The origin of the concept of ‘social enterprise’ and its evolution
The increasing acknowledgement of the third sector in Europe, together with the broader interest in non-conventional entrepreneurial dynamics addressing current challenges, led to the emergence of the new concept of ‘social enterprise’. 6
Whereas a dozen years ago this concept was rarely discussed, it is now making amazing breakthroughs on both sides of the Atlantic. In the US, it first met with a very positive response in the early 1990s1 . In 1993, Harvard Business School launched the ‘Social Enterprise Initiative’, one of the milestones of the period. Since then, other major universities – including Columbia, Stanford and Yale – and various foundations have set up training and support programmes for social enterprises or social entrepreneurs.
However, in the United States the social enterprise remains a very broad and often quite vague concept, referring primarily to market-oriented economic activities serving a social goal.
The social enterprise is then viewed as an innovative response to the funding problems of non-profit organizations, which are finding it increasingly difficult to solicit private donations and government and foundation grants (Dees 1998).
The concept is also used to highlight the innovative side of certain types of projects, as well as the financial risks they are taking (Young 2001). In this latter case, the concept of social enterprise includes a wide spectrum of organizations, from for-profit business engaged in socially beneficial activities (corporate philanthropy) to non-profit organizations engaged in mission-supporting commercial activity (Kerlin 2005).
To reflect the economic and entrepreneurial dimensions of initiatives, four criteria have been put forward:
a) A continuous activity, producing and selling goods and/or services Social enterprises, unlike some traditional non-profit organizations, do not normally have advocacy activities or the redistribution of financial flows (as do, for example, grant-giving foundations) as their major activity, but they are directly involved in the production of goods or the provision of services to people on a continuous basis. The productive activity thus represents the reason, or one of the main reasons, for the existence of social enterprises.
b) A high degree of autonomy Social enterprises are created by a group of people on the basis of an autonomous project and they are governed by these people. They may depend on public subsidies but they are not managed, directly or indirectly, by public authorities or other organizations (federations, for-profit private firms, etc.). They have the right to take up their own position (‘voice’) as well as to terminate their activity (‘exit’).
c) A significant level of economic risk Those who establish a social enterprise assume – totally or partly – the risk of the initiative. Unlike most public institutions, their financial viability depends on the efforts of their members and workers to secure adequate resources.
d) A minimum amount of paid work as in the case of most traditional non-profit organizations, social enterprises may combine monetary and non-monetary resources, volunteering and paid workers. However, the activity carried out in social enterprises requires a minimum level of paid work.
The concept of social enterprise: a bridge between co-operatives and non-profit organizations.
Several concepts have been used to define a set of organizations and initiatives that are neither public nor private for-profit ones.
Theoretically, the social enterprise concept can also be seen as a tool for building bridges between distinct components of the third sector. As a matter of fact, when apprehending the third sector, two sources of tension appear to be recurrent and sometimes difficult to overcome. One source of tension originates in the gap between enterprises offering their entire output for sale on the market (as do most co-operatives), on the one hand, and associations whose activities are usually deemed to have a weak economic character (such as youth movement activities) and whose resources are totally ‘non-market’ (grants, subsidies, etc.), or even non- monetary (volunteering), on the other hand. A second tension arises between mutual interest organizations (co-operatives, mutual societies and a large number of associations) which, at least in principle, aim to serve their members, and general interest organizations, serving the broader community (such as organizations combating poverty and exclusion, or those involved in development co-operation, environmental protection and so on).
The term ‘Social Enterprise’ has quickly picked up momentum as a way of describing an important new movement in business and entrepreneurship.
A social enterprise is a cause-driven business whose primary reason for being is to improve social objectives and serve the common good.
In Europe, the concept made its first appearance in the early 1990s, at the very heart of the third sector, following an impetus that was first Italian, linked closely with the co-operative movement. More precisely, in 1991, the Italian parliament adopted a law creating a specific legal form for ‘social co-operatives’; the latter went on to experience an extraordinary growth. These cooperatives arose primarily to respond to needs that had been inadequately met, or not met at all, by public services (Borzaga and Santuari 2001).
