Social Innovation

Alex Nicholls, University of Oxford, Oxford, UK

J Gregory Deesy, Duke University, Durham, NC, USA
Ó 2015 Elsevier Ltd. All rights reserved.

Abstract

Social innovation refers to the processes and outcomes that develop a novel approach to addressing a social problem or need.
Compared to commercial innovation, it poses some distinctive challenges, particularly with regard to the incentives to invest
in it, assessment of performance, and diffusion of effective innovations. Scholars began paying attention to this phenomenon
in the late twentieth century, but many open research questions remain.
The term ‘social innovation’ has had two meanings in the academic literature. In its earliest scholarly uses, primarily in
sociology, it was used to refer to the creation of new patterns of human interaction, new social structures, or new social
relations. The second focuses on innovations designed to address a social or environmental issue or to meet a specific social
market failure or need. Often, both types of innovation are combined to establish new patterns of social relations that have
positive social outcomes. As Mulgan et al. (2007) argued, social innovations are “social both in their ends and their means”
creating “new social relationships and collaborations” as well as responding to specific social needs (p. 2). This article
provides an overview of the evolving field of social innovation globally. First, it introduces the term and sets out key defi-
nitions. Next, the chapter explores the key contexts and drivers of social innovation and maps the actors who engage with it.
Following this, social innovation is located within academic theory. The next section considers some of the distinctive
challenges faced by social innovation. The concluding section makes some final observations and sets out a future research
agenda.

Introduction production, knowledge intensity and transfer, and per capita

Innovation designed specifically to address social or environ-
mental issues is not new. However, it is only recently that
research, deliberative practice, and the formulation of bespoke
policy agendas focused specifically on such ‘social innovation’
have begun to emerge. Today, social innovation is increasingly
seen as essential in developing the ‘clumsy solutions’ needed to
tackle today’s complex ‘wicked problems’ across the world
(Mulgan et al., 2007; Murray et al., 2010; Nicholls and
Murdock, 2011).
Mainstream analyses of the emergence of innovation at the
country level have often identified a series of ‘waves’ based on
technological change, usually starting with the Industrial
Revolution in the eighteenth century (Kondratiev, 1998). In
essence, five waves of modern macroinnovation have been
discerned so far, each associated with a particular disruptive
technology in the Schumpeterian sense:
l The Industrial Revolution (1771–1829)
l The Age of Steam and Railways (1829–75)
l The Age of Steel, Electricity, and Heavy Engineering
(1875–1908)
l The Age of Oil, the Automobile, and Mass Production
(1908–71)
l The Age of Information and Telecommunications (1971–)
These waves are usually characterized by step changes in
financial markets, productivity growth, urbanization, mass
y
Deceased. After a long illness that he had bravely fought, Professor
J. Gregory Dees died suddenly on 20 December 2013. With Greg’s death,
the academic field of social entrepreneurship lost its founder and most
respected thinker and many of us lost a dear and kind friend. He is sorely
missed but his legacy will endure forever. This article is his last completed
work.
income growth. In other words, economic factors are used as the
primary evidence in defining such waves of innovation, with
social or societal factors being subsidiary or external to the
main patterns of disruptive change discerned. More recently,
however, social innovation has been recognized as a new wave
of innovation that gives primacy to systems and processes of
change in social relations on the one hand and, on the other,
to innovation around the conceptualization, design, and
production of goods and services that address social and
environmental needs and market failures. Social innovation
may represent a step change compared with previous waves of
innovation in that it often attempts to disrupt and reconfigure
systems themselves rather than simply providing disruption
within existing systems. Social innovation can be seen as the
simultaneous production of new ideas and new social struc-
tures and a process of recontextualization of the norms of the
public good, justice, and equity.
Today, social innovation cuts across all sectors of society
often combining the conventionally disparate logics of private,
public, and civil society in new, hybrid organizations and
forms of action. For the private sector, there are two dimen-
sions of social innovation: first, the recognition that techno-
logical innovations fail if they are not integrated with changes
in social relations within the organization and second, as a new
agenda for the role of business in society. For the state, social
innovation reflects an established tradition of welfare reform
based on increased efficiency and effectiveness. It may also
challenge the governance status quo in societies by aiming to
transform the power structures across social relations that
allocate goods and services ineffectively or unequally. For civil
society, social innovation involves both internal process of
organizational change (such as new legal forms and collabo-
rations) and novelty in external outputs and outcomes (such as
new products and services).

International Encyclopedia of the Social & Behavioral Sciences, 2nd edition, Volume 22 http://dx.doi.org/10.1016/B978-0-08-097086-8.73105-9 355
356 Social Innovation

Definitions The Organisation for Economic Co-operation and Devel-

At its simplest, social innovation represents new ideas that
address unmet social needs (Mulgan et al., 2007). However,
beyond this, there are two broad schools of thought
concerning the definition of social innovation: new social
processes and new social outcomes. The first emphasizes
changes in social relations and often has a focus on
rebalancing power disparities in society. For example,
Mumford (2002: p. 253) noted:
opment (OECD) endorsed this definition but also acknowl-
edged the process dimension of social innovation (2011: p. 1),
Social innovation is distinct from economic innovation because it is
not about introducing new types of production or exploiting new
markets in itself but is about satisfying new needs not provided by
the market (even if markets intervene later) or creating new, more
satisfactory ways of insertion in terms of giving people a place and
a role in production.

Social innovation.refers to the generation and implementation of
new ideas about how people should organize interpersonal activi-
ties, or social interactions, to meet one or more common goals.
Westley and Antadze (2010: p. 2) subsequently expanded
upon this.
Social innovation is a complex process of introducing new products,
processes or programs that profoundly change the basic routines,
resource and authority flows, or beliefs of the social system in which
the innovation occurs. Such successful social innovations have
durability and broad impact.
Second, social innovation can be seen as the answer to
social market failures in the provision of vital public goods.
Phills et al. (2008: p. 36) proposed that social innovation is
A novel solution to a social problem that is more effective, efficient,
sustainable, or just than existing solutions and for which the value
created accrues primarily to society as a whole rather than private
individuals.
In addition to these two metadefinitions, three types of
social innovation can be identified that cut across both (see
Table 1). First, there is incremental innovation in existing
goods and services to address social need more effectively or
efficiently. Second, there is institutional innovation that aims
to harness or reshape existing social and economic struc-
tures to generate new social value and outcomes. Finally,
disruptive social innovation aims at systems change via
political action and is typically driven by social movements
aiming to reframe issues to the benefit of otherwise disen-
franchised groups.
Social innovation can also be defined in terms of the level of
its action or impact from the individual to the systems. Such
levels can be mapped against the two main definitions of social
innovation focused either on new processes or on new
outcomes (see Table 2).
Finally, drawing upon theory from design thinking, Murray
et al. (2010) set out the key stages of the development of
a social innovation as a nonlinear process (see Figure 1). This
model is characterized by a series of key inflection points
where the development of an innovation moves first from
prompts and proposals to prototyping (an important part of
the design process), then to sustainability and, finally, to scale.

Table 1 Types of social innovation

Level Objective Focus Example organization (sector)

Incremental To address identified market failures more effectively: Products and services Kickstart (low-cost irrigation foot pump)
e.g., negative externalities and institutional voids Aurolab (low-cost intraocular lenses)
Afghan Institute of learning (female
education)
Institutional To reconfigure existing market structures and patterns Markets Mpesa (mobile banking)
to create new social value Institute for one world health (‘orphan’
drugs)
Cafedirect (Fair Trade)
Disruptive To change the cognitive frames of reference around Politics (social Greenpeace (environmental change)
markets and issues to alter social systems and movements) BRAC (micro-finance)
structures Tostan (human rights)

Table 2 Levels of social impact

Social process (example) Social outcome (example)

Individual Coproduction (Southwark Circle) Lost-cost health care (Aravind Eye Hospital)
Organization Wiki-production (Wikipedia) Work integration social enterprise (Greyston Bakery)
Network/movement Open source technology (Linux) Nontraditional training and education (Barefoot College)
System Microfinance (Grameen Bank) Mobile banking (MPESA)

Figure 1 Stages of social innovation development (Reproduced from
Murray, R., Caulier-Grice, J., Mulgan, G., 2010. The Open Book of
Social Innovation. Young Foundation/NESTA, London).
Contexts
Social innovation can be seen as a response to an acceleration
of global crises and the so-called wicked problems character-
ized by multiple, contradictory analyses and diagnoses
(Rayner, 2006; Murray et al., 2010). Examples include the
failure of modern state welfare systems (Leadbeater, 1997;
Mulgan, 2006a), the impacts of mass urbanization (Moulaert
et al., 2007), the failure of conventional market capitalism,
increasingly urgent global resource constraints, the impacts of
climate change, increased social breakdown, rising life
expectancy and associated health and social care costs,
growing cultural diversity within and across countries,
growing inequality, rising incidences of chronic long-term
conditions and pandemics, behavioral problems associated
with the ‘challenge of affluence,’ difficult transitions to adult-
hood, and endemic reductions in individual happiness and
indices of well-being (Mulgan et al., 2007: p. 9). In this context,
wicked problems can be seen as highlighting the failure of
conventional solutions and established paradigms across all
three conventional sectors of society: private sector market
failures that ignore pernicious externalities or marginalized
populations, public sector thinking in departmental silos,
and an absence of focus on performance outcomes in civil
society.
An important subset of these ‘wicked problems’ concerns
public sector welfare reform in response to demographic and
societal changes combined with the economic realities of rising
welfare costs and worsening public finances. In a different
reading of the rising interest in social innovation, such action is
seen as a necessary (but not always automatic) companion to
rapid technological change and economic innovation
(Hamalainen and Heiskala, 2007). This conceptualization
links to notions of social innovation as a process of
reshaping of social relations to maximize productivity and
economic development, often framed by the optimistic
assumption that the benefits of these changes will be shared
equally. Common to both contexts is a series of complex and
multifaceted issues that drive innovation not only in
processes and outcomes, but also, increasingly, as boundary-
blurring activity across the conventional sectors of society. As
Murray et al. (2010: p. 3) noted:
Social Innovation 357
Social innovation doesn’t have fixed boundaries: it happens in all
sectors, public, non-profit and private. Indeed, much of the most
creative action is happening at the boundaries between sectors.
Indeed, social innovation can often be the product of trying
to resolve apparent contradictions and tensions across different
fields of action. Taken together, the three ideal-type sectors
(public, private, and civil society) can be conceptualized as
a triad represented in stability as a triangle. Between each of the
three ideal-type points lies a range of hybrid organizations that
combine elements of the ideal types in different proportions:
these represent social innovation as boundary-blurring activi-
ties (see Figure 2). Examples include social enterprises that
combine business logics and models with social objectives and
ownership structures (such as mutual societies and coopera-
tives) and public–private partnerships that provide new
models of welfare provision outside of, but often in tandem
with, the state (Bovaird, 2006). Various models of the ‘shadow
state’ exist in which community organizations, as well as larger
charities and nongovernmental organizations (NGOs),
function as a surrogate state in terms of the functions of an
elected government (e.g., the Grameen organizations in
Bangladesh that provide education, telecommunications,
solar power, health care, employment, and financial services
across the country).
The potential of social innovation across sector boundaries
has also been demonstrated in practice by the emergence of
social innovation ‘hubs,’ incubators, and networks such as the
Social Innovation Exchange that aim to bring together dispa-
rate players from across institutional fields to spark new
thinking and modeling (http://socialinnovationexchange.org).
The value of clustering organizations working across bound-
aries in a larger innovation ecosystem is also behind the notion
of ‘Social Silicon Valleys’ (Mulgan, 2006b).
Theoretical Traditions
The topic of innovation – like entrepreneurship – has been of
interest to scholars for many years. Schumpeter’s work in the
first half of the twentieth century provided much of the foun-
dational thinking for subsequent innovation research,
Civil society
Formal–informal
Social enterprises Shadow state
Multisector
Pr
c
of
Collaborations
bli
it–
pu
no
te–
np
iva
ro
Pr
fit
Private sector Public–private Public sector
Partnerships
Figure 2 Social innovation: hybridity across boundaries.
358 Social Innovation
particularly within an economic context. Of particular influ-
ence have been Schumpeter’s (1942) reimagining of Marxian
notions of ‘creative destruction’ caused by systemic
innovation and his typology of ‘five dimensions’ of
innovation. The latter provided a conceptual classification
used in much of the subsequent analysis of innovation:
1. The introduction of a new product or an improved version
of an existing product.
2. The introduction of an improved method of production.
3. The development of a new market (or entry into an existing
market for a new player).
4. The development of a new source of supply or supply chain.
5. The more efficient or effective organization of any industry
or sector.
Schumpeter’s work was also significant in that it introduced
the construct of the entrepreneur as endogenous to economic
systems in contrast to conventional economic analyses that had
largely cast the actor as an exogenous agent of change. Recently,
Schumpeter’s theory has been extended to include noneco-
nomic forms of entrepreneurship and social entrepreneurship
explicitly and broaden the categories of innovation. Even
though Schumpeter’s work transformed the study of innova-
tion, it has also been problematic in that it has led to the rise of
a ‘heroic entrepreneur’ focus of analysis that can obscure the
critical operational role of collaborations, networks, and
groups. (This has also been the case in social entrepreneurship
research; see Nicholls (2010).)
The next significant contribution to innovation theory came
from rural sociology and the analysis of the processes behind
the diffusion of innovation in this context. (It is not entirely
clear who first coined the term ‘social innovation’ to refer to
novel solutions to social problems.) This research established
categories of adopters of innovation – ‘innovators, early
adopters, early majority, late majority, and laggards’ – that are
still used today. Faced with a series of industrial crises, stag-
flation, and increasing overseas competition, a second wave of
modern innovation research emerged from the 1970s onward
focusing on the effects of new technologies on economic
productivity.
In tandem with a range of new theorizing concerning the
competitive strategy of firms, the 1980s saw the emergence of
innovation studies based firmly within the management
discipline and pioneered by von Hippel (1988). This work led
to important subsequent contributions by Christensen (1997,
2002) and Chesbrough (2003). In the past 10 years, there
has been a plethora of more generalist management books
on aspects of innovation, as well as specific studies looking at
a single aspect of innovation and its effects.
As part of this proliferation of work on innovation,
a specific social innovation literature began to emerge, most
notably with attempts by Drucker (1987) and Moss Kanter
(1999) to blend commercial and social innovation theory
together within a hybrid construct of ‘business in society.’
(Moss Kanter (1999) developed a model of corporate social
innovation that suggested that cross-sector partnerships
between not-for-profits and business offered valuable
opportunities for innovation as a setting for ‘beta testing’ new
ideas and processes. These pioneering ideas around ‘new
paradigm partnerships’ led directly to subsequent work in
‘corporate social entrepreneurship’ (see also Collins’s (2005)
reflections on the similarities between his analysis of ‘great’
businesses and successful social sector organizations).)
However, the distinctiveness of – as well as overlaps
between – these two streams of work has been the subject of
specific work only in the past 10 or so years. Building upon
the analysis of the existing social innovation literature set out
by Pol and Ville (2008), two broad conceptualizations of
social innovation are identified here: innovation in social
relations (that typically reflects process changes) and
innovation to address social market failures (that typically
reflects outcome changes). A third strand of social innovation
theory, focused on macrolevel systems resilience, has also
emerged from complexity theory.
Innovation in Social Relations
The largest and most well-developed body of work in this
category specifically focuses on innovation that addresses
various dimensions of changes in social relations. This litera-
ture can be subdivided into five categories of scholarship, as set
out below:
l Research Design Challenges: Early work on social innova-
tion developed from within behavioral science with
a particular interest in devising ‘social change’ approaches to
tackle key, contemporary social problems, often at
a community level (Fairweather, 1967).
l Changes in Social Structures: Hamalainen and Heiskala
(2007) argued that it is social innovation processes that
ultimately determine the economic and social
performance of nations, regions, and industrial sectors
and organizations: “Social innovations are changes in the
cultural, normative or regulative structures.of society
which enhance its collective power resources and improve
its economic and social performance” (2007: p. 59).
l Changes in Patterns of Work: Holt (1971) focused on social
innovation within organizations, conceived of as new social
patterns of employee interaction. This work was echoed in
the activities of the Netherlands Centre for Social
Innovation 30 years later (see Pot and Vaas, 2008).
l Diffusion of Social Change: from within sociology, there are
analyses of the microlevel structures of innovation and
diffusion that affect society – for example, how medical
innovations spread across groups of clinicians – that have
been classed as social innovation. Henderson (1993) was
interested in the relationship between social innovation
and political change in terms of diffusion processes. He
explored how citizen movements catalyze social
innovation – conceptualized as distinct from dominant
cultural norms – from fluid positions outside of conven-
tional societal structures.
l Urban Studies: There is a significant cluster of work within
urban studies exploring innovative responses to social
exclusion as social innovation under the heading of Inte-
grated Area Development. Much of this work centers on
innovation within social relations in urban contexts, and as
a body of work, it explores the potential of public, private,
and civil society models; interventions; and interactions. In
Moulaert et al. (2007) characterized social innovation as

“a polymorphic constellation of counter-hegemonic
movements and initiatives” (p. 196) engaged in active
processes of social struggle and change.
Innovation to Address Social Market Failures
This stream of work relates to the outcome-driven model of
social innovation already discussed above and focuses on
innovation as the means by which new products and
services can be provided to underserved market segments. At
the macrolevel, this includes the mechanisms by which new
markets are created in weak institutional spaces or to
address market failures. The latter is conceived of as
encompassing failures not only in commercial markets but
also in public sector ‘markets,’ where the state fails to
provide public goods, and civil society ‘markets,’ where
charities, not-for-profits, and NGOs fail to provide effective
goods and services to their beneficiaries. Such failures
typically provide innovation opportunities, but can also
provide challenges in terms of reconciling potentially
competing institutional logics.
Resilience Theory
A third strand of social innovation theory has emerged recently
focusing on its relationship with the overall sustainability and,
particularly, the resilience of the larger ecosystem within which
it evolves. The overall resilience of a system may be examined
through the lens of the adaptive cycle, which is graphically
represented by an infinity loop encompassing four phases:
release, reorganization, exploitation, and conservation. The
exploitation and conservation phases in the ‘front’ loop
represent periods of growth and resource accumulation, where
change is routine and almost always adaptive, while the release
and reorganization phases in the ‘back’ loop can represent the
introduction of novelty, either transformative (radical) or
adaptive change, and renewal of the system. The back loop
represents, therefore, a precarious moment from the point of
view of whether the system remains stable, adapting, and
learning but not transforming or whether it is pushed close to
a threshold that tips the system into a new stability domain.
The new domain may share characteristics with the old stability
domain but will have radically different feedback loops, and
hence different relationships between the phases (Moore and
Westley, 2011). Resilience theory offers a systems-level model
of the emergence and dissemination of patterns of social
innovation.
Distinctive Challenges of Social Innovation
The structure of capitalism is often credited with providing
a powerful incentive for the development and dissemination
of commercially viable innovations. As long as markets are
relatively open for innovators to sell what they believe people
will be willing to pay for, there will be an incentive to inno-
vate. With sufficient profitability, the innovators can attract
the capital needed to expand, and other players have an
incentive to copy or build on commercially successful inno-
vations, contributing to their diffusion. This system has
Social Innovation 359
produced a powerful engine of innovation in capitalist
economies.
While some social innovations may have significant
commercial potential and benefit from this dynamic, many
(if not most) create benefits for society that are not automatically
rewarded in the marketplace (Phills et al., 2008). Direct
beneficiaries may not be able or willing to pay more than the
cost of the innovation, even when the social benefits would
make up for such expenditure. And third-party payers may not
have the resources (e.g., developing country governments), or
may not even know the extent of social benefits created by
a given social innovation, to judge how much to pay.
One example is education in developing countries. Inno-
vative curricula and school designs might well improve
outcomes in these countries, but without attendance by chil-
dren in poor families, the improved education will not have its
desired widespread social benefits. Attendance by children of
the poor can be low for many reasons. For instance, with the
rural poor, the parents might be just as happy with their chil-
dren working on the small farm that constitutes the family’s
only source of income and food. One solution is paying poor
families to send their children to school, tying payment
amounts and timing to absentee rates, grade completion,
graduation, and even enrollment in tertiary education
programs. Yet, some countries can barely afford their education
systems now, expecting parents to pay for textbooks, uniforms,
and some school fees. The idea that social innovators working
in this space can make sufficiently high profits to draw in
competitors and create a vibrant market with rapid diffusion
seems unlikely, no matter how effective the innovation is at
improving educational outcomes. Similar dynamics exist in
health care, sanitation, clean water, clean air, and so on. Social,
long-term, and intangible benefits are hard to sell to
individuals, especially those feeling the day-to-day pressures
of poverty. Third parties, such as governments, multilateral
agencies, major NGOs, and foundations, can help, but have
limits and may not be a viable long-term sustainable source
of revenue and profitability for a particular innovation.
Inception
Motivation does not seem to be a major problem. People
innovate for many reasons. Research on innovators in busi-
ness illustrates a wide range of motivations, some of which
have nothing to do with making money. There are a variety of
motivations for innovation, of which money is only one. It is
conceivable that innovators who are driven to solve a social
problem (or by other nonpecuniary motivations) will leave
the economic dimensions of their innovations as an after-
thought. They may be more concerned with developing
something that achieves the desired social impact than with
something that is economically sustainable and scalable.
There are certainly many examples of social innovations that
lack sustainable and scalable business models. This is a chal-
lenge when business model innovation may be what is
needed to create a viable solution. The following are the key
questions. Is there more of a disconnect between the inno-
vation and finding a viable business model when the moti-
vation of the innovator is social impact rather than making
money? Are there advantages to blending these motivations?
360 Social Innovation
Evaluation
In the case of commercial innovations, the market is the
ultimate judge. With social innovation, an extra step is
required to decide if the intended social impact is achieved
and not offset by other unintended and undesirable side
effects. This kind of standard is applied to some commercial
products where public safety is an issue (such as pharma-
ceuticals), but it is crucial for social innovations since market
success may not be at all correlated with the social impact of
the innovation. Effective evaluation of performance impact is
a challenge for social organizations: it can be costly and
difficult. Moreover, there are, as yet, no commonly agreed
methods or standards of evaluation for social impact,
although this is changing with the growing recognition of the
importance of this topic by funders. This raises a series of key
questions:
l What needs to be measured to establish impact?
l Why should such an evaluation be conducted? Who should
pay for it?
l For whom is the data intended? Who decides what counts as
a legitimate social impact? In many cases, social innovators
may have uncontroversial benefits in mind related to
improving education, health status, increasing income
opportunities for the poor, and so on. However, some goals
are more controversial, such as women’s rights, reproduc-
tive health decisions, political or ethical content in educa-
tional curricula, and more.
l Who should generate/collect the data? How participative
should the data collection process be? Does it need to be
done by a third party for objectivity?
l When should impact be evaluated?
l How should performance impact best be captured?
Considering each of these questions in turn may allow the
most effective and appropriate methodology for a given social
innovation to be discerned but will also typically raise difficult
issues, not least potential contradictions across different
perspectives on the nature and scale of an impact or benefit.
Diffusion and Scaling Impact
Social innovations, even those with demonstrated positive
impact, have a reputation for scaling slowly, despite some clear
exceptions, such as microcredit. Innovations require change,
which commonly meets resistance, and without powerful
financial incentives to counter the resistance or clear demand
by consumers, it is not surprising that the pace of innovation
and its spread will be comparatively slow. It may also be
slowed by the fact that in some cases its spread depends on
adoption by large bureaucratic institutions such as govern-
ments. Consider the example of controlling scurvy in the
British Navy that Rogers mentions early in his classic Diffusion
of Innovations. In this case, even with a compelling controlled
trial as early as 1601 showing how lemon juice can prevent
scurvy and save many sailors’ lives, and another study in 1751,
it took until 1795 before the British Navy adopted the inno-
vation as policy and until 1865 before the British Board of
Trade adopted the innovation. Commercial innovations can
also diffuse slowly. However, at least on the commercial side, if
you can demonstrate value to paying customers, and a profit-
able business model, there are incentives for the innovation to
be spread more quickly, especially if it is not fully protected
intellectual property. Copycats, clones, and adaptations are
likely to arise as others see an opportunity to profit. In the
absence of a profitable, self-funding business model, many
social innovations struggle to attract the capital and operating
funding for expansion. Consider a clinic that provides and
monitors tuberculosis treatment that can sustain itself on
government funding once that funding is in hand, but it
receives funding only months after opening each new site,
requiring philanthropic operating capital to start up each new
site. The government funding is not enough to repay a loan.
Funding is not the only barrier. Some social innovators also
report difficulty finding and retaining the necessary talent to
scale their innovations, due to the distinctive skills required
(often a mix of business skills and technical expertise in the
field in which they are operating) and due to limits on
compensation because of limited profitability and norms
against profiteering from the poor. High salaries in social
ventures that get their revenue from governments, aid
agencies, or from the poor themselves are frowned upon.
Innovation Ecosystems
Recent literature on innovation has recognized that successful
innovations of all kinds require an ecosystem of resource
providers, value chain partners, and complementary players.
This poses special challenges for social innovators because they
are often operating in situations (distressed environments) in
which the surrounding ecosystems are weak. Supply chains and
distribution networks may be unreliable and underresourced.
Infrastructure may be flawed or nonexistent. Institutions that
are taken for granted in well-developed markets are often
absent or weak. Sometimes social innovators have to fill
institutional voids. They cannot count on the profit incentive to
induce others to fill the gaps. Institutional voids affect
commercial entrepreneurs as well. They are more prominent in
social innovation because the spaces in which social entrepre-
neurs frequently choose to work have weak institutional,
economic, and social ecosystems, and because social entre-
preneurship is a relatively recent phenomenon with distinct
resource and capability needs that have not been well served by
existing markets.
Altogether, social innovations face some distinctive chal-
lenges in that they are not incentivized or reinforced by the
kind of market system that rewards and supports the devel-
opment of profitable commercial innovations. This raises
serious research questions regarding how societies can create
the institutional environment to optimize the benefits of
social innovation. However, there are promising develop-
ments. One example is Social Impact Bonds (SIBs), which
represent an interesting example of how incentives can be
aligned across disparate groups engaged in social innovation.
SIBs use outcome-based payments linked to rigorous perfor-
mance metrics to align the interests of external investors,
government departments (or charitable foundations), and
service providers around optimizing interventions that
address difficult social issues where success leads to significant
social impact.

Failure, and Unintended Consequences
All innovation is risky, and many are bound to fail. If societies
want to promote social innovation, they have to tolerate and
learn from failure. Yet, there appears to be a norm of hiding
failure in the social sector. There seems to be a sense of shame
at failing to deliver intended social benefits. The innovator has
let down society or a set of needy beneficiaries, and perhaps
a generous donor or an investor intent on achieving that social
impact. To complicate matters, some failures are unknown
because of lack of serious evaluations. This has caused errors to
be repeated and progress to be slowed.
Moreover, it should also be acknowledged that social
innovation is not, in and of itself, always a positive thing.
Indeed, social innovation may have a ‘dark side.’ This could be
evidenced in several ways, for example:
l By socially divisive or destructive objectives and intentions
(e.g., secret societies or extreme political parties).
l By unintended consequences that achieve negative social
effects (e.g., by excluding some groups from the focus of
social goods, services, or change).
l In cases of operational failure, mission drift, or strategic co-
option by an external party.
Conclusion
Today, social innovation may offer vital solutions to key global
problems such as climate change, the crisis of the welfare state,
health pandemics and failures, social dislocation and
inequality, and educational failure. Indeed, rather than
conceptualizing social innovation as a subset of technological–
economic innovation, it may be the case that the reverse is
now true.
Social innovation offers a compelling set of examples of
hybrid logics and organizational models that offer both
microlevel novelty and the potential for macrolevel systems
change influence. These models provide useful templates to
understand how innovation and change can be operationalized
in other settings, as well as generating a range of interesting
research questions concerning how to go to scale and the
development of ecosystems models of social and environ-
mental change. Indeed, policy makers, private sector leaders,
and civil society actors are increasingly recognizing the need for
more fluidity across the ideal-type sectors of the Triad model
shown above.
However, the study of social innovation remains at an early
stage of development. There are many important research
topics that require further work including the measurement of
innovation outcomes and impacts; the governance and
accountability mechanisms for organizations in change
processes or systems in flux; the challenges of the ‘liability of
newness’ in terms of societal legitimacy, funding mechanisms,
and wider resource strategies for social innovation; and the
political processes around successful social innovation. Both in
terms of practice and research, social innovation offers rich
opportunities for future action.
See also: Business and Society: Social Accounting; Human
Rights and Social Work; Innovation; Network Paradigm:
Social Innovation 361
Applications in Organizational Science; Organizations:
Authority and Power; Social Business; Social Changes: Models;
Social Justice and Social Inequalities.
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