Theories regarding the appropriate financial resource mix for social enterprises are sparse: though some degree of earned revenue is often assumed in the definition of social enterprise, such income often accounts for only a portion of the resources these enterprises require (Searing & Young, 2016). Further, since the definition of social enterprise varies across cultures (and scholars), such theories would need to be general enough to apply to numerous types of social purpose organizational structures and national contexts.
We contend that the benefits theory of nonprofit finance offers useful insights to the financial resource mix for social enterprises more generally. Benefits theory originated as a way of understanding the revenue mix of U.S. nonprofit organizations in terms of their missions, benefits and beneficiaries (Faulk, 2014; Marwell & Calabrese, 2015; Wilsker & Young, 2010; Young, Wilsker, & Grinsfelder, 2010; Young; 2007; Young, 2017). Since its introduction, benefits theory has been extended to Chinese agricultural cooperatives (Zhao, 2014), Chinese foundations (Wei, 2016), Swiss INGOs (Aschari-Lincoln & Jäger, 2015), and the Australian nonprofit sector (Cortis, 2016), among other contexts. Such efforts provide the foundation for the formal generalization of benefits theory proposed in this paper.
Testing benefits theory in a cross-cultural context will involve analysis across three criteria previously unexplored in the benefits theory literature:
a. That national political regimes and cultures may constrain the availability of various income sources;
b. That countries define social enterprise (SE) differently in terms of allowed/required organizational forms and fields of service;
c. That the definition of different types of benefit will vary across cultural context; for example, is university education in Germany free because the “public good” provided is considered more “public” than in the tuition-paying U.S., or because the same degree of “public” good is worth more?
In anticipation of the possible future availability of proprietary ICSEM project data, we will first test benefits theory using current published, reported, or shared information on social enterprises for 5 to 10 countries. Countries will be selected according to the robustness of available information on services, sources of finance, and organizational forms; if many countries meet this standard, further selection will be based on constructing a diverse sample to test the flexibility or limitations of benefits theory. Following selection, we will analyze financing patterns relative to expectations from benefits theory and the three criteria listed above; the nature of the data will determine whether this takes the form of country level analysis or more rigorous econometric comparisons using data from individual enterprises. Our theoretical development and empirical analysis will provide a new perspective on how social enterprises are financed in different countries and thus provide helpful information for those responsible for organizational structure and strategy on both the organizational and policy levels.
References
Aschari-Lincoln, J., & Jäger, U. P. (2015). Analysis of Determinants of Revenue Sources for International NGOs Influence of Beneficiaries and Organizational Characteristics. Nonprofit and Voluntary Sector Quarterly, 0899764015595721.
Cortis, N. (2016). Access to Philanthropic and Commercial Income Among Nonprofit Community Service Organisations. Voluntas: International Journal of Voluntary and Nonprofit Organizations, 1-24.
Faulk, L. (2014). Overcoming the Cause of Failure and the Role of Issue Salience: Toward a Comprehensive Theory for Nonprofit Activity and Competition in a Three-Sector Economy. Paper presented at the Nonprofit Policy Forum.
Marwell, N. P., & Calabrese, T. (2015). A deficit model of collaborative governance: Government–nonprofit fiscal relations in the provision of child welfare services. Journal of Public Administration Research and Theory, 25(4), 1031-1058.
Searing, E. A. M., & Young, D. R. (2016). Feeding the Animals. In D. R. Young, E. A. M. Searing, & C. V. Brewer (Eds.), The Social Enterprise Zoo: A Guide for Perplexed Scholars, Entrepreneurs, Philanthropists, Leaders, Investors, and Policymakers. Cheltenham, UK: Edward Elgar.
Wei, Q. (2016). A Multilevel Analysis of Factors Influencing Chinese Foundations’ Capacity for Resource Mobilization.
Wilsker, A. L., & Young, D. R. (2010). How does program composition affect the revenues of nonprofit organizations?: Investigating a benefits theory of nonprofit finance. Public Finance Review, 38(2), 193-216.
Young, D.R. (2007). Financing Nonprofits, Lanham, MD: AltaMira Press
Young, D.R. (2017). Financing Nonprofits and Other Social Enterpises, Northampton, MA: Edward Elgar Publishing (forthcoming)
Young, D. R., Wilsker, A. L., & Grinsfelder, M. C. (2010). Understanding the determinants of nonprofit income portfolios. Voluntary Sector Review, 1(2), 161-173.
Zhao, L. (2014). Stakeholder Participation in Co-operative Capital in Chinese Agricultural Co-operatives Co-operative Innovations in China and the West (pp. 198-214): Springer.
4. Financing issues for social enterprises, philanthropy and social finance
