The Organization of Social Enterprises: Transacting versus Giving
50 Pages Posted: 27 Jul 2018 Last revised: 8 Jul 2019
Date Written: June 1, 2019
Traditional models of organizations focus on the distinction between for-profits and nonprofits. This article presents a model where entrepreneurs receive subsidy-donations and have a choice not only between the for-profit and non-profit forms, but also between (1) giving to the beneficiaries, and (2) forming social enterprises that transact with them. Entrepreneurs form social enterprises to measure beneficiaries’ abilities and tailor disbursals to their needs when variance in abilities is high. When variance is very high, social entrepreneurs choose to form for-profits rather than nonprofits. This analysis has implications for the theory of the firm and policies to promote social entrepreneurship.
Keywords: social enterprise, corporate social responsibility, theory of the firm, non-profits, development, subsidies
JEL Classification: L3, K1, H2
Suggested Citation: Suggested Citation