New research reveals how red tape, resource misuse and conflicting goals are stopping social businesses from providing sustainable regional value
Social businesses are prevented from delivering sustainable regional value due to complex policies and unclear guidance from local authorities, unnecessary financial constraints, and resource misuse finds new research from Durham University Business School.
The study provides a warning to policymakers that their interventions, or lack thereof, are actively damaging the capabilities of social businesses to deliver tangible regional value. Going further, it presents a new model to better support regional success, by enhancing four key drivers of progress; collaboration, agility, regulation and entrepreneurial leadership.
The study, undertaken by Dr Chrysostomos Apostolidis, alongside colleagues from institutions across the UK and Greece, finds that whilst social businesses start out with strong locally-focused intentions, the means through which they are required to operate reduces the impact of the good they seek to do.
An inherent challenge is a lack of visible support, guidance and knowledge at a local authority level, despite funding being readily available from national and international governments and collectives in order to support their objectives. This hinders social businesses from operating effectively and adapting to modern pressures.
“Competing with profit-oriented organisations and other stakeholders makes it difficult for social businesses to both deliver their desired value to the regions they operate within, and remain profitable,” says Dr Apostolidis. “Furthermore, the most obvious routes for support currently risk hindering or even erasing the impact social businesses with to have on the community around them.”
Whilst collaborating with other, larger organisations can be positive tool for smaller and social ventures, the researchers state that priorities and definitions of value can shift in such arrangements when stakeholders are not aligned. As a consequence, the potential for social businesses to create a positive impact regionally in a sustainable manner becomes watered down, as wider external priorities shift their focus.
“Co-creation can often lead to co-destruction,” Dr Apostolidis warns. “Merely creating social value is insufficient if that value is leaked to other regions or to external actors. Whereas, in sourcing funding from bodies such as the EU, social businesses are forced to focus on unnecessary bureaucratic tasks instead of their social mission.”
Policymakers, he states, need to be better able to address the fact that current structures often fail to retain the benefits social businesses generate.
Social businesses facing a similar set of hurdles
To better understand the common barriers faced by social businesses at a regional level, the researchers conducted interviews with, and collected data from ventures in Bangladesh and Greece, whilst a prior study examined the same challenges within the UK. Despite the differences between geographies, economic structure and traditions, and access to international support the researchers found that social businesses faced a similar set of hurdles. These included:
- A lack of understanding about the needs of social businesses or the value they hold for a community prevented buy-in from central and local governments.
- Limited regional resource sharing and knowledge transfer between social businesses and stakeholders such as local authorities, organisations and communities hindered progress and lead to financial and operational challenges.
- Policy-related complications, complex bureaucratic processes, and stigma surrounding social businesses impeded opportunities for support.
- A lack of financial strength to enact structural change or prioritise innovation, left social businesses at a disadvantage compared to not-for-profit organisations.
- Recurring social mission drift, as social businesses adapted their plans in order to secure backing from more diverse stakeholders.
To address these challenges, the authors have applied their findings to create the Sustainable Value Capture: CARE (Collaboration, Agility, Regulations and Entrepreneurship) Framework, which sets out the essential preconditions for social businesses to deliver sustainable regional value.
“It’s not just about finding more money or deciding the right direction for progress,” shared Dr Apostolidis. “It’s about recognising that current policies can be actively harmful to the cause and finding a better solution.”
Aside of better knowledge-building and sharing within local authorities, the CARE model supports routes for social businesses to finding more appropriate stakeholders; incubators, NGOs and other locally-based ventures in order to ensure a greater, more sustainable level of value creation for the local region.
The introduction of financial incentives is also suggested as a measure to ensure partnerships and processes stay on track to deliver their intended goals. Greater regulation should also be used as a vital tool in ensuring commitment and adherence to sustainable regional value creation, safeguarding the goals of social businesses and smaller entities from wider, external influence and priorities.
Education too is presented by the model as a powerful tool, positioning universities as a vital means to ensuring the entrepreneurs behind social businesses can build the leadership capabilities required to best support their growth and success.
Further reading
The study Sustainable Regional Value Capture by Social Businesses: A Dynamic Capability Perspective is authored by Dr Chrysostomos Apostolidis of Durham University Business School, alongside colleagues from Northumbria University, Coventry University, Sheffield Hallam University, Heriot-Watt University in Scotland, and the University of Nicosia in Greece. It is published in the Regional Studies Journal.