This is my final paper for my “Sociology of Organizations” course.
Introduction
Our contemporary world faces a myriad of problems. Social problems are everywhere and perhaps their ubiquity is caused by our heightened awareness of them or perhaps we’re just not as good at solving social problems as we are at creating them. A whole sector in society has come to bear the responsibility of social needs but it seems to not be enough. The civil sector is a sector of great diversity but it is also in a phase of transition to more rational, formal methods of organizing that are more commonly observed in the market sector. This organizational transition reflects the neoliberal cultural ideology of our age and deserves greater critical attention (Bromley, 2020). This article aims to provide an overview of our collective organized solutions in response to social problems and discuss the implications of neoliberalization in this context. In order to provide important context, we discuss the construction of social problems and provide a brief historical development of solutions to social problems before discussing the nonprofit sector and the rise of social enterprises.
What is a social problem?
Before discussing our organized solutions to social problems, we must first address the issue of the definition of social problems. Social problems are complex and dynamic just like the social world we live in and naturally, they are spatially and temporally contextual. However, what is considered to be a social problem is not random, it’s closely linked to the political, cultural, and economic context. Therefore, it is important to acknowledge the subjective aspect of social problems and their social construction (Spector & Kitsuse, 1987). For example, child labor has existed for quite a long time and was very much legal and even regulated in some countries, especially after the industrial revolution. Now, it is considered a human rights violation. Or take government or corporate mass surveillance for example: do we consider it as big a problem as poverty? Not yet, perhaps because it’s a relatively new phenomenon that we don’t fully understand yet and it’s also an important tool for powerful people. What is defined as a social problem and how it is defined are important factors in the solutions we come up with. A universal definition does not exist and it is not within the scope of this paper to come up with one, but Mary and Peter Senn have traced a history of the definition of a social problem and summarized the literature with a comprehensive sociological definition constituted of eight parts that each have their implications:
“(1) a social situation (2) involving a substantial number of persons (3) which is declared (4) to be inconsistent with the values (5) of some powerful group (6) and labeled as a situation (7) which must be dealt with (8) by some kind of collective action (Senn & Senn, 1993).”
This definition also implies that in their construction, social problems go through stages of claims-making and legitimation in which it makes all the difference who is making the claims and what the legitimation process entails (Spector & Kitsuse, 1987). Therefore, in our analysis of the types of organizations that are meant to address social issues, it is also worth mentioning what these organizations perceive as social problems. Just like social problems themselves, the organized solutions we have for them also come in all shapes and sizes. They differ throughout history and they differ from place to place. Not only that, they differ in terms of what part of society is responsible for addressing these problems, and the organizational forms adopted to address these problems. It is not my goal to provide here a complete account of all of these organizations, but to provide a general perspective of their historical development and a critical discussion of contemporary trends of organization in response to social problems.
Historical Development of Solutions to Social Problems
What were preindustrial social problems and how were they dealt with? Especially because the term “preindustrial” spans over a very large period of time and space, there most probably existed a variety of solutions to social problems but let’s focus on some general themes. The main social problems of preindustrial societies seem to center around poverty, health and social deviance. The characteristic of these acknowledged problems most relevant to this study is that they were considered smaller in scale than the social problems we face today: they were considered local and were able to be dealt with locally. Also, some phenomena that we would today definitely consider a problem, weren’t seen as problems by those who had influence in determining the social problems of the day, such as the widespread practice of slavery. Due to less dense populations and the trivial negative impact on the environment, many of our contemporary problems weren’t experienced by preindustrial societies. Although many problems we generally don’t experience today had serious consequences on preindustrial societies such as high child mortality rates (Mayne et. al., 2020). Depending on the context, there were formal and informal approaches (or both) to dealing with these problems. Informal methods of addressing social problems could be kinship-based community support systems in which other members of the community help those in need. This could be in the form of sharing resources or looking after orphans. When it comes to formal solutions, it seems like the main institution responsible for dealing with these problems were religious institutions, especially if they held power and influence in their societies. Many religions have incorporated the idea that those who can, must help those in need in the form of charitable religious practices. These practices are likely the origin of what we call charity and philanthropy today. Monetary aid wasn’t the only form of solving social problems, there were service-based institutions such as orphanages, hospitals and asylums too (Hardy, 2013). So, if we had to generalize we could say that the formal responsibility of solving social problems was mainly assigned to religious institutions traditionally. With the advent of industrialization, most societies underwent major economic, social and political transformations that significantly contributed to shaping the world as we know it today. The industrial revolution brought with it new ways of life… and several new social problems as well. Agrarian economies became industrial economies that relied on machines in manufacturing and a factory system instead of the previous domestic system of production that paved the way for mass production. Production became cheaper and more efficient with the new organization of work. The concept of work was redefined, laying the foundations of our work experience today. The capitalist mode of production that was adopted created unprecedented wealth and higher overall standards of living which led to the expansion of the middle class and brand new structural social and economic inequalities. Factory work often involved undesirable and dangerous working conditions, even for children. The disintegration of traditional communities and their ties severely damaged the community support networks of preindustrial life which left more social problems unaddressed and called for greater formal solutions. The rapid urbanization accompanying industrialization led to problems related to overpopulation such as disease, lack of housing, unemployment etc. The ever-increasing use of non-renewable resources for production at an unprecedented scale led to the environmental problems we are facing now. Social problems reached a scale that traditional methods could no longer handle and the distribution of this newly found wealth became an issue (Kuhnle & Sander, 2010). “Industrial, urban, and capitalist developments, with their inherent, unprecedented social problems, spurred political demands for change of regimes and of social rights (Kuhnle & Sander, 2010).” Government involvement in social issues was not a new phenomenon but it was generally limited in preindustrial societies. In Europe, it was mostly restricted to Poor Laws which wasn’t enough for the increasing prevalence and severity of social problems in industrial societies. Rising nation-states were required to take on a new, larger role in the wellbeing of their citizens. Problems weren’t local anymore, but national. Along with these new social problems, the idea that humans should have rights was born from the American and French Revolutions. With the rise of concepts such as social insurance and social security, nation-states went from governments that primarily protected their citizens from external and internal threats and produced public goods to governments that were also responsible for the welfare of their people. Thus, the rise of welfare states. A new realm of public services was born: public education, public health and legal protection from the dangers of workplaces (Kuhnle & Sander, 2010). Educational inequalities were now acknowledged as social problems and so were certain forms of worker exploitation. But what about the problems that weren’t acknowledged by the state? Democracies provide citizens with a choice in who governs them, to some extent. However, democracies are designed to represent the interests of majority groups which means social problems experienced by minority groups receive less public recognition. Alternative solutions in the form of nonprofit and non-governmental organizations that tackled these underrepresented problems were pursued. Hence, the rise of the *third sector *of society that is comprised of these organizations. Perhaps paralleling the intensifying division of labor in production, the structure of society itself was subjected to an “intersectoral division of labor: the distribution of functions among for-profits, nonprofit organizations and public agencies (DiMaggio & Anheier, 1990).”
“Recent years have witnessed a considerable surge of interest throughout the world in the broad range of social institutions that operate outside the confines of the market and the state. Known variously as the “nonprofit,” “nongovernmental,” “voluntary,” “civil society,” “third,” or “independent” sector, this set of institutions includes within it a sometimes bewildering array of entities — hospitals, universities, social clubs, professional organizations, day care centers, environmental groups, family counseling agencies, sports clubs, job training centers, human rights organizations, and many more (Misuraca, 2007).”
The Nonprofit Sector
What exactly is the third sector, the “civil sector” of society? We are easily able to differentiate between the state and market, public and private, but defining the third sector is a challenge. One might assume that the diversity of the organizations considered to be a part of the third sector and the sector’s comparative weakness in terms of power and influence to the other two sectors are the reasons that it hasn’t received much attention. However, Salamon & Anheier argue that these explanations are insufficient because the same diversity can be observed in for-profit organizations and because the third sector isn’t as weak as you might think in every context. They claim that a more important reason for this disregard has to do with the availability of a proper definition and that “the lack of attention to the third sector is a function less of the weakness of the sector than of the weakness and limitations of the concepts that have so far been used to comprehend and define it (Salamon & Anheier, 1992).”
“That clearer specification of the nonprofit sector is urgently needed should be apparent from the varied terminologies used to depict this range of institutions. A great many such terms are used — ‘nonprofit sector’, ‘charitable sector’, ‘independent sector’, “voluntary sector’, ‘tax-exempt sector’, ‘non-governmental organisations (NGOs)’, ‘associational sector’, ‘économie sociale’ and many more (Salamon & Anheier, 1992).”
Each term by itself highlights a certain aspect of the sector, but ignores other important aspects. Salamon & Anheier provide an account of the different types of definitions surrounding the third sector: the legal definition, the economic definition, the functional definition and the structural/operational definition. They illustrate the explanatory advantages of the structural/ operational definition with three case studies of countries with considerable differences: the UK, Germany and Brazil. This definition is comprised of five key components; the organizations that make up the third sector are:
2. Private: are separate from the government,
3. Nonprofit-distributing: don’t return generated profits back to owners or managers,
4. Self-governing: not controlled by external entities,
5. Voluntary: involving some kind of voluntary participation (Salamon & Anheier, 1992).
From now on, we will use the term nonprofit to describe this sector as this aspect of the sector is more relevant to our discussion. Now that we’ve established to some extent what the nonprofit sector is and acknowledged the ambiguity of the concept, the question of why these organizations exist comes up. Many scholars from different fields have looked into this question and we don’t yet have a consensus but let us review some of the major perspectives. First of all, let’s examine some economic approaches that originate from the multitasking literature in contract theory. The relevant takeaway from this literature is that if organizations are balancing different objectives that are not equally measurable, such as profit and social impact, the incentives for these objectives have to be designed accordingly. For example, the nonprofit form may have emerged because its non-distribution constraint decreases the incentive to prioritize profit related goals and ensures that social objectives are put first. Hansmann defines the “non-distribution constraint” as a mechanism inherent to nonprofit organizations that overcomes contract failure. It prohibits the distribution of surplus profits to owners or managers of the organization, thus rendering nonprofitness an inappropriate form for personal profit (Ghatak, 2020). This constraint ensures the reliability of the organization by eliminating the potential for opportunism; assuring that funds and donations will be used strictly for the cause. Also, those looking for a profit won’t choose this form of organizing anyway. So from this perspective, nonprofit organizations appear where this constraint is required: “when consumers cannot make informed choices because (a) donors buy services for unknown third parties (overseas charities), (b) known beneficiaries are seen as unreliable witnesses to service quality (daycare centers, mental hospitals), © pooled donations cannot be tracked to specific services (political advocacy), or (d) services are so complex that ultimate consumers cannot evaluate their quality and so important that low quality poses unacceptable risk (medical care) (DiMaggio & Anheier, 1990).” Heterogeneity theory (or market failure/government failure theory) is also an economic approach that explains the existence of the nonprofit sector/civil sector by building on classical economic theory. Market failure here refers to the idea that markets are not useful in the production of public goods (goods that are free and for everyone) which is why a government is needed. Economist Burton Weisbrod goes further to suggest that in a heterogeneous society in which many people have different ideas about which public goods should be produced, governments also fail to satisfy the needs of their citizens so the need for a “third sector” arises. This perspective has certain implications such as the expectation of a larger nonprofit sector in countries with higher population heterogeneity and lower production of collective goods by the government, and that the third sector would mostly be funded by private charity. Salamon & Anheier test these hypotheses cross-nationally and are not able to find evidence for this explanation. While the heterogeneity approach emphasizes the aspect of competition in the relationship between government and the third sector and explains the existence of a third sector based on the absence of the state, interdependency theory emphasizes cooperation between the two and acknowledges the existence of “voluntary failure” along with market and government failure, meaning the constraints on the third sector to provide public goods. Salamon & Anheier’s analysis provides evidence for the implications of the interdependency approach but this approach fails to explain the conditions that produce such a relationship between the nonprofit sector and the government (Salamon & Anheier, 1998). These economic perspectives, although quite interesting, are based on assumptions of rational actors that act through utility functions and the explanations have an instrumental aspect to them that does not fully capture the cultural and institutional factors that contribute to the existence of these organizations. Salamon & Anheier claim that social origins theory provides a more comprehensive explanation that takes into consideration the embeddedness of societies in their social, political and historical context and formulates a categorization based on the amount of government social welfare spending and the scale of the nonprofit sector that better fits to explain their cross-national empirical data. They find that this approach has more explanatory power than economic theories but it still doesn’t explain all of their data. Critiques of Salamon & Anheier’s use of social origins theory recognize the usefulness of the approach but highlight the shortcomings. Einolf claims that their analysis is incomplete in that they ignore “the role of ethnolinguistic diversity, the timing of state formation and above all the role of religion and the relationship between church and state.” He emphasizes the importance of cultural and religious differences between societies but also the effects of the nonprofit organization in the Western world on the rest of the world (Einolf, 2015). In explaining the division of labor among different forms of organizations from a historical perspective, Dimaggio & Anheier claim that “US nonprofit organizations appear less a single form than a kind of cuckoo’s nest occupied by different entrepreneurs for different purposes” and of these they focus on the most prevalent: status groups, professions and the state. In the US, nonprofit organizations were differentiated from other forms of organization in the 19th Century by upper classes who had an interest in shaping their urban environment and to this day they remain involved with the activities and decisions of nonprofit organizations. While their influence was originally in the form of local elites taking part in boards of trustees, this kind of influence has decreased whereas recently its more in the form of upper class managers that bring to the nonprofit realm corporate approaches to governing. While other status groups exist such as worker and minority groups, the organizations founded by them have more difficulty legitimizing their organizations and collecting resources. The Progressive Era shows a tendency for professionals to resort to nonprofit organizational forms perhaps due to the parallels in ideologies: “service ethos, autonomy from market values, and exercise of expertise on behalf of the common good (DiMaggio & Anheier, 1990).” However, while nonprofit hospitals and universities exist, some professionals such as lawyers prefer for-profit forms of organization and there are a lot for-profit hospitals and universities as well. The state and the nonprofit sector also worked in coordination, the government would delegate certain responsibilities to nonprofit organizations and fund them while they did the actual implementation. So much so that government funding became the number one source of revenue for nonprofits. After providing a historical perspective they illustrate three institutional (and “implicitly ecological”) explanatory factors for nonprofit prevalence. First, the key decisions that initial entrepreneurs make are decisive because these decisions become institutionalized making it more costly to stray from initial forms through various mechanisms. Second, are public policies such as tax policies and government financing. Third, is the climate of opinion. People have their beliefs about what forms of organization are suitable for certain purposes, for example some “goods” should not be produced by the market because of the motive of profit and its negative consequences for consumers of that good (DiMaggio & Anheier, 1990). In their examination of cross-national variation in the nonprofit sector, Dimaggio & Anheier find that sectors equivalent to the nonprofit sector in the US with similar central characteristics are widespread and that institutional factors have greater explanatory power in cross-national variation than microeconomic approaches. Cross-national differences in intersectoral relationships influence the prevalence and roles of nonprofit organizations and the polity structures of nations create tendencies for specific forms of organizing that are reflected in the organizational form of nonprofit organizations. The heterogeneity of cultural contexts produces different demands for collective goods and because nonprofit organizations originate from strong ideological and religious orientations, the sector and the organizational structure often reflect these institutional backgrounds (DiMaggio & Anheier, 1990). Nonprofit organizations also exhibit organizational inertia and they especially tend to imprint on periods of historical conflicts rather than reflect the contemporary context (Marquis & Tilcsik, 2013). Dimaggio & Anheier reach the conclusion that seeking general differences between the three sectors of society is a problematic endeavor. There are a lot of subtypes of nonprofit organizations based on factors such as legal forms, the resources they depend on, government assistance etc. So much so that the variety within this organizational form exceeds the differences by sector. Also, the boundaries between these sectors are quite ambiguous, and some organizations span these categories with their activities or structures, making it difficult to identify which sector it belongs to. All of these factors result in an abundance of forms of nonprofit sectors and organizations throughout the world: “‘nonprofitness’ has little consistent transnational or transhistorical meaning (DiMaggio & Anheier, 1990).” So as we can see, we don’t have a general law that explains the existence of the nonprofit sector and its difference from the state and market, but scholars are making progress in identifying factors that contribute to the prevalence of this phenomenon and when you’re trying to explain something so contextual, you shouldn’t expect there to be a universal law anyway.
Social Entrepreneurship
Today, a new kind of organizational actor takes the spotlight in the struggle against our problems: social enterprises. To start, let’s think about social problems today. Along with local or regional problems, we have social problems of a global scale now and we have so many of them. Poverty is an age old global problem that some might say we’re alleviating but that depends on how you define poverty. We also struggle with several versions of inequalities based on gender, class, race and disabilities. We’re in the midst of a mental health and substance abuse crisis. Not to mention we’re also in an environmental crisis and a global pandemic. There are an overwhelming amount of contemporary problems that would be impossible to list here. What’s more, we’re very much aware of many of these issues. Yet, these problems don’t seem to be going anywhere. We have a whole sector working on these problems, yet we’re not making much progress towards resolving them. The progress that we are making is hard to quantify and hard to measure making it difficult to understand if our current method is working. According to a 2018 survey of 3,400 nonprofit leaders in the US, demands for services are increasing at a rate faster than nonprofits can meet them, especially those serving low-income communities. For most, the top challenges facing their organization are related to staffing and financing: recruiting enough staff, finding managers, offering competitive salaries, raising funds that cover their costs, raising unrestricted revenue and achieving financial stability (Nonprofit Finance Fund, 2018). The effectiveness of the nonprofit sector as a solution to the massive, complex social problems of our day has been called into question. The challenges experienced by those involved in the sector have produced critiques on the constraints of nonprofit organizing. In his book Uncharitable: How Restraints on Nonprofits Undermine Their Potential, humanitarian activist/entrepreneur Dan Pallotta explains why he thinks nonprofit organizations don’t work. He claims that the underlying problem is the way we think about social initiatives, specifically the myths that we believe about them. We have social problems of a tremendous scale and very small organizations to deal with them, and our beliefs about these organizations keep them small. We discriminate against nonprofit organizations because we have a separate “rulebook” for them. He identifies five problems: constraints on employee and manager compensation, prohibition on risk-taking, impatience with outcomes that discourages long-term vision, low tolerance for paid advertisement and no incentives for investment. Pallotta argues that the “demonic label of overhead” comes from the Puritan origins of charity that perceive charity as a method of penance for capitalist profit making which made it essential that there was no profit-making involved in charity activity. It seems that what Pallotta is describing is an institutional interpretation of an example of imprinting that results in the undermining of the purpose of the organization (Marquis & Tilcsik, 2013). Nonprofit organizations are sanctioned for adopting practices that work for for-profit organizations, even if this is irrational and has negative consequences in the long run. The legitimacy of nonprofit organizations is compromised in the form of losing the trust of their donors, when they engage in for-profit activities. These problems are related to the non-distribution constraint mentioned earlier and nonprofit organizations being dependent on donations, not having the means to gain resources themselves. The challenges the constraints of nonprofit organizations present, combined with the erosion of the already vague boundaries between sectors has prompted an appealing new idea: let the market solve social problems. Commercial organizations seem to use an effective method of organizing and reaching goals especially related to making profit, and some of the most powerful organizations today are corporations so even nonprofit forms of organizing have strong resemblances to formal rational commercial organizations. However, the blurring of boundaries is two-sided: for-profit organizations have begun to incorporate social and environmental goals (Bromley & Meyer, 2014). This blurring coupled with the perceived ineffectiveness of traditional forms of nonprofit organizing contributed to the rise of market-based solutions and the emergence of new hybrid organizations that balance financial and social concerns, and a fourth sector of society that represents this wide range of organizations (Battilana & Lee, 2014). The idea that business should be used to address social problems manifests in different ways at the organization level. For example, some trends treat businesses themselves as the problem. Corporations use resources, determine working conditions, and impact their environment, often to a greater extent than any other organization or individual. Therefore, some movements prioritize minimizing or completely eliminating the harm that corporations inflict on their environments. For example, Certified Benefit Corporations define themselves as “a new kind of business that balances purpose and profit. They are legally required to consider the impact of their decisions on their workers, customers, suppliers, community, and the environment (B Lab, 2021).” The concept of “stakeholder capitalism” similarly is based on the idea that corporations should aim to benefit all stakeholders rather than focus on increasing only shareholder value (Hunt et al., 2020). These ideas can be understood as versions of corporate social responsibility. The term corporate social responsibility (CSR) has actually been around since the 1950’s but the specific responsibilities lacked definition. Since then, with changing social expectations and the efforts of academic interest, its meaning evolved from generating economic profit to creating shared value (CSV). Along the way, the dichotomy between business and social benefit was challenged and doing “good business” was understood to be profitable in the long run (Agudelo et al., 2019). CSV differs from CSR in that it brings social responsibilities to the core of the organization rather than treating it as a peripheral philanthropic matter. The created social values themselves are percieved as integral to competition and profit maximizing. The inventors of the concept of CSV argue that for-profit companies are now taking the blame for the problems with the world when in reality a change of perspective could be the first step towards a new kind of capitalism that has social problems at its core and emphasizes the creation of shared value: “creating new policies and operating procedures that allow your company to maximize its revenues, whilst also offering benefits that add to the local community (Porter & Kramer, 2011).” This line of thinking represents an approach that sees for-profit organization as a powerful tool for meeting human needs and considers social enterprises our best chance against social problems. However, social entrepreneurship encompasses all of these ideas and is a broad term that applies to the many forms of organizing that blur the lines between for-profit, nonprofit and public. Although we can’t generalize about their form of organization, their distinguishing goal is to balance purpose and profit, without the rigidity of nonprofit or public organizations. Perhaps, its best to think of social enterprises on a spectrum between the two poles of nonprofit and for-profit organization, encompassing the full range of hybrid organizational structures in between (Dees, 1996). The rise and prevalence of this new hybrid form deserves critical attention. Let’s discuss the potential implications of the emergence of social entrepreneurship as the ideal solution to social problems.
Discussion
“Australia, like many countries, is a place where neoliberal orthodoxies are so naturalised that most of us largely don’t even notice them. In jurisdictions where social enterprises are used as policy instruments to respond to the dismantling of welfare states, or to valorise paid work and enterprise as the source of all human value, where the discourse of social enterprise is used to impose managerial norms on not for-profit organisations, where (mostly male) social entrepreneurs are held up as heroic standards of greatness, where we establish endless pitch competitions and encourage students to devise business solutions to problems of which they have no experiential knowledge (and which may not have market solutions), and where legal definitions of the concept determine what is and is not social enterprise according to mainstream regulatory agendas, we can’t but acknowledge the close interplay between legitimised forms of social enterprise, university discourses of social entrepreneurship and neoliberal agendas (Barraket, 2019).”
With all this discourse on a new capitalism, it may seem like we’re on the brink of a revolution that will bring an end to all of our many sorrows. Social enterprises are increasingly being perceived as the new best way to tackle social problems. The corporate world has begun to acknowledge social problems and their role in producing them, and corporations are even contributing to solutions. However, it’s not really a revolutionary idea to mimic corporations because they are efficient in accumulating capital. If we were to use social movement terminology, it’s more of an example of a reformative organizational social movement rather than a revolutionary one (Aberle, 1966). It does not challenge the ideal of neoliberalism, but attempts to solve these problems within the ideology of neoliberalism. This transition relies on a popular mechanism: mimetic isomorphism (DiMaggio & Powell, 1983). Traditionally nonprofit forms of organization are imitating the models used by for-profit organizations deemed to be successful, shedding their institutional origins. Social enterprises are hybrid organizations composed of social and market aspects that correspond to nonprofit and for-profit forms of organization and when we think of it as a spectrum, these enterprises can be located anywhere between nonprofit and for-profit with varying degrees of resemblance to either form (Dees, 1996). Now if these enterprises were homogeneously distributed in this spectrum, we might not have a problem. The existence of both nonprofit and for-profit forms of organization within industries has been shown to produce beneficial competition effects (DiMaggio & Anheier, 1990). However, there is reason to believe that these enterprises would tend to resemble market corporations rather than nonprofits. In a for-profit environment, competitive isomorphic pressures could push social enterprises to increasingly resemble for-profit corporations because it would be easier to interact with the organizations surrounding them (Hannan & Freeman, 1977). The formal and managerial structures of social enterprises are already more similar to traditional businesses, especially if their solutions are to be scaled which is considered an advantage of the for-profit form. Scaling would result in large for-profit organizations which are known to have a tendency to inertia, inefficiency and goal displacement (Sharma, 2016). Also, the justifying arguments for social enterprises centered on the non-distribution constraint also delegitimize nonprofit forms of organizing which could lead to a decrease of diversity in our solutions to social problems and the dominance of for-profit solutions to social problems, an approach that we don’t know the consequences of yet. This situation brings up the question of relevance: these organizations by definition hold very different goals, which entail different challenges in achieving them (DiMaggio & Anheier, 1990). The for-profit form of organization is proven to be successful for a very specific measurable goal, that is making profit. How can we assume that the same model will work when we add other goals of a very different nature? Would this not create a form of goal displacement and general confusion around the primary purpose of the organization? Also, what would be the primary goals of these organizations? One would like to imagine that it would be the social cause, but achievement of goals are measured by outcomes. The outcomes for social goals — social impact — are not so easily measured. However, profit related goals are easily quantifiable which might make the achievement of material goals an easier measure of success. Assuming that there is a tradeoff between profit-making and social benefit, the mission-integrity problem describes the tension between the different goals of social enterprises. Mission-oriented social enterprises need a mechanism that balances the incentives of decision-makers towards the specific mission. This can be achieved through the selection of socially motivated managers, but this is a quality that may not be very easy to observe (Ghatak, 2020). Even if the selected managers have prosocial motives, will they be able to relate to the beneficiaries’ experience or will the organization be alienated from the problem? Another issue that must be addressed is how this trend would affect the construction of social problems. As we mentioned previously, a social problem needs to be acknowledged as one before we can speak of solutions. When the legitimate form of social organizing becomes social enterprises, who decides what is considered a social problem? Social entrepreneurs and people or organizations that invest in their solutions. Nonprofit organizations were criticized as tools of elite control due to the board trustees and corporate managers assigned to several of them but as the sector grew, the diversity of key decision makers had increased (DiMaggio & Anheier, 1990). With social enterprises, the decision makers are directly a part of the market system, which might create conflicts of interest in the legitimization of social problems that the neoliberal market system creates. So, the key question here is “who is more likely to found or invest in a social enterprise?” And how does this effect the inclusivity of the representation of social problems and the effectiveness of the designed solutions? Social enterprises have positioned themselves as the self-sustaining antithesis of nonprofit organization, and the emphasis of differentiation is the regard for profit whereas ideally the solution to social problems would focus on the needs of the beneficiary (Sharma, 2016). If we agree that social problem solving should focus on the well-being of the humans involved, how are we supposed to achieve that if we’re playing by the rules of a neoliberal system that doesn’t have a regard for overall human well-being? From what we’ve discussed, the key actors of social enterprises and their prosocial personalities are decisive for the prioritization of social outcomes over financial outcomes. The assumptions core to neoliberalism define human-beings as self-interested, rational utility seekers, a perspective that doesn’t seem to believe in a selfless desire to solve social problems. Some regard social enterprises as a vehicle for a better world, others see it as a vehicle for neoliberalism. Constructing social enterprises as our main solution to social problems shifts the responsibilities of the state and nonprofit sector who in many contexts work together for the alleviation of our problems, to the free market which ultimately increases the already dangerously high influence of the market on our lives (Sharma, 2016). Neoliberalism is an ideology that emphasizes the benefits of competition, would it not be better if we emphasized cooperation in addressing social problems? It is an ideology that treats endless economic growth as our salvation, but haven’t we already seen enough negative consequences of this perspective?
Conclusion & Further Research Suggestions
“Nonprofit sectors are often described as sources of diversity and innovation. They contribute to pluralism by creating centers of influence outside the state and provide vehicles through which disenfranchised groups may organize. They enlarge the menu of models among which policy makers may choose when experimenting locally with solutions to social ills (Dimaggio & Anheier, 1990).”
We have established that nonprofit organization was a field of enormous diversity and the benefits of such diversity might be in danger. This discourse surrounding social enterprises not only pushes the nonprofit form towards an idealized neoliberal substitution, it also delegitimizes nonprofit ways of organization that contribute to the heterogeneity of our solutions to social problems. And social goals come in variety, so while some might be suitable for the for-profit form, there’s bound to be some that the market can’t solve and that would benefit from a diversity of solutions. This article is a general review of the literature that explains our organized collective solutions to social problems. After providing a historical development of nonprofit organizations and the rise of social enterprises, I aimed to illustrate concerns regarding the delegitimization of nonprofit forms of organizing and the idealization of for-profit social enterprises. I believe these concerns deserve further academic attention. Further research could first of all test the assumption that the rise of social enterprises has negative effects on the nonprofit population. An ecological approach could investigate the relationship between population growth rates of nonprofits and social enterprises and whether there is a significant amount of conversion from one form to the other. Another important question regards which social problems are better suited to the for-profit social enterprise form. Studies of the individuals within organizations could comparatively explore the kinds of people that work in nonprofits and social enterprises. Suggested focuses would be on their demographical background, previous experiences, relation to the social goal of the organization, and prosocial attitudes. The topic of multiple goals also deserves further attention: research could address how social enterprises define their goals and what kind of incentive mechanisms help to balance them. Finally, critical studies of how social enterprises define and measure impact would provide a better understanding of how effective these organizations are against social problems.
“Neoliberalism has a track record of favoring the few at the cost of the many. The charity sector tries to redress these inequities and give succor to those left behind. One is the antithesis of the other. Should we not get together to halt the advance of neoliberalism into charity? Do we need to see social entrepreneurship as a “non”-nonprofit? Should we instead promote hybrid models that plan the social change effort with both charity and revenue streams? Should we encourage community entrepreneur networks where charity funds are used to support entrepreneurial efforts from within a beneficiary community that help solve their social problem? Should we advocate for governments and corporates to join hands with nonprofits in planning, delivering, and monitoring welfare services? Equally, should we set ethical and social responsibility standards for entrepreneurships and applaud them for their contribution to society? Social entrepreneurship is definitely a part of the bouquet of social solutions. But should we be mindful about preventing its slide into the neoliberal form that it is perceived to take now (Sharma, 2016)?”
References
Aberle, David F. 1966a. The Peyote Religion among the Navaho,. Chicago: Aldine Pub. Co. 1966b. The Peyote Religion among the Navaho,. Chicago: Aldine Pub. Co. B Lab. “Certified B Corporation.” Accessed 13 January, 2021, https://bcorporation.net/. Barraket, Jo. 2019. “Comment: Is Social Enterprise a Vehicle for Neoliberalism?” Centre for Social Impact. Battilana, Julie, and Matthew Lee. 2014. “Advancing Research on Hybrid Organizing — Insights from the Study of Social Enterprises.” *Academy of Management Annals *8 (1): 397–441. https://doi.org/10.5465/19416520.2014.893615. Bromley, Patricia, and John W. Meyer. 2017. “‘They Are All Organizations’: The Cultural Roots of Blurring Between the Nonprofit, Business, and Government Sectors.” *Administration & Society *49 (7): 939–66. https://doi.org/10.1177/0095399714548268. Champion, T. C. , Herlihy, . David , Herrin, . Judith Eleanor , Aubin, . Hermann , Stearns, . Peter N. , Sørensen, . Marie-Louise Stig , Mayne, . Richard J. , Frassetto, . Michael , Parker, . N. Geoffrey , Peters, . Edward , Treasure, . Geoffrey Russell Richards , Weinstein, . Donald , Salmon, . John Hearsey McMillan and Barzun, . Jacques. “History of Europe.” Encyclopedia Britannica, November 26, 2020. https://www.britannica.com/topic/history-of-Europe. Dees, J Gregory. 1996. “Social Enterprise Spectrum: Philanthropy to Commerce.” Harvard Business Publishing, May, 7. DiMaggio, Paul J., and Walter W. Powell. 1983. “The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields.” *American Sociological Review *48 (2): 147. https://doi.org/10.2307/2095101. DiMaggio, Paul J., and Helmut K. Anheier Reviewed work(s): 1990. “The Sociology of Nonprofit Organizations and Sectors.” *Annual Review of Sociology *1: 137–59. Einolf, Christopher J. 2015. “The Social Origins of the Nonprofit Sector and Charitable Giving.” In The Palgrave Handbook of Global Philanthropy, edited by Pamala Wiepking and Femida Handy. London: Palgrave Macmillan UK. https://doi.org/10.1057/9781137341532. Hannan, Michael T., and John Freeman. 1977. “The Population Ecology of Organizations.” *American Journal of Sociology *82 (5): 929–64. https://doi.org/10.1086/226424. Hardy, Gordon. 2018. “Why Give? Religious Roots of Charity.” Harvard Divinity School. Hunt, Vivian, Bruce Simpson, and Yuito Yamada. n.d. “The Case for Stakeholder Capitalism,” 8. Kuhnle, Stein, and Anne Sander. 2010. The Emergence of the Western Welfare State. Oxford University Press. https://doi.org/10.1093/oxfordhb/9780199579396.003.0005. Latapí Agudelo, Mauricio Andrés, Lára Jóhannsdóttir, and Brynhildur Davídsdóttir. 2019. “A Literature Review of the History and Evolution of Corporate Social Responsibility.” *International Journal of Corporate Social Responsibility *4 (1): 1. https://doi.org/10.1186/ s40991–018–0039-y. Marquis, Christopher, and András Tilcsik. 2013. “Imprinting: Toward a Multilevel Theory.” *Academy of Management Annals *7 (1): 195–245. https://doi.org/10.5465/19416520.2013.766076. Mary, S., and Peter R. Senn. 1995. “What Is a Social Problem? A History of Its Definition.” In Jahrbuch Für Soziologiegeschichte 1993, edited by Carsten Klingemann, Michael Neumann, Karl-Siegbert Rehberg, Ilja Srubar, and Erhard Stölting, 211–46. Wiesbaden: VS Verlag für Sozialwissenschaften. https://doi.org/10.1007/978-3-322-97304-7_9. Misuraca, Gianluca C and Centre de recherches pour le développement international (Canada). 2008. E-Governance in Africa, from Theory to Action a Handbook on ICTs for Local Governance. Ottawa: International Development Research Centre. http://site.ebrary.com/id/ 10193677. Nonprofit Finance Fund. State of the Nonprofit Sector Survey. 2018. (https://nff.org/learn/ survey#results) Pallotta, Dan. 2008. Uncharitable: How Restraints on Nonprofits Undermine Their Potential. New England: Tufts University Press. Powell, Walter W., and Patricia Bromley, eds. 2020a. The Nonprofit Sector: A Research Handbook. Third edition. Stanford, California: Stanford University Press. eds. 2020b. “4. The Organizational Transformation of Civil Society.” In The Nonprofit Sector, 123–43. Stanford University Press. https://doi.org/10.1515/9781503611085-007. Salamon, Lester M., and Helmut K. Anheier. 1992. “In Search of the Nonprofit Sector. I: The Question of Definitions.” *Voluntas *3 (2): 125–51. https://doi.org/10.1007/BF01397770. Salamon, Lester M, C. Wojciech Sokołowski, Helmut K Anheier, Johns Hopkins Comparative Nonprofit Sector Project, Johns Hopkins Institute for Policy Studies, and Center for Civil Society Studies. 2000. Social Origins of Civil Society: An Overview. Baltimore, MD: Johns Hopkins Center for Civil Society Studies. Sharma, Jyoti. 2016. “A Neoliberal Takeover of Social Entrepreneurship?” Stanford Social Innovation Review. Spector, Malcolm, and John I. Kitsuse. 1987. Construction of Social Problems. New Brunswick, New Jersey: Transaction Publishers.