Towards an Appreciation of Ethics in Social Enterprise Models

Mike Bull & Rory Ridley-Duff

Journal of

ISSN 0167-4544

J Bus Ethics DOI 10.1007/s10551-018-3794-5

1 23 Your article is published under the Creative Commons Attribution license which allows users to read, copy, distribute and make derivative works, as long as the author of the original work is cited. You may self- archive this article on your own website, an institutional repository or funder’s repository and make it publicly available immediately.

1 23 Journal of Business Ethics https://doi.org/10.1007/s10551-018-3794-5

ORIGINAL PAPER

Towards an Appreciation of Ethics in Social Enterprise Business Models

Mike Bull1 · Rory Ridley‑Duf2

Received: 2 November 2016 / Accepted: 17 January 2018 © The Author(s) 2018. This article is an open access publication

Abstract How can a critical analysis of entrepreneurial intention inform an appreciation of ethics in social enterprise business models? In answering this question, we consider the ethical commitments that inform entrepreneurial action (inputs) and the hybrid organisations that emerge out of these commitments and actions (outputs). Ethical theory can be a useful way to reorient the feld of social enterprise so that it is more critical of bureaucratic (charitable) and market-driven (business) enterprises connected to neoliberal doctrine. Social enterprise hybrid business models are therefore reframed as outcomes of both ethical and entrepreneurial intentions. We challenge the dominant conceptualisation of social enterprise as a hybrid blend of mission and market (purpose-versus-resource) by reframing hybridity in terms of the moral choice of economic system (redistribution, reciprocity and market) and social value orientation (personal, mutual or public beneft). We deconstruct the political foundations of charitable trading activities, co-operative and mutual enterprises and socially responsible busi- nesses by examining the rationalities (formal, social and substantive) and ethical commitments (utilitarian, communitarian, pragmatic) that underpin them. Whilst conceptual modelling of social enterprise is not new, this paper contributes to knowl- edge by developing a theory of social enterprise ethics based on the moral/political choices that are made by entrepreneurs (knowingly and unknowingly) when choosing between systems of economic exchange and social value orientation, then expressing it through a legal form.

Keywords Social enterprise · Hybridity · Business ethics · Trading charities · Social · Co-operatives · Utilitarianism · Communitarianism · Pragmatism

Introduction this void hides the diversity of ethical, moral and political choices implicit in the labels applied to diferent SE busi- Whilst there appears to be broad support for integrating ethi- ness models. cal decision-making into social enterprise (SE) governance Our research question is: ‘how can a critical analysis of systems (Ridley-Duf and Bull 2016; Spear et al. 2009) and entrepreneurial intention inform an appreciation of ethics developing ethical production and consumption practices in social enterprise business models?’. In developing an through ‘’ business models such as Fairtrade (see answer, we problematise the connection between SE orien- Davies and Crane 2010; Davies et al. 2010; Doherty and tations and the business models they create in two ways: (1) Davies 2013; Mason and Doherty 2015), there is a void by challenging the dominance of the public/private (mission- in the SE literature on the connection between its alleged market) dichotomy and how this framing limits discussion hybridity and resulting business ethics. We will argue that of SE ethics to the integrity of ‘mission’; (2) by linking SE ethics to diferent motivations to create SEs, the rationali- ties they generate and the legal forms they take. In short, we * Mike Bull examine the connection between the motivations that trigger [email protected] social (ethical inputs), and the way moral Rory Ridley‑Duf choices regarding economic exchange, organising principles, r.ridley‑[email protected] legal form and social value orientation produce SEs (ethical 1 Manchester Metropolitan University, Oxford Road, outputs). Manchester M15 6BH, UK Whilst prior research has positioned SE hybrids (and 2 Shefeld Hallam University, Howard Street, ) as a global movement building a Shefeld S1 1WB, UK

Vol.:(0123456789)1 3 M. Bull, R. Ridley‑Duf distinct from the state and private sectors Thomas (2011, p. 244) ‘what counts as critical depends on (Nicholls 2006; Pearce 2003), there remains little analysis what counts as dominant’. The mission-market framing of within SE research to problematise its ethical commitments SE is dominant. Whilst Dey and Steyaert (2010) develop a (Chell et al. 2016). As depicted in Fig. 1, we see the concep- critical response based on ‘counter’ or ‘little’ narratives that tion of SE as having a rhetorical front (‘trading for social ofset the dominant ‘grand’ narrative, we see a more sub- purpose’) which is dominant in the framing of SE. However, stantive back that ofers a wider ranging, but coherent, coun- behind this is a substantive ‘deep’ back with diverse politi- ter perspective. Moreover, as Barinaga (2013) has pointed cal foundations that are under-theorised in the feld. Despite out, there is more than one social entrepreneurial rationality calls to move beyond defnition (Light 2008; Mair and Marti enacted through the diferent tools, strategies and methods 2006; Nicholls 2006), we still see benefts from problema- of management in the case studies she observed. We agree tising the theorisation of SE through the alternative lens of that social entrepreneurial rationalities need further explora- business ethics (Bull et al. 2010; Chell et al. 2016; Dacin tion, but also that they need to be considered in light of their et al. 2010, 2011; Dey and Steyaert 2016). political foundations, organisational implications and legal As Roberts (2003) sets out, it is important to distinguish expression. As Daskalaki et al. (2015) contend, new forms image (rhetoric) and substance (actions). We concur with of organising and organisation represent social transforma- Daskalaki et al. (2015) that our theorising needs to move tions in the way we co-constitute new social realities. We to investigating multidisciplinary connections that infuence follow their to call to break away from individualistic capi- social transformation. They call for new multi-level frame- talistic discourses by showing how social entrepreneurship works. Our response is to connect entrepreneurial intentions also achieves social transformation through legal models that to rationalities that inform organisational practices and the refect alternative political and social choices, rather than legal choices that connect these practices to distinct forms economic ones. of SE with diferent political foundations. The substantive back therefore requires more explanation Scholars in the feld already question whether ‘social to broaden the concept of SE beyond ‘trading for social pur- enterprise’ is the Trojan horse for privatisation (Murdoch, pose’. To do this, we grapple with the paradoxes, contradic- 2007), the marketisation of the social economy (Teasdale tions and tensions in the dominant discourse. 2012) or part of a political project to advance neoliberal- We identify three disconnections that open up the sub- ism into charitable and community-based enterprise (Dey stantive back, which require more theorising: and Steyaert 2016). Such caution is warranted. As several authors have claimed, we need to question the way SE is 1. How political foundations difer across the breadth of presented as a revision upholding the spirit of capitalism SE forms; (Barinaga 2013; Costa and Saraiva 2012; Hjorth 2013). 2. How conceptualisations of SE (community interest com- Further, Tedmanson et al. (2012) warn that entrepreneur- panies, trading charities, co-operatives, mutuals, com- ship as a feld of study has been dominated by a pro-market munity beneft societies) link political foundations to and pro-entrepreneur ideology. Consequently, we agree with ethical commitments; Barinaga (2013) that we need to problematise the rationali- 3. How a theory of social enterprise ethics can inform the ties that underpin SE, and with Hjorth (2013) that a more development of the feld. public form of entrepreneurship needs recognition in the SE literature. Researchers need to peel away and engage the This critical approach, based on an alternative way of see- paradoxes, contradictions and tensions of the entrepreneurial ing, contributes to a more critical entrepreneurship litera- endeavour. ture (Barinaga 2013; Daskalaki et al. 2015; Hjorth 2013; We will argue that behind this rhetorical front there is a Steyaert and Hjorth 2005). As Ogbor (2000, p. 607) argues: substantive back which is given less attention. As Parker and ‘…deconstruction of entrepreneurial discourse enables us

Fig. 1 Conceptualising the chal- lenge of social enterprise ethics

1 3 Towards an Appreciation of Ethics in Social Enterprise Business Models to become resistant, rather than assenting, spectators and To build our argument, we have divided the paper into readers of entrepreneurial texts. Signifcantly, it enables us four sections. In the frst section, we explore the SE literature to examine those binaries that have been supplemented and/ with the specifc aim of critiquing and contextualising hybrid or silenced in the discourse on entrepreneurship’. models to highlight the dominance of a discourse that ofers We explore the silences created by the dominant mission- a choice of public, social and private enterprise. We then market discourse on SE to build on Hjorth’s (2013) argu- position our argument as an alternative worldview rooted in ment that we need a more intensive discussion of the social, a choice between associative (CTAs), (CMEs) and Steyaert and Hjorth’s (2005) argument that we need and responsible (SRBs) social entrepreneurship. Secondly, a more thoughtful elaboration of the relationship between we contextualise our paper within the broader feld of busi- entrepreneurs and society. We expose the frst disconnection ness ethics and pinpoint the gap in the literature we contrib- (1) by considering diferences in political, moral and ethical ute to. This sets the scene for a section that outlines formal, commitments that arise out of three diferent rationalities social and substantive rationality and examines how they (formal, social and substantive). This eschews the oversim- link to conceptualisations of SE. Lastly, we link our discus- plifed public–private (mission-market) dichotomy in SE sion of ethics to a meta-theory of economic choices and by favouring an alternative analysis based on hybridities social value orientations (based on Dreu and Boles 1998; that occur when moral choices are made between economic Polanyi 2001) to show how the various motives to action systems (redistribution, reciprocity and market) and social (ethical inputs) produce a diversity of organising princi- value orientation (personal, mutual and public benefts). As ples and outcomes (ethical outputs). In our conclusions, we a result, we tackle the second disconnection (2) by reorient- highlight our contribution by arguing that the diversity of ing the feld so that it considers diferences in the ethical SE itself is linked to moral and political choices regarding commitments that stem from charitable trading, from - economic exchange and social value creation (compare Bull eration and mutuality and from socially responsible busi- et al. 2010). ness (Fig. 1). Specifcally, we will argue that three core approaches to SE have an associated rationality and legal that produces diferent ethical outcomes: hybrid Conceptualising Social Enterprise (i) charitable trading activities (CTAs) that are infuenced by the formal rationality of fxed charitable or social objects; At a grassroots level, SE in the UK initially gained its strong- hybrid (ii) co-operatives and mutual enterprises (CME) are est foothold within the co-operative movement and commu- guided by social rationality in mutual associations and coop- nity regeneration sector (Ridley-Duf and Southcombe 2012; erative action, and; hybrid (iii) socially responsible busi- Teasdale 2012). Prior to 2001, the focus was on building nesses (SRBs) that are outcomes of social entrepreneurs’ a broad movement of employee-owned businesses (EOBs) substantive rationality (Ridley-Duf and Bull 2016). This and philanthropically minded community beneft societies approach enables us to tackle the fnal disconnection (3) to funded by community share issues (Brown 2004, 2006). frame a response to the special issue of the Journal of Busi- By late 1997, a coalition of co-operatives and co-operative ness Ethics on outstanding ethical issues in SEs (see Chell development agencies had formed Social Enterprise London. et al. 2016). We set out new lines to start new conversations. As regional links developed, a national body—the Social Whilst wrestling with the defnitional tensions within the Enterprise Coalition (SEC), was created to lobby for co- feld of SE is not new, extending the debate to rationali- operatives, social frms, trading charities, community and ties and ethics adds to a growing body of papers taking a employee-owned businesses. more critical perspective. By showing that ethical commit- As time passed, and particularly after a UK government ments are rooted in social and political choices that produce consultation involving charities and voluntary groups, the diferent types of SE, the feld can broaden its focus and co-operative origins of the SE movement in the UK became move away from seeing management as a series of technical obscured by a strengthening (US-dominated) discourse choices to a more critical understanding of the moral and on earned income and innovation in charities and public political choices that social entrepreneurs make when they services (Ridley-Duf 2007, 2008; Somers 2013; Teasdale institutionalise their organising through their choice of legal 2012). A gradual move from redistributive form (Barinaga 2013; Wray-Bliss 2009). We contribute to to forms of market-action is also found in some early UK CMS through unsettling the dominant mission-market SE research (Amin et al. 1999; Westall 2001). The efect was discourse on hybridity in favour of a more nuanced analysis to raise the profle of social businesses as a policy option that exposes the plurality of choices available and the new through joint action by governments and private charita- forms of organising that actualise social transformations ble foundations or through partnerships with ‘responsible’ (Daskalaki et al. 2015). .

1 3 M. Bull, R. Ridley‑Duf

In early SE discourse, as highlighted by Pearce (2003, p. 81-page strategy. Given the claim that ethics and morality 34), there was an underlying assumption that SE is an ethical are at the heart of SE (Bull et al. 2010) combined with a activity: ‘The purpose of social enterprises is to contribute rhetorical proposition that SE is about ‘trading for a social to the common good, to beneft society and more widely, purpose’ why is ethics missing from policy discussion? the planet. Specifc objectives will ft within this overarch- The dominant discourse on SE emphasises its hybrid ing sense of social purpose’. In 2002, the UK Government organisational form, or forms, blending mission and market published its strategy for SE (DTI 2002). This outlined a logics that are coined variously as ‘businesses with social new era and political framework for the development of SE purpose’ or ‘in business for good’ (Billis 2010; Mason and in and . As part of the positioning of the sec- Doherty 2015). As Defourny and Nyssens (2010, p. 44) note, tor, the strategy crafted a defnition still used widely today. It in agreement with Pearce (2003), ‘for all schools of thought, read: ‘A social enterprise is a business with primarily social the explicit aim to beneft the community or the creation objectives whose surpluses are principally reinvested for of social value is the core mission of social entrepreneur- that purpose in the business or in the community, rather ship and social enterprises’. This high moral ground was than being driven by the need to maximise proft for share- expressed in the frst version of the Social Enterprise Mark holders and owners’. The strategy itself recognised various (SEM) by featuring a halo above the words ‘social enter- hybrid organisational forms under the SE umbrella that are prise’ (Ridley-Duf and Bull 2016). (weakly) recognised in the ofcial defnition. Likewise, there This discourse has shaped conceptual models of SE. is no mention of ethics in either the defnition or the entire Table 1 shows theoretical framings that we have used in

Table 1 Analysis of enterprise orientations

1 3 Towards an Appreciation of Ethics in Social Enterprise Business Models both teaching and research, all of which appear unequivo- needs met, employment opportunities created, trading) cally as a spectrum of orientations that range from philan- increases living standards, which has some virtue in terms thropic to commercial enterprise. Prior to the launch of SE of a greater good for society. At level 1, Wagner-Tsukamoto in the UK, Dees (1998) in the USA and Pestof (1998) in proposes that business activity passively satisfes some unin- Europe were theorising a trend towards more commercial tentional level of moral agency by virtue of ‘doing’ business. approaches in the non-proft sector. Pestof (1998) outlines Thus, the unscrupulous activities of clothing manufacturers European hybridity thinking and what he calls the welfare using in their supply chains do have some level mix between state and enterprise orientation. He draws on of moral legitimacy and ethical capital in Wagner-Tsukamo- Polanyi (2001, [1944]) to conceptualise SE as a combination to’s eyes if they are contributing to ‘rising living standards of various actors (state, community and for-proft compa- and rising welfare in society’ (2007, p. 210). nies), deploying various logics of action (public, non-proft, Laasch and Conway’s (2015) next conceptualisation private for-proft, informal and formal) to engage in diferent (‘responsible business’) is taken to include those commer- types of economic exchange (redistribution, reciprocity and cial organisations that practice corporate social responsibil- market). Unlike ‘third sector’ conceptualisations of SE in the ity and/or address UN sustainable development goals. For UK aligned to ‘community’, Pestof places it frmly at the Wagner-Tsukamoto (2007), this enterprise orientation covers intersections between community-based, proft-making and two levels-level 2 (‘passive, intended moral agency’) and public-beneft activities. level 3 (‘active, intended moral agency’) (2007, p. 210). At Dees in the USA warned of the cultural challenges to level 2, there is an ethical commitment to strategically doing non-profts from the operational strategies required by a the minimum, staying within the law but not creating value change of enterprise orientation. Dart (2004) concurs that a for key shareholders beyond what Carroll (1991) refers to ‘business-like’ hybrid enterprise orientation modifes moral- as legal and economic responsibilities. Following Friedman ity in virtuous organisations and that this results in a cultural (1970), enterprise orientations observe the injunction to stay shift towards a neoconservative, pro-market agenda. Dees within the rules of the game. For the previously mentioned (1998) visually represents three enterprise orientations: (1) clothing manufacturers exploiting child labour, it would be charitable type, mission-driven, non-proft organisations; (2) within the ‘rules of the game’ to abide by a country’s policy market-driven, proft-seeking organisations; and (3) mission on labour age, even if it is lower than in other parts of the and market-driven hybrid enterprise orientation (Table 1). world (see Fisher and Lovell 2006 for the case of Adidas Interestingly, Dees introduces the dichotomy of ‘appeal Soloman). At level 3, Wagner-Tsukamoto identifes where to goodwill’ and ‘appeal to self-interest’, which opens up the considerations are accommodated—so long as link between SEs and business ethics. An appeal to goodwill they do not override shareholder interests. Intended moral invites action that is philanthropic and redistributive, which agency is played out in organisations that embrace a neolib- we discuss later by contrasting it with an egoistic, neoliberal eral sustainability agenda. (market) orientation. However, Laasch and Conway’s next conceptualisation Through a comparison of Dees (1998), Hjorth (2013) and (‘social enterprise’) is positioned as an enterprise orien- Laasch and Conway (2015), we can observe that a commer- tation with more of an external than internal orientation cial orientation is theorised as internal value creation (‘econ- towards value creation and mission, going beyond the self- omising’) combined with egoism (on the right of Table 1). interest inherent in neoliberalism. The challenge here is the This is presented as the opposite of external value creation positioning of co-operatives as SEs, because co-operatives (‘socialising’) and philanthropy (on the left of Table 1). might superfcially display a more internal than external Laasch and Conway’s model highlights the demarca- orientation, or be associated with Dees’s mission and mar- tion between the diferent value propositions of organisa- ket ‘mixed motives’. As seen in Table 1, the positioning of tions. They conceptualise (‘irresponsible business’) which co-operatives is, however, recognised explicitly by Conaty pinpoints an internal enterprise orientation combined with (2001), Westall (2001), Cornforth (2003), Defourny and an egocentric mission. This is aligned with Dees’s ‘purely Nyssens (2016) and Ridley-Duf and Bull (2016). Lastly, commercial’ orientation. ‘Irresponsible’ business (Laasch Laasch and Conway discuss philanthropic organisations and Conway 2015) might not necessarily be breaking the with an external value orientation (‘business foundations’), law (e.g. selling illegal substances like cocaine), but it could similar to Dees’s ‘purely philanthropic’ type and Hjorth’s include clothing manufacturers that exploit child labour or ‘socialising’ entrepreneurship with a public ethos. retailers that avoid paying tax in countries where they trade. Alter (2007) makes a similar argument to Dees, Laasch The broad generalisation that commercial businesses are and Conway. She positions enterprise orientations along irresponsible is treated with caution by other authors. The a spectrum to distinguish diferent business models. She work of Wagner-Tsukamoto (2005, 2007) is subtler because highlights a step change between those on both the social it suggests that the outcome of market processes (consumer and economic value creation ends of the economy. Ethics

1 3 M. Bull, R. Ridley‑Duf are alluded to here, inasmuch as Alter posits that socially Based on this review, we settle on three confgurations of responsible businesses follow sustainability strategies under hybridity (highlighted in grey in Table 1). In the next sec- the ideology of ‘doing well by doing good’—good taken tion, we focus on the rationalities and ethical propositions of to mean a public good based on utilitarian ethical reason- these three types. We frstly position ourselves in relation to ing. Bull et al. (2010) also furthered Wagner-Tsukamoto’s the literature on business ethics, then set out the diferences theorem by plotting a fourth and ffth level of ethical capital between formal, substantive and social rationality. We argue over Alter’s model. Levels 4 and 5 occur on the social value that each rationality changes the criteria for making moral side of Alter’s diagram, with level 4 titled ‘intended blended choices, leading to divergent ethical commitments that infu- value’ that combines ‘social’ and ‘economic’ outcomes, ence each approach to SE. and level 5 which goes beyond balancing to give preference to ‘social’ outcomes. The distinction between ‘non-proft with income generating activities’ and ‘social enterprise’ Ethics and Rationality in Alter’s model is interesting because it opens up space to consider diferent enterprise orientations in the social value Business ethics is a contested feld polarised between those creation side of the economy. that seek to prescribe and describe ethics and those that see Conaty (2001) also notes these diferences by distinguish- little value in studying it at all (Parker 1998a, b). Parker ing ‘the social enterprise way’ as ‘the ethical path between (1998a, b) contends that academic study of ethics cannot charity and commerce’. Conaty suggests SE hybridity ranges escape prescriptions of various ‘authorities’ by turning its from the trading activities of charities at one end to co- attention to the ‘more solid terrain of description’ because operative and mutual societies at the other. He also refers there is no consensus about the nature of being. Faced with to the success of SE being down to 5Ms—one of which is the conundrum of not being able to reach a consensus on moral motivation (the other four being; markets, manage- what it is to be ethical, Parker points to the ‘turn’ in the ment, mouth and money). Just as Wagner-Tsukamoto opens works of Derrida, Foucault, Giddens and Habermas on the up nuanced diferences amongst the ethical diferentiators way social norms impact judgment. This foregrounds epis- of private companies, Alter, Dees and Conaty start of ofer temology, ways of knowing, to give rise to the study of busi- evidence of ethical diferentiation between types of SE. Of ness ethics as a study of the political ‘foundations’ on which interest here is the way Conaty draws attention to an ethi- ethical commitments are socially constructed. cal path as well as the two enterprise orientations labelled Parker’s assumptions are challenged by Anthony (1998) ‘social business’ and ‘co-ops and mutuals’. If we add Alter’s who contends that business ethics does not derive from label, we arrive at three hybrid forms of SE: (1) ‘non-profts the on-high proclamations of political institutions but out with income generating activities’; (2) ‘co-ops and mutuals’, of everyday interactions between workers and managers. and; (3) ‘social businesses’. He cites Selznick’s (1992, p. 19) view that moral choices In Bull (2015) and Ridley-Duf and Bull (2016), the ‘are not elements of an external ethic brought to the world hybrid logics of SE are explored to arrive at the same three like a Promethean fre. They are generated by mundane forms of SE. They both frame SEs in three ways: hybrid needs, practical opportunities and felt satisfactions’. Based (i) CTAs constituted in charity law; hybrid (ii) CMEs con- on Selznick’s statement, we contend that social enterprise stituted in society law; and hybrid (iii) SRBs constituted development, indeed all business development, is rooted in in company law. This aligns with the latest global research everyday moral choices, satisfactions and opportunities we project (ICSEM) led by Defourny and Nyssens (2016). The seek for ourselves and others, and our choice of whether ICSEM project also separates organisational types into dis- to direct our own labour or allow others to direct it for us. tinct hybrids: (1) public sector social enterprises (PSSE); (2) These starting points are shown in Fig. 2. entrepreneurial non-profts (ENP); (3) social co-operatives Rhodes et al. (2010a, b, p. 536) claim that it is possible to (SC); and (4) social businesses (SB). This research draws establish empirically that ‘“ethics in practice” [is] embed- heavily on Spear et al. (2009) who frst outlined these four ded in the mundane activities of organising and managing’. types. Bull (2015), however, challenges the concept of PSSE The ‘organising’ and ‘managing’ that interests us are those because each SE is constituted through one of the other legal that social entrepreneurs generate through their SEs as they forms. Put simply, all PSSEs choose between CTA, CME confront dilemmas in their relationships with others (Wray- or SRB enterprise orientations (so we represent PSSEs in Bliss 2009). We have circled these in Fig. 2: (1) motiva- Table 1 as spanning the other three choices). This reading tions to help others to help oneself; (2) the desire to help of the literature concurs with earlier work by Westall (2001) others without exploiting oneself, and; (3) the motivation to and Cornforth (2003) who also saw three confgurations that self-direct one’s own eforts to help others. As Wray-Bliss align with the same distinctive SE types (CTAs, CMEs and (2009) sets out, critical ethics arises out of refecting on the SRBs). impact of our relationships with others, our responses to

1 3 Towards an Appreciation of Ethics in Social Enterprise Business Models

Fig. 2 A matrix of everyday interactions

their demands, the extent to which we distant ourselves from Throughout the 1990s and 2000s, private sector guidance them or, alternatively, feel a sense of responsibility to or for on corporate governance reinforced the idea that gover- them. nors and executives should protect their independence by Before we can build on Fig. 2, we need to set out our favouring outside directors and trustees. Within this system, views on three rationalities (formal, substantive and employees who are hired to enact the rules have little or no social) and discuss how they link to our choice of SE theo- part to play in making them, whilst senior managers and ries (Table 1). Barinaga (2013) challenges SE scholars to trustees/directors make and enforce them. Whilst Weber acknowledge the political implications of social entrepre- distinguished ‘rigid’ and ‘logical’ applications of formal neurial rationalities. We do this by going beyond Barinaga’s rationality (Shamir 1993), he sought to avoid alternative choices (economic, discursive and community) to consider rationalities that considered ‘ethical imperatives, utilitarian the political and philosophical origins of formal, substantive and other expediential rules and political maxims’ (Weber and social rationality. 1978, p. 657). Formal rationality was advanced by Weber (1978, p. This alternative, which he regarded as substantive ration- 656) as a ‘logically clear, internally consistent, and, at least ality, eventually came to the fore in the USA when Dewey, in theory, gapless system of rules’ that provides the legal Pierce, James, Holmes and Gray supported the New Deal in foundations for advanced societies. Within this system, deci- the 1930s (Shamir 1993). This challenged the dominance sion-making is intended to proceed based on predictability, of formal rationality by attacking the privileged position of applying logic to derive abstract principles that bring about scholarly elites and capital owners. It also provided a way consistency when making judgements. Moreover, these for democrats to challenge the normative infuence of for- abstract principles are enforced through the application of mal rationality which concealed ‘the unequal distribution of rules based on predetermined judgement criteria (Feldman economic and political power […] behind a veil of objective 1991). Legal frameworks based on formal rationality are science’ (ibid., p. 49). necessarily controlled by an elite. Weber argued that (when Substantive rationality difers through its focus on the making decisions) it was best to exclude ‘external inter- goals of rational actors and the environment in which they ference’ on the basis that it could corrupt the process of are realised (Simons, 1978). In place of abstract principles applying abstract principles in the interpretation of rules. As decided a priori by an elite, substantive rationality focuses Shamir (1993) notes, this led Weber to devalue knowledge on contextually appropriate decision-making in each envi- derived from practice. Weber not only favoured a scholarly ronment. As Shamir (1993) points out, Weber eschewed approach to rule making, but also that the resulting rules this type of rationality as the basis for a legal system. In should be enforced in a way that shielded rule enforcers doing so, he failed to appreciate the value of substantive from the infuence of others (particularly those engaged in rationality for studies of goal-directed entrepreneurs. More practice). broadly, the logics of substantive rationality present a chal- A clear link with Weber’s formal rationality persists lenge to the idea that a universally applicable system of rules today in ‘best practice’ guidelines adopted by charities and based on formal rationality can produce ethical outcomes in related hybrid SEs with top-down approaches to governance. practice, because social contexts and norms vary so widely.

1 3 M. Bull, R. Ridley‑Duf

Substantive rationality would hold that the best decisions that international defnitions and laws identify the need for are local, not universal, and that a range of decisions may governance systems that enable people afected by decisions be adequate for a given situation. The ‘best’ decisions will to contribute to making them (Defourny and Nyssens 2016; also vary across time and space. Restakis 2010; Ridley-Duf 2015). Moreover, Laville and Connecting substantive rationality to social entrepre- Nyssens (2001) have long argued that one of the primary neurship is straightforward because the latter is rooted in ‘products’ of SE is social, not economic, capital. Creating an action-orientated approach to revealing, reframing and the that sustains a community requires the challenging inequitable distributions of power and wealth establishment of social networks where relationship quality in a specifc community (Martin and Osberg 2007). Moral improves and levels of trust increase. judgements rest on whether the motivations of social entre- The rationality that applies in this case is social, not sub- preneurs are practically adequate for a given context. For stantive (Ridley-Duf 2008; Ridley-Duf and Bull 2016). example, the moral claim that Yunus’s (2007) concept of Social rationality occurs when decision-making is guided social business is ‘better’ is based on the practical adequacy by considerations of whether to form, develop or maintain of the ’s role in mitigating rural poverty in relationships for their own sake (rather than an instrumen- Bangladesh. Justifcation does not depend on an appeal to tal purpose). From a socially rational perspective, decisions precedents and a priori abstract principles, but on the out- would be taken (or not taken) based on whether the person comes achieved for people. As Shamir (1993) describes, making the decision wanted to disrupt or preserve friend- this aligns substantive rationality with pragmatism because ship networks, business relationships and family ties. In ethics are made and remade in the context of practice— terms of its ethics, it is the rationality closest to critical eth- the ‘mundane’ everyday decisions referred to by Anthony ics. It concerns itself wholly with the relationship between (1998), not a priori abstract reasoning advanced by Weber. selves and others (Wray-Bliss 2009), and the rationales we Seen in this light, social entrepreneurship is the application develop for more intimate or more distant relationships. of pragmatism rooted in the substantive rationality of the Social rationality, therefore, is qualitatively diferent to for- social entrepreneur. It is triggered and sustained by sensitiv- mal and substantive rationality in that decisions are made ity to local political and social issues, and its ethical salience based on their potential to shape, change, preserve or end is linked to the outcomes achieved. social relationships. The criticism that pragmatism promotes expediency The connection to CMEs is easy to make through an rather than ethical behaviour (based on Weber’s notion of examination of its guiding principles. Six of the seven co- abstract principles) is rejected by Haack (1976, p. 232) on operative principles (open membership, democratic control, the basis that counter-arguments depend on an ‘inadequate economic participation, autonomy, inter-cooperation and understanding of the theory [of pragmatism]’. Critics place concern for community; see Birchall 2012) guide relation- too much emphasis on pragmatism’s ‘practical utility’ cri- ships rather than missions, products or services. They guide terion and ignore its stated commitments to coherence and the relationships between individual members, members correspondence with an objective reality. Haack (1976) and their enterprise, and between their enterprises and the defends pragmatism by arguing that formally rational sys- wider community. The relationship focus can appear in the tems cannot sustain ethical outcomes in practice because mission statements of co-operatives. For example, Seward rules abstracted from reality (i.e. that neither correspond Community Co-operative’s website suggests they commit to nor are coherent with local realities) have less practical to ‘sustaining a healthy community that has: equitable eco- utility because they are less able to accommodate (and be nomic relationships, positive environmental impacts and responsive to) the moral choices that occur in diferent social inclusive, socially responsible practices’. The principles contexts. establish a norm of thinking about the social aspects of Our view, however, is that both formal and substantive organising, tackling and promoting com- rationality are vulnerable to the criticism made by Simons munity participation (associational life) as an integral part (1978) that they are blind to the discipline of (social) psy- of business (see Scott-Cato et al. 2008). chology. Whilst substantive rationality might account for the We can link these three rationalities to SE business mod- ‘learning by doing’ approach of individual social entrepre- els. In CTAs, the commitment to social or charitable aims neurs, it cannot account for SEs that emerge from collective dominates. The legal framework requires trustees/directors action. We need a more critical ethics (Wray-Bliss 2009, p. to take decisions that advance specifc ‘objects’. This not 273) to wrestle with ‘the multitude of unique met and unmet only accounts for Cornforth’s ‘Compliance’/‘rubber stamp’ others, each of which have the same call upon [us]’. The governance mode and Agency Theory for command and feld of SE does not just concern itself with products and control, it also inclines trustees/directors towards formal services, but also the contribution of SEs to the quality of rationality (framed by utilitarian ethics). Trustees/directors human relationships within a community. It is for this reason of charities, in law, are judged as having a confict of interest

1 3 Towards an Appreciation of Ethics in Social Enterprise Business Models if they combine practice (working) with trusteeship (govern- charities and charitable foundations where rule-makers are ing). In Weberian terms, trustees/directors are scholar and appointed and do not experience the efects of their own rule judge—deciding the rules under which others will operate making. (They make rules for others.) and then enforcing them. If they work amongst those gov- Governance in CMEs is internalised because members of erned by the rules, it will corrupt their moral duty to enforce the organisation (whether workers or users) design ‘closed- the rule system. Wray-Bliss (2009) would likely frame this loop’ systems for electing their boards (Turnbull 2001). The as an ethical rule to ‘keep your distance’ (from others). ethical emphasis shifts to ‘self-help’ by afording members Based on the arguments of Shamir (1993) and Anthony scope to vary their ‘objects’ in democratic assemblies. As (1998), we contend that this illustrates why Weberian eth- they can set objects without reference to a higher authority, ics produces poor ethical outcomes—it is not sensitive or the orientation is towards substantive, not formal, rationality. responsive to the moral dilemmas of practice. However, democratic decision-making may still be subject The charitable model, therefore, is premised on one group to formally rationality at the level of process. of value holders/generators undertaking activities for others, In SRBs, there are governance models aligned with Corn- ostensibly helping those unable to help themselves within forth’s ‘Agency’ model (Table 1). Cornforth states that in a governance system that requires they keep their distance this model, the principal agent (the entrepreneur) has difer- (Westall 2001). According to The Code Founding Group ent interests to those that work in the organisation. There- (2010)—a body representing Association of Chief Execu- fore, an element of control, compliance and monitoring goes tives of Voluntary Organisations (ACEVO), Charity Trustee on. Whilst the entrepreneur could enforce this through for- Network and National Council for Voluntary Organisations mally rational systems, their own ethics (rather than the eth- (NCVO) (amongst others)—the six principles for good ics implied by statutory objects) shifts the decision-making charity governance are: (1) understand the role; (2) delivery process towards substantive rationality. Entrepreneurs give of purpose; (3) work efectively as a team and individual; pragmatic consideration to their previous experience and (4) control; (5) integrity; and (6) be open and accountable. make decisions based on their own value system (Coase These six characteristics align well with compliance/rubber 1937). As Ridley-Duf and Bull (2016) state, one element stamp board theory (Cornforth 2003), where safeguarding of SRBs is a focus on innovation, which is strongest in the (integrity), checking practice against rules () US literature where the value propositions of social entre- and ratifying decisions (control) are considered the role preneurs are taken as the drivers of (Fried- of the board. Not surprisingly, this commitment to formal man and Desivilya 2010; Light 2008). This focus on inno- rationality and the separation of board and executive led vation (particularly in the use of private sector fnancial Spear et al. (2009) to conclude that these types of SEs tend instruments) is also a feature of Yunus’s (2007) argument to lack an enterprise culture. To the extent that philanthropic for ‘social business’. Yunus sets out two hybrid ‘types’ that governance retains a Weberian commitment to formal ration- both have substantively rational goals (i.e. the elimination ality, it will likely incline its practitioners towards bureau- of poverty). Yunus’s frst type adopts the characteristics of cratic processes controlled by an elite (the trustee board). an SRB in which there are locks on both assets and profts. The commitment to formal rationality also represents an Yunus argues vigorously for equity instruments and arrange- ethical position that social/charitable purpose(s) (particu- ments that enable investors to recover their investment. To larly under statutory law) requires performance manage- this end, he sees a need for a social investment industry to ment against predetermined criteria, judged by a regulatory make capital available and establish the metrics that social authority against charitable objects. investors need to make judgements about which investments In CMEs, the member-owned, controlled and governed produce the greatest social returns (Nicholls 2010). Whilst model can be aligned with Cornforth’s (2003) democratic there is scope for an investment industry driven by formally model (see Table 1). At the heart of this is a strong ori- rationality, this mode of thinking is restricted to the way entation towards relationships through open membership, investment is provided, not the social goals of the entre- inclusive/democratic governance, , preneur (who continues to exercise substantive rationality participatory management and—in its most radical imple- consistent their own ethical commitments). mentations—wage . The dominant rationalities are In summary, this section has brought together diferent social (in governance) and substantive (regarding the social, conceptualisations of SE and elaborated how formal, sub- economic and cultural needs of members). The democratic stantive and social rationality are applied to organise and ideology of CMEs is rooted in one-person, one-vote system manage activities. We compared the conceptualisations in that usurps the formal rationality envisaged by Weber by dis- Table 1 to present enterprise orientations across three hybrid solving the divide between rule-makers and rule-followers. types of SE that align with particular trajectories, forms of As members, the ‘governed’ make the rules by which ‘to incorporation, types of governance, management ideolo- govern’, as well as ‘be’ governed. This is not the case in gies and historical foundations. We now switch attention to

1 3 M. Bull, R. Ridley‑Duf theorising the links between these ethical outputs (types of themselves but concurrently protect others through regular SE) and underlying ethical inputs (motivations to act). subscriptions of fnancial capital that are paid out on the basis of need. On altruistic action (i.e. actions that are motivated by a Motivations, Individual Actions deliberate intent to help others, not the self), there is a range and Organisational Ethos of underpinning logics from entrepreneurial self-directed action ‘I’ll direct my eforts towards helping others’ to work- In this section, we link motivations to act (Fig. 2) with SE ing under the direction of an institution or authority (such types (Table 1) and their linkages to diferent rationalities. a charity or public body) seeking to create a public beneft A distinction can be made between the person who directs ‘I’ll help you to beneft others’ (see Fig. 2). However, our actions and the benefciary of the actions that are directed. argument here is that few people exist at the extremes of Individualist philosophy can vary between the presumed these axes. Equity theory (Huseman et al. 1987; Kilbourne self-interest that underpins entrepreneurial action ‘I’ll direct and O’Leary-Kelly 1994) posits that people prefer balanced my efort towards helping myself’ and the willingness of benefts in which neither individuals nor social groups are self-interested individuals to join together and engage in col- over or under compensated for their eforts ‘I’ll help others lective action for self-beneft ‘I’ll help you to beneft myself’ without exploiting myself, and share any benefts received (Coase 1937; Parnell 2011; Smith 1937 [1776]). Whilst with others’. contemporary culture is replete with images of aggressive The theoretical underpinnings of these positions are action by individual entrepreneurs (in popular programmes elaborated in Fig. 3. The two-by-two matrix is re-divided like The Apprentice), Parnell (2011, p. 8), the former CEO into three-by-three matrix with nine orientations. The frst of the Plunkett Foundation, contends that action directed dimension (across the top) is theorised using Polanyi’s work by self-interest can also be organised jointly: ‘An impor- on modes of economic exchange: redistribution, reciproc- tant feature of the co-operative approach is its acceptance ity and market (Evers 1995; Nyssens 2006; Pestof 1998; of people [who are] largely driven by self-interest. It also Polanyi 2001 [1944]; Roy 2015). Importantly, Pestof (2005) acknowledges that most people are unlikely to modify their suggests this ‘welfare mix’ encapsulates a diversity of hybrid self-centred behaviour without a sufcient incentive to do logics (beyond mission and market) and considers the actors so […]. Co-operation recognises that self-centred behaviour involved. can be moderated when a more enlightened form of self- Redistributive actions seek to move resources from one interest takes account of the wider mutual interest’. setting to another in accordance with pre-agreed political For Parnell, collectivism is not always motivated by altru- and social priorities. This logic is used by governments, istic intent (even if altruism is the outcome). Instead, collec- public authorities and charities that raise funds (or taxes) tive action, and the desire to work with others co-operatively, from one source and redistribute them to others who cre- can still be motivated by the desire for individualised ben- ate public goods/services. Reciprocity, on the other hand, efts. Examples of this can be found in trade unionism and is grounded in the logic of mutual aid, whereby equita- schemes where individuals join to protect ble contributions to, and drawings from, mutual funds

Fig. 3 Mapping ethical ethos against motivations

1 3 Towards an Appreciation of Ethics in Social Enterprise Business Models generate both individual and collective benefts (Ostrom applied to a person who thinks only of the beneft to others et al. 1999; Restakis 2010). In this case, action is focused (pro-social). on securing reciprocal exchanges, counter gifts and culti- What is the ethos behind each of the positions on the vating a willingness amongst people with familial, kinship grid and the enterprise types in each space? As can be seen or community ties to proactively support each other’s well- in Fig. 3, the top left space implies a public service ethos being. As Pestof (2005) suggests, reciprocity is difer- that guides philanthropic and redistributive action (Pratchett ent to redistribution. Reciprocal action is conducted via a and Wingfeld 1996). As we are concerned with SE, this network of human relationships practising social rational- orientation is omitted in the fgures hereafter. In the opposite ity whilst redistributive action operates through a central corner (bottom right, Figs. 3, 4) is a private enterprise ethos authority pursuing formal (and perhaps also substantive) built on individualistic and market principles, outlined in rationality. Smith’s ‘The Wealth of Nations’ (Smith 1937 [1776]). This The last type of economic exchange is through the mar- orientation is also omitted from fgures hereafter as this does ket. Exchange is still the goal, but the mediating mechanism not lead to SE either. That leaves an alternative dimension is no longer the social rationality of kinship, community ties (starting bottom left, Fig. 3). Community action is redis- or personal bonds. It is replaced by a depersonalised system tributive, but with an individualistic ethos. In Smith’s ‘Moral of commodity production with buying and selling goods Sentiments’ (1790), he identifes the personal benefts of mediated by transaction costs that are variously infated (by caring for others. Where the orientation is individualistic or the seller) to increase the amount of proft or reduced (by co-operative, the enterprise orientations range from charita- the buyer) to minimise losses (Coase 1937). The more mar- ble associations (more pro-social) to community association, ket transactions are for private beneft (i.e. a single goal of then to more personal benefts from collective action in trade proft-maximisation or utility), the more they incline towards and credit unions (Fig. 4). These can lead to SE organised systems of substantive rationality (of the consumer) and as CTAs supported by a statutory or social framework of formal rationality (of the fnancier). Where market transac- charitable objects. Formal rationality is still dominant, but tions are for social beneft (i.e. intended to have a dual goal can be moderated by social rationality. of wealth sharing and impact on the community), they will In the opposite corner (top right, Fig. 3) is Martin and reorient towards social and substantive rationality. Osberg’s (2007) idea of social entrepreneurs as ‘dynamic The second axis (down the left-hand side) is theorised individuals’ with a market-based pro-social ethos. This using works on social value orientation (the propensity orientation in social entrepreneurship leads to SE, par- and inclination of a person to help others). The concepts ticularly through SRBs (but including industrial and retail deployed here are drawn from studies of altruism rather than co-operatives as well as Yunus type 1 social businesses). modes of economic exchange (Dreu and Boles 1998). The In SRBs, social entrepreneurs are guided by their own, concepts distinguish a person who is individualistic (egocen- rather than a statutorily controlled set of social priorities, tric), co-operative or philanthropic (pro-social). The term oriented towards pragmatism and substantial rationality. individualistic is applied to a person who thinks only of their Where industrial co-operatives form or emerge (Owen 2014 own beneft (egocentric), whereas the term philanthropic is [1816]), the social rationality of members starts to moderate

Fig. 4 Mapping enterprise orientations and forms

1 3 M. Bull, R. Ridley‑Duf the substantive rationality of founders, and over time this and collective action. The dominant paradigm is one that will increase where governance systems yield power to a sees the world through a lens that runs from the top left to sovereign assembly of member-owners (see Whyte and the bottom right—public–social–private (showing a choice Whyte 1991). between a public service orientation, social and private Lastly (Fig. 3, centre) is Ostrom’s (1990) research on col- economy). We posit that this runs from an altruistic commu- lective action based on the economics of reciprocity and nitarian ideology through to a neoliberal ideology (Fig. 5). co-operative social values. The orientation of co-operatives Ethical theory in SE to date has principally been framed and mutual societies is based on the ethos of sharing ben- through this mission-market lens on the basis that SE arises efts, not to keep them all to oneself or give them all away out of the commercialisation of non-profts. As Figs. 4 and (Ridley-Duf 2007, 2008). The primary concern is produc- 5 show, this is crudely reductionist and fails to account for tive social relations rather than ‘objects’ so the dominant the diversity of motives, missions and legal forms in the rationality is social, rather than formal or substantive. The feld of SE. enterprise orientations that prevail here are co-operative SE is more than a single organisational and ethical type. societies, mutual enterprises, community businesses and By switching the framing, we ofer another axis from bottom member- or employee-led businesses (Fig. 4). There is a left to top right that shows three alternative hybrids (asso- balance to be struck between community and individualistic ciative–cooperative–responsible) within the SE discourse orientations here, so Fig. 3 also shows Arizmendiarietta’s (Figs. 4, 5). This exposes the ‘deep back’ and its multiple co-operativism (Whyte and Whyte 1991), in which indi- connections to ethical theory. On this alternative axis, the vidual capital accounts exist alongside indivisible reserves ideology is one of social (bottom left) through within the Mondragon co-operative network in Spain. communitarian pluralism (middle) to pragmatic communi- In this section, we refected on the philosophical motiva- tarianism (top right). tions that guide individual and collective action. In mapping We now take each in turn. Social liberalism difers from concepts, we linked motivations to act (inputs) against ethos neoliberalism through its greater emphasis on human, (outputs) within a 3 × 3 matrix (Fig. 3). We now link our social and political (rather than economic) rights. Whilst framework more frmly to enterprise orientations (Fig. 4) the focus is still on the protection of individual rights and before identifying the ethical theories and rationalities that freedoms, the emphasis switches to freedoms beyond the support each SE (Fig. 5). marketplace—freedom of thought, speech and associa- tion. CTAs (Fig. 4, bottom left) seek to protect these by engaging in non-proft income generating activities that Switching the Axis‑Ethical Theories redistribute resources through associations and societies. of Philosophies of Action Some altruistic action can be directed towards commu- nity beneft, maximising happiness for members and their At this point, it is worth emphasising how our analysis is host communities, and through economic exchanges that shaping our argument for an appreciation of ethics in the redistribute to those in greatest need, guided by utilitar- theorisation of SE. Figure 4 brings to the fore how enterprise ian ethics (Fig. 5). Social liberalism may or may not have orientations can be mapped onto motivations for individual state support, but in either case it remains a vehicle for

Fig. 5 Mapping ethics within social enterprise groups

1 3 Towards an Appreciation of Ethics in Social Enterprise Business Models the redistribution and promotion of power, wealth and Pragmatic communitarianism is more market-oriented voice amongst a group of individuals. It can beneft from and gives greater consideration to ‘what works’ in terms of statutory support where this provides legal frameworks utility and public beneft. SRBs (Fig. 4, top right) incorpo- for its development. Social liberalism that is redistributive rate approaches to market exchange-based trading activi- through either community or charitable associations still ties that proactively pursue sustainable development goals favours the formal rationality of charitable goals (Fig. 5), (Defourny and Nyssens 2016). Activities are self-directed by in which members commit to ‘objects’ and deploy a those seeking to bring about a public or community beneft. means-ends rationality to achieve them (Weber 1978). The As SRBs, they are in a stronger position to take advantage of legal and cultural frameworks here are charitable objects existing market institutions and its ideological rules. It leads (under charity or non-proft law) or social objects (under to business models under the control of a single (or small community interest or community beneft society law). group of) social entrepreneurs who purport to help others. A philosophy of communitarian pluralism leverages the Whilst utilitarian ethics (the best outcome for the greatest power of individual freedom of thought, speech and associa- number of people) may prevail, this is a more pragmatic tion to reach collective agreements on mutual benefts for form of communitarianism driven by change makers and the members of a socio-economic enterprise (Ridley-Duf social activists (Yunus 2007). The arbiters of social value are 2007). CMEs (Fig. 4, middle) incorporate their commitment social entrepreneurs operating in a community context, and to social rationality and mutual exchange through CMEs. it is their moral choices that are favoured, rather than those The result intended (if not always fully realised) is an active democratically agreed in an association or co-operative. As inclusive democratic system of governance (Borzaga and a result, the dominant rationality is substantive, rather than Depredi 2014). These enterprises deploy both market and social or formal (Fig. 5). non-market trading strategies and can combine non-proft In our central column of CMEs, diferent rationalities or for-proft principles to distribute benefts equitably to can be combined, but the ethical rules for establishing and members and/or host communities. They combine member- operating collective SEs are premised on social rationality ownership and/or member-control with trading that provides as an end it itself. In CTAs and SRBs, social rationality is a mix of member and public benefts. Within CMEs, plural- the means (i.e. relationships between people are organised ism is more fully realised in social and solidarity co-ops to pursue a social outcome or secure a fnancial proft). In (Defourny and Nyssens 2016; Ridley-Duf 2015) because contrast, within CMEs purpose is the means, (i.e. the pur- their structures are more open and inclusive than single- pose is chosen to (re)build a community of people). This stakeholder co-ops and share benefts more widely across a aligns with previous research evidence that it does not mat- community (Fig. 4). Thus, there are both unitary and plu- ter what a company/enterprise does so long as the result ralist forms of communitarianism (more unitary in worker/ is a cohesive community that advances human well-being consumer co-ops and more pluralist in multi-stakeholder co- (Laville and Nyssens 2001; Ridley-Duf 2015). As Scott- ops that enfranchise workers, customers and investors/sup- Cato et al. (2008) argued, academic debate on the defnition porters). Hence, whilst the middle ground is fully realised of the social economy depends on organising principles, not by multi-stakeholder co-operativism, there are ‘of-centre’ on the purpose(s) or market in which the enterprise operates. forms that err towards more unitary governance logics (com- To summarise, we have achieved our objective of criti- munity businesses) or towards socially liberal forms of indi- cally analysing entrepreneurial intentions in SE from an vidual ownership (e.g. directly employee-owned businesses) alternative perspective. We now turn our attention to the (Fig. 4). Social rationality in CMEs is played out where research question and our contribution. In our conclusions, members collectively decide on the benefts that matter at we address the question ‘How can a critical analysis of a particular point in time, and where the quality of human entrepreneurial intention inform an appreciation of ethics relationships (rather than charitable or social ‘objects’) is the in social enterprise business models?’. dominant frame of reference (Fig. 5). Social rationality (Ridley-Duf 2008), therefore, produces a diferent business model in which ‘good’ decision-making Conclusions is measured and assessed in terms of member participation in determining objects that are relevant now, rather than We present social enterprise ethics as the rule systems that fxed. Whilst there can be substantive rationality operating emerge from social entrepreneurial choices to hybridise through a responsiveness to members and the community, redistribution, reciprocity and market exchange in pursuit where the social rationality of members dominates the sub- of pro-social, mutualised and individualised outcomes. This stantive rationality of social entrepreneurs, there is a mem- challenges the dominant conceptualisation of SE as a hybrid ber and community orientation, rather than a market logic, blend of mission and market dichotomy (purpose-versus- dominating moral choices (Fig. 5). resource) by reframing hybridity in terms of the moral

1 3 M. Bull, R. Ridley‑Duf choice of economic system (redistribution, reciprocity and cooperation and mutuality in CMEs, to the pragmatic com- market) and social value orientation (personal, mutual or munitarianism of ‘dynamic’ social entrepreneurs in SRBs. public beneft). We have deconstructed the political founda- We also acknowledge and build on the scholarly contri- tions, ethical commitments and outcomes of CTAs, CMEs butions from Copenhagen Business School (see Barinaga and SRBs by examining the rationalities (formal, social and 2013; Hjorth 2013) by connecting rationalities to entrepre- substantive) that underpin them, and interpreted how this neurial intentions and legal form, then opening the space for afects the way moral choices are enacted and enforced. a greater consideration of the ‘social’ in public entrepreneur- Whilst conceptual modelling of SE is not new, this paper ship and entrepreneurial discourses. Our theory links to and contributes to knowledge by developing a theory of social explicates how alternatives to the dominant public/private enterprise ethics based on the moral/political choices that are (mission-market) discourse are rooted in collectivist, partici- made by entrepreneurs (knowingly and unknowingly) when patory and activist traditions of (social) enterprise creation choosing between systems of economic exchange, legal form (Daskalaki et al. 2015). We ofer a theory of the way motiva- and social value orientation. tions drive individual and collective action, change the way Having reviewed the literature and looked at the distinc- we respond to the social challenges of meeting our needs, tions between SE hybrid forms (Alter 2007; Conaty 2001; satisfying our wants and advancing practice, and thereby Cornforth 2003; Dees 1998; Westall 2001), we draw on con- produce distinctive systems of social enterprise ethics. ceptual models that grapple with SE identities (community interest companies, trading charities, co-operatives, mutuals, Compliance with Ethical Standards community beneft societies). We argue that the framing of hybridity to date only addresses the ‘ethical front’ of SE—its Authors declare that they have no confict of inter- rhetorical appeal. Our paper ofers a substantive analysis of est. new thinking on hybridisation linked to alternative framings Human and animal rights This article does not contain any studies of the feld to explore its ‘deep back’ (Bull 2015; Defourny with human participants or animals performed by any of the authors. and Nyssens 2016; Ridley-Duf and Bull 2016). We paid attention to the diferent framing of means and ends that Open Access This article is distributed under the terms of the Crea- occurs when social rationality dominates moral choices tive Commons Attribution 4.0 International License (http://creat​iveco​ in the context of cooperative action. We clarify the moral mmons.org/licen​ ses/by/4.0/​ ), which permits unrestricted use, distribu- tion, and reproduction in any medium, provided you give appropriate choices made when confguring a SE by pinpointing ethical credit to the original author(s) and the source, provide a link to the diferences between hybrids. 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