Social capital, social innovation and business model innovation

Dr Winnie Law
wwylaw@hku.hk

SLGP7103 Social Entrepreneurship and Social Innovation

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Lecture Outline
I. Defining Innovation
• Eco-innovation
• Business model innovation
• Social innovation

II. The Concept of Social Capital

III. Civic Engagement and Public Participation

IV. Class Exercise

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Innovation

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Innovation

• Innovation – challenges the usual way

of doing things

• Research & Development (R&D)

• Technology-led innovation

• The “innovation” can be a product,

service or even be a process or an
experience

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4 Types of Innovation Impact

Photo source: Fresh Consulting

Incremental Sustaining Disruptive Radical

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Sustainable Innovation / Sustainable-oriented Innovation

Eco-Innovation Social Innovation Business Model Innovation

• Sustainable innovation is a process where sustainability considerations (environmental, social,

and financial) are integrated into company systems from idea generation through to research and
development (R&D) and commercialization. This applies to products, services and technologies, as
well as to new business and organizational models. (Charter et al., 2008; Charter and Clark, 2007)

• Sustainability-oriented innovation (SOI) involves making intentional changes to an organization’s

philosophy and values, as well as to its products, processes or practices to serve the specific
purpose of creating and realizing social and environmental value in addition to economic returns.
(Adams et al, 2015)

• Beyond eco-innovation because it includes social objectives; beyond regular product and process
innovations and is future-oriented (Charter et al., 2008)

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Environmental / Eco-Innovation
• Prior to SI/SOI, innovation that works towards attaining sustainable development is often
conceived under the light of “Eco-Innovation”

• Interdisciplinary project “Innovation Impacts of Environmental Policy Instruments” introduced

the term “Environmental innovation (Eco-Innovation)” as:
“…all measures of relevant actors (firms, politicians, unions, associations, churches,
private households), which develop new ideas, behavior, products and processes, apply or
introduce them; and which contribute to a reduction of environmental burdens or to
ecologically specified sustainability targets.” (Klemmer et al., 1999)

• The European Commission defined eco-innovations as:

“Eco-innovation is any form of innovation aiming at significant and demonstrable
progress towards the goal of sustainable development, through reducing impacts on the
environment or achieving a more efficient and responsible use of natural resources,
including energy”. (EC, 2006)

• OECD proposed the following about measuring eco-innovation:

“Eco-innovation is the production, assimilation or exploitation of a product, production
process, service or management or business method that is novel to the organisation
(developing or adopting it) and which results, throughout its life cycle, in a reduction of
environmental risk, pollution and other negative impacts of resources use (including energy
use) compared to relevant alternatives.” (OECD, 2007)
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Business Model Innovation
An increasing number of scholars are framing Sustainable Innovations as a business model
challenge. (Adams, Jeanrenaud, Bessant, Denyer & Overy, 2015)

• Business model of a company, whole industry or business philosophy is seen as a mediator

for innovations that not only links production and consumption but also embraces
stakeholders and their expectations from non-business areas (Boons and Leudeke-Freund,
2013). [exchange of value]
• Successful Sustainable Business Model Innovation can be analyzed in terms of how firms
succeed in combining a value proposition with value chain management, interface with
customers, and revenue model [what shapes the innovation network]

• Value proposition : What value is embedded in the product/service offered by the firm
• Supply chain: How are upstream relationships with suppliers structured and managed
• Customer interface: How are downstream relationships with customers structured and
managed
• Financial model: Costs and benefits from the 3 above, and their distribution across
business model stakeholders
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 Source: Fernanda Torre (2012)

Business Model Innovation

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 Source: Adams et al., 2016
Business Model Innovation – 3 “levels” x 5 “hows”

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The Case of Lee Kam Kee

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 Source: Autopilot Leadership Lab (2021)
The Case of Lee Kam Kee

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The Case of Lee Kam Kee

• A capital venture invests in start-ups globally

• “Under the LKK Group’s mission to make the

world a happier and healthier place beyond
1000 years, Happiness Capital invests in long-
term and impactful verticals to co-create
sustainable systems in: food, health, trust, and
environment.” (Happiness Capital, 2023)

• A B-corp!

• Has a 1,000-year vision!

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 Social Innovation
• “Any novel and useful solution to a social need or problem, that is better
than existing approaches (i.e., more effective, efficient, sustainable, or
Content
just) and for which the value created (benefits) accrues primarily to Dimension
society as a whole rather than private individuals.” (Stanford Social
Innovation Review, 2008)
Empowerment
Dimension
• “Social innovations are new solutions (products, services, models,
markets, processes, etc) that simultaneously meet a social need (more Governance
effectively than existing solutions) and lead to new or improved Dimension
capabilities and relationships and better use of assets and resources. In
other words, social innovations are both good for society and enhance
society’s capacity to act” (The Young Foundation, 2012).

• “…the reconfiguring of social practices, in response to societal challenges,

which seeks to enhance outcomes on societal well-being and necessarily
includes the engagement of civil society actors” (Zivojinovic, Ludvig &
Hogl, 2019).
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Types of Social Innovations
Types Examples
New lifestyles - Zero waste living (1-year challenge)

Networks - Direct trade (coffee)

- B2B partnership
New services - Consumer good sharing (Sharing Economy)
- Energy contracting (pay for performance)
New / modified - Social enterprises (CICs)
organisations - Innovation intermediaries (previously the agents)

Public participation - New participation models (participatory budgeting)

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Source: Buchegger & Ornetzeder (2000)

Social Capital

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Social Capital is….
• “…a variety of different entities, with two elements in common: they all consist of some
aspects of social structure, and they facilitate certain actions of actors – Platform for C
whether personal or corporate actors – within the structure” (Coleman, 1988: 598)

• “…features of social organisation, such as networks, norms, and trust, that

facilitate coordination and cooperation for mutual benefit” (Putnam, 1993: 35) Attributes of SC

• “…there are some goods and services to which economic capital gives immediate
access, without secondary costs; others can be obtained only by virtue of a social
capital of relationships (or social organisations) which cannot act
instantaneously, at the appropriate moment, unless they have been established and
Functions of SC
maintained for a long time…” (Bourdieu, 1986: 252)

• “…the product of social interactions with the potential to contribute to the Functions of SC
social, civic or economic well-being of a community-of-common-purpose”
(Falk and Kilpatrick, 2000: 103)

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Forms of Social Capital

Bonds / Bonding
• Links to people based on a sense of
common identity (e.g. family ties,
culture, ethnicity)

Bridges / Bridging
• Links beyond a shared sense of identify
(e.g. colleagues, members of an
association)

Links / Linkages
• Links between different social classes
(e.g. often institutional ones)

Sources: Putnam (2000) & OCED (2007) Source: Pellini & Ayres (2005: 8)

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Forms of Social Capital Sources: Laycock (2019)

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Sources: Ward (2016)
Source: Claridge (2018)
Form of Social Capital
1. Structural social capital
• External and can be observed/modified: the various social organisations
making up society (families, social networks, voluntary associations, etc)

2. Cultural social capital

• Internal, not easily changed: shared norms, values, attitudes and beliefs

2 28
Social Capital is….
1. 3.

2.

4.
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Social Capital is….
1. 3.

2.

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What is Social Capital for?

Social structure and organisations are important in society -

From “I” into “WE”
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Basic Functions of Social Capital

• As a source of social control

- Population with common goals and objectives
- From “I” into “WE” – from individual citizens to a society/community

• As a source of family support

- Healthcare support, financial, social support, etc

• As a source of benefits through extra-familial networks

- Sharing of common interests or beliefs (e.g. churches)
- Advocacy for certain interests

Source: Portes (1998)

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Other Functions of Social Capital
• “…produces an atmosphere conducive to economic activity, it provides the
cultural will to solve community problems collaboratively” (Wilson, 1997: 747)

• “…increase the well-being and productive capacity of the members of a

community” (McDougall, 1993: 207)

• “…for maintaining and enhancing the value of public goods. Public goods are
those whose value can be maintained only through co-operation and trust, and
whose value is lost through the pursuit of individual self-interest” (Wilson, 1997:
747)

• “…life is easier in a community blessed with a substantial stock of social capital”

(Putnam, 1995:67)

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Social Capital as an
Engine of Innovation

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Social Capital and Social Innovation
• Social innovation produces / enhances social capital as:
- A process: mobilizing actors, participation process, new actors relationships,
interactions, new decision-making process
- An outcome: new and improved means of collaborative action, new
governance structure, partnership models

• Social capital enables social innovation with:

- Networks: going behind human capital; allowing social actors as innovation
bearers; offering momentum for change
- Collective learning: this includes social learning and organizational learning
leading to change

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Source: Neumeier (2016); Zivojinovic, Ludvig & Hogl (2019)

Social Innovation Strategy

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Source: Minas, Mander & McLachlan (2020)
What is Social Learning?
• Assumptions:
• Social transformation/community transition = social learning processes
• Groups and communities are vehicles of social change (SD requires social change)
• “It takes a community to care for the planet”
• To address the sociopolitical causes of biophysical environmental problems rather than
focusing on fixing the problems

• Definitions:
• “a collective form of learning”(Holden, 2008: 3)
• “…collective action and reflection that occurs among different individuals and groups as
they work to improve the management of human and environmental interrelations”
(Keen et al, 2005: 4)
• “Communities of enquiry” (Lipman, 2003)
• Social learning is one of the processes for building social capital

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Civic engagement and public participation

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 Social Innovation Model

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Public Participation

“…is a categorical term for

citizen power. It is the
redistribution of power that
enables the have-not citizens,
presently excluded from the
political and economic
process, to be deliberately
included in the
future…which enables them
to share in the benefits of
the affluent society”
(Arnstein, 1969: 217)

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Engagement/Participation
• “…can be broadly described as the process of working collaboratively with groups of people
affiliated by geographic proximity, special interest and/or similar situations to address issues
affecting the well-being of those groups of people. It often involves partnerships and
coalitions that help to mobilise resources and strengthen the associations and linkages that
constitute these different forms of community life” (Mulligan & Nadarajah, 2008: 87)

• “Participation is a process through which stakeholders influence and share control over
development initiatives and the decisions and resources which affect them” (World Bank,
1996: 3)

• “…a process through which the views of all interested parties (stakeholders) are integrated
into project decision-making” (United Nations, 1997: 4).

A trend that advocates making-decision with the public!

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Empowerment

…is the aim of public participation

• Access to information
• Understanding and articulation of information provided
• Opportunity and ability to express own’s views
• Etc.

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Common framework of PE
(International Association of Public Engagement, 2000)
INFORM CONSULT INVOLVE COLLABORATE EMPOWER
Objective
To provide the public with To obtain public To work directly with the To partner with the public To place final decision
balanced and objective feedback on analysis, public throughout the in each aspect of the making in the hands of
information to assist them alternatives and /or process to ensure that decision including the the public.
in understanding the decisions. public issues and concerns development of alternative
problems, alternatives, are consistently and the identification of
and/or solutions. understood and considered. the preferred solution.

Promise to the Public

“We will keep you “We will keep you “We will work with you to “We will look to you for “We will implement what
informed” informed, listen to and ensure that your concerns direct advice and you decide”
acknowledge your and issues are directly innovation in formulating
concerns and provide reflected in the solutions and incorporate
feedback” alternatives development” your advice to the
maximum extent possible”

Example Tools
•Fact Sheets •Public Comments •Workshops •Citizen Advisory •Citizens’ Juries
Web Sites •Focus Groups •Deliberative Polling Committee •Ballots
•Open Houses •Surveys •Consensus-building •Delegated Decisions
•Public Meetings •Participatory
Decision Making
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Increasing level of participation
 What is Civil Society?
• … “area outside the family, market and state”
(WEF, 2013)

• … “the wide array of non-governmental and not-

for-profit organizations that have a presence in
public life, expressing the interests and values of
their members of others, based on ethical,
cultural, political, scientific, religious or
philanthropic consideration.” (World Bank)

• … “emcompasses a spectrum of actors with a

wide range of purposes, constituencies,
structures, degrees of organization, functions,
size, resource level, cultural contexts, ideologies,
membership, geographical coverage, strategies
and approaches” (WEF, 2013)
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 Typologies of Civil Society actors (WEF, 2013; ADB, 2012)
• NGOs, CSO, and non-profit originations that have an
organized structure of activity, and are typically registered
entitles and groups
• Online groups and activities including social media
communities that can be “organized” but do not
necessarily have physical, legal or financial structures
• Social movements of collective action and/or identity,
which can be online or physical
• Religious leaders, faith communities, and faith-based
organization
• Labour unions, grassroots associations, youth clubs,
community-based coalitions
• Academic and research institutions, think tanks
• Social enterprises, cooperatives, associations
• Independent radio, TV, print and electronic media

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Image source: Tonny & Ahmed (2020)

Civil Society in the UK
Civil society arrangement as attribute of social innovation (Ludvig et al, 2019)

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 Role and Functions of Civil Society
Protection
• Formulating ideas and demands of citizens
Monitoring
• Preserving plurality and diversity of society for
societal integration Advocacy
• Public opinion-making
Social cohesion
• Providing services and public goods
• Assisting conflict resolution Intermediation &
• Acting for the political socialization Facilitation
• Monitoring & social accountability Service Delivery
• Testing of social innovations [agent of change!]
• Multiplication of wealth – cognitive, practical
experiences, and pro-social patterns of behaviour Empowering
Communities
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Paffenholz and Spurk (2010)

Social Innovation Examples:

can you identify—

(i) the types of social innovation;

(ii) the social capital being built; and
(iii) the engagement/empowerment process?

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Social Innovation – an early example
• Microfinancing – an early social innovation example
- Started in 1970s as a social movement by Professor Yunus

- Social need: to alleviate poverty

- How? To provide small amounts of credit and high-quality financial services

to the poor / entrepreneurs and small businesses who were too poor to
secure conventional bank loans https://www.youtube.com/watch?v=aF-TBo2GXJA

- What was/were the innovation?

- What was the relationship/capability being built?

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Social Innovation for Livelihood
• CASE: Litre for Light

• About 1.2 billion people

worldwide don’t have access to
electricity

• Provided lights to 850,000

households in 15 developing
countries

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Litre for Light: what are the innovations?
• Appropriate technology:

• A 55-watt solar bulb that refracts sunlight

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Source: Alex (2013)
Litre for Light: what are the innovations?
• A socio-economic model:

• Video: https://www.huffingtonpost.com/entry/plastic-bottles-electricity_us_596e64f4e4b0000eb1968bb5

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Source: Alex (2013)
Formulation of
new organisation

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Source: Ragauskaite & Zukovskis (2019)

Social Innovation in Behaviour Change
• CASE: Green Credit Card, South Korea
- Encourage the adoption of sustainable lifestyle
- Green card products must carry eco-labels,
carbon footprint label or eco-friendly
agriculture certification

Earn eco-points Use eco-points

§Buy low carbon and eco- §Cash
friendly products §Buy green products
§Reduce the use of energy , §Public transport fare
water and gas

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Source: Ministry of Environment, South Korea & Korea Environmental Industry & Technology Institute (2014)
Collaboration and Partnership (innovation)

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Source: Ministry of Environment, South Korea & Korea Environmental Industry & Technology Institute (2014: 92)
Class Exercise: “Pay for Success” as a Social Innovation?
Pay for Success / Social Impact Bonds
• Outcome-based contracts / partnerships
• “bonds” refer to “bonding” (promise or partnership) and not the “bonds” in the
financial market

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Source: Social Finance India (2023)

Class Exercise: “Pay for Success” as a Social Innovation?

西環學生健康服務中心

Source: Our HK Foundation (2018)

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Class Exercise: “Pay for Success” as a Social Innovation?
Would you consider “Pay for Success” a Social Innovation?

1. Who are the beneficiaries?

2. Who are the change agents?
3. Who are empowered?
4. How is Social Capital relevant? As process or outcomes?
5. If your answer is positive, which type(s) of social innovation is it?
• New lifestyles
• Networks
• New services
• New/modified organisations
• Public participation

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Q&A

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