Organizational Variety in Market Economies and the Emergent Role of Socially Oriented Enterprises

Institutional and organizational variety is increasingly marking advanced economic systems. Traditional economic theories have focused almost exclusively on for-profit enterprises and publicly owned organizations. However, the importance of a large sector which includes an heterogeneous mix of organizational forms, sometimes referred to as the “social economy” and sometimes the “third sector”, has been observed to grow in most industrialized and developing countries. This sector came to represent an actor able to challenge the dominant roles of the for-profit and public sectors. The most traditional and widespread of these non-traditional organizational forms are non-profit organizations and cooperative firms. However, new arrangements have emerged over time, both within and outside of these traditional categories. These new organizational solutions are often grouped under the heading of “social enterprises”, a new entrepreneurial form combining a social, or public-benefit aim with business-like management. Also, hybrid forms have spread. Social cooperatives are advocated by many as a successful mix of mutual benefit and public benefit objectives. Community benefit companies and cooperatives have emerged as a mix of mutual benefit and local development objectives. These hybrids show the deep intermixing and compatibility of organizational mechanisms within the social economy. This contribution focuses on three main organizational categories and on the institutional mechanisms underpinning the pursuit of their goals: private benefit enterprises; mutual benefit enterprises; and public benefit enterprises. The main mechanisms that will be discussed have to do with control rights, which in social economy organizations are never directed to guarantee maximum financial returns, the accumulation of assets directed to the pursuit of social goals, and the pluralist governance that, as a norm, involves person-members and other constituencies different from investors.