Nascent Social Entrepreneurship: Economic, Legal, and Financial Framework

Nascent Social Entrepreneurship: Economic, Legal, and Financial Framework

Cristina López-Cózar-Navarro, Tiziana Priede-Bergamini
DOI: 10.4018/978-1-5225-8182-6.ch012
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In the past few decades a new way of responding to social and environmental problems has emerge: the social entrepreneurship. It is presented as a special type of venture, in which the creation of social value prevails over the maximization of profits. Thus, the main objective of these type of venture is to serve the community and to search for a positive social change. In this chapter, in addition to presenting the concept of social entrepreneurship within the so-called third sector and its various approaches, the main legal forms are also presented, from the cooperatives to the newest initiatives carried out in different countries. Likewise, the different sources of funding that can used by social entrepreneurs, especially business angels and crowdfunding, are detailed. Finally, new trends such as the bottom of the pyramid and the positive social change are addressed within social entrepreneurship.
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Given the current economic climate, it is increasingly difficult for governments to supply the goods and services of so-called welfare state, and generally to serve a society that gradually demands more support, thereby increasing public spending. In this context, the social enterprise emerges as an organization capable of providing innovative and efficient solutions to social and environmental problems, as a starting point for the creation and consolidation of a more sustainable and balanced social and economic order. Due to the growth of social enterprises around the world in many different sectors of the economy, research and article publication has grown substantially in recent years (Santos, 2012; Zahra & Wright, 2016).

The social entrepreneur, by generating ideas and investing resources, effort and personal commitment, can find solutions to issues such as: fair access to housing, inclusion of vulnerable groups, equal access to employment and training, managing the dependence, etc. Thus, social enterprises allow a different form of development; this is, innovative, inclusive and sustainable; highly necessary for today´s global market. In this economic context, the role of these types of businesses is growing, even considered by the European Commission of great importance, which has led to the implementation of many initiatives and research projects, offering different ways of development. In this regard, the European Commission published in 2011 the Social Business Initiative, in which eleven key actions to promote the development of social enterprises are presented, grouped around three main intentions: to increase the visibility of social entrepreneurship, to improve the legal environment and to facilitate access to financing (European Commission [COM], 2011).

The issue is clearly of some importance, as these social entrepreneurship ventures may vary in their business models, ownership structures, legal forms and financing (Zahra & Wright, 2016); it is therefore very appropriate to expand the existing knowledge in order to contribute to a better understanding of the concept and to delve into the differentiating aspects of this particular organization. Indeed, we consider this work particularly timely as different countries are developing initiatives in terms of legal forms and new financing sources to foster the development of nascent social entrepreneurship.

The objectives of this chapter are:

  • To know the dimensions of the third sector as a framework for social entrepreneurship.

  • To understand the concept of social entrepreneurship and social enterprise.

  • To recognize the legal framework for the nascent social enterprise.

  • To identify the financial alternatives available for nascent social entrepreneurs.

  • To understand the bottom of the pyramid model and the positive social change approach.

To achieve these objectives, the chapter is organized as follows: first, the concept of the third sector is presented, distinguishing between the different approaches according to the entities that comprise it. Next, the concepts of social entrepreneurship and social enterprise are presented; the legal and financial frameworks are exposed, and related to the concepts of Bottom of the Pyramid and Positive Social Change. We finish the chapter including solutions and recommendations, future research directions and the main conclusions.


The Third Sector

Throughout history, in all ages and cultures there have been individuals and organizations who have acted on behalf of vulnerable and disadvantaged groups. Directing solidarity, altruism and own and others efforts, they have identified the needs of these groups and have carried out various actions to address them. However, from the last third of the twentieth century a significant growth about these issues has been developed worldwide and is shaping as an important part of the economic system. Therefore, is a matter of increasing attention by both politicians and academic literature (Monzón, 2006; Defourny, Hulgård & Pestoff, 2014).

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