A New Window for Social Entrepreneurship
Literature Review
Introduction
The development of an environmentally, financially and socially sustainable global economy is reliant on local economies that can be sustained (Wicks, 2006, p. 1). However, becauseglobalisation is causing a decline in local communities—particularly family farms, local businesses —it is important for small companies to work together tobuildlocal living economies in their own regions thatlink on both thenational and international level.
This paper reviewsthe literature addressing the nature ofcommunity-owned enterprises and the benefits of theseto not only the individual owners but also other business owners and communities. It is aimed that by showing how community-owned enterprisescan benefit communitiesgreatly, more such businesses will be developed and supported and that governmentswilldevelop policies to enable such endeavours to succeed.
Finally, the paper provides a critique of the reviewed literature and a conclusion to summarise the discussion.
Definitions of‘Community-owned Enterprise’
‘Community-owned enterprises’ are local businesses ‘that are owned, run, managed, and/or shared by members of the same community’ (Allard, Davidson & Matthaei, 2008, p.212)—either a geographic community or a community of shared interests. Community-owned enterprisesare elements of the solidarity economy due to their exemplification of economic organisation, democratic participation and local control at the grassroots (Allard et al., 2008, p. 212). Among the most common formsof community-owned enterprises are supermarkets and those in transportation, recycling and construction (Kleniewski & Thomas, 2010, p. 275). Further, their activitiestend to be smallscale and requirea low level of investment, such community campsites or craft production (Roe, Grieg-Gran & Schalken, 2001, p. 18).
Community-owned enterprises exist worldwide, but in China, they have arisen from and comprise four types of enterprise:small- and medium-sized private businesses that were collectivised in the 1950s,local industrial enterprises that were funded and owned by the local governments,community-owned enterprises or small collective enterprises,and urban collective enterprises or labour service enterprises (Wang, 1998, pp. 175-176).Similarly, a ‘town village enterprise’ (TVE) in China is abusiness unit that isowned by the residents of the rural community in whichit is located (Chiu & Lewis, 2006, p. 112). A‘rural community’ can be either a village consisting of around 200 households or a township of around 3,500 households. According to Chiu andLewis (2006, p. 112 ), a TVE cannot be owned by the state or by cooperatives but can be owned by private entities.
Although TVEs used to be collective enterprises, more are becoming privately owned. Chiu andLewis (2006, p. 113) notethat, in 1984, 76 per cent of persons employed by a TVE were employed by collective TVEs and 86 per centof TVE output was contributed by collective TVEs; by 1997, these figures had declined to41 per centand 49per cent, respectively. However, despite these declines, Saqib and Chakraborty (2005) claim that by 1997 the TVEs in China hadcontributed an output value of 1800 billion yuan—almost 30 per cent of the country’sgross domestic product. Moreover, rural secondary and tertiary industries accounted for 75.6 per cent of the entire rural economy during the same year (Saqib & Chakraborty, 2005, p. 203). The TVEs were also responsible for the transfer of approximately29 per cent of China’s rural labourers from farming to non-farming activities over the last decade (Saqib & Chakraborty, 2005, p. 203). By 2004, TVEs werestill achieving high growth rates (Saqib & Chakraborty, 2005, p. 203).
According to Chiu andLewis (2006, p. 113), one feature of a collective TVE is that all the businesses within a community are collectively owned by the community’s residents. In addition, the decisions of the managers of these enterprises are generally limited to the daily operations.The local government acts on behalf of the community residents and exercises strategic control rights over the businesses. The residents of the town or village—rather thanpersons from outside the community or employees of theenterprise—have legal ownership of the TVE’s assets. The TVE’s ownershavefull rights of control over the business, although theycan delegate such rights to an agency. The community government conducts the necessary negotiations for the community and has direct control over twoaspectsof the TVE’s after-tax profits.The firstis remitted to the community government as a management fee and the secondis designated for public expenditure, such as for the provision of community welfare in the form of pensions, health care, roadsor schools, for example.
Unlike a TVE, in whichthe community’s residents are represented by the community government, community organisationsare represented by a board of directors (Ross & Usher. 1986, p. 62). Further,in the United States, also unlike ina TVE, non-community members are permitted to own community organisations, as one-third of the economic impact of non-profit organisations – one type of a community-owned enterprise -- can be attributed to charities or foundations, arts and civic groups and religious institutions, while research, education and health services account for the remaining two-thirds (Williamson, Imbroscio & Alperovitz, 2003, p. 243).
Imbroscio, Williamson and Alperovitz (2003)have describedsix models of community-ownedenterprise: the community-owned corporation, the non-profit corporation, the municipal enterprise, the consumer cooperative, employeeownershipand the community development corporation.‘Community-owned corporations’ are the same as traditional corporations except that they are owned by the citizens who live in or are strongly connected to the community. In contrast, ‘non-profit corporations’ are considered the third major corporate structure in the United State, asthey account for more than seven per cent of the country’s total employment and more than six per cent of the economy (Imbroscio, Williamson & Alperovitz, 2003). ‘Municipal enterprises’are those enterprises conducted by governments, which contribute to each individual community’s economic stability. Such enterprisesinclude those that provide utilities,such as solid waste collection, sewerage processing,water and electricity. ‘Consumer cooperatives’ contribute to a community’s economic development through the provision of reasonably priced goods and services to their members. They are usually found in the retail grocery, healthcare and housing industries. ‘Employeeownership’can occurin the form of employee stock ownership or a cooperative, which a traditional corporation may implement to promote a democratic work environment and to enhance employee performance but which also contributes to the community’s economic stability. Lastly, ‘community development corporations’ are non-profit organisations that intend to restore the economic stability of fixed geographic areas, which usually consist of isolated and underdeveloped rural areas or urban neighbourhoods that have suffered from alack of investment and concentrated poverty.
Benefits of Community-Owned Enterprises
Kleniewski andThomas (2010, p. 275) have suggestedthat cities use community-owned enterprises to create and retain jobs. Since granting subsidies to a company does not guarantee that the company will remainin that city, city development economic funds are instead granted to locally owned companies that are committed to the community. Since community-owned enterprises are rooted locally, they employ local residents and form links with local suppliers and markets. This is supported by the findings of the Institute for Local Self-Reliance (2003), which show that purchases made from a big box retailer resulted in the retailerspending 14 per centof its profits locally, while purchases made from a locally owned business resulted in that business spending 45 per cent of its profits locally. This impliesthat purchases made from a local retailer support not only that businessbut other local businesses as well. Such local businesses includeInternet service providers, printers, accountants and local banks. In this regard, the institutesuggestedthat a much greatereconomic return would be generated from the development of strategies that would expand and strengthen locally owned businesses than from supporting additional chain store growth (Institute of Self-Reliance, 2003). This is further affirmed by the findings of Fallon andBrown (2004, p. 137), which indicate that the development of local Asian businesses could be facilitated by improved collaboration between locallybased business support providers.
The local government may own enterprises such as a football team or power company, whichenables the town or city to sell products at low prices and still make a profit for the benefit of taxpayers.
Dana andAnderson (2007, p. 21) assert that for the communities ‘that are supportive of members’ economic efforts and community-owned and individual-owned enterprises, the benefits easily multiply at the individual, family, and community levels’. This was also argued in a study showing that ‘people who live in communities where small, locally owned businesses are the norm are healthier than those who live in places where large corporations predominate’ (Mitchell,2012). In particular, the prevalence of obesity and mortalityrate are lower in these places.
A final example of the benefits of community-owned enterprises can be found in the United Kingdom, where community-owned wind farms have been established to provide both a source of steady income and a high degree of self-sufficiency (Pahl, 2007, p. 83).
Fostering Community-Owned Enterprises
As previously mentioned, Dana andAnderson (2007, p. 21) have suggested that a supportive political environment enables community-owned businesses to succeed. The lack of community resources for community development and for community-driven enterprise projects, employment and training can hamper community involvement (Curtin, 1996. p. 264). This is evidenced by the findings of Dara, Dimanche andSiochrú (2008), which show that lack of funding as well asinstitutional and bureaucratic barriers caused delays and difficulties in the implementation of community-owned information and communication technologyenterprises in Cambodia. Similarly,Hicks and Ison (2011, p. 244) haveindicated that while the community-owned renewable energy projects in Australia show promise in addressing rural economic health, community development and climate change, these benefits will be difficult to obtain on a large scale without the necessary support from stateand federal government policies.
As such, experts advocate that to promote community-owned enterprises, communities must become self-reliant through the reduction of dependency on national and global economic ties and ‘the destructive influence of mobile capital’ (Gibson-Graham, 2006, p. 80). Similarly, Torri (2010, p. 237) has assertedthat community enterprises be used as a strategy to foster the development of the local community in the long term.
In contrast, Ross andUsher (1986, p. 62) have claimed that community organisations and enterprises rely heavily on public subscription, such as membership fees;donations; and individual, corporate and public grants. Moreover, they suggested that these types of organisations and enterprises involvea large component of volunteerism becausetheyusually donot charge the full price for their goods or services. In such enterprises, the generation of self-sustaining operating revenue is not regarded as being ofmuch importance, meaning thatthese organisations operate on the basis of ‘a strong social accounting rationale’ (Ross & Usher, 1986, p. 62). However, as has been opined by Korten (2010), it is not necessary for all enterprises to be for-profit;indeed, there are many needs—such as water, electricity, banking, and health insurance—best provided by cooperatives or community-owned non-profit enterprises. This is because,according to Gibson-Graham (2006, p. 80), ‘the shared ethic that underlies economic development programs privileges care of the local community and its environment’.
Critique
All of the authors reviewed are in agreement that community-owned enterprises provide many benefits to community members and that policies can either facilitate or hamper their development. These are the strengths of their arguments as numerous studies have proven them. However, the weakness of their arguments is that no researcher mentioned that another benefit of community-owned enterprises is that they help promote a society that is more egalitarian, allowing easier access to goods and services for communitymembers. As is the case in Japan, which fosters such a society, egalitarianismcan lead to improvedpublic health status and lower crime rates (Bezruchka, Namekata & Sistrom, 2008, p. 592).
In addition, with volunteerism,asone of the featuresof community-based enterprises, the researchers failed to note that this can foster collectivist values within an individualistic community. Although the American culture, for example, is marked by individualism, the writer believes that it would be helpful for Americans to temper their individualistic values witha collectivist mindset, as this may be the key to resolvingthe many problems that American societyfaces. More specifically, a highly individualistic culture leads people to become selfish and self-centred, in turn generating a society in which chief executive officers enjoy large pay checks while their employees are being laid off and in whichhealthcare providers are more concerned about their profits than about providing care to those inneed.
Althoughindividualism should not be regarded as an entirely negative force, as already indicated, excessive individualismcan result inself-absorption, which isdetrimentaltothe community. As Torri (2010, p. 237) has asserted with regard to individualism in India, the individualistic values that pervade Indian communities hamper the success of small enterprises in that country.As such, Torri (2010, p. 237) has suggested that these enterprises should be seen from a more holistic view, that is, from the community’s perspective and not just from the business owner’s perspective, as is advocated by conventional views centred on individualism. To similar end, Poole andNegi (2008, p. 243) have suggested that more research should be conducted on whether it would be beneficial for civil organisations to include social welfare activities in their vision, particularly those concerning the enhancement of community health and social well-being.
Further, government policies that encourage and foster community-owned businesses should be created. With the increasing growth of privately owned businesses, owners of local businesses should also be provided with the knowledge and skills to enable them to compete with largecompanies. For example, Gundry andWelsch (2001, p. 453) investigated the attributes ofsuccessful female entrepreneurs and found that one of theirattributes wastheirability to select strategies for their company. Thisallowed the womento focus on new technologies and market expansion,their determination to own their own business and to be open to greater opportunity costs that would enable their companies to succeed. The study also showsthat these women had a more structured approach tothe organisation of their business and variously made use of a wide range of financing sources, team-based organisational designs, earlier planning to encouragethe growth of their business. In addition, the womenhadagreater willingness to sacrifice for and commit to the success of their business. Although it can be argued that such attributes and skills are innate, it is also true that many can be learned and developed. As such, local business owners should be offeredthe necessary learning opportunities.
Finally, although the number of minority-owned businesses, which make up a large part of the community-owned businesses, has been steadily increasing (‘Minority-owned businesses’, 2013), governments should make sure that this growth is sustained by providing these enterprises with the resources that they need and by making sure that policies continue to support such initiatives.
Conclusion
This paper has reviewedthe literature consideringthe definitions of ‘community-ownedenterprises’, what such enterprises comprise and, most importantly, thebenefits of these enterprises, which may be broadly summarised as the promotion of economic stability andsolidarity in communities. In addition, this paper has discussed how lack of resources can impede the development of these enterprises and how government support is essential to ensure their success. Finally, the critique section of this paperfocused on what can be learned from the existing literature and whatis needed to sustain the development of these community-owned enterprises.
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