A new generation of entrepreneurs are seeking to solve environmental and social issues through innovative, hybrid organisations such as social enterprises. These enterprises challenge current institutional structures within both charity and traditional business sectors, by creating business-like organisations with goals aligned with overall societal welfare. Most importantly in our case; the entrepreneurs promote institutional innovation by adopting hybrid legal structures that put social and environmental purpose at the centre. Due to limitations in current frameworks for for-profit and non-profit organisations, governments across the world have legislated new legal structures to enable dual purpose or blended mission (see Lambooy and Argyrou 2014; Brakman Reiser 2012). One such example is the limited liability Community Interest Company (CIC) in the United Kingdom, designed to serve community interests in a variety of forms. These structures come with different mechanisms to secure the protection and delivery of social and/or environmental value by introducing e.g. reporting requirements and dividend caps.
Research on social and environmental entrepreneurship and entrepreneurs has evolved rapidly within a range of disciplines over the last two decades. However, there is a significant lack of empirical data on how legal structures function in practice. This article addresses this gap by exploring why and how social entrepreneurs adopt the CIC structure, and how the structure enables the delivery of social and environmental aims. Furthermore, this paper provides a critical analysis of the various institutional dimensions represented by the Community Interest Company. The main characteristics of the CIC model are analysed and supplemented by empirical data from semi-structured interviews with 25 social entrepreneurs across the United Kingdom. The emphasis is on social entrepreneurs working on environmental issues. The following aspects are analysed: What are the main differences between the CIC structure and other related frameworks; what are the limitations to the structure; how are plural goals safeguarded in theory and practice; and if and how entrepreneurs attempt to compensate for any shortcomings. In particular, entrepreneurs are asked about their motivation for choosing the CIC model, how they view it in comparison to other available legal structures and how/whether this structure helps the enterprise in achieving its aims. Twelve interviews have been carried out and the data collection will be completed in March 2016. Interviews with government representatives and interest organisations are also included in this study.
Institutional theory is the core foundation for the analysis, although it also builds on other theoretical directions within the field of social entrepreneurship and legal theory. Institutions are defined as conventions, norms and formal (legal) rules (see Vatn 2005). Institutional theory is a well-established theory for how organisations develops and changes, and how institutions influence these processes. Institution are not mere rules; but structures that influence actor’s motivations and guide actions. They are as such not (only) constraints, but also enablers and influencers.
Examples of institutional characteristics include how legal structures ensure enforcement, transparency, directors’ duties, reporting requirements and profit distribution. Another institutional dimension is how actors act in relation to the structure and use the structure to achieve their goals. This is facilitated by the structures providing actors with agency and thereby enabling them to make different choices. This can include norms relating to management, mission control or profit distribution. It can also be that by being this structure, they believe they gain legitimacy or attract more funding. Preliminary results show that CIC entrepreneurs vary widely in their approach to the structure, and that the institutional nature of the structure creates chameleons changing their form in the face of wider political and economic forces dictating their chances of survival.
While the CIC structure has been created specifically for them, social entrepreneurs have been slow at adopting it. A decade of experience in the UK shows strong growth, but also challenges. These include lack of enforcement, struggles with financing, high risk of goal conflicts and a large share of CICs dissolving. Early results indicate that entrepreneurs are in general pleased with the CIC structure, but see limitations.. This paper puts forth important empirical experiences with legal structures for social enterprises, which is of high relevance to both entrepreneurs themselves as well as political and economic actors attempting to facilitate the strengthening of the sector and researchers working within this field.
References:
Brakman Reiser, D. 2012. “Theorizing Forms for Social Enterprise”. Emory Law Journal, 2013; Brooklyn Law School, Legal Studies Paper No. 310.
Lambooy, T. and Argyrou, A. (2014). “Improving the Legal Environment for Social Entrepreneurship in Europe”. European Company Law 11(2):71-76.
Vatn, A. (2005). Institutions and the Environment. Great Britain, Edward Elgar Publishing
6. Institutionalization, scaling up and public policies
