Modelling Social Enterprises

27 Pages Posted: 28 Oct 2016

See all articles by Aleksandra SZYMAŃSKA

Aleksandra SZYMAŃSKA

Free University of Brussels (VUB)-Vrije Universiteit Brussel, Institute for European Studies, Students

Marc Jegers

Free University of Brussels (VUB) - Micro-Economics for Profit and Non Profit Sector (MICE)

Date Written: December 2016

Abstract

The majority of research concentrates exclusively on the objectives of governments, profit entities or non‐profit organizations, while a significant number of organizations are hybrids. One form of these hybrids is the social enterprise. This paper theoretically describes social enterprises taking into consideration their main aims. Based on the ‘earned income’ school of thought, the principal‐agent theory and considering the nature of social enterprises’ activities we propose the objective functions of their owners (principals) and managers (agents). The maximization problem of the social enterprise is defined as the weighted average of the utilities of two groups of stakeholders who have an influence on the degree of the realization of the social mission and business orientations. We point out the direction which social enterprises should follow in order to obtain the highest value of their objective functions. The desired state for social enterprises should be one in which they reinvest all surpluses in the process of their mission realization and their profit is slightly higher than the required level by the principal’s contract.

Keywords: Social enterprises, social activities, social mission, principal‐agent theory, objective functions

Suggested Citation

SZYMAŃSKA, Aleksandra and Jegers, Marc, Modelling Social Enterprises (December 2016). Annals of Public and Cooperative Economics, Vol. 87, Issue 4, pp. 501-527, 2016. Available at SSRN: https://ssrn.com/abstract=2860383 or http://dx.doi.org/10.1111/apce.12127

Aleksandra SZYMAŃSKA (Contact Author)

Free University of Brussels (VUB)-Vrije Universiteit Brussel, Institute for European Studies, Students ( email )

Ixelles
Belgium

Marc Jegers

Free University of Brussels (VUB) - Micro-Economics for Profit and Non Profit Sector (MICE) ( email )

Brussels
Belgium
+32-2-629 21 13 (Phone)
+32-2-629 22 82 (Fax)

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