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Why Social Enterprises Are Asking to Be Multi-stakeholder and Deliberative: An Explanation around the Costs of Exclusion

Listed author(s):
  • Carlo Borzaga
  • Silvia Sacchetti

The study of multi-stakeholdership (and multi-stakeholder social enterprises in particular) is only at the start. Entrepreneurial choices which have emerged spontaneously, as well as the first legal frameworks approved in this direction, lack an adequate theoretical support. The debate itself is underdeveloped, as the existing understanding of organisations and their aims resist an inclusive, public interest view of enterprise. Our contribution aims at enriching the thin theoretical reflections on multi-stakeholdership, in a context where they are already established, i.e. that of social and personal services. The aim is to provide an economic justification on why the governance structure and decisionmaking praxis of the firm needs to account for multiple stakeholders. In particular with our analysis we want: a) to consider production and the role of firms in the context of the “public interest” which may or may not coincide with the non-profit objective; b) to ground the explanation of firm governance and processes upon the nature of production and the interconnections between demand and supply side; c) to explain that the costs associated with multi-stakeholder governance and deliberation in decision-making can increase internal efficiency and be “productive” since they lower internal costs and utilise resources that otherwise would go astray. The key insight of this work is that, differently from major interpretations, property costs should be compared with a more comprehensive range of costs, such as the social costs that emerge when the supply of social and personal services is insufficient or when the identification of aims and means is not shared amongst stakeholders. Our model highlights that when social costs derived from exclusion are high, even an enterprise with costly decisional processes, such as the multistakeholder, can be the most efficient solution amongst other possible alternatives.

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Paper provided by Euricse (European Research Institute on Cooperative and Social Enterprises) in its series Euricse Working Papers with number 1575.

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Date of creation: 2015
Handle: RePEc:trn:utwpeu:1575
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  1. Bruno S. Frey & Reto Jegen, 2000. "Motivation Crowding Theory: A Survey of Empirical Evidence," CESifo Working Paper Series 245, CESifo Group Munich.
  2. Pier Angelo Mori, 2013. "Customer ownership of public utilities: new wine in old bottles," Journal of Entrepreneurial and Organizational Diversity, European Research Institute on Cooperative and Social Enterprises, vol. 2(1), pages 54-74, August.
  3. David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-337, May.
  4. Roger Sugden & James R. Wilson, 2002. "Economic Development in the Shadow of the Consensus: A Strategic Decision-Making Approach," Contributions to Political Economy, Oxford University Press, vol. 21(1), pages 111-134, December.
  5. Dosi, Giovanni, 1988. "Sources, Procedures, and Microeconomic Effects of Innovation," Journal of Economic Literature, American Economic Association, vol. 26(3), pages 1120-1171, September.
  6. Handy, Femida & Katz, Eliakim, 1998. "The Wage Differential between Nonprofit Institutions and Corporations: Getting More by Paying Less?," Journal of Comparative Economics, Elsevier, vol. 26(2), pages 246-261, June.
  7. Borzaga, Carlo & Fazzi, Luca, 2014. "Civil society, third sector, and healthcare: The case of social cooperatives in Italy," Social Science & Medicine, Elsevier, vol. 123(C), pages 234-241.
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