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Profit or Purpose: The Dilemma of Social Enterprises

Mankal Sriram ()

No WP2011-08-02, IIMA Working Papers from Indian Institute of Management Ahmedabad, Research and Publication Department

Abstract: This paper examines the literature and practice in the field of social entrepreneurship. We specifically examine the diverse organisational forms under which Social Enterprises are undertaken and the dilemma they face when these enterprises grow. The literature is ambigious on what constitutes a social enterprise. While each of the definitions talk about solving a problem that has not been hither to examined effectively either by the market or the State, the orientation of the enterprises are not very clear in the literature. We examine the three strands of enterprises that are classified as social enterprises and their organisational form. Each organisational form has its own imperatives on growth and pressures it may have to yield to in an attempt to remain relevant. Using several examples from literature, we examine these pressure points and its implication on the purpose that the organisations are striving to serve. In the process we examine as to how much the motive for profits puts pressure on the purpose of the organisation. Each of these three strands provide interesting counter examples to the economic argument of an organisational form. We finally conclude the paper by emphasising on the importance of [a] hard-coding some elements in the choice of the client group or the ‘purpose’ and [b] having a governance structure that helps the organisations to remain focussed on the ‘purpose’. We also conclude that of the three forms of enterprise, by design, it appears that the co-operative form might be the best form of incorporation for a social enterprise, subject to certain caveats.

Date: 2011-08-16
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