Social Entrepreneurship and Innovation in Rural Europe

Ralph Richter, Matthias Fink, Richard Lang, Daniela Maresch

• Publisher: Routledge
• Year: 2019
• ISBN:
  9781351038447
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Emprendimiento

Social Entrepreneurship and Innovation in Rural Europe investigates how social entrepreneurship advances social innovation in rural Europe and contributes to fighting social and economic challenges in these regions.

Based on longitudinal data collected in four European countries, this book explains how social enterprises enact their business model based on an entrepreneurial reconfiguration of resources they obtain from their network relations, and how their activities empower local communities, driving change and eventually innovation. In these activities, the entrepreneurial mindset and the role as intermediary between different groups and domains of society help to reframe challenges into opportunities. The argument in this book develops from a description of what social enterprises report to do to an analysis of how they do it, and results in an explanation of why they take these actions. In doing so it gradually broadens the view from a focus on the social enterprises themselves to their interactions and network partners and, finally, to their positioning in societal fields. The presented model complements network theory with the concept of strategic action fields. This book reveals the crucial role of social entrepreneurship in innovation in rural regions, and the rich insights provided have far reaching implications for research, practice and policy.

This book will appeal to everyone interested in the interface of social entrepreneurship, innovation, and regional/rural development, either on a practical or academic level.

1 Rural Social Entrepreneurship and Innovation in Practice

Case Descriptions

To set the stage for the analysis in later chapters, in this case description we dig into the history and summarize in detail what we learned about the company. Specifically, we outline four cases that provide an overview of the challenges that rural communities face in the respective countries, and the activities the social enterprises have created to meet these challenges. This initial overview is followed by in-depth descriptions of the cases, which are based on the three EMES dimensions of social enterprises: (1) the social mission, (2) the entrepreneurial mission, and (3) the governance structure.

According to Defourny and Nyssens (2013), the social mission of social enterprises manifests itself in three criteria. First, social enterprises originate in civil society initiatives and “evolve in collective dynamics” (Defourny & Nyssens, 2013, p. 46) rather than being the project of a single leader. Second, “they aim to benefit the community” (ibid.) or society as a whole and not only the interests of an exclusive group. Third, the profit distribution in social enterprises is limited in order “to avoid a profit-maximizing behaviour” (ibid.). However, social enterprises are not only characterized by their social mission, but also by an entrepreneurial dimension. This entrepreneurial mindset distinguishes them from other organizations that strive for positive social impact. By executing entrepreneurial activities, social enterprises differ, for example, from public sector organizations, which typically implement delegated tasks. Defourny and Nyssens (2013) define three criteria that are indicative of the entrepreneurial dimension of social enterprises: (1) producing and selling goods and services, (2) taking entrepreneurial risks, and (3) employing paid workers. Lastly, social enterprises cannot be distinguished from their commercial counterparts only by their social and entrepreneurial mission but also by a more inclusive governance structure (Defourny & Nyssens, 2013). The governance of social enterprises is characterized by a high degree of autonomy (instead of operating on behalf of other institutions), decision-making that is independent from capital ownership (unlike voting powers related to financial shareholding), and having stakeholders involved in decision-making (instead of governing in an autocratic way).

The case descriptions are written from the perspective of an insider and are therefore based on descriptions gathered from semi-structured interviews, from participatory observations, and from documents published by the enterprise.

Empowering Rural Communities: How a Social Enterprise Provides Help for Self-Help in the Irish Hinterland

The Irish case reflects many of the aspects typical of a social enterprise. At the same time, it is very different from the other three cases, because it fills in the gaps of the institutional environment left by the Irish state, which is only rudimentarily present in rural regions. Thus, the Irish social enterprise emerged to compensate for the institutional voids. It covers many of the services that are typically delivered by the state in continental Europe. In this respect, it is an attempt to establish an entrepreneurial fast-track to social and regional development by leapfrogging the establishment of a modern welfare state. To enable a detailed understanding of the specific aspects of the Irish social enterprise, we first introduce the setting in which it is embedded and we identify the challenges it faces and the answers it provides to these challenges. We also describe its business model and offer a detailed description of the case along the three dimensions of social enterprises.

Challenges in Rural Ireland

Ireland is overwhelmingly rural according to recent statistical data (EC, 2017). About 90 percent of the Irish territory is predominantly rural. Only the greater Dublin area meets the European classification of “urban”. Nearly one third of the Irish live in rural areas. In comparison, across the EU, rural regions account for just 19.1 percent of the total population. Ireland is the most rural economy in Europe and has the most extreme divergence in economic output between urban and rural areas anywhere across the continent. With a GDP factor of 104.6 (100 corresponds to the EU average), rural Ireland is only half as strong as urban Ireland, which has a GDP factor of 207.9. Compared to the EU average, rural Ireland has a strong secondary sector (35.9 percent of the GDP). Irish rates of unemployment, employment, and risk of poverty and social exclusion are quite similar in rural and urban regions. Interestingly, more people are employed (70.8 percent) in rural Ireland and fewer are unemployed (7.7 percent) than on average in the EU. The risk of poverty and social exclusion for the population in rural Ireland is very close to the EU average of 25.5 percent.

Looking back, the 1980s was a decade of extremely high unemployment in Ireland, with an all-time high of 17.3 percent in December 1985. In addition, the country faced high levels of emigration with 70,600 persons leaving Ireland in 1989. A series of governments and sequent elections contributed to further undermining the economic development. This caused the government to increase borrowing and impose tax rates as high as 60 percent. Additionally, after joining the European Exchange Rate Mechanism (ERM) in 1979, Ireland had an overvalued currency that was not rectified until the 1986 devaluation. This extensive period of economic downturn especially impacted the viability of rural communities in Ireland. Rural areas were challenged as they lacked human capacity and infrastructure and offered few economic opportunities to their residents.

In early 2000, investments by multi-nationals such as Facebook and Google were running at a high, but new jobs tended to focus on a zone of investment within an hour’s drive of Dublin. According to a rural development expert:

In the last elections the government had the slogan ‘Keep the recovery going.’ That was grand in Dublin. But outside Dublin there was no recovery. The new government brought in the rhetoric of ‘Fixing rural Ireland.’ Now, the reality is that the majority of public investments still goes to Dublin.

(Regional development expert, personal communication, December 13, 2016)

The concentration of investments in urban areas has put rural areas at risk of slipping further behind. This is particularly true as investments in physical infrastructure such as roads, railways and airports have focused on addressing urban bottlenecks created by growth rather than on rural areas. The economic development and investment imbalance at a national level continues to be a challenge for rural Ireland.

The strongest impacts of the downturn were evident in smaller towns, where job losses in construction and locally traded services were significant. Small enterprises were badly hit, as evident in the numbers of closed premises, the depressed property prices, and the derelict buildings in many Irish villages. In the Mid-West rural region spanning around a scenic mountain range and located between the towns of Cork and Limerick the recession in the 1980s and the recent downturn following the financial crises in 2008 revealed underlying and persistent structural weaknesses and disadvantages across the area. This was reflected by the higher-than-Irish-average unemployment rates, increased out-migration levels, and increased business closures. The male employment rate in the region fell from 63.1 percent in 2006 to just 46.7 percent in 2011. During the same period, the disposable income of average households dropped by 12 percent in rural Mid-West Ireland and poverty rates increased significantly. When coupled with reduced service levels in the public and private sectors, this development caused a high level of stress for households and businesses.

The impact of the recession varied spatially within rural Mid-West Ireland. The locations closer to Limerick experienced the lowest income decline, while areas further south were more seriously affected. For instance, in just one Social Welfare Office serving the area of a local village, the number of persons who were registered as unemployed rose from 811 in 2006 to 2,756 in 2011—representing a 240 percent increase. Moreover, rural Mid-West Ireland also has areas of concentrated inter-generational disadvantages in some housing estates as well as hidden social exclusion in more spatially dispersed rural areas. To some extent, the period of economic growth and the boom in the early 2000s merely masked the underlying structural weaknesses typical of rural areas in Mid-West Ireland. These disadvantages include demographic imbalance, a lack of economic diversification, and inadequate infrastructure—all of which continue to provide challenges for this region.

In the rural Mid-West region, agriculture and food production predominate and are an intrinsic part of people’s lives and the economy. In the late 1990s, it was estimated that as much as 67 percent of the workforce were directly or indirectly dependent on the agricultural sector, working mainly in dairy and beef enterprises and their associated food processing industries (OECD, 2001). The region has a dominant secondary sector with two of Ireland’s largest milk processors located in small, local towns. However, since 2000, the number of people employed in the agri-food sector has declined due to the restructuring of industrial production, which led to job losses in agri-processing and in other traditional manufacturing industries. The area lost approximately 1,200 jobs between 2000 and 2008. This was due mainly to restructuring but also to a decline in the number of full-time farmers and an increase in part-time farming. The number of milk suppliers in the area decreased from 2,260 to 1,640 between 2000 and 2008. In the post milk quota era, the local dairy-based agricultural economy experienced a dramatic reduction in farm incomes. The Irish Creamery Milk Supplier Association has highlighted a nearly 40 percent fall in dairy prices since 2014, which led to a decrease in average annual farm incomes by up to €35,000 (Central Statistic Office, 2016), aggregating to a loss in farm incomes in rural Mid-West Ireland of an estimated €1.35 billion. Since the mid- to late-1990s, the urban boom in Ireland’s construction, retail, and services sectors has partly compensated for the impact of these structural adjustments, particularly for part-time farmers who now commute to a second job. The structural change has further moved the economic power toward the urban centers. A regional policy expert summarized the challenges:

We need to diversify economy, create jobs and have a strong education system with access for everybody.

(Regional policy expert, personal communication, December 13)

These developments call for governmental policies that support Ireland’s rural areas.

However, local public authorities traditionally have little input regarding the delivery of core services to communities in rural Ireland. Political representation and administration in the region have traditionally been concentrated in cities such as Limerick and Cork. Rural communities are remotely controlled by authorities located in these urban centers. Consequently, the CEO of the social enterprise stresses that “implementation usually differs from what the evidence was. And that is where it starts to go wrong” (CEO of social enterprise, personal communication, April 28, 2016). He also asserts that the national government has so far not appropriately addressed the challenges of rural Ireland:

We’ve had a minister for diaspora and a minister for social enterprise, but with no budget. What’s the point? Until the government takes it really seriously – what it means to do business in rural Ireland – there won’t be any change. To support the growth of indigenous enterprises you need infrastructure. You need roads, rail, broadband, and communications. These are all things rural Ireland doesn’t have.

(CEO of social enterprise, personal communication, December 15, 2016)

While rural Mid-West Ireland faces major structural challenges, it is important to recognize that this region is less peripheral than other rural regions in Ireland, particularly those in the West and North-West. Moreover, the region has considerable human and natural resources and a history of using them to promote economic and social development. This is the point of leverage for social enterprises such as the regional development company that we investigated in the Irish case. The regional development company covers an area divided into two administrative areas: (1) South and East Limerick and (2) North-East Cork. The regional population of over 860,000 is spread out over 54 communities. The headquarters of the regional development company is in a small village in County Limerick. The social enterprise also has four outreach offices in small villages distributed across Mid-West Ireland.

In summary, rural development companies emerged in Ireland to fill the gap that public authorities left in the rural hinterland. Their business models focus on the provision of core public services such as delivering regional, national, and EU funding programs aimed at social, economic, and environmental development, enhancing employability among the unemployed, supporting micro-sized and small businesses and promoting rural Mid-West Ireland as a tourist destination. In the words of the social enterprise’s CEO: “Our activities focus on community development, enterprise support, and employment” (CEO of social enterprise, personal communication, April 28, 2016).

How the Social Enterprise Fights the Challenges

The regional development company was founded in 1988 and had 40 employees in 2016. Between 2009 and 2015 the company supported nearly 800 people in gaining employment and provided social inclusion activities to over 3,300 children and young adults (O’Hara & O’Shaughnessy, 2015). Over time, the staff of the regional development company has played several different but complementary roles, including that of a researcher, an identifier of needs/gaps/solutions, an animator, deliverer, supporter, facilitator, encourager, implementer, project leader, and project partner. The company has been involved in several different activities, including developing networks, partnerships and collaborative projects, and the brokerage of additional resources and programs. It closely cooperates with the local and national authorities in the development of regional development plans.

In each of these roles and activities, the focus is on the client, be it the community, an individual or a business, and the regional development company is committed to ensuring that the needs of the client are met, either by the company itself or together with one or more of its partners. These partners can be local authorities or government departments, such as the Office of Public Works, the Department of Social Protection, the Department of Agriculture, and the Department of Tourism and Heritage. The partners engage with the regional development company through various networks. For example, a member of Teagasc (the state agriculture advisory agency) is a director on the board of the regional development company. At the same time, several staff members participate in networks such as the Village Partnerships and the Family Resource Centre. The CEO of the regional development company stressed: “We work as multi-disciplinary, multi-program, multi-area service provider” (CEO of social enterprise, personal communication, April 28, 2016).

The regional development company has acquired a lot of knowledge and developed considerable competencies from the management and successful implementation of national and European programs, which can now be applied to other programs and regions. This experience is complemented by a track record of delivering tangible results, establishing strong links with client groups and developing key partnerships with a range of community groups, social partners, local authorities, and statutory agencies. The regional development company uses its resources to facilitate and enhance the implementation of local development strategies in communities. This approach maximizes the benefits to communities, individuals, and businesses, thereby leading to economically, socially, and environmentally sustainable results across the local development strategy area.

In their activities, Irish rural development companies take a participative approach. They help the communities help themselves and enhance social cohesion across communities by facilitating community-led local development activities. This is also true for the company under investigation. From its incorporation, it has recognized the importance of engagement with clients and communities, referred to as animation. Animation comprises coaching, guiding, and supporting ...

Table of contents

• Cover
• Half Title
• Series
• Title
• Copyright
• Contents
• List of Tables and Figures
• Preface
• Acknowledgments
• Introduction
• 1 Rural Social Entrepreneurship and Innovation in Practice: Case Descriptions
• 2 How Rural Social Enterprises Innovate and Sustain: Potentials and Challenges From the Research Perspective
• 3 Rural Social Enterprise: An Emerging Strategic Action Field
• 4 Practitioner’s Voice: Reflections on the Relevance of the Identified Measures for Rural Social Entrepreneurship Practice
• 5 Key Takeaways: Implications for Social Entrepreneurship and Innovation in Rural Europe
• About the Authors
• Index