4. Social Enterprise Definitions and Development

An original distinction is drawn between a U.S style “social purpose enterprise” that draws upon philanthropy from individuals or organisations to support non-profit making organisations to act in the public interest; and an European “socialised enterprise” approach that draw upon collective voluntary actions, self-help and co-operative principles. This module will focus on the European model. Teasdale (2012) tracks changes in social enterprise developments in the UK through to recent times and asserts that the social enterprise movement initially gained traction in the UK within the co-operative movement and the community regeneration sector and saw itself as being different and distinct from the start from third sector or charity organisations.

For instance initial definitions of social enterprise such as that offered by Spreckly (1981) embraced a triple bottom line approach of potential personal, environmental and social benefits. This definition stated that

“an enterprise that is owned by those who work in it and / or reside in a given locality is governed by registered social as well as commercial aims and objectives and run cooperatively may be termed as a social enterprise”.

This definition appears to be rooted in the co-operative movement and has several limitations namely, (i) there is no recognition of registered charities who adopt revenue seeking strategies, (ii) the use of the word community is reflecting individuals in a particular locality rather than as a wider meaning of being a community of interest, (iii) there is no recognition of partnerships and multi stakeholder enterprises involving state and private organisations.

The European Research Network (EMES) 1996 definition of social enterprise set out a series of social and economic characteristics that were captured and asserted by Defouny (2001) as being,

Social dimensions –  (I) an explicit aim to benefit the community     (iI) an initiative launched by a group of citizens (iii) a decision making powers not based on capital ownership (iv) a participatory nature that involves beneficiaries (v) a limit on profit distribution Economic dimensions –  (i) a continuous activity producing goods and / selling services (ii) a high degree of autonomy     (iii) a significant level of economic risk     (iv) a minimum amount of paid work

This EMES definition has some similarity with the Spreckley 1981 definition but is noticeably less concerned with employee ownership and control as it places more emphasis on autonomy and risk taking as well as economic and social participation. This movement reflects the growing influence at the time if U.S-led social entrepreneurship. In the U.K the government’s view of social enterprise at this time saw social enterprise as being “first and foremost a business engaged in some form of trading to support a social purpose”, (DTI, 2005). This view argued that social enterprise should concern itself more with activities that generate funds instead of seeing itself as being a certain type

of organisational form that was only concerned with producing collective benefits.  This view was captured and expressed in a definition established by Alter (2007) which asserted that a social enterprise was a

“Business venture created for a social purpose to address or mitigate a social problem or market failure and which generated social value whilst operating with financial discipline, innovation and the determination of a private sector business”

Alter’s (2007) definition reflects the more U.S. like business-like rhetoric adopted and it introduces the idea of business needing to engage in innovation so as to keep moving forward.  This idea was also advanced at the same time by Perrini (2006) who argued that social enterprise entailed

“innovative practices designed to explicitly improve societal well-being, within entrepreneurial organisations to initiate guide or combine change in society”