Though scholars have suggested that entrepreneurs respond to certain socioeconomic conditions by engaging in social venturing activity, compelling empirical evidence is lacking. A prevalent explanation of social venture creation is the market failure perspective. This perspective holds that social ventures are created to address social issues that the market and the government have failed to deal with effectively. In this study, we delve into the market failure perspective to explain social venture creation rates and provide an empirical test at the macro-level. We focus on situations in which neither the government nor commercial entrepreneurs are able to correct market failures, thus giving rise to opportunities for social venture creation.