Study by Dr Helen Haugh of Cambridge Judge Business School looks at survival of newly established social enterprises.
Newly established social enterprises are more likely to survive under conditions that favour commercial but not non-profit organisations, finds a study co-authored by Helen Haugh of Cambridge Judge Business School.
Such “hybrid-commercial benefit” comes from social enterprises benefiting from the same supportive conditions that benefit commercial firms, such as a skilled labour pool and transport networks, but without compromising their social mission or competing directly with these firms because they target different customer groups.
Using population ecology theory, the study published in the journal Small Business Economics finds further that the age of social enterprises boosts chances of survival owing to the cumulative skills, expertise and leveraging of supportive networks that comes with time.
The authors also find that generalist social enterprises are more likely to survive than specialists due to what the authors call the “liability of specificity”: generalist social enterprises can be more flexible in resources used and markets served, and this increases the likelihood of survival by spreading risk. For example, a firm in the retail sector can spread risk by adapting its product range and serving various types of customers, while a community-owned wind farm has far narrower options.
“The study’s results provide a useful guide for policymakers and practitioners alike by examining the factors behind survival of social enterprises,” says the paper’s co-author Helen Haugh, Senior Lecturer in Community Enterprise and Research Director of the Cambridge Centre for Social Innovation at Cambridge Judge. “We examine nearly 7,000 enterprises over seven years, and clear patterns of survivability emerge.”
The study examines the survival rate of UK social enterprises between 2005 and 2012. A new organisational form was created in 2005 for UK firms that pursue both commercial and social goals, called the community interest company (CIC).
There were 6,868 CIC registrations over the study period, or a total of 21,607 CIC-year spells. An average of 3,406 CICs survived per year, with an average survival age of 25.2 months.
About 22% of the registered CICs are in public sector fields such as social security and education, followed by 15% in real estate, scientific, and technical activities, 14% in health, 14% in arts and recreation, and 12% in administrative activities. About 90% of CICs are found in urban and town settings, rather than rural locations.
The study offers three practical and policy suggestions for increasing the prospects for social enterprise survival: encourage the formation of new social enterprises while assisting their navigation in early riskier years; create specialist strategies to boost survival rates in certain industries that carry higher risk of failure; and pay attention to whether other organisations operating in an area are commercial or charitable.
The study in Small Business Economics – entitled “The nascent ecology of social enterprise” – is co-authored by Helen Haugh of Cambridge Judge Business School, Paul Robson and John Hagedoorn of Royal Holloway University of London, and Kate Sugar of the University of Bath.