Research disproves the theory that reducing government support will boost social enterprise

A recently published ‘Institutions and Social Entrepreneurship’ study by academics from Aston Business School, EDHEC Business School, and the University of Sheffield Management School identifies why some countries are better than others at fostering social enterprise.

The Global Entrepreneurship Monitor (GEM) ranks Denmark number one for social entrepreneurship activity. The study sought to identify the secret of Denmark’s success and what other countries, such as the UK, could learn from its example.

The authors analysed 26 countries to identify the relative importance of a range of economic, institutional, cultural and social measures in encouraging greater levels of social entrepreneurship.

These included:

• the level of active government support, i.e., the extent to which the government formally redistributes wealth through progressive tax structures and welfare spending

• the level of so-called ‘post-materialist values’ among individuals, i.e., the extent to which individuals feel willing and empowered to take action for the benefit of society; and

• socially supportive culture, i.e., the strength of informal networks in the wider community

The results of the analysis demonstrate that it is a combination of these three factors, not any one factor alone, that best encourages social enterprise activity. However, active government support is crucial: Without this support it is unlikely that individuals and communities can mobilise to fill the gap.

Key findings:

Seven out of the top ten countries for social entrepreneurship also top the list for strong social entrepreneurship support, e.g., a local culture and government that endorse such activity, as illustrated by the table below.

Big Society

Study highlights:

• Denmark, France, Italy, the Netherlands and Israel rank highest for government support

• Switzerland, Italy, the UK, US and Argentina rank highest for post-materialist values among individuals

• Malaysia, Iran and Russia rank amongst the top five countries for having a socially supportive culture but have relatively low levels of government support. This can explain why these countries rank lower for social enterprise activity (25th, 19th, and 24th, respectively)

Compared to other nations, the UK relies more heavily on individuals to drive social entrepreneurship activity, based on a relatively high ranking for post-materialistic values amongst its citizens (3rd) and less favourable rankings for government support (10th), and socially supportive culture (17th).

Ute Stephan, Professor of Entrepreneurship at Aston Business School commented:

“Broadly speaking there have been two schools of thought about the extent to which government encourages or stifles social entrepreneurship. Some feel that too much support removes the demand for social enterprise while others have taken the opposite view – that social entrepreneurship must have institutional support to survive.

“Things are never so black and white, but the importance of a supportive climate may explain some of the challenges facing the UK’s Big Society initiative, despite the UK’s strong post-materialist values. Cultivating such an eco-system is likely to be a longer term process. It is also a process that spending cuts and rising social inequalities in the UK likely undermine”.

Lorraine Uhlaner, Professor of Entrepreneurship at EDHEC Business School concluded:

“Our study highlights that the additional demand for social enterprise created when there are radical cuts in the state sector, such as those seen in many countries in response to the global economic crisis, do not translate into higher social entrepreneurship activity.

“Social entrepreneurs need to feel supported both by the government and the wider community to be able to realise their aims, which is why countries like Denmark perform so strongly. Private individuals and groups, if they collaborate and support each other, can make a difference but will only thrive with effective government support”.

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