Social Enterprise

At the Crossroads of Market, Public Policies and Civil Society

Marthe Nyssens, Marthe Nyssens

• Publisher: Routledge
• Year: 2007
• ISBN:
  9781134182176
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

In one of its previous books, the EMES European Research Network traced the most significant developments in 'social entrepreneurship' emerging inside the third sector in Europe. Building upon that seminal work, this volume presents the results of an extensive research project carried out over a four-year period of a comparative analysis of 160 social enterprises across eleven EU countries.

It breaks new ground in both its articulation of multidisciplinary theoretical frameworks and its rigorous analysis of empirical evidence based on a homogenized data collection methodology.

Looking at work intergration, it is structured around a number of key themes (multiple goals and multiple stakeholders, multiple resources, trajectories of workers, public policies) developed through a transversal European analysis, and is illustrated with short country experiences that reflect the diversity of welfare models across Europe.

With contributions from an impressive list of academics, all members of the EMES European Research Network, this rich follow-up volume to The Emergence of Social Enterprise is essential reading for academics, researchers and students in the fields of the third sector and social policies.

Part I
The governance of social enterprise

2 Work integration social enterprises: are they multiple-goal and multi-stakeholder organizations?
Sara Campi, Jacques Defourny and Olivier Grégoire

Overview

The objective of this chapter is to analyse the multi-stakeholder and multiple-goal structures of social enterprises on the basis of the data collected on 160 WISEs. After reading this chapter, the reader should:

• understand the theoretical frameworks supporting the ‘multiple-goal, multi-stakeholder’ social enterprise ideal-type;
• grasp the extent to which empirical evidence confirms this ideal-type;
• identify further lines of empirical analyses to understand the dynamics of stakeholders.

Introduction

A multi-stakeholder character and a multiple-goal nature are claimed to be important aspects of social enterprises as they were previously analysed by the EMES European Research Network (Borzaga and Defourny 2001). However, although these features have been underlined by various authors in theoretical terms, empirical evidence of their existence is still rather limited. This chapter, therefore, aims to take a step forward by conducting a deeper analysis of multi-stakeholder and multiple-goal characters in work integration social enterprises (WISEs) across Europe.

In the following pages, we first consider the multiple-goal aspect, providing some theoretical elements that are useful in interpreting its origins and its differentiating potential. Theories are then tested against the data collected during the PERSE project. The second section starts with a brief overview of the economic and organizational literature on multi-stakeholder topics; it also presents the approach we chose and the data we collected to check whether or not WISEs are multi-stakeholder enterprises. The third section examines the reasons that could explain the involvement of various categories of stakeholder in the ownership structure and the decision-making process of such organizations.

1 The multiple-goal nature of WISEs

1.1 Theoretical insights

Third sector literature often stresses, explicitly or implicitly, the fact that non-profit organizations (NPOs) are more likely and better able to combine several objectives than traditional for-profit firms which, in neo-classical economic theory, are generally supposed to have one single major goal, i.e. profit maximization, dominating all other possible achievements (Weisbrod 1988; Ben-Ner and Van Hoomissen 1991; Hansmann 1996, among many others). In their attempt to provide ‘building blocks’ for a socio-economic theory of social enterprises, Laville and Nyssens (2001) went further by suggesting that such a combination of different goals is embedded in the very nature of social enterprises as conceptualized by the EMES European Research Network. In their view, social enterprises pursue at least three different categories of goal:

• Social goals, connected to the particular mission of social enterprises, i.e. to benefit the community. This ‘general’ goal can be expressed as a number of more specific ones, such as meeting the social needs of a particular category of citizens (socially excluded people, families with children or elders to look after, immigrants, people with specific health problems, etc.) or improving life quality in deprived areas.
• Economic goals, connected to the entrepreneurial nature of social enterprises: ensuring the provision of specific goods or services, achieving financial sustainability in the medium/long run, efficiency, effectiveness, competitive advantage, etc.
• Socio-political (civic) goals, connected to the fact that social enterprises come from a ‘sector’ traditionally involved in socio-political action:
  proposing and promoting a new model of economic development; promoting the democratization of decision-making processes in economic spheres; promoting the inclusion of marginalized parts of the population, etc.

It should be noticed that although these categories of goal may seem clearly separated in some cases, in other cases the boundaries are rather blurred. For example, when the production activity deals with services that are clearly of public interest (as in the case of recycling activities, environmental services, elderly care, etc.), social and economic goals cannot easily be separated one from the other.

A difference between traditional third sector organizations and social enterprises lies in the fact that the multiple-goal nature of the latter has an intrinsic character. In traditional third sector organizations, the coexistence of various categories of goals is not so clearly marked: in most traditional associations, the commercial dimension and the commitment to economic goals are usually significantly lower than in social enterprises, whereas traditional co-operatives do not generally pursue the general interest in the same way as social enterprises do (Borzaga and Santuari 2003).

When social enterprises are engaged in the occupational and social integration of disadvantaged people, as is the case for those analysed here, the simultaneous presence of different goals is expected to be particularly evident, since these enterprises are supposed to combine goals of the training and work integration of disadvantaged people, the production of goods and services (whether of public or private interest), as well as the promotion of more socially inclusive and labour-intensive economic development (Evers 2001).

If we now look at the managerial literature on organizational goals, things appear much less clear. As early as in the late 1930s, for example, Barnard (1938) showed that, from an organizational point of view, the for-profit or non-profit nature was not a good indicator of organizational diversity since each organization – independently of the distribution of profits – could be seen as a ‘co-operative system’ within which the entrance and permanence of actors was due to the balance between incentives and contributions they exchanged with the system. In other words, all individuals in an organization have personal goals that need to be satisfied through the pursuit of the organizational mission, thus determining the need for the organization to take into account such a diversity of individual objectives to guarantee its survival. Such a line of thought has been particularly elaborated by authors such as Freeman (1984) who developed the idea that organizations have various stakeholders, whose ‘stakes’ have to be considered by managers in developing organizational processes. Others, such as Mintzberg (1983), have also stressed the existence, within all organizations, of a system of social and economic goals.

Many other authors, especially those linked to the ‘new institutional economics’, underline the interpretative poverty of the simple profit-maximization objective in analysing modern enterprises, which are increasingly compelled by market dynamics to take into account stakeholders’ specific needs (Milgrom and Roberts 1992).

Finally, from an operational perspective, it can be noted that increasing numbers of traditional enterprises claim concern for goals other than pure economic ones. In this way, ‘corporate social responsibility’ (CSR) practices are put forward to demonstrate enterprises’ commitment to attend not only to economic goals but also to the social and environmental needs of stakeholders and the community.

This brief literature overview suggests that social objectives are not unusual in traditional for-profit enterprises or, in other words, that in terms of goals the border separating traditional enterprises from social enterprises is not a clear-cut one. Nevertheless, the economic objectives of social enterprises are expected to focus on the production of goods and services per se, as responses to addressed needs – or, in the specific case of WISEs, as a means to achieve the work integration of disadvantaged workers – and on financial sustainability rather than on profit maximization and financial return. As a corollary, social objectives are supposed to be incorporated at the very core of social enterprises’ goals, whereas they appear as more ‘peripheral’ in for-profit enterprises.

1.2 Empirical evidence

The existence of a multiple-goal structure was analysed in the PERSE project by asking managers of the 158 WISEs that formed the sample to indicate the goals pursued by their organization. More precisely, interviewees were asked to identify such goals within three categories of objectives defined on the basis of some previous EMES work referring specifically to WISEs (Evers 2001): occupational and social integration of the workers; production of goods and services; and advocacy and lobbying. A fourth category was also available to allow for any other kinds of goal.

At this first level, the ‘multiple-goal’ hypothesis finds a very strong support: 154 organizations out of 158 were considered by their manager to have at least two objectives.¹ More precisely, 97 per cent of the organizations in the sample pursue an objective of occupational and social integration as well as an objective of production of goods or services, and nearly 90 per cent also mentioned an advocacy and lobbying objective. Only 10 per cent of the WISEs surveyed declared that they had goals they classified in the ‘other’ category: community renewal through solidarity and selfhelp, environmental protection, innovation in the provision of social services, promotion of entrepreneurial behaviour within the community, etc.

Of course, it was necessary to go beyond such a superficial view, and especially to look at the relative importance the interviewees gave to the various categories of goals. This was done from two different perspectives. First, managers were requested to rank the categories of goal, from one to four in order of decreasing importance.

As shown in Table 2.1, the results suggest a quite clear order of importance: the social and occupational integration of disadvantaged workers is considered as the most important objective by 77 per cent of the WISEs surveyed, the production of goods and services is cited as the second most important goal by 55 per cent and advocacy and lobbying as the third objective by 69 per cent.

Second, the respective weights of the various goals were computed to take into account information such as the fact that the production objective, although second in most cases, comes first for 30 per cent of WISEs.

Table 2.1 Goal ranking in European WISEs (%)

The results of such calculations, as presented in Table 2.2, show that the respective weights of the two major categories of goal come closer: on average, at the European level, their weights are then 41 per cent for the occupational and social integration objective and 35 per cent for the production goal, while the advocacy and lobbying objective matters for 21 per cent (significantly more than the ‘other’ category, which weighs only 3 per cent).² This picture is confirmed by the analysis at the national level: these weights stay within the same range and never go beyond 47 per cent for a single goal when they are calculated within each national sample of WISEs.

Table 2.2 The respective weights of goals within European WISEs* (%)

* The number of organizations that declared that they pursued the goal was weighted by the value of the rank attributed to the goal (values being respectively 4, 3, 2 and 1 for ranks 1, 2, 3 and 4). The results were then converted into percentages of the total.

However, such a strict ranking still does not provide any information about the distance between objectives nor about the relations between the different goals. It is why the survey tried to fine-tune the results by focusing on the way WISEs balance their production goal and their work integration objective.³

Answers here reveal that 50 per cent of managers consider both objectives as equally important while 34 per cent see the production activity as subordinated to the work integration goal. This latter situation is particularly true for a majority of WISEs in countries such as Denmark, Germany or France, where most public subsidies they receive seem clearly linked to active labour market policies and/or to specific profiles of disadvantaged unemployed persons. However, in some cases where the work integration goal prevailed at first, a tendency to better balance both objectives was observed as WISEs were increasingly pushed towards the private market. Such a trend is clearly identified in Italy (see Chapter 5 of this book).

On the other hand, the production goal may be expected to be particularly important when WISEs produce public or quasi-public goods or services, for instance within contracts with local or regional public authorities. As a matter of fact, a subgroup of WISEs insist on the fact that their core mission is to participate in local development, especially in disadvantaged communities, by delivering a range of goods and services and that, in this process, they create training and employment opportunities for marginalized groups in the local labour market. Therefore, for this kind of social enterprise, the mission of ‘integration of disadvantaged workers through a productive activity’, while important, remains in the background of their mission. This is the case, for example, for local development initiatives in Ireland (O’Hara and O’Shaughnessy 2004) or community businesses in the UK (Aiken and Spear 2005). However, on the basis of the data collected during the PERSE project, it was not possible to find any significant correlation between the relative importance of goals and the nature of the goods and services produced.

In spite of such diversity, all these results strongly confirm the hypothesis according to which a majority of European WISEs have a multiple-goal structure, characterized by quite an equal relevance of the two major objectives hypothesized as typical of this specific kind of social enterprise, namely the occupational and social integration of disadvantaged people and the production of goods and services.

Finally, when asked about the origin or source of their WISEs’ goals, practically all managers referred to the original intentions of the founders, which appeared to be strongly related to community needs (82 per cent) and labour market problems (78 per cent).⁴ Such a frequent reference to the needs of the community as a source of...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Illustrations
• Contributors
• Acknowledgements
• Introduction
• Part I: The Governance of Social Enterprise
• Part II: The Balance of Resources In Social Enterprise
• Part III: Profiles and Trajectories of Workers In Work Integration Social Enterprises
• Part IV: Public Policies and Social Enterprise
• Conclusions