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The development of social enterprise follows several decades of recognition by governments of the role of the third sector social enterprise (Borzaga and Defourny, 2001; Dees, 1998). 2004) however, argues that Canadian social enterprises can be traced back at least 12,000 years as communities strive to cope with the effects of hunger, disease and war. Communities needed to be as self-sufficient as possible in food supply and provisions. The issues which social enterprises seek to address are often environmental, health, education and social problems, which are also frequently the very issues which the state wants to be addressed. From a social and economic perspective, the value added of social enterprises stems from their engagement with the production of goods and services, the social integration and return-to-work activities. They are contributing to social cohesion, to the accumulation of social capital, and to sustainable development at the local, national and international levels (Borzaga, Galera and Nogales, 2008; Aiken, 2007). Furthermore, empower citizens economically, socially and culturally as an on-going process, requiring human and financial resources and an enabling public policy environment that calls for policy innovation. Through these activities, social enterprises are contributing to a framework for sustainable wellbeing (Borzaga and Tortia, 2007; Galera, 2008; Powell, 2007; Laville, Lévesque and Mendell, 2005) of disadvantaged members of our community.
Several authors suggest that social enterprises are part of a “welfare mix” in which both the state and citizens collaborate and co-design of new forms of social service provision (Ascoli and Ranci, 2002; Evers and Laville, 2004; Pestoff and Brandsen, 2006). Since the 1960s to 1970s American and European third sector organisations have been developing social enterprises to support disadvantaged populations. Social enterprise transcends traditional third sectors and applies as equally to health, environment, education and social welfare as it does to economic development or job creation activities.
In the United States, the emergence of social enterprise as a sector, however, began during the 1970s. The high oil prices of 1973 led to a prolonged economic downturn in the US, which consequently led to cuts in government funding for non-profit organisations by the Reagan administration. The magnitude of the cuts in social welfare spending was to the order of $38 billion over the period from the 1970s-1980s. Government cuts and increasing competition for funds due to the growing number of social needs prompted non-profit organisations to shift toward commercial income generation. According to various scholars such as Crimmins & Keil (1983) and Eikenberry and Kluver (2004), the sector saw commercial revenue as a means of replacing government funding. This thus paved the way for the emergence of social enterprise as a widely accepted tool toward addressing social problems due to a necessity resulting out of the withdrawn role of the state.
The development of social enterprise in Europe was driven by private initiative, citizens, young professionals, and trade unions, families of disabled persons, using innovative practices in addressing social and environmental needs. Recognising that most social enterprises, at least at their inception, are small or medium-sized enterprises (“SMEs”), the European Commission spur the creation of social enterprises as part of its efforts to develop the SME sector as a whole. The Commission recommends that the European Union member-states implement policies that incentivize citizens to create SMEs in hopes of closing the productivity gap between the European Union. The Commission suggests that the creation of SMEs leads to increased economic diversity, which in turn promotes greater economic growth potential. The Commission suggests that member states provide business support to social enterprises and create policies that allow for the easy creation of businesses. The United Kingdom have followed these recommendations and enacted legislation intended to encourage the growth of social enterprise within these countries.
As a result of social enterprise development in the UK, in contrast with the US emerged not from a withdrawal of the state role, but rather, an active effort by the state to push social enterprise as an approach toward solving its massive economic and social problems. However, there clearly exists an imbalance in power relations between the state and third sector social enterprises – the state often holds the purse strings. Therefore, for third sector social enterprise organisations to develop, the state has to be willing to support and accommodate their development and sustainability.