Institutional influences on social enterprise types in the Republic of Ireland

SE research took place in parallel in Europe and the United States (Kerlin, 2006). In Europe in 1997, the European Union Funded project EMES (The Emergence of SE in Europe) brought together researchers from 15 European Union member states to agree on and apply a definition and framework of SE in each country, resulting in a book of country case studies, as well as comparative analyses of SE in different European countries (Borzaga & Defourny, 2001). A key learning from this research is that the diversity of national approaches to SE is influenced by how public services are delivered and the role of the welfare state. SE in Europe evolved from the concepts of social economy, an older form of organising that includes cooperatives, mutual societies and associations, and the nonprofit sector (Defourny, 2001). The nonprofit, or third sector, is part of the three-sector approach of public (first), private for-profit (second) and nonprofit (third) sectors (Powell & Steinberg, 2006), and has also been studied extensively, including international comparisons (Salamon & Anheier, 1998). Other European Union funded research projects further analysed social entrepreneurship and innovation, identifying a “new generation of social entrepreneur,” which was the growing role of innovative individuals in creating new SEs, in contrast with the collectives of the social economy and groups of the third sector (Benadusi & Sapienza, 2015).

Meanwhile in the United States (US), research and practice of social entrepreneurship evolved in two separate schools of thought: social enterprise and social innovation (Dees & Anderson, 2006). The social enterprise school of thought referred to the growing practice of nonprofits generating earned income to support a social mission, and for-profit companies providing social services, with both trends beginning in the 1980s. This marked a shift away from a clear three-sector role division, towards a blurring of boundaries between the second and third sectors, referred to as the SE spectrum between commercial and philanthropic poles (Dees, 1996). Also in the 1980s, the social innovation school of thought emerged, which promoted and celebrated individual entrepreneurs finding new and creative ways to generate both social and economic value (Drayton, 2006). Analyses of the social innovation school of thought, sometimes called the US approach to social entrepreneurship, generally associate President Reagan’s economic policy of cutting government spending as the driver for nonprofits to generate earned income as an alternative source of funding (Kerlin, 2006). However, Kerlin and Pollak found growth in both commercial and government sources of revenue among US nonprofits in the 1990s and early 2000s and characterise earned income as a new and additional – rather than an alternative – revenue stream (2018). This suggests a confusion between two scenarios: first that reductions in government spending led to greater social need, stimulating new ways to address that need, and second, that cuts in government revenue must have led to new ways to generate income – and that it was politically expedient to promote the latter over the former. Another driver of SE was the interest of business schools – especially in extending entrepreneurship theories to social contexts - bringing an increasingly managerial response to solving social problems. These factors account for some of the perceived disparity between US and European approaches.

The research on European and US approaches to SE include conceptual as well as empirical studies, observing new approaches to social purpose organising in different geographical contexts. A literature review by Hoogendoorn et al. brings these different geographical approaches together into four schools of thought: American Social Innovation, American Social Enterprise, EMES, and United Kingdom approaches (2010). The study draws explanatory links between geographic differences and organisational level features: mission, legal structure, innovation, profit distribution, earned income and governance. The assumption is that the fragmentation of SE is between countries or regions, rather than within countries, an assumption that has not been tested.

International comparisons of SE have evolved in two separate streams: comparing organisational types in different countries (Defourny et al., 2020), and comparing the social origin and institutional context of approaches to SE in different countries (Kerlin, 2010). Defourny and Nyssens proposed a typology that provided a theoretical basis for the different organisational types of SE that had been observed in different countries so far (2017). The typology is based on three principles of interest as three points of a triangle that correspond with three sectors: general (state or first sector), capital (for-profit organisations or second sector), and mutual (cooperatives, or third sector) interest. SEs originate from one of the three principles of interest and gravitate away from the three pure forms towards a hybrid resource mix. The result is four types that are described in the next section: Entrepreneurial Nonprofit, Social Cooperative, Social Business, and Public SE (2017). The types were tested in 43 countries where support for all four types was found, however Public SEs were found as a subset of Entrepreneurial Nonprofits, rather than a separate type (Defourny et al., 2020). Defourny and Nyssens’ theorising of SE is not based on macro-level, institutional variables, such as correlation between presence of certain types with levels of economic development.

Kerlin’s research complements Defourny and Nyssens’ typology because she conducts international comparisons of SE based on national, or macro-level, institutional contexts (Kerlin, 2010), and develops an international framework including culture, type of government, stage of economic development, and model of civil society (Kerlin, 2013). The five approaches to SE that she identifies are: sustainable subsistence, autonomous mutualism, autonomous diverse, dependent focussed, and enmeshed focussed (2013). Kerlin’s framework for conceptualising the institutional context for the expression of SE is a useful way to approach country case studies because it accounts for historical institutional differences between countries (2010). Country case studies have been conducted applying and testing Kerlin’s 2013 framework in several countries, including Spain (Fisac & Moreno-Romero, 2015), Chile (Gatica, 2015), and South Korea (Bokgyo, 2015). A special issue of Voluntas features country case studies of France, Germany, Italy, Poland, Scotland, and Serbia (Baglioni, 2017), which provide useful points of comparison. Interestingly, researchers note that existing international comparisons do not account for unique historical and cultural factors at a national level. In Chile, for example, Kerlin’s framework did not account for the profound influence of Pinochet’s rule on social organising and, subsequently, SE efforts (Gatica, 2015). In Spain, regional differences within the country were not captured by the framework (Fisac & Moreno-Romero, 2015). Similarly for the typology, in Mexico, the colonial past explains the presence of ‘indigenous’ SEs, which are not accounted for in Defourny and Nyssens’ typology (Paramo-Ortiz, 2019). While it is expected that international frameworks cannot account for every national particularity and are presented by the authors as high-level starting points for comparative studies, these national case studies do reveal that the lack of connection between typologies and institutional contexts leaves a gap. An open question remains: what is the influence of institutional context on SE types?

Research on SE typologies considers a range of micro-level factors that are variables within organisations. SEs are divided into types according to activities, mission, purpose, social change orientation, capital, and principles of interest (Alter, 2007; Defourny & Nyssens, 2017; Gordon, 2015; Mair et al., 2012; Zahra et al., 2009). For example, mission-relatedness refers to the extent to which the revenue generating activities relate to the mission of the organisation (Alter, 2007). Another approach to classifying SEs into types focusses on organisational purpose. Gordon divides purpose into: mutual, community, altruistic, ethical, private market, and public statist, which he describes as reflecting different traditions in the UK (2015). Mair et al categorise 200 SEs according to their activities, which they group according to forms of capital leveraged by those activities: social, economic, human and political (2012).

Another way of approaching purpose is to consider the extent to which social entrepreneurs, those motivating the SE, aim for social change; some SEs have a change imperative and are founded by activist social entrepreneurs (Gawell, 2006; Jones et al., 2008). Other social entrepreneurs build organisations that meet a particular need, not aiming for change, which Zahra et al call ‘social bricoleurs’ (2009). This literature focusses on the individual social entrepreneur, which is a different focus to the organisation, and comes from a different line of research. These studies categorising SEs into types focus on organisational level features - mission, purpose, social change imperative, and forms of capital. While researchers are situated in specific locations, for the most part they do not include the influence of the geographic context in their theorising. What is not clear from these different typologies is how the different levels, micro (individuals), meso (organisations) and macro (national, historical-cultural context, international networks and frameworks) influence each other.

After reviewing the various typologies and categorisations of SE, it was determined that the Defourny and Nyssens typology of SE provided the most encompassing and grounded typology available. It relates to the wider literature in the following ways.

Entrepreneurial nonprofits (ENP) are third sector organisations that find ways to generate earned income, often in addition to grants and donations, and reflect a trend of third sector organisations becoming more ‘business-like’ (Maier et al., 2014). This phenomenon has increased following the 2007 global financial recession. Traded or earned income is the revenue generated from the organisation’s activities, as opposed to grants or donations received from private or public sources. Traded income is not necessarily related to the SE’s mission (Alter, 2007).

Public Sector Social Enterprises (PSE) deliver public services and often take the form of employment schemes (Defourny & Nyssens, 2010, 2017). This type includes Work Integrated Social Enterprises (WISE), which are publicly funded employment initiatives to support the social and occupational integration of marginalised people (Spear & Bidet, 2003). PSE type emerged in Europe in response to inadequacies in social welfare that saw chronic unemployment and poverty but is more recently an approach to SE that is part of the ENP type (Defourny et al., 2020).

Social Cooperative (SC). Cooperatives are democratically run businesses, such as group water schemes and credit unions, and pre-date SE as an organisational form in Europe (Defourny & Nyssens, 2012; Hoogendoorn et al., 2010). Social Cooperatives have evolved more recently as a means of delivering welfare services to the elderly and other at-risk groups. In a detailed review of SE law in Europe, Fici comments that “the cooperative form is the “most natural” and “more virtuous” form for an SE (2020, p. 17) due to their democratic governance structures. SCs are characterised by both their activities of general or community interest, as well as by their democratic and participatory governance. They are key actors in the social and solidarity economy, a concept that encompasses a wide range of organisational forms, such as associations, guilds and mutuals (Moulaert & Ailenei, 2005).

Social Business (SB) refers to for-profit businesses with social goals (Child, 2019; Defourny & Nyssens, 2017). Following the famous advice of Porter and Kramer, many businesses aim to have ‘shared value’ beyond concern for profit alone (2011). Some of these businesses become certified B Corporations, or B Corps, an international standard that assures consumers that the business is committed to its stated social or environmental goals and values (Marquis, 2020). In 2018, Deloitte published its Global Human Capital Trends report that showed “a profound shift facing business leaders worldwide: The rapid rise of what we call the social enterprise” (Deloitte, 2018, p. 2). The use of the term here refers to for-profit businesses that engage with social and environmental issues in a substantial way, and is considered an evolution of corporate sustainability (Dyllick & Muff, 2015). Some countries have specific legal forms that oblige the social business to reinvest a percentage of its profits into its mission, such as the Community Interest Company in the United Kingdom (Gordon, 2015).

Table 1 synthesises the literature reviewed to show how different levels of analysis have resulted in theory development of SE. For example, a meso-level analysis results in a theory contribution that is the concept of four types of SE (ENP, PSE, SC and SB); these are based on internal organisational features, like traded income, mission focus, participatory governance, and shared value, with, to some extent, contextual dimensions, such as geographical origin of the type. By making these levels of analysis explicit, we are able to include more extensive macro level dimensions by combining Defourny and Nyssen’s typology (2017) with Kerlin’s international framework for analysing SE (2013). Thus, we can analyse a country case study as related to international comparisons based on institutional factors, and also to organisational types, that include internal organisational features. Figure 1 illustrates this conceptual framework.

Figure 1:

This model of institutionally embedded types presents a framework for the question: How does national context relate to and explain types of SEs? Or expressed another way, within Kerlin’s international framework of SEs, which types are we likely to find in any given approach to SE? Implicit in the model and the literature are three steps of logic, numbered in the model: (1) organisational features determine the type of SE; (2) the types of SEs are influenced by the national institutional context; and (3) international comparisons are based on national differences. Our study tests these steps of logic by applying the model to the case of Ireland.

A brief descriptive history of the origin of SE types in Ireland reflects external influences, which over time became internal characteristics of voluntary organising. In each section below, we draw on desk research to discuss the Irish context for a particular SE type, and also present a narrative for each type from the empirical research. Influences on SE types include Ireland’s shared history with the United Kingdom, being part of Europe and a European Union member state, the role of the Catholic and Protestant churches in delivering public services, extensive flows of emigration to and from the US, and a strong but vulnerable economy reliant on multinational corporations domiciled in Ireland. Throughout much of Ireland’s history, agricultural communities organised locally, had community and voluntary traditions and rituals that shaped the way people organised for social purpose in communities. SE in Ireland has evolved from this “Community and Voluntary sector” (Donnelly-Cox et al., 2001) and includes some of the same actors before they were called SEs. While we found PSEs and ENPs consistent with the dependent focused model of SE, we also found a strong tradition of SBs and SCs. We also found a strong innovative individual approach, consistent with the social entrepreneurship literature (Hoogendoorn et al., 2010), but inconsistent with a dependent focused model of SE.

Table 2 provides a summary of how our set of 57 SEs relate to the typology. 18 SEs fit into more than one type. This non-representative sample illustrates how legal form does not correspond neatly with SE type. The SEs provided rich qualitative data to explain how each type relates to the institutional context.

Ireland has a large and historically significant nonprofit sector, that has included entrepreneurial initiatives since the beginning. The first charity law was set out by the Irish Parliament in 1634, which governed voluntary organising until the 1800 Act of Union between Great Britain and Ireland when the Irish Parliament was abolished. Research on the history of voluntary action in Ireland places the origin of modern voluntary organisations in the eighteenth century, when Catholic and Protestant faith groups set up philanthropic social-purpose organisations in parallel (Acheson et al., 2004). These organisations focussed on providing medical care, helping the sick and disabled and education and were often funded and named after wealthy donors, many of whom were women, noted for their leadership and innovation. Following Ireland’s struggle for independence, the Irish civil war (1922-23), and then the creation of the Irish Free State (1922), the new government lacked capacity to provide or support public services. The religious based services, both Catholic and Protestant, which were already established, continued to run educational and health services, establishing schools and hospitals. Thus, many nonprofits in Ireland today have Christian origins. First references to a nonprofit ‘sector’ in Ireland emerged in the 1980s (Donnelly-Cox et al., 2001). Legislation for charity regulation was passed in 2009 and implemented in 2015 and has resulted in stronger governance and reporting requirements for all registered charities (Charities Act, 2009), many of which identify as SEs, or fit a definition of SE.

While there is currently no comprehensive data on which nonprofits can be designated as SEs, O’Shaughnessy has conducted a recent study of the SE landscape in Ireland, including legal form, ecosystem, origins and drivers (2020). According to Benefacts, a public database of nonprofits that closed in February 2022, there were about 30 thousand nonprofits in Ireland in 2019, with 13.8 billion Euro annual turnover, and with 5.9 billion Euro support in 2018. Some 9,800 of these organisations were registered charities. A state report in Ireland estimated 1,400 SEs, but the purpose of the report to examine SE as a source of regional development and job creation likely limited the types of organisations included, limiting the study to charities (Forfás, 2013). A mapping study of SEs in Waterford county included 325 SEs, many of which were small local community development initiatives (Cooke et al., 2019).

ENP narrative: The 2007-2008 Global Financial Crisis impacted Ireland significantly and triggered a crash in banking and in a property bubble. While the collapse of the ‘Celtic Tiger’ can be traced to reckless trading by private banks, the focus of the subsequent reform has been the restructuring of the public sector (Regan, 2012). ENPs attribute the ‘bank bailout’ to a reduction of funding to nonprofits, which then had to seek alternative ways of generating earned income. Cutting spending on essential public services, like health and education, to pay back this national debt is highly criticised by SEs (meeting notes) and often viewed as a failure of the public sector (meeting notes). Nonprofits commercialised in response to that failure.

While Ireland joined the European Economic Community in 1972, social policy started to play a more significant role in European level policy, with the Essen guidelines, recognising the importance of social economy organisations in 1993 (Acheson et al., 2004). The European Commission (EC) launched a “third sector and employment initiative” in 1997, and budget lines for social economy projects became a standard part of the EC budget. The European Union made a commitment in 2000 for a ten year strategy that would promote social inclusion and strengthen the social economy in Europe (Spear & Bidet, 2003). Ireland has not only been influenced by EU policy on social integration but has also been the recipient of funding via various programmes to support local development through SE (O’Hara, 2001).

While there is no legal form of SE, in 2019 for the first time a national policy was launched, including a definition of SE (Government of Ireland, 2019) 10 years after the Charities Act. This policy emerged to support and advance the work of SEs in Ireland that address many important social and environmental issues. The national policy reflects the Irish government’s focus on SEs as employment generating initiatives: Work Integration Social Enterprises – WISE (O’Shaughnessy & O’Hara, 2016). The policy does not include credit unions or social businesses and has a minimal focus on cooperatives. Actors in the ecosystems that research participants primarily refer to are: Local Enterprise Offices, Pobal (a nonprofit set up by the State to support social inclusion and local development programmes on behalf of government departments), Department of Rural and Community Development, Department of Justice, and the Health Service Executive (meeting notes). For many years, PSEs did not apply for the international SE award competitions, although that is changing; there is also a noticeable generational difference between stakeholders of PSE (meeting notes).

PSE Narrative: The shift to WISEs to address poverty and unemployment is considered a response to chronic problems that were not successfully addressed by public policy historically and for decades. SE leaders and ecosystem actors focussed on budget cuts following the bank bailout (which is referred to more than the global financial recession, events which are interconnected) (meeting notes).

Modern concepts of credit unions and cooperative businesses originated in Europe in the 19^th Century and spread to Ireland in 1957 (O’Hara, 2001). Politician and agricultural reformer Sir Horace Plunkett has been credited with promoting agricultural co-operatives in the late 19^th century as means of sustainable rural development (West, 1986). He founded the Irish Co-operative Society (ICOS) which remains the country’s leading co-operative umbrella organisation. The legal form is the Industrial and Provident Societies, set up and owned by the members, which operate for the benefit of the members and the community in which they operate. ICOS cites multiple types of co-operatives active in Ireland including ‘cultural, community and leisure’, which they describe as community businesses (website and meeting notes). The biggest and best-known co-operatives in Ireland are in the agri-food sector. Additionally, there are over 350 group water scheme co-operatives in Ireland, which provide mains water services in rural areas. Credit Unions also fall under this category being membership organisations whose members save together and lend to each other at agreed rates of interest and have community development goals (meeting notes). According to the Irish League of Credit Unions, there are 339 credit unions in Ireland as of 2019 – down from 521 in 2008 due to a consolidation programme (meeting notes). While SCs according to their definition have a public or community benefit, many cooperatives have both financial and community goals, thus blurring the boundary between social and commercial cooperatives (meeting notes).

SC Narrative: The agricultural roots of the co-operative movement in Ireland are still visible in the focus of the work of ICOS and help explain the limited emergence of the cooperative movement in Ireland. State funders of third sector organisations and the requirements of the Charity Regulator encourage the adoption of Company Limited by Guarantee as the preferred legal nonprofit form and account for the limited emergence of consumer, service and other co-operative entities (meeting notes). The promotion of co-operatives as a “stronger sustainable economic business model” reflected weaknesses or failures of traditional for-profit businesses that were both implied and stated (meeting notes).

The SBs in our sample had a for-profit legal form, had investors and called themselves SEs. They had a strong international focus, rather than being local businesses. The 2018 Deloitte report on SE as the biggest current direction in international business includes a report based on interviews with 212 business leaders in Ireland (Deloitte Ireland, 2018). Two of the SBs in our research had the international designation of B-Corp. B-Corp is a newer designation in Ireland and was held by three Irish companies at the time of this study, with a further four companies, registered outside the jurisdiction, with a presence in Ireland (meeting notes). Multiple non-Irish B-Corps brands are available in Ireland. Their referents were international networks and collaborations, and they were not aware of or concerned with SE policy or state funding programmes (meeting notes).

SB narrative: The SBs that we spoke to each identified specific needs or issues in existing business practices to which their SE was a response. For example, one ethical coffee company set up its operations to keep more of the value in the supply chains closer to the coffee farmers (meeting notes). Much of their marketing message aimed to educate consumers about why supply chains have kept countries with rich resources in poverty, despite demands for the resources they have. In addition to the specific problems each SB addressed, research participants also said that they were part of a movement or trend to improve businesses by taking negative externalities more seriously and being genuinely committed to positive social and environmental impacts, rather than just giving them lip service (meeting notes).

A strong narrative on the role of innovative individuals in driving SE emerged. The historical driver of this theme was linked to ties between Ireland and the United States. In addition to influence from the EU and the UK, the United States has a significant influence on Ireland’s development throughout history. Famines in Ireland (1740-41 and 1845-49) resulted in massive loss of life, but also to mass emigration, ultimately resulting in a large Irish diaspora. Irish emigrants who are financially successful give back to their country of origin, through philanthropy, returning home, and in other ways. For example, the Ireland Funds is a philanthropic organisation for the Irish diaspora to fund community work in Ireland, and recently started funding SE as well. According to the US census records for 2017, about 10% of the US population claim Irish ancestry, or 31.5 million people, more than six times the population of Ireland. Furthermore, due to Ireland’s favourable corporate tax rates, there are over 700 US companies domiciled in Ireland according to the America-Ireland Chamber of Commerce including some of the world’s largest technology companies (Google, Facebook, Pay Pal, Linked In, Microsoft, eBay, Dell) and pharmaceutical/biotechnology companies (Novartis, Amgen, Eli Lilly, Biogen, Johnson & Johnson). This US influence has resulted in an active innovative individual approach to SE that has remained quite separate from other forms (meeting notes). However, many of these individuals go on to lead organisations that correspond with existing SE types: mainly SB and ENP (meeting notes).

There is a vibrant start-up culture especially in urban centres and connected to business schools (meeting notes). There are pitching competitions for students and graduates, accelerators, incubators, national, international and global SE Awards, and shared office spaces (e.g. Dogpatch Labs). For example, Irish students apply for the SE and social innovation award competition run by IE Business School in Spain. The student society, Enactus, runs a national and global competition for SE start-ups. The students participating in the various competitions have as their referents multi-nationals and global networks, not national policy on SE, are not familiar with WISEs, and do not consider their work as related to cooperatives (meeting notes). Ashoka, an international organisation that promotes social entrepreneurs, or Changemakers, had an office in Dublin from 2007 to 2019 and during that time identified 16 Ashoka fellows (meetings with Ashoka director, 2016, 2018).

In our sample of 57 SEs, innovative individuals set up ENPs, SBs, and even sometimes PSEs, meaning they availed of a WISE programme for financial support to hire staff. While the WISE form is usually associated with PSEs, we found it was more widespread, with ENPs and even SCs, as in our sample, availing of government supported employment schemes.