurship concept is considered as a new phenomenon, it

has actually a long history. In fact, one of the earliest scholars who have discussed the
relationship between entrepreneurship and social entrepreneurship is Schumpeter,
who presented the common factors between entrepreneurship and social
entrepreneurship in his 1911 dissertation (cited in Steyaert and Hjorth 2006, 33-34).
Drawing on Schumpeter we argue that a general theory of a particular phenomenon,
for example the general theory of entrepreneurship, is feasible in analyzing a sub-
phenomenon of that phenomenon. According to Schumpeter social entrepreneurship
emerges together with dynamic or entrepreneurial change as “a form of dynamic
behavior in one of the non-economic areas of society” (Swedberg 2006, 33). See
Table 2 for an illustration.

Table 2: Economic change and social entrepreneurship (Swedberg 2006, 34)

Economy Society
Dynamic or entrepreneurial change Development Social entrepreneurship
Static or non-entrepreneurial change Adaptation Social evolution

10
We follow Swedberg (2006) in the use of the concept of social entrepreneurship to understand the
relationship between entrepreneurship and social changes (see also Guclu, Dees, and Anderson 2002).
11
Hockerts (2006, 4) cites several scholars who contribute to social entrepreneurship literature;
Bornstein (1998); Boschee (1995); Brinckerhoff (2000); Dees (1998a), (1998b); Dees, Emerson, &
Economy (2001a); Drayton (2002); Henton, Melville, & Walesh (1997); Leadbeater (1997); Warwick
(1997); and Zadek & Thake (1997).

9
2.3. Entrepreneurial process in social entrepreneurship

For being able to form a theoretical framework we take the Guclu, Dees, and
Anderson model called “The opportunity creation process” (2002) and use it as one of
the starting points for our theoretical framework. The model depicts two things: in
Step 1 the model emphasizes rightfully the role of entrepreneurs (i.e., the nascent
entrepreneur 12 ) and their personal experiences – that is, prior knowledge 13 , human
and social capital 14 – as a source for the promising idea in initial phase of the process
and during the process; and in Step 2 the development of the promising venture idea
into an attractive business opportunity. See illustration of the model in Figure 3.

Figure 3 The opportunity creation process (Guclu, Dees, and Anderson 2002, 2)

Although, Guclu et al. (2002) manage to disclose many of the recent ideas of the
entrepreneurial process in their model, they fail, however, in some respects, to include
into their model at least two important aspects already available in the literature.
Firstly, they manage to disclose the importance of nascent entrepreneur’s personal
experience, social assets and needs, and change which all serve as a filter and guide in
the idea generation process. These aspects share, in some respects, Venkataraman’s

12
See Reynolds (2000) who defines nascent entrepreneurs as individual who are actively engaged in
the star-up process, or entrepreneurial process, but who have not yet achieved an actual firm birth.
13
Read more about this in Shane (2000).
14
Read more about human and social capital in Davidsson and Honig 2003, and in Gordon (2006).

10
ideas of “Raw materials of Opportunities”. Venkataraman categorizes these sources
following: technological, economic, and social trend and conditions as well as
“Needs” emerging in the surrounding society (Venkataraman 2002). In this study we
draw on the ideas of both of these scholars to be able to understand more thoroughly
the initial phase of the process of development new business opportunities for
exploitation following the nascent entrepreneur’s decision to start the entrepreneurial
process.

Secondly, although Guclu et al. (2002) cleverly disclose in their model that business
opportunity is not something ready to be discovered but an outcome of the developing
process, they fail, however, to explicitly focus on the situation which shows that there
are at least two paths to go during the process. This new approach to see the progress
of the developing ideas into opportunities is presented more clearly if we combine
some new ideas from Brainard and Siplon (2004), Dunham and Venkataraman (2002),
and Simms and Robinson (2006) into Guclu et al.’s model. By drawing on the current
studies we argue that based on their basic assumptions nascent entrepreneurs are
making decisions to start the entrepreneurial process with a focus either on social
impact or economic efficiency. In former case, following the ideas of Simms and
Robinson (2006) we can talk about nascent entrepreneurs with an “activist identity”.
In words of Brainard and Siplon (2004) we can talk about the “voluntary spirit
model”. If the decision to start the entrepreneurial process includes focus toward
economic efficiency, we can talk about nascent entrepreneurs with an “entrepreneurial
identity” (Simms and Robinson 2006). Following Brainard and Siplon (2004)
vocabulary we can call this case the “economic model” and emphasize business-like
methods included into the model.

In addition to what we have stated above, we draw on Dunham and Venkataraman’s

(2002) conclusion about the results from the study of differences between rational and
creative action that the entrepreneurial process coming true depends on which one of
these two assumptions the actors in the process utilize. In both cases the processes are
identifiable by the premises; in activist situation all the decisions to be made are based
on social impact; and, in entrepreneurial situation on economic efficiency.

11
Focusing on the concrete behaviors we draw on Dunham and Venkataraman (2002),
and Sarasvathy (2001) and argue that since nascent entrepreneurs have made their
decisions to start the entrepreneurial process focusing either on social impact or
economic efficiency they have two paths to choose 15 . One choice is to draw on
rational choices / causal reasoning – that is comparing and selecting among choices
already given; and the other is to draw on creative thinking – that is generating new
alternatives. In addition we argue that in the end of the process of both cases,
independent of the previous choices, every behavior is more or less based on rational
choices 16 (see Volery and Gomez 2000 17 ). In other words, when the nascent
entrepreneurs feel that the conceptual description of the new and emerging business
opportunity is ready to put into more specific terms for exploitation, the behaviors are
focusing toward the creation of “fit” between the business opportunity and the
selected market.

If we take as given that the nascent entrepreneurs in social entrepreneurship context

are willing to exploit their new business opportunities in the mode of new social
firms, according to Young (2001) their options are following: corporate philanthropy,
social purpose organization, or hybrid. In all cases the new firm can either nonprofit
or for-profit. See more detailed description in Table 3.

15
In fact, because it is a question of a continuum between two extreme points, that is, rational choices
or causal reasoning, and creative thinking, it means that this choice situation can be described as either
more creative or more rational. Thus, a pure creative or rational situation is unrealistic.
16
In the case of effectuation the progress from creative to rational becomes evident through several try
and error types of circles during the entrepreneurial process.
17
Interpreting the ideas of Volery and Gomez (2000, 37) of the “business state of the world 1” in
which the entrepreneur identifies opportunities and resource holders, and generates ideas for new
business activities we argue that these behaviors are creative or rational, and in the case of the
“business state of the world 2” including activities like bringing resources together, developing
products or services, and generating stakeholder we argue that these are more or less rational because
the need to form “a fit” between the new business opportunity and the real-life situation.

12
Table 3: Comparison between the organizational entities of social enterprises
and the legal forms they may take. (Source: Young 2001)
Identity/ Nonprofit For-profit
Legal Form
Corporate Major nonprofit competing for market Business corporations whose
Philanthropy share who find it useful to help other philanthropy is part a business strategy to
charities as part of corporate strategy enhance profits

Social Purpose Nonprofits that undertake commercial Businesses whose owners are focused on
Organization activities to generate funds and social goals and where the for-profit form
support social goals is more comfortable or practical

Hybrid Nonprofits whose leaders seek both Businesses whose owners sacrifice some
income and social benefits profits to achieve social goals

3. CASE STUDY

This study is a part of the Sytrim – project (social enterprises and recycling 2005-
2007) that is financed by European Social Fund (ESR) Equal-programme and
managed by Learning and Research Services at the University of Oulu, Finland. The
core mission of Sytrim is to develop and create enterprises in the field of recycling.
The project is designed to promote cooperation and networking between social
enterprises. Business models and business plans of social enterprises are evaluated to
identify best practices. Totally eight social enterprises belong to the Sytrim-network.
The authors of the paper have participated in the Sytrim –project that has given the
pre-understanding of social enterprises and recycling.

In this paper presents a single case “EcoMary” (a pseudonym) that belongs to Sytrim-
network. The background information concerning the case company is founded on the
earlier discussions and studies. The case analysis is based on a semi-structured
interview carried out in 10th October 2006. The executive director of the case
company “Mr. Stone” (a pseudonym) was interviewed by Sauli Pajari and Kaarlo
Paloniemi. The interview took 1h 40 min and was recorded.

13
3.1 The case

EcoMary is an association that is established and registered for social enterprise in

2005. EcoMary is strongly connected to its background organisation “Unemployed
Association of Marytown” (a pseudonym) (UA), which started in 1995. The task of
EcoMary is first to operate as collecting point of WEEE. Secondly, it is a pre-
treatment station that sorts, store and disassembly WEEE. Also working equipment
are repaired and sold in the charity shop of UA. EcoMary employs four people. Also
about 30 people from Unemployed Association are working for EcoMary.

EcoMary is operating as a collecting point for two producer co-operations, Elker Ltd
and SERTY, and a pre-treatment station for Elker Ltd. Since 2005 over 500 t of
WEEE is handled yearly. In figure 4 the network structure of Elker Ltd is presented.

Cash flow

Recycling fee Producer Materials flow

Tuottajat
co-operatives

Payment

Elker Ltd Recycling firms

Payment

Handling Handling Handling

payment payment payment
WEEE

Private Collection Transportation EcoMary

User Points firm
Re-use
Industry and
Community
Landfill

Figure 4. The position of EcoMary in the recycling network.

First, when a private user is buying new equipment, he also pays a recycling fee for
producer co-operatives. Few years later the used equipment is returned to a collection
point and transported to a pre-treatment company. After pre-assembly the metal
fractions and other valuable components are sold to recycling firms. Elker Ltd. as well
as SERTY has contracts with collection points, transportation companies and pre-

14
treatment points, which are operating as subcontractors. The payment for these
organisations is based on the amount of handled WEEE at each stage. Earnings from
valuable components and metals sold to recycling firms are divided between the pre-
treatment firm and the producer organisation.

On the other hand, non-private users, such as industry and offices, are not allowed to
return WEEE to a collection point free of charge. EcoMary makes its own agreements
with non-private users. The collection from non-private users is an important business
for the case company, because it can charge freely and gets the earnings fully from
recycling firms.

3.1.1. The emergence of new business

The Unemployed Association established 1995 was looking for new manager in 1999
by a newspaper advertisement and Mr. Stone was hired even though he did not have
any degree: Mr. Stone had dropped out technical collage. However, he has had over
20 different jobs before and had worked in metal industry, restaurants and had started
and managed a t-shirt printing shop. He had also been a motor-cycle race driver etc.
Mr. Stone’s father had had a car dismantler shop, which was his first job. Mr. Stone
said that he has an innovative attitude to life “Whatever people do, why not, I can
learn to do the same”

In 1999 the revenue of the UA was about 0.5 million Euro and in 2006 three times
more, that is, about 1.5 million Euro. The town has supported the association from the
beginning, last year the support was about 180 000 Euro. The UA hires for long-term
unemployed persons. It also offers different kind of legal and social services to help
unemployed and displaced people. After a month in 1999, Mr. Stone decided that the
association should orientate more to business. Mr. Stone explained that operations of
association must be done in the economical basis: “There must be concretization that
makes money. You cannot get social impacts without money. The association must
have money in its own pocket”. In that time there were lot of good, skilled
unemployed people and Stone started to look at businesses were selling would be easy
to do. For example, they started to build sauna cottages, to carpenter as well as carrier
services and renovating furniture. The association also sold recycled furniture, cloths,
catering etc. The only business area Mr. Stone abandoned was car repair, because, on

15
the one hand, they did not had enough skills needed in repair, and on the other hand,
due the changes in legislation the risks in being responsible for repair of the car were
growing.

Many people, especially among the founding members of UA were suspiciousness for
the new business ideas. Mr. Stone had to justify why the association should make
profit. He explained that without money the UA cannot offer its social services. It
took about two years, before the change was totally accepted. Mr. Stone considered
that the ideas are developed and made together with the chair of executive board of
UA. He mentioned representatives of the town, the major of the town, social services,
the employment office, local Employment and Economic Development Centre and
also the association of entrepreneurs as important local partners. Only conscious and
controllable risks are taken in the business; as Mr. Stone said “If you jump from low
you do not fall from a height”

The idea to enter to recycling business 18 started in 2002, when Mr. Stone noticed that
lot of electronic equipment, televisions, refrigerators etc, were brought to UA. He
presupposed that this waste would offer new business area for UA especially, because
the demand for used computers etc. had been high in a University town (a
pseudonym). From economic point of view he made an assumption that best way to
test new possibilities was to establish a project: “We could really exploit brought
equipment by using someone else’s money”. The association had employed many
years one person who had repaired used equipment but it was not profitable, so they
needed “support” to start to test new business idea. As a solution to the situation a
three year project called ELSA was established with support of local Employment and
Economic Development Centre. The aim of the project was to study and test the
recycling business. First they had four people for disassembly and they employed a
managing director who has been responsible for operational planning and
management every since. The practical skills for the business they learnt by visiting
for a week in another recycling company. Then they hired a new production area and
the number of workers increased up to 30. The volumes were growing also because

18
Recycling shall mean the reprocessing in a production process of waste materials for the original
purposes, or for other purposes, including organic recycling but excluding energy recovery (European
Council 1994). In this paper recycling business covers collection, pre-treatment, reprocessing and reuse
stages.

16
they started to market their recycling services. They also bought a scarp baling
machine, which increased efficiency and the recycling of WEEE started so to become
real business. Also a new factory premises and a forklift was bought. In Finland the
European Union’s directive on Waste Electrical and Electronic Equipment (WEEE)
came into force in 13.8.2005 which decreased the payments from sold components
and materials even 90 %. This was a hard time for the business, but according to Mr.
Stone they managed by increasing volumes and finding supporting businesses.

The business of ELSA increased and Mr. Stone started to figure out what kind of new
business model would be feasible after the project. On one day in small hours in
December 2004 Mr. Stone got a creative idea how to organize the business after the
project. EcoMary was established only for business purposes 1.7.2005 in a format of
a registered association 19 . The council of the association is formed by four key
persons who are also working in the Unemployment Association. The profit from
EcoMary is going back to the main association. EcoMary also pays rent for UA for
the premises and machinery. Respectively, the UA is able to support EcoMary
financially when needed. The establishment of EcoMary was not possible without the
support (e.g. financial, materials, facilities) from UA.

13.9.2005 EcoMary was also the first association that is accepted for social enterprise
75% of personnel of EcoMary are disabled persons and the rest are hired by UA. Mr.
Stone explained that EcoMary is also a good brand for the “Unemployed
Association”. It is a showcase that gives good impression on operations. Mr. Stone
has not made any literal business plan for business; the ideas are in the head of Mr.
Stone. In the future the business will be widening to other sectors although, supply of
skilled workers limits the implementation.

3.2. Case Analysis: Case “EcoMary”

In this preliminary paper we focus on the entrepreneurial process of one case and use
the selected social enterprise as an explorative case used to test our revised theoretical
framework. If the framework is feasible we will use it in analyzing the entrepreneurial

19
The constitution of the association defines the policy. The council of the association is the decision-
making body.

17
process of all other social enterprises, as well. In addition, we have limited our study
to focus only on particular steps or phases in the entrepreneurial process. We argue
that these phases are useful in understanding the three research sub-questions: firstly,
to understand the basic assumptions of the parent organization (i.e., the Unemployed
Association of Marytown) behind the choices made in choosing how the corporate
entrepreneur identifies himself in the beginning of the process, secondly, to
understand the nature of his actions in going further in the process, and thirdly, to
understand how the corporate entrepreneur finds the way to fulfill the double-edge
goal of parent social association.

Based on our theoretical framework and the collected data (i.e., observations on site
and the interview of Mr. Stone) it is reasonable to state that the corporate
entrepreneur, Mr. Stone, identified himself clearly as entrepreneurial. This
interpretation confirms our initial theoretical framework; the prior experiences (i.e.,
education, work experiences, also as entrepreneur, social networks, etc.) makes it
more understandable why Mr. Stone did saw the business-like methods and means
and goals as more feasible than those heading toward direct social impact. While the
shared understandings and history among people in the Unemployed Association
imply to the activist nature of the strategy of the UA, we believe that the association is
turning its course toward more explicitly as business strategy driving organization
when the question is about organizational support given to corporate venturing (i.e.,
focusing intentionally on new ways to enhance its main goals, the social impact.)

The case is a typical corporate entrepreneurship spin-off case because it includes

several activities before the actual new venture start-up. In this case these previous
activities included the try-and error-testing activities to explore new business-like
operations in the context of the three year project ELSA. Without this project it would
have been much more difficult for the association representatives to approve to start
“effectually” 20 (i.e., being prepared to bear an affordable loss AND to try again with
another type of operations). However, as an invited member of the staff of the UA Mr.
Stone was able to influence the decisions of the association and to convince the
administration to support the founding of ELSA project which, in fact, had aim

20
Read more about effectual or effectuation in Sarasvathy (2001).

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toward more direct social impact. However, at the same time Mr. Stone was able to
get to know how to operate economically efficient in the business he had only little
knowledge. Based on his multifaceted experience, and his ability and willingness to
learn new things Mr. Stone was able to avoid the easy solution, to do “business-as-
usual” and build the new activity based on rational thinking (i.e., goal-directed choice
of given means). In fact, his choice to choose a surprising mode of organizing – that is
an association based social enterprise, is very innovative because it makes possible to
look for both effective means to gain profit, and indirect social impact by being able
to finance the activities of the UA among unemployed.

4. DISCUSSIONS

In Finland social enterprises are for-profit by legislation – business just like any other.
However, the case of EcoMary discloses how this assumption is possible to overcome
by developing innovative business models which allow different kinds of questions to
ask and different kinds of solutions to create. In this paper we have revised the
theoretical framework by drawing on previous studies both in entrepreneurship, in
general, and in social entrepreneurship, in particular. Our study is clearly in the
beginning of its course but it already gives us some initial evidence which helps us to
understand the problems a nascent social corporate entrepreneur faced in the
entrepreneurial process. We hope that in the future we are able to test our framework
more thoroughly, and contribute the entrepreneurship research on entrepreneurial
process.

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