In the last two decades Italian social cooperatives have drawn the attention of scholars worldwide. These cooperatives are social enterprises incorporated as nonprofit organizations intended to address social goals through market-based activity. According to Defourny & Nyssens (2010), Italian social cooperatives have inspired models of SEs internationally since the early 1990s. As such, they have been studied from many different perspectives, including theory (Poledrini, 2015), social capital (Borzaga & Sforzi, 2014; Degli Antoni & Portale, 2011), and geographical location (Costa & Carini, 2016; Picciotti et al., 2014). However, so far little has been written about the financing of social cooperatives, in particular how financing differs from one social cooperative to another. Therefore, the aim of the present paper is to study the business models employed by social cooperatives in Italy and how much they deviate from conventional businesses or other nonprofits. In particular, based on the benefits theory of nonprofit finance (Young, 2017) and other related research literature, we test the following formal hypotheses:
H1: Social cooperatives in subsectors that produce essentially private goods exhibit a greater reliance on commercial income than social cooperatives in subsectors that produce essentially public goods.
H2: Social cooperatives in subsectors that produce essentially public goods exhibit a greater reliance on contributions income than social enterprises in subsectors that produce essentially private goods.
H3: Social cooperatives that rely more heavily on commercial income are more highly leveraged (have greater debt relative to total income or assets) than social cooperatives that are less highly leveraged
H4: Over time, individual social cooperatives diversify their revenues in order to manage risk (diversification to be measured with the Hirschmann-Herfindahl index (HHI)).
To test these hypotheses, we analyze a dataset based on data from the AIDA[1] database.
Our analysis reveals that the financing of Italian social cooperatives exhibits considerable variation, with income from contributions and other sources representing a substantial part of the income of many of these organizations. Furthermore, much of this variation is explained by the different fields of service in which social cooperatives operate, consistent with benefits theory. In addition, we find that the capital structure of social cooperatives varies in a manner that reflects different degrees of dependence on sales revenues. In particular, consistent with other research on borrowing by nonprofit organizations, social cooperatives that depend more heavily on sales revenues are also more highly leveraged with greater levels of debt (Yetman, 2007).
Finally, we find that social cooperatives do further diversify their revenues over time in order to manage risk and growth. Overall, this paper argues that the social cooperative form in Italy is not subject to a single stereotype but allows for varying business models anchored in commercial activity to different degrees.
References
Borzaga, C., & Sforzi, J. (2014). Social capital, cooperatives and social enterprises. In A. Christoforou & J. B. Davis (Eds.), Social Capital and Economics: Social Values, Power, and Social Identity. London: Routledge.
Costa, E., & Carini, C. (2016). Northern and southern Italian social cooperatives during the economic crisis: a multiple factor analysis. Service Business, 10 (2), 369–392.
Defourny, J., & Nyssens, M. (2010). Social enterprise in Europe: At the crossroads of market, public policies and third sector. Policy and Society, 29 (3), 231–242.
Degli Antoni, G., & Portale, E. (2011). The Effect of Corporate Social Responsibility on Social Capital Creation in Social Cooperatives. Nonprofit and Voluntary Sector Quarterly, 40 (3), 566–582.
Picciotti, A., Bernardoni, A., Cossignani, M., & Ferrucci, L. (2014). Social cooperatives in italy: economic antecedents and regional distribution. Annals of Public and Cooperative Economics, 85(2), 213–231.
Poledrini, S. (2015). Unconditional Reciprocity and the Case of Italian Social Cooperatives. Nonprofit and Voluntary Sector Quarterly, 44(3), 457–473.
Yetman, R. J. (2007), “Borrowing and Debt”, chapter 11 in D. R. Young (ed.), Financing Nonprofits, Lanham, MD: AltaMira Press, pp.243-268
Young, D. R. (2017), Financing Nonprofits and Other Social Enterprises, Northampton, MA: Edward Elgar Publishing, forthcoming
[1] AIDA is a database created by the Bureau Van Dijk (www.bvdinfo.com) and it stores the contact and economic data of more than 950,000 Italian enterprises.
4. Financing issues for social enterprises, philanthropy and social finance
