Social Enterprise and

Social Entrepreneurship
A Brief History and Critical Examination
Week 2 – Session 3 – Jan. 17, 2017
2206 – Global Social Enterprise, Dr. Sara Minard
• What is purely ‘social’ or ‘economic’ about the
economy? What is purely ‘social’ or ‘economic’ about
government, or civil society?
• Why do we need a distinction such as ‘social’ economy
or ‘social’ markets or ‘social’ entrepreneurship?
• What does the ‘social’ allow us to measure and
understand? (Dees)
• What does the market do that the State cannot do, and
vice versa?
• Is there a ‘social economy’?

Why the ‘social’?

• Max Weber, Karl Marx, Jurgen Habermas, Karl Polanyi
• Money as the most ‘glaring form’ of commodity fetishism
• Georg Simmel’s Philosophy of Money (19th Century)
• “the complete heartlessness of money is reflected in our social
culture, which is itself determined by money”
• Joseph Schumpeter, James Coleman – utilitarian model
• Albert Hirschman, Avner Offer, Jane Guyer, Marjorie Kelly
• Michael Sandel, “What Money Can’t Buy: The Moral Limits
of Markets”
• Should we pay children to read books or to get good grades?
Should we allow corporations to pay for the right to pollute the
atmosphere? Is it ethical to pay people to test risky new drugs or to
donate their organs?

Money and Meaning

• What are the historical origins of the concepts of social
enterprise and social entrepreneurship?
• How has the political economy of states and markets
shaped the relationship between business and society,
between poverty and welfare? (Laville and Nyssens,
2001; Seelos, et al., 2010)
• More specifically, how does the functioning of societies,
and what societies come to value, determine the
functioning of markets and what markets value?

Comparative Overview
• Reciprocity and Non-monetary trade (Barter)
• Gift
• Obligation and kinship (“forced reciprocity”)
• Social and solidarity economy
• Cooperatives and mutuals
• Philanthropy and volunteerism

• Global Perspectives
• Europe
• Latin America
• Canada and the US
• ‘Three generation’ model in Japan

Historical Background
— In Europe, SE roots lie in the cooperative movement which
began as a response to the exploitation of the poor by
company owners in the 1800s
— First legal form of SE in the world was in Italy in 1980
— In U.S., SE roots lie in America’s strong belief in philanthropy
and the market as the way to recalibrate economic inequality,
seen as civil society’s responsibility to help (vs. State)
— Strong public charities in the United States, have received over
70 percent of their income from fees for goods and services
since the 1950s
— Developed globally in tandem with a pervasive divestment in
social and economic benefits after the decline of the post-war
welfare state (EU) and the post-colonial state (Sub-Saharan
Africa)

Europe/US Comparative 6
— On both sides of the Atlantic, new entrepreneurial
behaviors driven by a primary social purpose mainly
took place within the third (social) sector
- In the US, Social Sector = Non Profit Organizations
- In Europe, “Third” Sector = Not For Profit
Organizations
— (include cooperatives) => Quest for economic
democracy
— On both sides of the Atlantic, changes in public
funding of the third/social sector played an important
role
– In the US, shortcuts in the volume of public grants
– In Europe, forms - rather than the volume - of public
funding were transformed: quasi-market, second labor
7
programs
In the North American context, social entrepreneurship
usually refers to a wide array of experiences both in non-
profit and for profit sectors; and even in the public sector
(pending a certain number of conditions)
• Emphasis is on resourcefulness and ingenuity
• “Social” signifies a target group, not a method of
collective action
• The notion of “changemakers” (Bill Drayton, Ashoka) has
been individuals, not communities
• No explicit link between work (worker unions) and social
enterprise, more an extension of charity

US Perspective 8
Social Enterprise: Any private activity
conducted in the public interest, organized with
an entrepreneurial strategy whose main
purpose is not the maximization of profit but
the attainment of certain economic and social
goals, and which has the capacity to bring
innovative solutions to the problem of social
exclusion and unemployment.

OECD Definition
• Broad: Any market activity whose primary purpose is
social good
• US: Employing entrepreneurial skills to solve market or
state failures with the aim of achieving social impact
• EU: A social enterprise…
• fulfils social goals
• addresses a target population in need
• may operate under various legal forms
• deals with voluntary social work
• has a non-profit orientation or reinvests profits
• may receive public funding

Other common definitions

• Entrepreneurship is a critical component of economic
growth and social inclusion, but not a panacea
(OECD,2006), used for:
• increasing economic growth
• spreading innovation
• creating jobs
• accumulating personal wealth (for profit business)
• Other Entrepreneurship literature refers:
– to the act of creating and growing new and small
businesses;
– to the willingness to take risks, to be innovative
– to exploit business opportunities

Social Entrepreneurship
} Conceptions rooted in the US context
• Two “schools of thought”:
A. The “Earned Income” school of thought (Dees, REDF,
Alliance)
B. The “Social Innovation” school of thought (Drayton)

} Conception rooted in the EU context

• The “EMES approach” to social and solidarity economy
Since the year 2000:
- Major influence of the two US schools of thought in other
regions
- Diffusion of the EMES approach in various regions
12
Early version: the “Commercial Non-Profit” approach
• Focus on earned-income strategies for NPOs
• Social enterprise: « any earned-income business or strategy
undertaken by a nonprofit to generate revenue in support of
its charitable mission » (Social Enterprise Alliance )
• Bulk of publications can be described as prescriptive
Later version: the “Mission-driven business” approach
• Social enterprise: “any business that trades for a social
purpose” (Austin)
Shift from a sole market orientation to a broader vision of
business methods to more effective, not just better funded,
social sector organizations (Emerson; Twersky)

“ Earned Income” School 13

In line with Ashoka’s promotion of the “entrepreneur
for the public good” since 1980, Dees (1998) stresses
social innovation processes undertaken by social
entrepreneurs.
• Systemic nature of innovation
• Emphasis on social impact and social change
outcomes rather than on incomes, more attention
given to social entrepreneur as changemaker, than on
the social enterprise as a business

“ Social Innovation” School 14

• The emergence of social enterprises in the 31
member states of the EU (1996-2013), legal
frameworks in
• EMES developed a common European approach to
social entrepreneurship
• A European overview of social enterprises (main
areas: work integration, personal services, local
development)
• Social enterprises in the field of integration by work -
« Work Integration Social Enterprises » (2001-2005)

EMES European Network 15

• EMES “Ideal Type” is a methodological tool
rather than a normative framework
• 9 economic and social criteria
• An economic project
– Continuous production with some paid work
– Economic risk (mix of resources)
• Primacy of social aim
– Limited profit distribution
• A participatory governance
– High degree of autonomy
– Stakeholders’ involvement
– Decision-making power not based on capital ownership

The EMES Approach 16

1. Enterprises working to re-integrate unemployed
people and redevelop deprived areas; and
subsidize work
2. Enterprises offering goods and services to the
wider community both in traditional fields (home
help, care for the elderly, etc.) and those
responding to new demands (remedial education,
literacy classes and security on housing estates, etc,
fair trade, environment)

Two “kinds” of social enterprises 17

 The social mission of the enterprise
For profit At the core of the enterprise

“EMES ideal –type SE”

Project linked European legal frameworks
to Corporate “ Social Innovation school”
Social Responsibility “Commercial non profit approach”

“Mission- driven business approach”

Convergences/Divergences
18
 The production of goods or services
• For all schools, such organizations produce goods
and/or services
• For EMES, this productive activity is, usually, related
to the social mission of the social enterprise
• The “Social Innovation” school seems to share this
approach
• For the “Earned Income” school, social enterprises
can develop business activities unrelated to the social
mission to provide financial resources

Economic Dimensions 19
 The Economic Risk

Economic Risk= Economic Risk=

Market resources Blend of resources

“Earned income school” “ Social Innovation school”

“EMES ideal –type SE”

Economic Dimensions 20
 How to guarantee the fulfillment of the social mission ?

Social entrepreneur Collective forms

of governance

“ Social Innovation School” “EMES ideal –type SE”

-Multiple stakeholder ownership
-“Commercial non profit approach”
-Collective appropriation of profit
(non distribution constraint)
-Economic democracy: limits in
voting power and return on capital shares

Governance Dimensions 21
• In the European context: institutionalization of the
social enterprises in the landscape of public policies:
ü Collective forms of governance as a trust signal allowing public bodies
to support social enterprises in various ways (new legal forms, public
schemes…);
ü Risk : instrumentalization of social enterprise according to the priorities
of the government’s agenda (WISE)
• The “Social Innovation” school: focus on the question
of the scale of social innovation processes inside the
enterprise:
ü Support of foundations bringing a leverage effect
ü Risk: move from primary social mission to blended value creation

Scale & social Innovation 22

• New legal forms: Benefit Corporation, L3C, B-Corp
Certification, Public Sector Innovations (Austin, 2006 :
« Social entrepreneurship: it is a corporation, too »)
• Moving from CSR (within existing firm) to Hybrid
Models (challenging/changing the firm)
• Social impact metrics expanded to blended value
creation (Emerson) and standardization (IRIS, GIIRS,
PULSE)
• Social financing mechanisms (SIBs, Impact Investing)

US Trends 23
• Increasingly market-driven, SE has increased role
• Leading the way in Social Finance (SIBs, CICs, Funds)
• Unclear boundaries for social entrepreneurship
• Language/conceptual problem: social entrepreneurship
is often inaccurately used as a synonym of social
economy, and differentiated from CSR
• Not all of the social economy/non profit sector is
entrepreneurial -- important distinction
• Social entrepreneurship is considered the
innovative/entrepreneurial part of social economy,
more in the collective/group

EU Trends 24
• Creation of federative bodies providing various types
of technical support (for instance, the Italian
Consorzi)
• Setting up of public or public-private funds providing
seed capital, loans and other financial supports
• Promoting access of SE to public procurement (e.g.
local public goods)
• Public policies focusing explicitly on the promotion of
SE (UK since 2002, EQUAL programme,…)
• New legal frameworks designed for SE (CICs)

EU Trends 25
• In Europe, insistence on specific governance structures
• In the US, insistence on the mission-driven behavior of
the social entrepreneur or the social enterprise;
agnostic about form.
• Main divergences…
ü the quest for more economic democracy
ü a "signal" allowing public authorities to support social
enterprises in various ways
• Main convergences…
üthe role that social finance plays in leading the space
üchanging emphasis from the hero to “impact”

Summary of Trends 26
• What do people or organizations mean when they say
they are interested in the “impact” of their actions,
activities, interventions, etc.?
• What if every time they used the word ‘impact’ they
replaced it with the word ‘justice’ or ‘social obligation’?
• How would that change how it is defined and measured?
• How would it change the questions they are asking about
the work they are doing?

Critical Examination
ü Work on creating better tax exemptions or privileges and subsidies
ü Specify legal forms and legal recognition: these constitute a precondition
and first step in establishing a more comprehensive and tailored
promotion system of social enterprise
ü Create social enterprise-related business support structures which
should be organized at a regional or local level include for example:
ü Funds providing (risk) capital to social enterprises
ü Consultancy agencies for social enterprises (for start-up and development,
search for funds, locally relevant impact metrics)
ü Business and management training for the social sector
ü Institutionalize co-operation among social enterprises and/or between
social enterprises and the public sector
ü Research (collect data!) the sustainability of productive organizations
with explicit social aims and their superiority to alternative forms; show
how it is done and share these findings widely.

What you can do.