SERC Conference 2008 Introducing a New Textbook from Sage Publications

Understanding Social Enterprise: Theory and Practice

By Rory Ridley-Duff, Mike Bull and Pam Seanor

Introducing a New Textbook

This introductory article attempts to answer questions for:

1. Those in the private sector wondering if social enterprises are a threat or an opportunity

2. Those in the voluntary sector trying to work out their medium/long-term future, and

whether they should engage or resist the notion of social enterprise.

3. Those in the public sector being asked to develop, support or commission work from social

enterprises.

4. Those who self-define as part of the social enterprise sector, wondering how to understand

themselves and describe the value of their approach to others.

In recent years, a new term - social enterprise - has been promoted throughout the world (Borzaga

and Defourny, 2001). The problems surrounding its meaning can be explored by reviewing the

contexts in which the term is now achieving recognition. A national economy can been

conceptualised as having three sectors (Billis, 1993; Pearce, 2003). Firstly, there is an economy

that supports the state, a public sector comprising state institutions as well as publicly owned and

funded organisations. Secondly, there is a private economy that co-exists and competes with the

state: it is comprised of businesses that enable people to earn money and make a living. Thirdly,

there is a sector with organisations established by people on a voluntary basis to pursue social or

community goals.

The problem with a three-sector analysis of the economy is that it tends to marginalise organisations

that transgress the boundaries of these dominant definitions. For example, co-operative enterprises

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(owned by employees, producers or consumers) cross the boundary between the private and

voluntary sectors (Oakeshott, 1990). They often have a social or community goal, but are usually

set up to negotiate and distribute social and financial benefits equitably rather than prioritise the

social and financial goals of the founders (Ridley-Duff, 2002). In addition, they frequently adopt the

democratic practices of the state sector by having elections for senior positions and assemblies of

people who can directly question executive authority.

The Emergence of the Third Sector

The continued growth and development of co-operative forms of enterprise, and ‘mutual help’ as a

commercial principle led to the emergence of a new term in the early 1990s - Third Sector. This

term covers more than voluntary bodies and charities to include mutual organisations (e.g. building

societies), social firms and producer, marketing and consumer co-operatives (see OFT, 2008). One

social value that pervades the entire Third Sector is a concern that modern private and public sector

management principles have contributed to the social exclusion of disadvantaged groups and

vulnerable individuals. For some in the sector, the goal is to address (and find alternatives to)

powerful political and financial interests that disempower citizens (Morrison, 1991; EAO, 2008).

Many Third Sector organisations, therefore, share a common goal of reducing social exclusion.

They may do this in a variety of ways: by providing services more cheaply to disadvantaged groups;

by using collective bargaining power to negotiate access to scarce or expensive resources; by

organising themselves in a way that enfranchises and empowers individual members (and gives

them a collective political voice); by adopting traditional approaches that redistribute surplus wealth

to disadvantaged groups through charitable practices and organisations.

The identification and growth of the Third Sector has been accelerated by changes in the public

sector. Since the early 1980s, there has been a shift away from welfare through state institutions and

increased use of agencies and contractors (Chandler, 2008). The concept of New Public

Management underpins a commercialisation agenda (attempts by government to make greater use

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of markets and private sector thinking in public service delivery to ‘save’ money). Accompanying

this is the contentious belief that business practices and managerial solutions will improve the

‘performance’ of both the public and voluntary sectors (Paton, 2006; Chandler, 2008). Given that

many in the Third Sector regard private and public sector management principles as the cause of

social exclusion, it is no surprise that there is resistance to the idea that the same techniques can

solve contemporary social problems.

Nevertheless, it is this thinking that drives change in the UK National Health Service (NHS). As in

other parts of the world, the NHS exemplifies the trend towards a “contracting culture” in which

grants and state funding are replaced by commercial contracts for service delivery. So, in recent

years, the boundaries between the private and public sector (in term of market thinking and

managerial practices) have started to blur traditional distinctions between different sectors of the

economy (Bull, 2006, 2007). Secondly, the emergence of radical business alternatives with a strong

social orientation, democratic organisation, and positive attitude to profitable trading has led to a

new language that describes relationships and organisation forms that bridge the boundaries

between sectors (Seanor, Bull and Ridley-Duff, 2007).

Social Enterprise
In the late 1990s, as a director of Computercraft Ltd, Rory played a small role in discussions to

establish a new business support agency. Around the table were support and trading organisations

from the co-operative sector (ICOM, Poptel and Computercraft) and representatives from public

sector training and enterprise councils (TECs). All the parties were looking for an idea (and name)

that captured the goals for a new support agency. They decided on the name Social Enterprise

London. Poptel (a phone co-operative) and Computercraft (an IT co-operative) provided political

support and organisational know-how. The TECs and ICOM provided the same, plus assets and

funding streams that enabled Social Enterprise London to establish itself (SEL, 2008).

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Whether this is the first organisation to systematically use and promote the term ‘social enterprise’

throughout the UK is unclear, but the role of Social Enterprise London in helping to bring the

concept (and language) to public consciousness is not in doubt. It helped to establish the first

undergraduate Social Enterprise degree courses at the University of East London (UEL, 2008) as

well as the first Social Enterprise Journal that is now owned and published by Emerald Publishing

(JMU, 2008). Its first Chief Executive (Jonathan Bland) went on to head the sector’s leading

political organisation, the Social Enterprise Coalition.

As a result of their (and others) agency, “social enterprise” has started to spread throughout our

culture. The appeal of the term across the political spectrum is not only the reason why many new

relationships are being forged, but also the reason for confusion and competition over its meaning

and nature. By 2008, the term “social enterprise” had been appropriated by (and applied to) four

distinct groups:

A Charities and voluntary groups that are embracing a ‘contracting culture’ by tendering for

contracts.

B Charities and voluntary groups that establish trading operations to generate income for their

social missions.

C Co-operatives / social firms that tackle social exclusion by adopting ‘bottom-up’ and

pluralist approaches to governance and human resource management.

D Businesses that invest or share their surpluses in a ‘public interest’ or ‘fair trade’ enterprise.

Three of these contexts (A, B and C) are typically linked to developments in the Third Sector

(community businesses, social firms, voluntary groups, charities, co-operatives, credit unions and

mutual societies). The last of these (D) is increasingly linked to two other developments. Firstly,

there is New Public Management that seeks to reverse the post-WW2 policy regarding the state’s

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role in the delivery of education, health and social services. Secondly, there are private sector led

corporate social responsibility initiatives that create partnerships and joint projects involving

stakeholders from more than one sector (BITC, 2008).

Confusion and Competition

As a result, the term ‘social enterprise’ has become highly contested. Advocates for each of these

groups may, or may not, recognise the other parties as legitimate social enterprises. This is

experienced most sharply when organisations trading for a social purpose, or individual social

entrepreneurs, are rejected by social enterprise support agencies on the grounds that they do not

organise their activities in a sufficiently transparent way (i.e. do not adopt the charity model), or are

trading too much with commercial organisations for ‘private’ gain (i.e. using too many private

business techniques).

As a way through these conceptual difficulties, it is helpful to examine how theories of social

enterprise are grouped into two competing perspectives (Seanor, Bull and Ridley-Duff, 2007).

Firstly, there are those that conceive social enterprises as trading organisations sitting in the middle

of a continuum between the pursuit of a social mission (charitable) and trading in a market

(private). The issue here (for those supporting their development) is whether they are sufficiently

social and charitable in their organisation and trading purposes.

Another perspective, however, breaks out of this linear mode of thinking and views social enterprise

as a cross-sector trading organisation or activity (Morgan, 2008) capable of rebuilding and

developing social capital where this has been depleted by contemporary political and economic

thinking (Laville and Nyssens, 2001). As such it emerges in the boundaries between the public,

private and voluntary sectors to address the shortcomings of each (Nyssens, 2006; Ridley-Duff,

2008). Holding these organisations up to the norms and ‘best practice’ of charitable, private or

public enterprise at best obscures, at worst devalues, their potential. It not only creates a mindset

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incapable of recognising their innovative approach, but also has the potential to stifle it. For this

reason, the criteria used to determine what is and is not “social enterprise” will remain a key policy

debate at local, national and international levels. While resources are being allocated to the sector,

there is financial and political advantage in monopolising the language and definitions being used.

Nowhere is irony more evident than in the employee-ownership sector. Despite this sector's active

involvement in the formation of Social Enterprise London, one of its leading lobby organisations

(Employee Ownership Association) has now started to articulate an identity based on

"co-ownership" because their members are marginalised in social enterprise policy making (see

Knell, 2008). The recent All Party Parliamentary Report on Employee Ownership makes this clear

in repeated pleas for political recognition "comparable" to the social enterprise sector. In this

report, the language reflects an agenda based on "the combination of the co-ownership model with

social enterprise philosophy..." (Knell, 2008:15). Unsurprisingly, much of this debate takes place

against the backdrop of health sector reforms, with various associations seeking to legitimate their

members approach to "social business" and increase their credibility in new markets for socially

enterprising solutions (Black and Nicholls, 2004).

The trend is towards recognising that social enterprise has an ideal type that is aspirational rather

than fully realised: a multi-stakeholder co-operative or charitable business with a clear social

mission, inclusive system of governance and socialised ownership (Pearce, 2003; Nichols, 2006;

Ridley-Duff, 2008). As such it represents a new chapter in the philosophy of business and

organisation development generally. Entrepreneurial goals frequently, but do not always, include

attempts to erode the barriers between ‘governors’ and ‘governed’ (‘directors’ and ‘employees’ /

‘trustees’ and ‘staff’) in order to increase responsiveness and democratic accountability both

internally and externally. At the same time, there is a renewed emphasis on trading strength in

order to build sustainable resources that impact positively on the lives of multiple stakeholders. In

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this guise, social enterprise moves beyond another form of charity in which wealthy philanthropists

or concerned individuals use their wealth, time, commitment and traditional business experience to

fund solutions to social problems (Nicholls, 2006). It becomes an ideology for proactively

nurturing wealth creation in a variety of forms by groups of people committed to social inclusion,

and who embed democratic principles in their management practices, service delivery and product

designs (SEC, 2008).

Social enterprise is a complex discourse, embracing language, concepts and practices in:

• enterprises that bridge the boundaries between the private and voluntary sectors (e.g. trading
charities and mutual societies).
• enterprises that bridge the boundaries between the private and government sectors (e.g. housing
associations and partnerships in the Health Sector).
• enterprises that bridge the boundaries between government and voluntary sectors (e.g. enterprise
/ employment support services provided under contract).
• enterprises that internalise a social orientation, democratic governance and entrepreneurial
trading (e.g. co-operatives / employee-owned / co-owned businesses).

The proposed textbook by Rory Ridley-Duff, Mike Bull and Pam Seanor will explore how this

heterogeneity has come about, and how practitioners can use new knowledge to advance the

practice of social enterprise. Focussed on the UK, but drawing extensively on international

examples and case studies to illustrate theory, the book will compare and contrast perspectives on

social enterprise emerging amongst practitioners, consultants, academics and policy makers.

Acknowledgements
This article draws on material submitted for the book proposal and approved by the Sage editorial
board in March 2008. The authors thank Sage Publications for agreeing to the reproduction of
material in this article. Understanding Social Enterprise: Theory and Practice will be available
from Sage Publications in early 2010 to support the development of professional, undergraduate
and postgraduate curriculum in the university and support sectors.

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