3.1: Youth entrepreneurship: a SWOT analysis
Empowerment is one of the most important social value creation activities performed by social enterprises (SEs). It refers to the “process by which those who have been denied the ability to make strategic life choices acquire such an ability”
Social entrepreneurship may have great potential to mobilize youth to engage in efforts to achieve major social objectives, including employment creation, poverty reduction, inclusion and integration. What is it that enables youth to succeed or impedes their success as social entrepreneurs?. How a given number of factors can strengthen or undermine the possibility for (youth) social enterprises to be successful and generate social impact? This unit will try to clarify these aspects.
Youth entrepreneurs have both advantages and disadvantages compared to seniors counterparts in undertaking and setting up a social business. Here is a quick SWOT analysis highlighting both Internal factors (strengths and weaknesses) that are immediately available to the youth involved and are often closely linked to their individual situations and external factors (opportunities and threats) faced by youth as part of the broader context in which they live and are usually beyond their control.
- More creativity, resilience, inspiration, and action orientation
Such qualities are often more present in young people than adults (Coduras, Velilla and Ortega, 2018). The significant overlap in the traits of young people and entrepreneurs derives in large part from age-related factors linked to biology and life experience. Age is a proxy for the more important factors of cognitive, emotional and neurological. For generational reasons due to their living periods, they show more creative features, novelty-seeking aptitudes and thrill-seeking tendencies.
- Minor risk aversion.
Research shows an inverse correlation between age and entrepreneurial activity (Levesque and Minniti, 2006). Elder people have less attitude than younger groups to undertake an entrepreneurial activity. This is due to increases in risk aversion and the personal need for wealth accumulation as individuals grow up.
- Faster learning and quicker adaptability
Youth are in general faster learners and more adaptable than adults and are more open to new modes of approaching problems. This aspect applies mostly to their readiness concerning the digital world. They have a better awareness on how to take advantage of the virtual landscape for online activities such as networking, marketing and brand positioning. These characteristics can boost their chance to mobilize the audience to support their cause.
- Increased sensitivity to global problems
Young people are probably the first generation to have a global mindset towards social problems and the circumstances in which they live. Many young people are apprehensive about their futures and the future of the world. This shared concern often brings young people together to initiate change themselves. Because they understand the need to take the long view on issues such as the global climate crisis, many young social entrepreneurs place a high priority on environmental sustainability. Like the corporate social responsibility paradigm, youth social entrepreneurship is a constructive model for young people who want to create positively impactful business.
Last but not least, research shows that aspiring social entrepreneurs tend to be more successful when they have a better awareness of the local context and the social problems they want to tackle.
Little professional experience
Young people typically have comparatively less life and professional experience. Although they may be able to provide a fresh perspective on social problems, their ability to predict outcomes is limited, as they have had fewer years to gain the experience upon which sensible decisions are based. This “weakness” may be partially ameliorated by intentional experiences that increase the likelihood of youth engagement in social entrepreneurship. It is a well rooted belief, for example, that they tend to acquire more perspective-building experiences through activities such as travel.
- Reduced risk forecast
Likewise, young people in social entrepreneurship have received less formal preparation, including the kind of skills that would strengthen their capacity to anticipate potential problems and prevent missteps. While improvisation is a typical strength for successful entrepreneurs, the foresight to avoid big failures may be best developed through past trial and errors as well as through education and training.
- Human capital to be acquired
Similarly, young social entrepreneurs have yet to accumulate sufficient levels of relevant human capital, and their limited technical knowledge and the lack of certain key competencies and connections affect the probability of their success. Young social entrepreneurs who start ventures without prior training or practice are at a disadvantage in the marketplace. Human and business networks are a crucial factor for the success of a social enterprise (or any venture). However, young people rarely have human capital they can leverage to broaden market access and increase the likelihood of success.
- Reduced trustworthiness from social investors and funders
Lastly, in the financial landscape, many youth are at a disadvantage in comparison with other social entrepreneurs because educational background and prior work experience often figure prominently in social investment decisions. Young people lack credit histories and collateral, and they may be seen as a high-risk debtor by potential funders. Furthermore, as they often have limited financial literacy and awareness, they may secure loans or other forms of financial support that are not sustainable or are not suitable to their needs.
- The 2030 Agenda and stronger synergies between different stakeholders.
There is growing support for the idea that effective solutions can be generated through increased interaction between citizens (including youth), commercial enterprises and policymakers. As part of this trend, many global corporations have launched social responsibility programmes targeting youth. Empowering young people and reinforcing their belief in their own capabilities can inspire them to set up their own social enterprises and to engage in continued or additional entrepreneurial activity well into the future. Social entrepreneurship can offer young people job opportunities and targeted services and can empower them to be economically and socially active — all of which can have a profound impact on their communities.
- Developing marketable skills
Youth social entrepreneurship offers a meaningful supplement to traditional education models in helping them to build twenty-first century competencies. These competencies fall into four main categories, often referred to as the “four C’s”: critical thinking and problem-solving, communication, collaboration, and creativity. These skills are strongly aligned with the current milieu of economic, social and scientific innovation. The contributions of such learning experiences to the four C’s gives young people a competitive edge as they navigate the labour market.
- Digital technologies
They represent an area of opportunity with enormous potential benefits. Digital financing, for example, can facilitate and accelerate funding. Many financial service providers have a broad physical and online presence and can reach young people all over the world. Nowadays there is greater access to a wide range of financing options that can be explored quickly and easily. Digital technologies also support the formation and strengthening of partnerships. Such tools can contribute to the expansion of networks and the acquisition of knowledge.
- Social context
Legal frameworks, cultural norms and environmental circumstances can limit the active engagement of youth in the economic, financial, social and political spheres. Some threats to successful youth entrepreneurship are related to realities or perceptions associated with age and experience, while others derive from external factors or conditions. For this purpose, it can be fundamental the presence of mentors, incubators and hubs that create a favourable environment. Research has shown that support structures have a positive impact on young social entrepreneurs.
- Limited funding sources
Financing often represents one of the greatest challenges for young social entrepreneurs. Although the social mission is at the core of the social enterprise, business operations must be financially sustainable. Young social entrepreneurs must therefore work to achieve and maintain financial independence while also pursuing social development. Although new modes of financing are emerging that may create opportunities for youth social entrepreneurship, limited access to start-up funds is still commonly considered the most pressing challenge for young social entrepreneurs. Simply being young is a distinct disadvantage. Banks are unlikely to offer loans to youth, as most lack collateral and have no track record of financially viable ventures. Many traditional funding sources see young people as high-risk clients who will likely default on a loan. The combination of formal restrictions and skewed perceptions of risk and competence makes it very difficult for young social entrepreneurs to access funding services.
- Social impact
Social impact is a core feature differentiating social enterprise from traditional commercial enterprise and needs to be measured to assess the value and effectiveness of social entrepreneurial activity. However, this can be a challenge for all social entrepreneurs, including youth, as social impact is multidimensional and not easily quantified (Bornstein and Davis, 2010), and measuring social impact and social value creation requires metrics that are conceptually different from those used to measure commercial impact. To overcome this methodological issue, a number of qualitative performance measures have been developed for social ventures, including triple bottom line accounting, the balanced scorecard for nonprofits and social reporting. One of the most prominent among the tools developed to measure social impact is SROI. The plethora of available measures suggests that investors, donors, public stakeholders and social entrepreneurs want to assess and document the value created by social enterprises, regardless of the complexity and. However, these metrics are not fully accepted across the social sector, let alone widely used. In spite of the methodological challenges and costs, young social entrepreneurs are compelled to engage in social impact evaluation to demonstrate social value creation, as this can be critical for promoting social buy-in and attracting investment.