Towards an appreciation of ethics in social enterprise business models

IntroductionAmin et al. (2002) stated that the marketisation of the social economy corrupts its ethical base. In this paper, we argue that social enterprise (SE) is an ethical activity and that the conceptualisation of ethics... [ view full abstract ]

Introduction

Amin et al. (2002) stated that the marketisation of the social economy corrupts its ethical base. In this paper, we argue that social enterprise (SE) is an ethical activity and that the conceptualisation of ethics remains under-theorised in the field. We ask the question, ‘what ethical base’?

Statement of the empirical or theoretical question

Prior research has positioned SE hybrids (and social entrepreneurship) as a global movement building a social economy distinct from the state and private sectors (Pearce 2003, Nicholls 2006). Despite this, there remains little analysis within SE research to problematise its ethical commitments. We start from previous works that argue that the alternative lenses of business ethics can help to develop the field by re-orienting it to be more critical of bureaucratic (charitable) and market-driven (business) enterprises connected to neo-liberal doctrine (Bull et al. 2010; Chell et al. 2016; Dey and Steyaert, 2016).

Neo-liberal doctrine renders the field as sitting along a continuum of public, social and private enterprise. After identifying three different rationalities - formal, social and substantive (Weber, 1978; Sharmir, 1993; Ridley-Duff, 2008) - we reframe the field from a communitarian perspective to ‘see’ social enterprise as associative, cooperative and responsible (Ridley-Duff and Bull, 2016).

Methodological approach

This is a conceptual paper that reviews what is known about links between ethics and social enterprise, then critiques it using three theories of rationality (formal, substantive and social). We link each theory of rationality to organising principles in virtue ethics, social liberalism, pragmatism and utilitarianism. This helps us to explicate difference in the ethics of different social enterprise models.

Main argument

We clarify the distinctions that can be made with regard to social enterprise hybrid types by highlighting ethical differences between them. We utilise Ridley-Duff and Bull’s (2016) typology of social enterprise orientations (CTAs, CMEs and SRBs)[1] and locate each of them within a matrix based on Polanyi’s work on economic exchange and Dreu and Boles’s (1998) work on social value orientation. This enables us to pinpoint the foundations of different enterprise orientations and move thinking away from SE as a public-private hybrid so that we can ‘see’ differences between SEs based on whether they associative, cooperative or socially responsible business activities. This multi-layered approach builds on Wagner-Tsukamoto (2005, 2007) and Bull et al’s (2010) work by adding an appreciation of ethical capital to work on enterprise orientation.

Main conclusions and relevance

Our contribution to knowledge is in identifying and mapping virtue ethics (found in charitable foundations and associations), social liberalism/utilitarian ethics in CTAs, communitarian pluralism in CMEs and Pragmatism/utilitarian ethics in SRBs. Based on our findings we go back to the literature and propose a number of contributions arising from our analysis.

Firstly, we outline the differences between types at the level of underpinning ethical commitments. Secondly, we highlight significant differences between the rationalities and ethical commitments that dominate enterprise orientation thinking and bring them together into a coherent meta-theory. We argue that switching from a public-social-private mindset to one based on associative-cooperative-responsible practices captures the three rationalities and ethical propositions of different SE orientations.

In doing so, our main contribution to knowledge is to highlight how orientations that drive individual and collective action come from different ethical bases. This conceptualisation advances theoretical debate on ethics in social enterprise and invites further research on linkages between ethics and different social enterprise business models.

References

Amin, A., Cameron, A. and Hudson, R., (2002), Placing the Social Economy, Routledge: London.

Bull, M., Ridley-Duff, R., Foster, D. and Seanor, P. (2010) “Defining social enterprise through a theoretical conceptualisation of ethical capital”, Social Enterprise Journal, 6(3), 250-264.

Chell, E., Spence, L., Perrini, F and Harris, J.d., (2016) “Social Entrepreneurship and Business Ethics: Does Social Equal Ethical?” Journal of Business Ethics, 133: 619-25.

Dey, P., and Steyaert, C., (2016) ‘Rethinking the space of ethics in social entrepreneurship: Power, subjectivity, and practices of freedom’, Journal of Business Ethics, 133: 627–41.

Nicholls, A., (2006). Social Entrepreneurship: New Models of Sustainable Social Change. Oxford: Oxford University Press.

Pearce, J., (2003). Social Enterprise in Anytown. London: Calouste Gulbenkian Foundation.

Ridley-Duff, R., (2008). Social enterprise as a socially rational business. International Journal of Entrepreneurial Behaviour and Research, 14(5): 291-312.

Ridley-Duff, R and Bull, M. (2016), “Rendering the social solidarity economy” in Cooperatives - The Power to Act, Lévis : Sommet international des coopératives.

Shamir, R. (1993) ‘Formal and substantive rationality in America Law: a Weberian perspective’, Social and Legal Studies (Volume 2), pp. 45-72.

Wagner-Tsukamoto, S (2007) “Moral Agency, Profits and the Firm: Economic Revisions to the Friedman Theorem” Journal of Business Ethics. 70(2): 209-20.

Weber, M. (1976) Economy and Society, Berkley, CAN: University of California Press.

[1]              Charitable trading activities (CTAs), co-operative and mutual enterprises (CMEs) and socially responsible businesses (SRBs).