Three Worlds of Social Enterprise
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Three Worlds ofThree Worlds ofSocial EnterpriseSocial Enterprise
byStephen W K CHIU
Director of Public Policy Research Centre and Professor, Department of SociologyChinese University of Hong Kong
Social enterprise in the context of Social enterprise in the context of welfare reformwelfare reform
Esping-Andersen’s Three World of Welfare Capitalism as the starting point– Liberal Regime – US; UK– Conservative Regime – Italy– Social Democratic Regime – Sweden
Social enterprise as an institutional innovation in response to welfare reform in almost all advanced countries
Social enterprise in the context of Social enterprise in the context of welfare reformwelfare reform
Social Enterprise emerges as a common response to many common problems in advanced countries, – structural unemployment– government budget deficits– inadequacy of traditional social policies– need for more active social integration measures
Yet, different countries have different patterns of social enterprise development because of differences in the pre-existing welfare system and the subsequent welfare reform
PRAMS – Five Key Questions for PRAMS – Five Key Questions for Social Enterprise DevelopmentSocial Enterprise Development
We analyze overseas experience in social enterprise development within the PRAMS framework– P (Problems)– R (Resources)– A (Agents) – M (Market Niche) – S (Scale and Scope)
P (Problem)P (Problem) What is the pressing problem in the welfare
reform under tightening government budget– Re-commodification (the need to push people
back into the labour market; to channel people back to private source of welfare services)
– Updating (the need to adjust to new needs and demands amid socio-demographic changes)
– Rationalization (the need to be cost-effective in delivering high-quality welfare services)
R (Resources)R (Resources)
How to mobilize resources for social enterprise initiatives?– Market (sales of goods and services)– State (public subsidies, e.g. contracting,
seed money)– Society (community support, e.g.
volunteer work, donations, training, consultancy)
A (Agents)A (Agents)
Who are the primary agents for social enterprises?– Newly established – Existing organizations (e.g. non-profit
organizations venturing into business activities, or private business embracing social goals)
M (Market Niche)M (Market Niche)
Where are the market niches for social enterprises?– Newly emerged or Existing, underserved
areas– Demand for goods and services not yet
fulfilled by private firms– Community needs unmet by government
provisions
S (Scale and Scope)S (Scale and Scope)
What is the scale and scope of the social enterprise sector as a whole?– Scale: whether the sector performs a
significant role– Scope: whether the sector occupies a
well-defined position
Overseas Experience: Pathways to Overseas Experience: Pathways to social enterprise developmentsocial enterprise development
Different societies show different patterns in the development of social enterprises
Pre-existing welfare model and the subsequent welfare reform interact with the local social context pave different pathways to social enterprise development
Social Enterprise in the USA Social Enterprise in the USA The social enterprise sector gained momentum
from the mid-1990s onwards as a result of private-public cooperation, with the third sector spearheaded the development
The major pattern is that nonprofit organizations venture into revenue generating activities in order to support social mission
The pre-existing liberal welfare system is such that the government plays a relatively passive role in income redistribution and social service provisions
PRAMS in the US CasePRAMS in the US CaseProblem
– Re-commodification– Welfare reform in 1996: the Personal
Responsibility and Work Opportunity Reconciliation Act
– Amid state retrenchment from welfare provision, the nonprofit sector also sees the urge to look beyond traditional funding sources for their social missions
PRAMS in the US CasePRAMS in the US Case
Resource– Government support relatively small– Revenues are generated from the market
through sales of goods and services; and – A community-wide support, including
grants by foundations, capital investment by social venture capitalist/venture philanthropist
PRAMS in the US CasePRAMS in the US CaseAgent
– Existing non-profit organizations venture into income-earning activities, sometimes through establishing a subsidiary
– A social enterprise community in the making, with major players including
Academic and university faculty Independent consultants and consulting firms Management Assistance Centres Foundations Venture philanthropists
PRAMS in the US CasePRAMS in the US Case
Market Niches– New market niches emerged by social
movements including corporate social responsibility, ethical consumption, and social returns on investment
– social enterprises can appeal to end users and corporate sponsors with their social purposes
PRAMS in the US CasePRAMS in the US Case
Scale and Scope– The social enterprise sector in the US is significant
because it helps generating additional revenues for social goals by creating a private-public cooperation
– Though many of their activities may overlap with private organizations, they carve out a niche by mobilizing community support for their social purposes
Social Enterprises in USASocial Enterprises in USA With nonprofit organizations venturing into revenue
generating activities, the phenomenon of social enterprise is exploding. There are about 175,000 economically active nonprofit organizations in the US as of 2002.
As of 2002, the estimated aggregate employment is 8,780,300 people, or 8.2% of the country’s total private employment.
But the current pool of self-identified social enterprises is small, fragmented. According to the social enterprise database maintained by the Social Enterprise Alliance, there are about 5,000 enterprises
Social Enterprises in the USASocial Enterprises in the USA In 2000, services-related ventures are the major
type of earned-income ventures, with 31% in human services
A wide acceptance of nonprofit organizations venturing into income-generating activities, with 65% already doing or being interested in doing so
On average, operating ventures generated 12% of annual net revenue
35% say they are making money; 19% say breaking even, and 35% say in need of subsidies
Social Enterprises in the UKSocial Enterprises in the UK
The social enterprise sector emerged as a result of private-public cooperation, with the government taking a major coordinating role
The government believes social enterprise can play a greater role in the delivery and reform of public services
The major pattern of social enterprise development is newly-formed small organizations providing community-based services
PRAMS in the UK CasePRAMS in the UK Case
Problem– Re-commodification– The New Deal in 1997: from welfare to work– The welfare state restructuring means that the
government needs new social agents for the delivery of existing and new welfare services
PRAMS in the UK CasePRAMS in the UK Case
Resource – 82 percent of the revenue are generated
through provision of goods and services– 12 percent of the revenue through grants
and donations
PRAMS in the UK CasePRAMS in the UK Case
Agent– Mainly newly formed organizations– At one end are the voluntary and community
sector– At the other are ethical and socially responsible
businesses
PRAMS in the UK CasePRAMS in the UK Case
Market Niche– Market niches are opened up both by
privatization of welfare services and by decentralization of administration
– Social enterprises are encouraged as public good providers
PRAMS in the UK CasePRAMS in the UK Case
Scale and Scope – The social enterprise sector is significant in that
it occupies a society-wide strategic role in urban renewal, community development and public service delivery
– The sector has a relatively clear position, with principal areas including health and social care, together with other community and social/personal services
Social Enterprises in the UKSocial Enterprises in the UK
In 2005, around 15,000 social enterprises in the UK, about 1.2 % of all enterprises in the UK
The typical social enterprise employs 10 people, with the median turnover of 285,000 pounds
The majority (71%) has one particular target beneficiary group
25% of all social enterprises aim to help people through employment
Major activities: Health & Social Care (33%), Community or Social Services (21%)
Social Enterprise in ItalySocial Enterprise in Italy Social Enterprise emerged as a bottom-up community-
based development The pre-existing welfare system is such that the
government plays a relatively significant role in income redistribution, but a relatively small role in social service delivery
The major pattern of social enterprise development is that community-based co-operatives emerged as new social agents to capitalize on an under-explored market demand for social services
PRAMS in the Case of ItalyPRAMS in the Case of Italy
Problem– Updating (the need to adjust to new needs and
demands amid socio-demographic changes)– Italian welfare model is primary about monetary
transfer and the supply of public education and medical services
– The undersupply of social services became an acute problem starting from the late 1970s
PRAMS in the Case of ItalyPRAMS in the Case of ItalyResource
– Government support relatively insignificant in at the beginning, but later became the primary client through contract-out services
– The majority of the revenues are generated through the provision of community-based services
– A community-wide support including volunteers
PRAMS in the Case of ItalyPRAMS in the Case of Italy
Agent– Throughout the 1970s to 1990s, newly formed social
co-operatives acted as primary agents for the provision of social services to the local community
– Two types of social co-operatives as recognized by legislation in 1991:
Type A – delivering social, health and educational services Type B – producing goods and services for private customers
or public agencies, with at least 30% of the workforce being disadvantaged or hardly employable workers
PRAMS in the Case of ItalyPRAMS in the Case of ItalyMarket Niches
– Market niches emerged first in those under-supply areas such as home care and residential care for the elderly, juniors and handicapped
– Market niches emerged later as public authorities reserve up to 20% of the public demand for goods and services for enterprises who employ at least 30% of total workforce as disadvantaged persons.
PRAMS in the Case of ItalyPRAMS in the Case of Italy
Scale and Scope – The social enterprise sector is significant in its
role in social service delivery and employment integration
– The sector also enjoys nation wide recognition, as evidenced by legislation in 1991.
Social Enterprises in ItalySocial Enterprises in Italy
In 1991, when the Act was passed, social co-ops numbered just under 2,000
In 1998, around 4,500 social co-ops Rough 70% are supplying social services, and
30% are work integration The average size is 40-50 members and 25 paid
workers.
Social Enterprises in ItalySocial Enterprises in Italy
It is estimated that there is a total of 100,000 members of social co-ops, of which about 9,000 are volunteers and 75,000 are paid workers.
The total number of users served by social co-ops are about 400,000.
The users are mainly elderly, juniors, and handicapped.
The principal form of service was day care.
Social Enterprises in SwedenSocial Enterprises in Sweden A top-down model of social enterprise
development that the government transfers part of its existing services to new social agents
The Swedish welfare state provides both monetary transfer and full-range of social services.
The development of social enterprise is comparatively limited because the state plays a dominant role in social service provision
PRAMS in SwedenPRAMS in Sweden
Problem– Rationalization (the need to be cost-effective in
delivering high-quality welfare services) – The major problem is that both the government
and citizens question whether some areas of those services are cost-effective and/or providing citizens with enough choices.
PRAMS in SwedenPRAMS in Sweden
Resource – Resources are generated in the process of
privatization, through which part of the welfare services are transferred from the government to other social agents
PRAMS in SwedenPRAMS in Sweden
Agent– Newly formed non-government organizations
are given opportunities to provide welfare services.
– CDA (co-operative development agency) acts as the primary promoter for new organizational models
PRAMS in SwedenPRAMS in Sweden
Market Niches– Through privatization, the Swedish government
created quasi-markets in which the government transformed to the role of “service purchaser” from a variety of competing providers”
PRAMS in SwedenPRAMS in Sweden
Scale and Scope– The social enterprise sector is small and
relatively insignificant, acting as a new policy tool for the government
– The scale is relatively small even for the two most dynamic cluster of social enterprises, namely “social work co-operatives” and “community development enterprises”.
Social Enterprises in SwedenSocial Enterprises in Sweden
In 2002, there were about 90 social work co-operatives providing work to approximately 1,400 persons
Only 9 community businesses were in operation in 2002, with an aggregate turnover being 1 million euros.
Cross Country ComparisonCross Country ComparisonUSA UK Italy Sweden
P Recommodify Recommodify
Update Rationalize
R Market State Society State
A Existing New New New
M New New Existing New
S Vibrant, Diversified
Vibrant,Well-defined
Vibrant,Well-defined
Moderate, well-defined
Lessons for Hong KongLessons for Hong KongThe Enterprise Side:
– Social enterprises are most likely to succeed in responding to unmet community needs
– The development of social enterprise as a whole depends on how large the room is left behind by the market and the state in that regard
Lessons for Hong KongLessons for Hong Kong
The Social Side: – Social enterprise development requires
consensus building in order to achieve the followings
decide which social agents are to take up those new social roles
to form a private-public partnership so as to form a viable resource pool
To generate community support, e.g. corporate sponsor, professional training, volunteer, etc.
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