Entrepreneurial Philanthropy: An International Case Study of Contemporary Practice
Lead Author: Dr Jillian Gordon
Contact Details: University of Strathclyde, Strathclyde Business School, Hunter Centre for Entrepreneurship, 199 Cathedral Street, Glasgow, G4 OQU, Scotland. Tel: 0141 548 3482. Email: .
Co-Authors: Professor Eleanor Shaw, University of Strathclyde, Strathclyde Business School
Professor Mairi Maclean, University of Exeter Business School
Professor Charles Harvey, Newcastle University Business School
Introduction
Philanthropy is a key activity of wealthy entrepreneurs (Gordon, 2011; Shaw et al., 2013; Harvey et al., 2011; Maclean et al., 2013; Acs, 2013) motivated by the opportunity and capacity to support economic and social regeneration in regions that can benefit from intervention. High net worth entrepreneurs are increasingly focussing on engaging in philanthropy at a younger age; an act made possible by their capacity to amass significant personal fortunes from their entrepreneurial success (Bishop and Green, 2008, Handy and Handy, 2006; Gordon, 2011; Shaw et al., 2013). Many of the new philanthropists focus their attention on developing countries where they are actively trying to orchestrate change amidst a myriad of complex factors (Bishop and Green, 2008; Brainard and LaFleur, 2008). The solutions being championed by entrepreneurial philanthropists often involve the fostering of private enterprise (De Lorenzo and Shah, 2007) and the strengthening of existing enterprise and market infrastructure. The capacity of such individuals to create change is made possible because of their individual capital wealth (economic, social, cultural and symbolic); and their positioning within a macro network that spans the domains of business, politics, government and international development (Gordon et al., forthcoming). In particular, the African continent has become the focal point of many entrepreneurial philanthropists in recent years. The potential of philanthropists to engage in activity in this region, which is both strategic and a potential game changer at a macro level, is noticeable, especially if we consider the profile of individuals like Bill Gates and Sir Richard Branson and their command of resources: wealth, knowledge, reputation and contacts. The philanthropic presence of such individuals in the region is noted and forever present in contemporary media. However, little is known about the practices of entrepreneurial philanthropy in this context. Recent extant literature has sought to provide an introduction to entrepreneurial philanthropy within a theoretical framework using Bourdieu’s capital theory (Harvey et al., 2011; Shaw et al., 2013). Building on such research, this paper seeks to extend our knowledge and understanding of entrepreneurial philanthropy by exploring the practical workings of the phenomena. Specifically, this paper explores entrepreneurial philanthropy in an international context; through a single case study of the philanthropic activity of the Wood Family Trust (WFT), established by Sir Ian Wood and his wife Lady Helen, in 2007, with an endowment of £50 million.
Sir Ian Wood is a successful Scottish entrepreneur whose wealth derives from the family business, the Wood Group. Under Sir Ian’s control, the Wood Group has grown to be one of the most successful engineering companies in the world. Today, the re-named, Wood Group PSN employs over 35,000 people around the globe in the oil and gas and power generation markets; providing services in engineering, procurement and construction management. In particular, we are interested in the work of the WFT in Sub Saharan Africa, where it targets 75% of its overall philanthropic investment at the region. More specifically, philanthropic investment is targeted at the tea sector in the countries of Tanzania and Rwanda. The other 25% of the WFT’s investment is targeted at young people in the UK, helping them to become more enterprising, independent, tolerant and caring members of society. This paper, however, is solely focused on the international activities of WFT in the tea sectors of Tanzania and Rwanda.
This paper adds to the relatively sparse but growing literature on entrepreneurial philanthropy (De Lorenzo and Shah, 2007; Gordon, 2011; Harvey et al., 2011; Shaw et al., 2013; Maclean et al., 2013) and responds to a call for more research which relates entrepreneurship to its societal context. It also relates to the recent work of Acs (2013), who argues that entrepreneurship and philanthropy are inextricably linked, and who posits that philanthropy has given an edge to capitalism by promoting fundamental forces that are necessary to advance technological, social and economic equality. Building on the work of Acs (2013), we emphasize the importance of embeddedness and the socio-cultural context in which social innovation and economic development occur (Austin et al, 2006; Granovetter, 1985; Ram et al, 2008; Smith and Stevens, 2010; Tapsell and Woods, 2010; Maclean et al., 2013). We adopt a case- based approach (Eisenhardt, 1989; Eisenhardt and Graebner, 2007; Yin, 2009) to examine how entrepreneurial philanthropy can support and foster enterprise and market infrastructure that can cultivate economic development in developing countries, in a meaningful way, and help towards revitalizing a region marred by poverty and low economic growth.
The paper is situated within a wider and on-going study of entrepreneurial philanthropy, which examines individual and business giving in contemporary, historic and international contexts. We define entrepreneurial philanthropy as the pursuit on a not-for-profit basis of big social objectives through active investment of their economic, social, cultural and symbolic resources (Harvey et al., 2011; Maclean et al., 2013; Shaw et al., 2013). Entrepreneurial philanthropists are characterised by their desire to amass huge levels of personal wealth which they choose to assign a large share of to their philanthropic endeavours (Schervish et al., 1994; Bishop and Green, 2008; Shaw et al, 2013; Maclean et al, 2013). Moreover, entrepreneurial philanthropy moves beyond traditional forms of philanthropy where donations and grants are the norm (Anheier and Leat, 2006).The present paper uses the Wood Family Trust (WFT) as a lens through which to examine the contemporary practice of entrepreneurial philanthropy in an international context, and specifically focuses on the work of WFT in the agricultural sector of Tanzania and Rwanda. We ask the following questions: how is entrepreneurial philanthropy practiced; what does it add that other forms of donor giving does not; how does it add, more generally, to current debates on the role of philanthropy in economic development and what are the implications for practice and policy.
The paper is structured as follows. In the next section we set out the context of the study and make linkages to relevant literature, before presenting the research setting and our methodology. The empirical findings of the case study are then presented and discussed. To conclude, we outline the main conclusions of the paper, its limitations and the implications for policy and practice.
Context: Agriculture Sector, Value Chains and Economic Development in Sub Saharan Africa
The importance of the agriculture sector to the economic development of East African countries cannot be underestimated. In Sub Saharan Africa, 64% of the population depend on agriculture for their livelihood and income (Best et al., 2005). Hence improvement in the agriculture sector has the potential to make a real impact on the development of the national economies within the Sub Saharan region. Moreover, the development of a more efficient agricultural sector can positively impact on the economic opportunities and well being of the rural populous (Minot and Vargas Hill, 2007). Generally, East African countries are characterised by below average harvests, elevated food prices, conflict and food insecurity [a consequence of regional droughts and historic conflicts that have marred the region]. In Tanzania, a country with a population of 42.7 million people, of which 74% are rural in population; agriculture represents 28% of Tanzanian GDP and over 80% of the labour force are based in agriculture (World Development Report, World Bank 2005). The agriculture sector is of real significance to Tanzania; and by choosing to focus on the sector the WFT has the potential to create positive change that will benefit Tanzania top down and bottom up.
Economic policy in East African countries has been geared towards decreasing the central role of government and creating a more liberal economy, a consequence of their attained independence and their former socialist roots (Impact Investment Report, Gatsby Charitable Foundation, 2011). Elsewhere, we can observe that where there is strong agricultural productivity, there is typically a faster rate of economic growth; which benefits the poor (Minot and Vargas Hill, 2007). Over the last decade there has been increasing interest in ‘making markets work for the poor’ (Elliot et al., 2008), a particular approach to economic and social development that focuses on strengthening market systems that benefit the poor. It is against this backdrop that specific sector value chains become of interest. The value chain as a concept was first introduced by Porter (1985). It focuses attention, as the metaphor suggests, on the linked set of activities through which the enterprise can accrue value and thereby competitive advantage (Gereffi et al., 2001)By focussing on the complete chain of a sector and determining where and how value can be added and how it can be made efficient brings an opportunity to create positive socio-economic change. Strengthening the value chains in the agricultural sector becomes significant, because small holder farmers who feature in the agricultural chain have typically been ignored despite their contribution to food security and income in the region (Jayne et al., 2003). The World Bank notes that achieving a 1% increase in agricultural yield is estimated to reduce the percentage of people living on less than $1 a day by between 0.6% and 1.2% (World Bank, 2005); making a positive impact on the income and food security of households. By focussing on the strengthening of value chains in sub-sectors of the agricultural sector and supporting them to become more productive and efficient, the effects are considered to be potentially far and wide reaching (and more sustainable) for people living in-country (Ponte and Gibbon, 2005). Moreover, by creating a better equipped agricultural sector the capacity of the sector overall to attract further private investment can potentially be strengthened. In turn, the availability of private investment can support the growth of the private sector and that of SMEs; who are critical to the overall growth and development of any country (Wennekers and Thurik, 1999).
By choosing to focus on a specific sector, value chains, private sector and smallholders the links to entrepreneurship become important. More specifically, the success and experience of the individual philanthropist in entrepreneurship is viewed here as critical to the approach adopted in philanthropy; which aims to improve livelihoods through business. This resonates with Stayert and Katz’s (2004) discussion on entrepreneurship, who posit that it has become a model for innovative thinking, re-organising the established and crafting the new across alternative space and settings (2004:182). Philanthropy is a space whereby entrepreneurs can extend their innovative thinking, practices and expertise in a disruptive but innovative manner (Gordon, 2011, Shaw, et al., 2013). The socio-cultural context of entrepreneurship is therefore critical to entrepreneurial philanthropy; it transfers over to the philanthropic activities of such individuals, it informs and influences what they choose to focus on and how they engage in their philanthropy. Thus entrepreneurial values and practices are inherent to how entrepreneurial philanthropy is practiced (Shaw et al., 2013). The approach adopted in entrepreneurial philanthropy goes beyond simply donating money or awarding a grant passively; entrepreneurial philanthropy involves the active involvement of entrepreneurs in their philanthropy; who draw on the totality of their resources to stimulate socio-economic innovation (Gordon, 2011; Shaw et al., 2013).
Research Setting and Research Process
The empirical foundation of this paper is an in-depth case study of the WFT. In the seminal paper on case research, Eisenhardt (1989) argues that as a research strategy it is appropriate when used to explore new topics, and where existing theory is inadequate. Moreover, Eisenhardt argues that case research is a valuable method when attempting to develop an understanding of dynamics within a specific setting. WFT has been purposefully selected (Siggelkow, 2007) because of its endeavours in Africa, it represents a rare opportunity to explore the practices of entrepreneurial philanthropy in an international context. As highlighted by Perrini et al., (2010) and Eisenhardt and Graebner (2007), access can also determine the selection of a case study. As research into socially innovative entrepreneurial philanthropists is dependent on securing access, the opportunity to secure access and to conduct research into WFT was considered valuable to extend our understanding of the phenomenon of entrepreneurial philanthropy.
Research Setting: Biography of the organisation
Greenwood and Hinings (1993) argue for the need to understand the biography of an organisation under research. The WFT was founded in 2007 by Sir Ian Wood and his wife Lady Helen with an endowment of £50 million, and is headquartered in Aberdeen, alongside that of the commercial business. WFT has two main objectives. The first is to make markets work for the poor in Sub Saharan Africa. The second objective is to encourage young people to become enterprising, independent, tolerant and caring members of society. In relation to the first objective, WFT advocate providing a framework for people to help themselves, which they further articulate as being centred on wealth creation, job creation and business development. WFT invests multiple resources in the programmes it supports.
Within the activities of WFT, we focused in particular our research on its international programmes in the Tea Sector. In Tanzania, WFT along with the Gatsby Charitable Foundation (GCF) [the philanthropic vehicle of Lord Sainsbury] implement the ‘Chai-Kwa Maendeleo ya Tanzania’ (Chai) programme and the ‘Imbarutso-Win Win for Rwandan tea programme’ (Imbarutso). Chai is the kiswhaili word for tea. The Chai programme was launched in 2009 with a commitment to invest US $9 million, with a specific aim to double smallholder tea production, increase farmer profits and increase the competitiveness of the Tanzanian tea sector. Tea represents the fourth largest export crop in Tanzania and is worth US$28.7 million in export earnings to the country. The Imbarutso programme was launched in 2011 with a commitment to invest US$9 million over a six year period in the Rwandan tea sector. Imbarutso is the Kinyarwanda word which means to catalyse. The Imbarutso programme aims to increase smallholder net income, turn smallholder farmers into viable and efficient micro and small enterprises (MSE’s) and increase the overall effectiveness of the tea sector. Tea represents Rwanda’s second highest export earner and is considered to be one of the highest quality tea type in the world; it represents a vital source of income for around 30,000 smallholder businesses and 60,000 households. The overarching theme across both tea programmes is to help economic development at a micro and macro level by helping people to help themselves. The partnership with GCF is symbolically important given the historic presence of GCF in the region and the status of its founder. GCF has actively promoted economic development in the region for 18 years; and has programmes in the cotton, textile and tea sectors. GCF has also provided venture capital for African agriculture since 2005. WFTleads on both the Chai and the Imbarutso programmes but in full consultation with GCF. The ethos of WFT in its African activities is best illustrated in the following excerpt taken from the latest Chairman’s Review:
“Our role is to facilitate employment and business activities through supporting local enterprise and market development in growth sectors. We analyse sector value chains and unblock key constraints from primary production through to processing, distribution, and eventually to the end market and consumer” (WFT Chairman’s Review Report, 2012).
The centrality of community (in both a geographic and vocational sense) and the socio-cultural context is observable in the philanthropic approach adopted by WFT to catalyse social and economic innovation in the region. Peredo and Chrisman (2006) and Steyaert and Katz (2004) both argue that the renewal and maintenance of communities and the creation of opportunities are pivotal to helping people to help themselves. Moreover, the surrounding environment [in this instance the in-country government, trade sector associations and farmers] needs to be amenable to socially innovative ideas in order to effect change (Maclean et al., 2013; Chell et al., 2010; Smith and Stevens, 2010; Steyaert and Katz, 2004). Thus building and maintaining strong relationships within the sector, in-country, is paramount to the future success of philanthropic intervention.
Since its inception in 2007 WFT has spent a sum of £13 million on the programmes it supports in the UK and in Africa; at the same time the funds of the Trust have increased considerably. At the beginning of 2013 WFT held funds of around £113 million to continue engaging in the existing programmes in the UK and in Africa (WFT Annual Review Document, 2012, WFT Audited Accounts, 2012). During the 2011/2012 financial yearWFT committed £835,000 to Chai and £359,000 to Imbarutso (WFT Annual Review Document, 2012; WFT Audited Accounts 2012). The Chai programme is now nearing its fourth year of implementation and over the course of the three years that audited accounts are available; WFT has invested £1.97 million in the Chai programme.[1]
Research process
In conducting our empirical investigation, in-depth semi-structured life-history interviews with key individuals of WFT were conducted by one member of the research team over a six-month period. The interviewees included the philanthropist, the chief executive of the foundation, the operational director of African programmes and the head of Africa operations at GCF. The interviews lasted between 90 minutes and two hours in length, all were recorded and transcribed. The WTF interviewees were conducted face to face at the Scottish Headquarters of WFT and the GCF interview was conducted by telephone with follow up communication conducted via email. Further sources of empirical evidence included annual reports, individual programme reports, and other relative documents. . The life-history interviews provided rich and meaningful insights into the working practices of WFT, it importantly allowed for the personal experience of each individual’s engagement in the work of WFT to be illuminated. In developing the case study the research team were guided by Eishenhardt and Graebner’s (2007) suggestion to collect interview data using various, knowledge intensive informants each from a different hierarchical level and function within an organisation, as well as from within associated organisations. The adoptedapproach has allowed for the multiple personal stories to be explored, the organisation as a unit of analysis to be explored and the organisational partnership with GCF to be explored; it therefore sits within Perren and Ram’s paradigmatic framework (2004) which is considered particularly suited to entrepreneurship research. The inductive approach has allowed for evidence base to be developed that enables us to explore the practical workings of entrepreneurial philanthropy; and provides us with valuable insights from the different actors involved.