Explaining the Success of the Work Integration Social Enterprise;

A study on the key business model elements within the context of the Netherlands

Date: 30-06-2014 Name: L.T. van den Broeke Student number: 2541621 Contact: l.t.vanden.broeke@student.vu.nl Address: Admiraal de Ruyterweg 402 2 1055ND Amsterdam University: VU University Amsterdam Study: Master Business Administration Specialisation: Entrepreneurship Supervisor: Dr.ir. Elco van Burg

Master thesis

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Foreword

This thesis that you are about to read is the final work on my study Entrepreneurship at the

VU University. It was in 2010 – during my first voluntary work period in an orphanage in

India – that I started brainstorming on ideas on how to solve societal problems. Soon I

decided that starting my own business could be one solution. By employing people with no

chance on getting a job I could offer them new opportunities and empowerment. A few

months later I wrote down the steps that I would make in order to become this type of

entrepreneur. My first step was my study International Business at the University of

Maastricht. During my exchange in Norway I found out that there was an actual name for the

type of business that I had in mind: ‘Social Entrepreneurship’. Soon I started to deepen my

knowledge about social entrepreneurship and it seemed no less than logical to continue my

academic career at the VU studying a Master’s track in Entrepreneurship. The next step of my

plan involved practical experience. It was for this reason that I approached Social Enterprise

NL at the beginning of the academic year. They could not only provide me with much needed

guidance for my thesis but also gave me an insight in the world of social entrepreneurship, a

chance for which I am very thankful.

I would like to express my great gratitude to the various people that directed me through the

period of conducting this research. First and foremost I would like to thank dr.ir. Elco van

Burg for his guidance and wisdom throughout the whole process. Also I would like to thank

the team of Social Enterprise NL for the collaboration with this project. In particular I would

like to thank Mark Hillen. Mark supported me throughout the whole process and without his

expertise it would never have resulted in this thesis. I would also like to thank the ten

entrepreneurs that participated in the study and the experts that took part in the discussion

group that shared their highly valuable insights. I am also grateful towards my family and

boyfriend for supporting me through the good but also exhaustive times. A final word of

gratitude goes towards my grandfather, whose knowledge and understanding helped me gain

the necessary persistence to finish the thesis to its final state.

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Abstract

Over the past years, the research on social entrepreneurship has become an increasingly

important research topic. Yet till now it is still underdeveloped. Research on the business

model of the social enterprise is still scarce. This thesis aims to explore the business model of

one of the specific types of social enterprise: the work integration social enterprise (WISE).

The research question that this study answers is: ‘What does the business model of the Work

Integration Social Enterprise look like within the context of the Netherlands?’ A qualitative

approach is used to investigate the research question. Ten case studies were conducted and

the results of this study have been discussed in an expert session conducted by the author. The

results gave insights along the lines of the four main elements of the business model by

Shafer et al. (2005): creating value, capturing value, strategic choices and the revenue model.

This knowledge contributed to the delineation of several contributors to the success of the

WISE within the Netherlands.

Key words: Social Entrepreneurship, Work Integration Social Enterprise, Business Model

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Table of Contents

Foreword ............................................................................................................................... 2

Abstract .................................................................................................................................. 3

1. Introduction ..................................................................................................................... 5 1.1 Academic Relevance ............................................................................................................ 6 1.2 Social Relevance .................................................................................................................... 7 1.3 Thesis Structure .................................................................................................................... 7

2. Literature Review .......................................................................................................... 8 2.1 Social Entrepreneurship .................................................................................................... 8

2.1.1 History and background of social entrepreneurship ..................................................................... 8 2.1.2 Definition social entrepreneurship ........................................................................................................ 9 2.1.3 Comparison social and commercial entrepreneurship .............................................................. 10 2.1.4 Organisational types .................................................................................................................................. 11

2.2 The Work Integration Social Enterprise ....................................................................13 2.2.1 The employee ................................................................................................................................................ 13 2.2.2 Stakeholders .................................................................................................................................................. 15 2.2.3 Revenue model ............................................................................................................................................. 15

2.3 Business models..................................................................................................................17 2.3.1 Importance of business models ............................................................................................................ 17 2.3.2 Traditional business models .................................................................................................................. 18 2.3.3 Change towards new social business models ................................................................................. 20

2.4 Concluding section .............................................................................................................22

3. Methodology ................................................................................................................. 23 3.1 Research philosophy and design ..................................................................................24 3.2 Case studies ..........................................................................................................................24 3.3. Data collection ....................................................................................................................25 3.4 Semi-structured interviews and archival data ........................................................26 3.5 Experts and expert panel .................................................................................................27 3.6 Analysis and coding ...........................................................................................................27 3.7 Validity and methodological limitations....................................................................28

4. Findings .......................................................................................................................... 28 4.1 Creating Value......................................................................................................................29 4.2 Strategic Choices .................................................................................................................35 4.3 Value network .....................................................................................................................37 4.4 Capturing Value ...................................................................................................................40 4.5 Concluding section .............................................................................................................43

5. Discussion ...................................................................................................................... 44 5.1 The business model of the WISE ...................................................................................44 5.2 Academic implications .....................................................................................................49 5.3 Practical implications .......................................................................................................49 5.4 Limitations ............................................................................................................................50 5.5 Future research ...................................................................................................................51

6. Conclusion ..................................................................................................................... 52

Bibliograhpy ...................................................................................................................... 53

Appendices ......................................................................................................................... 56 Appendix A: Questionnaire ....................................................................................................56 Appendix B: Overview participants’ interviews .............................................................58 Appendix C: Experts and entrepreneurs during the workshop ................................58 Appendix D: Overview codes .................................................................................................59 Appendix E: Additional literature review .........................................................................60

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1. Introduction

When the Dutch king Willem-Alexander pitched the term ‘participatiesamenleving’ in his

annual speech in 2013, he indicated an important change with respect to the encouragement

of the employment of people with labour-inhibiting disabilities. A ‘participatiesamenleving’ –

or society of participation – is meant to encourage a culture in which everyone contributes to

society to the best of their capabilities (Willems, 2013). One of the key aspects of this vision

is to reintegrate disabled people into the labour market in order to economise on social

benefits and improve the overall quality of life of these people. By mandating a minimum

quota of incapacitated employees for corporations, the government hoped to improve the

integration of this vulnerable group of people (Rijksoverheid, 2014). The labour-integration

problem that accompanied this group of people is not something from recent years. However,

the fact that the term ‘participatiesamenleving’ was pitched indicates that there is a crucial

need for integration that was not met thus far by previous policies. Also one can see that

opportunities have always been offered by the corporate world, yet these initiatives have thus

far proved to be insufficient to help the entire target population and thus governmental action

is deemed necessary (Rijksoverheid, 2014). This indirectly indicates that the breed of

employer who does offer chances to this target population must be of a particular nature. It is

a breed of employer who plausibly acts on a different motivation than the ‘traditional’

capitalistic entrepreneur. The business form that is related to the integration of incapacitated

employees is called the ‘work integration social enterprise’ (WISE). The mission of this

enterprise is to provide employment for people with a distance to the labour market. It is

arguable that once the number of WISE is significantly increased the need for government

intervention by means of – for example – quota is reduced.

In the EU, the WISE is defined as an organisation where at least 30% of the staff has labour-

inhibiting limitations (Dereadt, Gijselinckx & Opstal, 2009). Several countries surrounding

the Netherlands recognize, and encourage, this business form (O’Hara and O’Shaughnessy,

2004; Loss, 2003). The Dutch government does not yet recognize the WISE as a full-grown

independent business form, and herewith foregoes the full potential that resides in it. Much of

this might be blamed on the incomplete understanding of the nature and characteristics of the

WISE within the Netherlands.

So far there is hardly any research on the WISE in the Netherlands, and in particular there is

no research on the business model of the WISE. The aim of this thesis therefore is to delineate

the concept of the WISE within the Dutch entrepreneurial landscape.

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The research question will be:

What does the business model of the Work Integration Social Enterprise look like within the

context of the Netherlands?

This research will focus on different elements of the business model of the WISE. In

particular this research will look at the elements that differentiate the WISE from a normal

business. The ones that are investigated in this study are the following:

The employees

The impact of the employees on the end product or service

The relation with the stakeholders

The revenue model

The elements will contribute to the understanding of the business model and show the nature

and the characteristics of the WISE. More importantly, the research will in the end gather a

sample of best practices which – taken together – allows to model the ‘ideal’ business model

for this particular form of organisation.

1.1 Academic Relevance The field of social entrepreneurship is currently growing quickly. This results in an increasing

amount of academic articles written about this topic. Nonetheless the field is still not

completely developed, and numerous research gaps are still existent. There still is a lot of

dispute about the definition of social entrepreneurship and significant efforts need to be made

in order to mature the research field (Martin & Osberg, 2007).

This study will further explore one aspect of social entrepreneurship: the business model of

the WISE. This paper will be of academic relevance given the absence of existent research on

the business model of this particular business form. This research will contribute to the

understanding of the business model of the WISE. This thesis will combine literature from the

WISE and business models in order to get a theoretical framework. The main scope of this

thesis will lie in expanding the theoretical development of this field.

Whereas the WISE in other European countries is documented quite extensively it is still a

relatively unexplored area within the context of the Netherlands. Most research is focused on

the integration of disadvantaged low-skilled workers, whereas this research also includes the

integration of disadvantaged high-skilled workers. Furthermore this study will contribute on

the literature about the WISE by focusing on the entrepreneurial aspects of the WISE. So far

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most research focused mainly on the WISE from a macroeconomic perspective. Furthermore

this study will contribute to the field of business models. So far there has been a main focus

on business models with an emphasis on value capturing. There is hardly any research on

social business models (Santos, 2012). The delineation of the social business model found in

this study meets this shortcoming.

1.2 Social Relevance

There is no clear general understanding of the nature and characteristics of the WISE within

the Netherlands. Through case studies this thesis will contribute on what nascent WISE’s or

longer established WISE’s can learn from each other’s best practices. This approach is well

suited for this particular field of business given the fact that social entrepreneurs are more

willing to share their insights compared to ‘traditional’ entrepreneurs. Although there still is a

sense of competition, the overall goal is to create a large social impact. Social entrepreneurs

will be more willing to collaborate if this would increase the chances of a larger social impact

(Social Enterprise NL, 2014). The sharing of best practices causes social entrepreneurs to

become aware about their business models and enables them to improve deviating aspects of

their organisation. In the end, this research will contribute to the success factors of the WISE

in the Netherlands.

There are several countries in which the WISE is considered as a business form with great

societal and economical value (Spear and Bidet; 2005; Vidal, 2005; Nyssens, 2006). By

adapting the working environment to employees’ needs, one does not only contribute to the

quality of life but also to the overall labour productivity. The jobs that these companies create

thus bring improvements to the participants’ overall productivity. This translates itself into

lower government provided benefits, more income tax, and thus higher revenues for the

government. By conducting research on the WISE, this study explores the societal and

economical value that this organisation creates in the Netherlands. Furthermore this study will

give insight on the kind of support this enterprise needs and hence might help the sector of the

WISE to growth.

1.3 Thesis Structure

This thesis will be structured as follows: chapter two provides the theoretical framework

regarding social entrepreneurship, the WISE in particular, and the overall business model. A

chapter covering the methodological choices made in order to target the research question

follows upon this framework. Chapter four is dedicated to the presentation of the findings of

the case studies, which are consecutively discussed based on previously written literature in

chapter five. A section on the social and academic relevance complements this chapter

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together with a paragraph on the limitations of the study and suggestions for future research.

This thesis will end with a conclusion.

2. Literature Review

This chapter of the thesis describes what becomes the theoretical foundation of this study. To

answer the research question it is first important to define social entrepreneurship. A deeper

insight into the social enterprise is given by zooming in on one specific type of social

entrepreneurship: the WISE. This theoretical basis will end with a review on business models.

2.1 Social Entrepreneurship

This section of the paper will show why it is important to have a sharp definition of what

social entrepreneurship is. Amongst the discussed topics are the history of social

entrepreneurship, its definition, its distinguishing factor relative to commercial

entrepreneurship, and its different organisational types. The reason for the inclusion of these

subtopics is the fact that they are important contributors to the establishment of the term that

we now know as social entrepreneurship. Without a firm understanding of these themes it will

become difficult to get a decent understanding of what is truly meant by social

entrepreneurship. After the establishment of these topics one can identify the various forms of

social enterprises that come forth from these themes; these are the ones mentioned in

subparagraph 2.1.4.

2.1.1 History and background of social entrepreneurship

Social entrepreneurship is a phenomenon with a rich history dating back to a long time ago.

There have always been ventures that have been nursing the sick or feeding the poor (Kickul

& Lyons, 2012). However old it may be, it is since relatively short that scholars started

mentioning it by the term we now know it by: social entrepreneurship (Dees, 1998). The

attention for the concept of social entrepreneurship is currently growing rapidly. It is no more

than logical to assume that this increased scholarly attention is related to the practical

endeavours in the social field. Another effect of the increased scholar devotion is that the

body of terminology related to social enterprises becomes increasingly varied, making it hard

to state a definitive definition (Martin & Osberg, 2007). This versatility in terminology would

be beneficial in case all resulting efforts would get sufficient funding. This however is a

somewhat flawed assumption since resources are scarce and not every social effort gets what

it needs in order to succeed. If every non-entrepreneurial effort – however social it may be –

is mentioned under the name ‘social entrepreneurship’, than chances are that the term

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becomes vulnerable to erosion. It is important to keep the definition true to its roots in order

to ensure that social entrepreneurship lives up to its promises (Martin & Osberg, 2007). The

next section will strive to give the definition of social entrepreneurship as accurate as

possible.

2.1.2 Definition social entrepreneurship

Although authors do not agree on what social entrepreneurship exactly is this section will

strive to give the most complete image of what social entrepreneurship is. One of the oldest

definitions is the one from Dees (1998).

Dees (1998) describes social entrepreneurship on the basis of six elements. The first element

is ‘being a change agent in the social sector’ (Dees, 1998, p.4). Schumpeter (1934) describes

an entrepreneur as a reformer. A social entrepreneur is a reformer with the goal to make a

social change. A social entrepreneur strives to make systematic changes to the habitual ways

in which things are done in the social context. Instead of solving the symptoms, the goal is to

remediate the underlying causes of the problems (Dees, 1998). The second element is

‘adopting a mission to create and sustain social value’ (Dees, 1998, p.4). The social mission is

more important than making profit. Profit making must be seen as the means to reach the end

(Dees, 1998). The third element is ‘recognizing and persistently pursuing new opportunities’

(Dees, 1998, p.4). Social entrepreneurs think in solutions, rather than problems. They try to

recognize opportunities. The entrepreneur should be persistent in his or her idea and as long

as there is faith continue in the pursuit of the goal. Ideas sometimes evolve along the way as

better alternatives reveal themselves to the entrepreneur. Sometimes an idea will change as

the entrepreneur finds along the way what the best solution is (Dees, 1998). The fourth

element is ‘engaging in a process of continuous innovation, adaptation, and learning’ (Dees,

1989, p. 4). Innovativeness holds a very important position amongst these three sub-elements.

Schumpeter (1934) describes that innovation can embody the invention of something truly

new but also as a novel combination of pre-existing things. Not only is innovation crucial in

the structure of the organisation, it also holds a key position in the financing of operations.

Social entrepreneurs are often forced to look into innovative methods to get adequate funding

for their projects. Innovation should not be a one-time event but rather a continuous strive for

novel opportunities (Dees, 1998). The fifth element is ‘acting boldly without being limited by

resources currently in hand’ (Dees, 1998, p. 4). Social entrepreneurs are skilled at doing

‘more with less’ and excel at attracting resources, even if they occasionally do not possess the

normally important collateral. Although the previous characteristic suggests an abundance of

resources the opposite is usually true, hence social enterprises are very risk conscious about

the risks they are taking, carefully managing all the shortcomings in their projects (Dees,

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1998). The sixth element described by Dees is ‘exhibiting a heightened sense of

accountability to the constituencies served and for the outcomes created’ (Dees, 1998, p.5).

Social entrepreneurs often make a need assessment that ensures that they are creating social

value. It is important to ensure that you as an entrepreneur assess the needs of the people that

you are serving. Communication between stakeholders can therefore be an important part of

being a social entrepreneur. Last but not least the entrepreneur should make sure that the idea

is attractive for the investor, something that can be challenging given the fact that social goals

often do not prioritise financial returns (Dees, 1998).

Dees laid the foundation on the definition of social entrepreneurship. There is still no

consensus on whether social enterprises are solely there to provide in a social need and are

hence not-for-profit or whether they can have a profit driven structure with social needs as a

prominent factor. Like Kickul & Lyons (2012), this study presumes that an organisation, as

long as it remains true to its social mission, can take any business form it deems optimal; be it

for profit, not-for-profit, or hybrid (Kickul & Lyons, 2012).

This study will go with the theory on social entrepreneurship posed by Santos. Santos (2012)

argued that previous scholars have taken such a broad stance that it has almost become

impossible to decide on the boundaries of the field of social entrepreneurship. It is for this

reason that Santos (2012) established a well-defined theory that focuses on a specific field.

Social entrepreneurs are addressing neglected social problems leaving the environment with

positive returns, sometimes referred to as positive externalities. Whereas the traditional role

of the government is to target these social problems they tend to be short on resources to

target all of them. This is where the social entrepreneur enters the stage and fills in the blanks

left by the governments. Often the entrepreneur will put significant effort in influencing the

government in order to create an as beneficial entrepreneurial environment as possible by

altering legislation or providing monetary support. Furthermore Santos described that firms in

general need to make a trade-off between value creation and value capturing. Social

enterprises generally prefer value creation to value capturing. Social entrepreneurs are

primarily motivated by the value creation for the society. This theory also has its implications

for defining a social business model. Value creation is measured on a societal level whilst

value capturing is measured on an organisational level (Santos, 2012).

2.1.3 Comparison social and commercial entrepreneurship

To some extent social- and commercial-entrepreneurship are similar. Amongst the common

grounds are the recognition of opportunities, the need for innovation, the desire for control

and the necessity of network building capabilities (Dees, 1998). One important distinction

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regarding the value proposition can be made between social entrepreneurship and normal

businesses. A regular – commercial – entrepreneur hopes to create value for its customers and

create a financial profit, resulting in a personal financial gain for the entrepreneur and the

venture’s investors. In contrast, the social entrepreneur does not strive for a financial gain for

himself or his investors. The social mission is most important. However, this does not impede

a business from making a profit (Martin & Osberg, 2007).

When categorising both social and commercial entrepreneurship one will witness that both

types are not purely distinct, but rather there is a continuum ranging from predominantly

social to mostly commercial. However, even at the far end of the scale one shall see that there

remains some social value in purely commercial entrepreneurship and vice versa. Though

social entrepreneurship is primarily characterized by its social value there is a wide range of

activities that fall under this category (Austin, Stevenson & Wei-Skillern, 2006). Figure 1

shows the spectrum of social and financial returns. As one can see a social enterprise can

have a non-profit structure as well as a for-profit structure or a combination of both. The next

section will elaborate on this in depth.

Figure 1: Spectrum of social and financial returns. From: “Stanford Social Innovation Review”. By

Emerson, J. (2008).

2.1.4 Organisational types

A social enterprise can be scaled on a spectrum from a pure non-profit organisational

structure to a pure for-profit structure, with hybrids in the middle. This section will describe

the different organisational types: pure non-profits, pure profits and hybrids. This section will

end with an overview of the different types of social enterprises that exist.

Pure non-profits

Although it is named a non-profit organisation this does not mean that the organisation cannot

make any profit. It can make a profit, however this profit should be reinvested in the

organisation to contribute to its mission. The main advantage of a non-profit structure is that

there are numerous options for generating revenue. An organisation can make revenue by

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selling services or products, but is also allowed to have a philanthropic income. Philanthropic

funding can be both traditional and non-traditional. Examples of traditional funding are

individual donations and government grants. The disadvantage of the traditional funding is

that the grants are often short-term, whereas the social problems are long-term. Constantly

acquiring new types of funding is highly inefficient and consumes valuable time. Another

disadvantage is that those firms of whom philanthropic grants represent the main part of their

‘income’ become highly dependent on these funds. In case the funding stops their continuity

is threatened abruptly, making their revenue model particular unsustainable (Kickul & Lyons,

2012). Private market investments – through for example crowd funding – or long-term loans

by foundations are examples of non-traditional funding (Austin, Leonard, Stevenson, Wei-

Skillern, 2007).

Pure for-profits

Central to those social enterprises that follow a for-profit strategy is the principle of ‘doing

well whilst doing good’. Apart from the social mission they are very similar to regular

commercial ventures. Where non-profit social enterprises usually find less difficulty in

finding funding, for-profit ventures sometimes struggle simply because they miss out on most

of the philanthropic grants. Philanthropists are mostly interested in the social progress instead

of the possible financial gains. Meanwhile however, for-profit organisations – especially

privately owned ones – face a lot less scrutiny than their non-profit counterparts. They can

more easily protect their intellectual properties and – in case of a privately owned

organisation – do not necessarily need to disclose their books (Kickul & Lyons, 2012). Non-

profit firms on the other hand do often need to justify their operations towards their generous

supporters. Concluding, one can state that for-profit ventures have greater control over their

venture and the corresponding revenue streams. Herewith comes the advantage of having the

ability to keep a portion of the generated profits for themselves whilst at the same time being

able to solve a social problem (Kickul & Lyons, 2012). The disadvantage for a social

enterprise with a for-profit structure can be that is difficult to explain their social objective

when they are making a profit (Smit, De Graaf, Verweij & Brouwer, 2011).

Hybrids

Hybrids combine elements from the non-profit, for-profit and/or governmental organisations.

The social entrepreneurs that create such a structure are searching for more financial and legal

flexibility. An example of a hybrid organisation is a for-profit social venture that needs

additional funds on top of the cash flows generated by its day-to-day business. In that case it

can also create a non-profit subsidiary that can accept donations and grants that the for-profit

could not attract (Kickul & Lyons, 2012).

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Division of social enterprises

There are many different types of social enterprises, and different authors made different

subdivisions. This study applied the subdivision made by the European Commission. The

main types of social enterprises can be divided into: personal services, local development of

disadvantaged areas and work integration (European Commission, 2014). Personal services

can for example include services for elderly people and childcare. Local developments of

disadvantaged areas are for example social enterprises that are operating in areas where it is

difficult to operate like remote rural areas where community services are necessary. Work

integration includes the training and integration of disadvantaged, unemployed people

(European Commission, 2014). The next section will explain the WISE in depth.

2.2 The Work Integration Social Enterprise

The WISE is an organisation that helps people with a disadvantage (be it physical or mental)

to reintegrate into a job position. Typical for this type of organisation is its multitude of goals:

social, economic and socio-political ones (Nyssens, 2008). Whereas in some other European

countries the WISE is acknowledged and supported by the government, this sector is still

relatively small in the Netherlands (For an extensive review on the characteristics of the

WISE in other European countries see appendix E). This section will elaborate on the main

topics of this study. The majority of the literature originates from studies conducted by the

EMES network. This network conducted two studies: PERSE and ELEXIES1. Both projects

conducted research on the WISE throughout Europe. The Netherlands did not participate.

2.2.1 The employee

The WISE can employ different kinds of target groups. The two main categories are

handicapped people and able-bodied jobseekers with serious integration problems (Davister,

Defourny & Gregoire, 2004). The WISEs that work with handicapped people adapt the

working environment to these people when necessary. The group of able-bodied jobseekers

with serious integration problems consists out of people with for example social problems

caused by alcoholism or schizophrenia. Others might belong to this group because they have

lacked adequate education due to early school dropout (Davister et al., 2004). Although the

former group is dominant there also is a group of highly educated members of the target

1

PERSE = "The Socio-Economic Performance of Social Enterprises in the Field of

Integration by Work". Researchers from eleven European countries participated in this project

that is coordinated by Marthe Nyssens.

ELEXIES = "L'entreprise sociale: lutte contre l'exclusion par l insertion conomi ue et

sociale". Researchers from twelve countries participated in this project that is coordinated by

Eric Bidet and Roger Spear

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group. Although this subgroup usually has less trouble in finding a suitable workspace there

are still situations in which finding suitable employment becomes a serious challenge (e.g. a

person struggling with severe autism). An organisation can decide to work with only one

target group of people or with a mix of various target groups. Some scholars argue that

focussing on one target group is the main factor for success (e.g. the VSBfonds & Start

Foundation, 2013). The reasoning behind this is that one can build knowledge about this

target group and focus on the remaining talent that resides within this group of people.

Smit, Van Genabeek and Klerkx (2008) found that entrepreneurs within the Netherlands

usually do not consciously mix people from the target group with regular employees. Dutch

WISEs look more like sheltered workshops, but with the major difference that those

organisations are usually run privately without governmental support. According to Smit et al.

(2008) mixing both groups of employees could have a positive effect on the reintegration of

disadvantaged people. In other countries this already resulted in positive outcomes. Mixing

both groups can increase the chance that an organisation becomes a financially healthy

company. Furthermore it can increase the chance that the disadvantaged groups integrate into

a ‘regular’ working environment (Smit et al., 2008).

The EMES network divides the different forms of WISEs into four main modes of

integration. The four modes are: transitional occupation, creation of permanent self-financed

jobs, professional integration with permanent subsidies and socialisation through a productive

activity (Davister et al., 2004). Transitional occupation occurs when the focus is on training

disadvantaged people in a temporary job with the aim to help them getting a regular job.

WISEs that create permanent self-financed jobs have the aim to create jobs that, in the

medium term, create self-sufficient jobs that provide disadvantaged people an income

independent from government support. People who have no chance of making it on the labour

market are met by stable places that are permanently subsidised by the government. These

places include locations that are ‘sheltered’ from the competitive environment in which they

are located. Among the target group are people who suffer from physical disabilities as well

as severe ‘social handicaps’. Socialisation through productive activities is not aimed at

reintegration in the labour market, but rather aims at the (re)socialisation of the target group

by means of social contact, acceptance of rules, and structured lifestyles. These activities are

semi-formal given they are not bound by legal or labour contracts (Davister et al., 2004).

There are two types of training recognized in the literature: ‘on-the-job training’ and

‘structured’ professional training. On-the-job-training is a short training aiming at assisting an

employee in getting to understand the basics of his task and to develop the skills necessary to

perform this particular job. The aim of structured professional training is to improve the

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competencies of the employee, herewith easing the employability on the labour market

(Davister et al., 2004).

2.2.2 Stakeholders

The presence of a variety of stakeholders forms the foundation of a multidimensional network

in which the sharing of social capital holds a central position (Nyssens, 2008). Previous

research has shown that this multitude of stakeholders is crucial for WISEs to achieve their

often complex social objectives. Related to this is the reliance on a diversity of resources that

originate from these stakeholders. Having a network composed of stakeholders from different

origins (e.g. private sector, public sector) or types of allocations (e.g. subsidies coming from

public domains, gifts, or volunteers) appears to be a crucial element for WISEs to succeed in

their objectives. Managing these different stakeholders and the resulting ambidextrous way of

operating is one of the characteristics that set the social entrepreneur apart from its purely

commercial counterparts (Nyssens, 2008). Alongside the necessary cooperation, transparency

also holds a crucial position. The organisation should be transparent in its actions as well as

open about the profit and loss statement. This can help an organisation to gain confidence

from the stakeholders; such as collaborators and financiers (Díaz-Foncea & Marcuello, 2012).

This section underlines the importance of the relationship with the various stakeholders.

Within the Netherlands social entrepreneurs often describe the relationship with the

government and other institutions as a laborious relationship (Smit, De Graaf, Verweij &

Brouwer, 2011).

2.2.3 Revenue Model

In contrast to normal businesses the WISE does not necessarily earn its financial ‘income’

only through its commercial activities, but rather through a more complex mix of diverse

financial ‘income-streams’ (Gardin, 2006). Both market and non-market resources are used to

achieve economic sustainability. It can be seen as a mix between the market, public

redistribution and reciprocity. Public redistribution consists of both direct and indirect

subsidies. Reciprocity represents the resources that WISEs get from for example volunteers.

The mix of market and non-market resources obviously depends on the nature of the handicap

of the employees at stake. Enterprises that integrate highly disadvantaged workers will most

likely need more non-market resources (Defourny & Nyssens, 2010). Managing the diverse

sources of funding can be challenging. It is more complex given that each source of funding

has different requirements and time horizons (Spear and Bidet, 2005).

16

Some WISEs are thus partly dependent on the government and the implementation through

institutions. The laws and regulations with respect to reintegration and social security are

changing regularly. This represents a challenge for the entrepreneur because regulation has

implications for the revenue model as well. The entrepreneur is sometimes partly dependent

on revenues from for example the reintegration trajectories or wage subsidies. The

government in the Netherlands is therefore sometimes seen as an unreliable partner (Smit et

al., 2011). Subsidization cuts can lead to problems for many social enterprises. It is a key

support for their activities that might lead to the diminishment of existence (Hara &

Shaughnessy, 2004). It challenges the organisation even more to balance commercial and

social organisations (Cooney, 2011). WISEs have the possibility to overcome this threat by

diversifying their activities in order to acquire additional revenue streams that should be able

to offset the decline of subsidies (Hara & Shaughnessy, 2004). There are two possible

options: 1) diversifying the products and services within one single business venture and 2)

establishing a multitude of ventures (Cooney, 2011). Social enterprises can for example

diversify the products and services in both retail as well as wholesale markets (Cooney,

2011). An example is a baker that next to the bakery also runs a restaurant and café. The

advantage of this is that when one of the elements within the organisations is not successful,

its losses are offset by the remaining profitable elements without losing sight of the social

needs. Establishing multiple ventures is the other option (Cooney, 2011). This is not always

an option given that it depends on the firm’s size and nature. When an organisation

establishes multiple ventures the management attention and coordination costs are usually

increasing. However, these costs can largely be offset following the same logic as the

previous example of diversification. Having multiple ventures increases the chances to hedge

costs and earnings to sustain cost parity and protect the highly esteemed social values

(Cooney, 2011).

Additional costs

WISEs do in general have more and higher costs to let the target group work according to

their abilities. According to earlier research the substantial additional costs that the

entrepreneur has do mainly derive from the personnel costs, the housing costs, and the

depreciation costs. Table 1 gives an overview of these additional costs.

17

Additional costs

Personnel costs 1) Costs due to lower productivity of employees

2) Costs for additional guidance

3) Other staff related costs

Housing costs 1) Extra space in order to have for example supporting conversations with

the target group

2) Building modifications

3) Additional square feet per employee available

Investment costs 1) Depreciation costs

2) Additional expenditure on adaptations of equipment

Table 1: Overview of additional costs. From: “Sociale ondernemingen en werknemers met een

arbeidsbeperking”. By Smit, A., De Graaf, B., Verweij, E., & Brouwer, P. (2011). TNO-Report.

These costs are generally not fully covered by the Dutch government. In some cases

organisations like the Dutch UWV intervene to cover for the additional expenses. This

however costs a lot of lobbying work and is generally not easily achieved (Smit et al., 2011).

2.3 Business models

This section of the paper will underline the importance of understanding the business model.

Next to that it will define the traditional business model and the elements that it is composed

of. The section will end with describing the ‘new’ social business model and its

corresponding characteristics.

2.3.1 Importance of business models

Over the last couple of years the interest in business models is increasing. Thanks to the

internet boom the term business model has become some sort of a buzz, making its

appearance in an increasing amount of literature (Magretta, 2002). Consequently, people use

the concept of business models in different ways and have a different understanding of what it

exactly is. There is no consensus on which elements the model is composed of (Shafer, Smith

& Linder, 2005). The concept is investigated from different academic disciplines (Pateli &

Giaglis, 2003). Some academic researchers attempted to combine literature on business

models and categorized the elements of business models that there are observed most often

(For e.g. Osterwalder, Pigneur & Tucci., 2005 and Shafer et al., 2005). These endeavours are

not only a sign of the popularity and relevance of the subject manner, they also bring

progression towards a situation in which there is widespread consensus.

The indistinctness about the business models has lead to misuse of the model. This is

unfortunate, given that a well-configured business model is essential for every organisation,

be it a nascent or established one. In order to use it in the correct way managers need to have

18

a clear understanding of its implications (Magretta, 2002). Osterwalder et al. (2005) have

numerous reasons for getting insight in the business model of an organisation. One can

compare one’s own business model – or parts of it – with other competitors once one has a

clear understanding of it. An organisation can learn from other business models. An

organisation can learn from comparing other organisations in the same industry, but also from

comparisons across industries. A different industry can give new insights and eventually lead

to business innovation. Apart from the competitive reasons there is also important internal use

for the consciousness of one’s business model (Osterwalder et al., 2005). One important

argument is for example the fact that a business model is hard to manage in case one is not

fully conscious of it. Increased consciousness not only helps in managing but also proves

beneficial for making important adaptations to it. The insights from the business model can

for example be useful for the implementation of the business model. An organisation is easier

to manage once the underlying logic behind it is clear. These changes might be essential in

case quick alterations are necessary due to revolutions in the competitive landscape

(Osterwalder et al., 2005).

2.3.2 Traditional business models

Definition

As earlier described, the business model can help an organisation to become successful when

implemented correctly. This section will in more detail describe what the business model is

and of what elements it is composed of. The most important aspect of a business model is

how the organisation creates value and captures financial return from that value (Shafer,

Smith & Linder, 2005). A business model is composed of various sub elements that taken

together resemble a closely aligned system (Magretta, 2002). The following definition

describes the business model:

“A business model is a conceptual tool containing a set of objects, concepts and their

relationships with the objective to express the business logic of a specific firm. Therefore we

must consider which concepts and relationships allow a simplified description and

representation of what value is provided to customers, how this is done and with which

financial consequences”(Osterwalder et al., 2005: p.3).

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Elements

Most researchers agree on the fact that, taken together, all elements create and deliver value

to the customer (e.g. Johnson et al., 2008). This however is broadly defined. Shafer et al.

(2005) compared different articles and found in total 42 different business model elements.

These elements are categorized into four separate groups. The groups that were found are:

‘strategic choices’, ‘value network’, ‘capture value’, and ‘create value’ (Shafer et al., 2005:

see Figure 2).

Figure 2: Elements of the business model. From: “The power of business models”. By Shafer, S.

Smith, H., Linder, J. (2005). Business Horizons 48 (3).

Every business needs to create and capture value. According to Shafer et al. (2005) creating

value is powered through firm specific resources and processes. The key resources for

example consist of people, technology and the facilities (Johnson et al., 2008). Amongst the

key processes are planning, budgeting, sales, service, training and development. Furthermore

they also include the company’s rules, metrics and norms (Johnson et al., 2008). Equally

important as the creation of value, is the capturing of value. The process of creating value is

captured by a firm’s revenue model. Value creation and value capturing occurs not in a

vacuum, but in a value network. Besides the creation and capturing of value an organisation is

involved in many strategic choices. This includes for example the differentiation and

branding of the product or service. From an academic perspective, Shafer et al. (2005) gave a

good overview of the elements that the business model is composed of. A more hands-on,

practical tool that managers can use is the business model canvas that was first introduced by

Osterwalder. The business model canvas is a graphical tool describing nine elements, each

representing essential business elements. The model is widely used throughout the world

(Greenwald, 2012).

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2.3.3 Change towards new social business models

The body of existing literature on business models of social enterprises is limited. Only a few

scholars have attempted to contribute to this research subject by for example defining the

elements of the social business model (e.g. Yunus et al., 2010). This section of the theoretical

framework attempts to summarize the research with regard to this subject so far. Jonker, Tap

& Van Straaten (2012) described the important elements that differentiate a sustainable

business model from a traditional business model. Although these scholars described a new

business model that should hold for any type of organisation, it gives a good picture of what a

business model of a social enterprise could look like.

Creating social value and the importance of partners

The ‘new’ business model differentiates itself from the ‘traditional’ business model by

creating social impact (Jonker et al., 2012). Whilst traditional models’ main focus is to create

value in the form of money, the ‘new’ business models’ goals are multidimensional.

Jonker et al. (2012) describes that it is not just the internal organisation that matters, but also

the external value network of business partners and contributors. An organisation should

focus on all-inclusive models where they also incorporate processes and elements coming

from the external environment. The firm should not only focus itself on internal affairs but

rather opens itself up for a more collaborative stance (Chesbrough, 2003). It is important to

make connections between different parties, such as the government, large commercial

organisations and neighbourhood initiatives (Jonker et al., 2012). What makes this

collaboration so important is the sharing of crucial information and knowledge across the

entire network. Consequently it is transparency that holds a crucial position amongst the core

values found in this ‘new’ business model (Jonker et al., 2012). The process of collaboration

is very complex and can only be learnt through experience. Whereas top-down

communication lines were previously seen as the easiest and effective methods, they no

longer suffice in a model in which partnerships play a central role. The clear disadvantage of

top-down communication is the lack of receptiveness towards valuable suggestions. It is these

suggestions that make it so crucial to put the partnerships in a key position. In order to make

these partnerships beneficial an organisation must first ensure that it is internally ready to

cooperate. Internal departments must open up and be willing to cooperate with external

parties. It is remarkable how those new business models differentiate themselves from

traditional business models with respect to the way stakeholders are treated (Miles, Miles,

Snow, 2006). Within the new business models stakeholders are often treated equally, and the

organisations are dependent on each other (Jonker et al., 2012; Miles et al., 2006). A ‘sense of

21

companionship’ between the different parties is therefore of significant importance (Jonker,

2012)

Related to this is the argument by Jonker et al. (2012) in which he states that social businesses

should value the access to important assets as more valuable than the actual possession of

them. A prerequisite of this principle is that the relationships one builds are of long lasting

nature. If this prerequisite cannot be met it is hard to rely on the mere access to these assets.

The preceding arguments stand in stark contrast to what traditional scholars stated. These

scholars, when referring to the traditional business models, emphasize the importance of the

internal organisation when composing a ‘traditional’ business model and herewith largely

forego the opportunities that are hidden in collaboration.

Furthermore Jonker et al. (2012) indicate that financial sustainability is part of the ‘new’

business models. Continuity is a very important part of the business model (Jonker et al.,

2012). Whereas profit driven firms tend to stress short-term profitability, social firms seem to

be focussed on the realization of long-term sustainability.

Social profit equation

Yunus, Moingeon, Lehmann-Ortega (2010) characterize a traditional business model on the

basis of three elements: the economic profit equation, the value proposition and the value

constellation. According to Yunus et al. (2010) a business model of social enterprise is

different from a traditional business model with respect to three particular points (See figure

3). First – as Jonker et al. (2012) also mention – rather than focusing only on the customer in

the value proposition, it is important to include all the stakeholders in the value proposition.

Second, the social profit equation makes also part of the business model. Thirdly, they state

that the economic profit equation only needs to recover the cost and the capital. According to

them financial profit maximisation is not the main target.

22

Figure 3: The four components of a social business model. From: “Building Social Business

Models: Lessons from the Grameen Experience”. By Yunus, Moingeon, Lehmann-Ortega

(2010). Longe Range Planning, 43.

A firm’s business model is often dependent on the social mission (Woolley, Bruno &

Carlsson, 2013). Woolley et al. (2013) examined a database of 124 social ventures. They

found that for example a firm concentrating on fighting against poverty has a different

business model than a firm of which mission it is to strive for women’s e uality (Woolley et

al., 2013).

2.4 Concluding section

This concluding section is based upon the combined literature from the field of social

entrepreneurship, the WISE and business models that define the elements of the social

business model used by this study. The main findings of the theoretical framework are

summarised in table 2.

Traditional Business Model Social Business model

Value creation mainly for customer Value creation for customers and society

Capturing value is the predominant focus Capturing value of importance, but rather a

means to an end.

Value network (Top-down) All-inclusive network

Table 2: Comparison of traditional and social business models. Based on the literature review in

chapter 2.

This study will focus on the four traditional elements of a business model as mentioned

earlier by Shafer et al. (2005). These elements are creating value, capturing value, strategic

choices and the value network. This study assumes that the social business model elements do

not significantly differ from a traditional business model, it is rather the practical application

of the elements that differ. When comparing Shafer et al.’s traditional business model with a

business model of a social enterprise, the main difference lies in the creation of value. When

going back to Santos’ (2012) theory of social entrepreneurship he describes value creation for

23

the society as the prime motivation for a social entrepreneur. Correspondingly this should be

one of the essential elements of a social entrepreneurship’s business model. The blade cuts on

two sides when focussing on the WISE business model. The WISE creates societal value by

providing employment possibilities for disadvantaged people whilst at the same time creating

customer value.

There are reasons to believe that the revenue model of a social business significantly differs

from a regular business. Being a financially healthy company is necessary to become

sustainable, yet it is not the sole purpose of the firm. As also mentioned before, a WISE can

get its financial income not only from the market but also from – for example – subsidies and

donations (Gardin, 2006). Also it is not just important to focus on the value network as

described by Shafer et al. (2005), but also in particular on the all-inclusive model in which the

partners play an important role and are equally treated (Jonker et al., 2012). Figure 4 shows

the model that this study will go with.

Figure 4: Components of a social business model. Based on Shafer et al. (2005), Santos (2012) &

Jonker et al. (2012).

3. Methodology

The aim of this research was to find exploratory insights on the business model of the WISE.

The first section of this chapter will describe the research philosophy and design. The second

section describes the case studies, followed by the data collection. Afterwards the semi-

structured interviews and archival data are discussed. The fourth section explains the role of

the experts and discussion group. Subsequently the data analysis will be discussed and this

section will end with the validity and methodological limitations of this research approach.

24

3.1 Research philosophy and design

The epistemological stance that is taken during this research is ‘transactional and subjectivist’

of nature (Guba & Lincoln, 1994). Given that this field of knowledge is presently

underdeveloped, the general aim of this research is to delineate the business model of the

‘WISE’. The insights in this business model will become richer in detail along the way (Guba

& Lincoln, 1994). Each WISE may be based on different perceptions and therefore it is

important to gather multiple perspectives from various social entrepreneurs.

Given the nascent state of the literature, a qualitative research approach fits best (Edmonson

& McManus, 2007). The research focuses on orientation and is explorative of nature as it is

discovering this novel topic. Eventually, the outcome of this research will be the basis for

new theoretical development. Interviews with experts and case studies are chosen as the

method to facilitate the study.

3.2 Case studies

Case studies are the best suitable approach given the qualitative methodological fit. First, case

studies are particularly helpful when answering ‘what’, ‘how’ or ‘why’ uestions (Baxter &

Jack, 2008). This study answers the uestion: ‘what does the business model of the WISE

look like?’ Second, case studies are suitable for exploratory research. Ten organisations have

been selected for theoretical purposes. The number of organisations is limited to ten due to

the limited time span of this study. It is therefore of utmost importance that a meaningful

selection is made (Eisenhardt, 1989). As mentioned by Pettigrew (1988) in Eisenhardt (1989):

“it makes sense to choose cases such as extreme situations and polar types in which the

process of interest is transparently observable” (p. 537)

The cases are chosen on two criteria: 1) the difficulty of the work and 2) the size of the

company. The difficulty of the work is categorised as low-skilled work or high-skilled work.

The reason for choosing the difficulty of work as distinctive factor is that there are reasons to

assume that participants with a low education need a different kind of accompaniment in their

tasks; something that might ask for a specific business model. It is reasonable to assume that

an organisation working with high-skilled employees aims at a different market segment and

correspondingly has different models for its costs and revenue’s; all variables that have a

significant influence of an organisation’s business model. The second distinctive factor is

company size. This study applies a distinction between ‘small’ and ‘large’ firms with a

boundary set at 25 employees that work for at least 32 hours weekly. The reason for choosing

the firm size as a distinctive factor is that there is reason to assume that the business models

of small and large organisations are significantly different from each other. The more diverse

25

product offerings that are usually accompanying large organisations have their effect on the

overall complexity of these larger firms, making their business models distinctively different

from smaller firms. Figure 5 visualizes the four resulting quadrants that will represent the

cases in this study. However, although each case is classified in one of the quadrants the

subdivision is still open for interpretation. For example, some firms work with a large

majority of low-skilled, disadvantaged workers and a smaller group of employees that is high-

skilled and disadvantaged. In this case this firm would be classified under the quadrants with

low-skilled employees. The next section further elaborates on the participants of the study.

Figure 5: Framework displaying the quadrants.

3.3. Data collection

The organisations are selected from the network of the foundation ‘Social Enterprise NL’.

This is a national platform in the Netherlands that represents, connects, and supports social

enterprises. Their network proved itself helpful in finding representative interviewees. In

March 2014 the network consisted of 170 social enterprises spread over 17 sectors. The

advantage of making use of their network is that most social entrepreneurs that are in this

network are eager to participate and contribute to the field of social entrepreneurship in itself.

Some of them hope to improve the impact that they have and are therefore willing to

collaborate and share their best practices. However, a disadvantage of selecting the sample

from the ‘Social Enterprise NL’ network is that they might be susceptible to groupthink.

So far there are only a few organisations in the Netherlands that focus on the employment of

high-skilled people that are vulnerable to the labour market. Therefore it was difficult finding

more than one organisation for both quadrants belonging to the group with high-skilled

employees. Searches outside the network of Social Enterprise NL did not result in any

additional participants. It is for this reason that the quadrant of WISE’s working with high-

skilled employees is limited in size. Despite its limited size there is still sufficient reason to

26

study this group given the indications that its result might be deviant from the rest of the

quadrants, making the group academically and socially relevant. Table 2 summarizes the core

characteristics of the sample population. See for more information about the participants’

appendix B.

Organisation Difficulty of work Number of employees (+/-) Product / Service

AutiTalent High-skilled - 30 collective agreements Digitalization and

administration

Swink High-skilled - 10 collective agreements Web services

Biga groep Low-skilled - 50 collective agreements

- 450 SW-indication

- 100 seconded (WSW)

- 100 trajectories

Several services:

Including

packaging and

cleaning services

Emma Safetyshoes Low-skilled - 100 SW-indication

- 20 collective agreements

Safety shoes

Balanz Facilitair Low-skilled - 600 SW-indication

- 250 collective

agreements

Facility Services

Kringloopwinkel

Opnieuw & Co

Low-skilled - 50 collective agreements

- 30 via WSW

- 60 seconded (WSW)

- 100 trajectories

- 50 volunteers

- 50 other

Thrift shop

Van Hulley Low-skilled - 13 trajectories

- 1 collective agreement

Underwear

De Prael Low-skilled - 28 collective agreements

- 104 volunteers

(Day care activities)

Brewer/

Gastronomy/retail

Driekant Low-skilled - 18 collective agreements

- 25 trajectories

Bakery with

lunchroom

Buurtwinkel

Bredeweg

Low-skilled - 10 collective agreements

- 35 trajectories

Supermarket with

lunchroom

Table 2: Core characteristics of sample population

3.4 Semi-structured interviews and archival data

Semi-structured interviews stand at the basis of this study. According to the semi-structured

approach the interviews were structured around a predetermined set of questions (see

appendix A) but allowed for possible elaboration – from both interviewee and interviewer –

where necessary. The interviews lasted anywhere between 80 minutes and two hours. The

interviews were conducted in Dutch. The interview questions were subdivided into the four

main topics of this study: the employees, the product of service, the stakeholders and the

revenue model.

27

The interviews are supplemented with archival data such as newspapers, internet websites,

financial plans and business plans. The advantage of using multiple data sources is that a

certain topic can be explored from multiple perspectives (Baxter & Jack, 2008).

3.5 Experts and expert panel

Various specialists were consulted for getting deeper insights in the business models of the

WISE. Aukje Smit is one of the experts, and discussed the interview questions. She has been

a researcher for TNO in the Netherlands since 1995, and she is currently specialising in the

inclusive labour market. She wrote several publications for the TNO about the WISE.

Furthermore she actively cooperates with the Start Foundation for whom she developed an

instrument to determine the extent to which a company contributes to the employment of

people with fragile position on the labour market.

The results of this study were discussed during a four-hour during discussion group. Eight

experts and four entrepreneurs of the participating organisations of this study were available

to give their advice and opinions (See appendix C for a complete list of the participants).

Together more insights were gained in the key topics of this study.

3.6 Analysis and coding

The ten interviews were transcribed and subsequently analysed. After the first two interviews

were conducted the transcripts were analysed to check whether the respondents interpreted

the questions correctly. After each interview the most important findings were summarised to

get familiarised with the data at an early stage.

Based on these findings and after the re-reading of the interview transcripts the most

important and reoccurring topics were coded. Literature related to the topics has been used to

categorise the codes, which consequently led to a higher level of abstraction. This resulted in

a total of 31 codes that were divided in the four main pillars of this study: the employee, the

product/service, the stakeholders and the revenue model (See appendix D for codebook). The

codes combined with the quotes were systemically organized in a word file. The codes have

afterwards been systematically organised amongst the four quadrants that are visualised in

figure 4 (Small organisation and low-skilled work; small organisation and high-skilled work;

large organisation and low-skilled work; large organisation and high-skilled work). The

results have been analysed to find similarities and contradictions between each quadrant. The

coding is done by the author herself, which could have resulted in biased findings (Guba &

Lincoln, 1985).

28

3.7 Validity and methodological limitations

Internal validity can be improved by having a preliminary analysis of the first interviews to

see if they contain answers to the research (Guba & Lincoln, 1985). In order to ensure that the

respondents agree with the initial concepts it is important to guarantee the interpretive validity

(Guba & Lincoln, 1985). The results have been reflected to the different interviewees. The

findings can be confirmed and explored from multiple perspectives by triangulating the

different data sources (Baxter & Jack, 2008).

The generalizability of the findings might be limited due to the relatively small sample size.

Although the small sample size potentially impedes large-scale generalization, it does suffice

in making a first exploration of a novel research area. In case this research finds sufficient

indications that WISE’s indeed have divergent business models, there is justification for

follow-up research including a more elaborate sample. Another sample related issue is the

fact that this particular sample limits itself to the Netherlands. Consequential the

generalizability across countries is limited. However limited the sample may be, there is

chosen for a wide variety of size, sector, age, and employees. This wide variety helps the

reader in deciding whether the results are transferable to other contexts (Guba & Lincoln,

1985). This creates a sense of variation to the theoretical body (Eisenhardt, 1989).

4. Findings

The following section will present the qualitative findings that came forth from the analysis of

the case studies. The findings have been structured into four paragraphs; each paragraph

represents an element of the previously visualized business model (fig. 5). Each paragraph

gives a representation of the topics that have proven to be important during the analysis of the

interviews and the archival data of the participating organisations. Also special attention has

been given to the existing differences between large and small firms all across the various

subjects. Furthermore the differences between the firms that focus on low-skilled work and

the firms that focus on high-skilled work will also be presented whenever applicable. The

structure of this chapter is visualised in table 3.

29

Table 3: Structure of the results section

4.1 Creating Value

This section will describe the elements that are most important for creating value for both the

organisation and the society. Based on the experiences that were gained during this study it

seems that the most important resources of the WISE are the employees and the

corresponding adjusted firm processes. This section will – among other topics – present the

selection of employees, the target group, the percentage of disadvantaged employees in the

organisation, the risk of working with this target group, motivation, turnover and reintegration

trajectories.

Selection of employees

In contrast to regular organisations where employees usually apply for a job position, the

employees with a distance to the labour market usually find a job through different

institutions such as municipalities and social services. The institutions act as intermediaries

that provide the WISE with the people for which they are aiming. Particularly large

organisations with low-skilled workers are in principle willing to accept every individual

provided that there is capacity and that the individual has the ability to add productive

capacity. Occasionally these organisations search for a specific person for a job such as

drivers or administrative workers. Companies such as Balanz Facilitair, Emma Safetyshoes

and Opnieuw & Co cannot work with people with a severe disadvantage. Whereas the former

examples look for productive output, companies such as the Biga groep also offer sheltered

workplaces with the sole purpose of providing people with day care. There is an upper

boundary on the level of incapacitation of the people who can be included in programs other

than the ones offered by sheltered workplaces. Most employees get first a temporary position

in which all possible combinations are tried to make sure the person can find a place in the

organisation. Although the procedures are aiming to provide everyone with a suitable position

this is not always possible.

Two of the smaller organisations with low-skilled workers basically accepted every employee

as long as there was capacity in e.g. re-integration trajectories, a permanent job or day care

4.1 • Creating Value

4.2 • Strategic Choices

4.3

• Value Network

4.4 • Capturing Value

30

activities. Two of the other small organisations mainly accepted people with a realistic chance

to re-integrate in another job after their designated programs have finished.

Other firms such as Swink and AutiTalent work with a different group of people that

distinguish themselves by their relatively high intelligence compared to the group of low-

skilled workers described earlier. Often these people have a severe lack of social skills that

precludes them from society and often has proved to be a high burden on acquiring much

needed diplomas. Whereas this lack of social skills excluded these people from getting

regular jobs they are still able to work at firms such as Swink and AutiTalent; firms that focus

on real skills and capabilities rather than on diplomas or certificates. The work that Swink and

AutiTalent perform is more specialised and precise. In these organisations work comes first;

they do not like to be referred to as charitable institutions. One other distinctive factor is the

fact that these organisations do not always approach their corresponding target groups

through intermediaries but rather hire them directly through internal recruitment processes.

The next section will discuss in depth why some organisations decide to work with one target

group, whilst others decide to target an entire range of people to work with.

Target group

Previous literature (e.g. report VSBfonds & Start Foundation) stated that the success of the

social entrepreneur partly depends on the target group of people that they work with.

According to them, focussing on one target group can be one of the main factors for success.

Whereas ‘AutiTalent’ is working with people within the spectrum of autism and ‘De Prael’

with people with a psychiatric background, the other organisations from the sample work with

mixed target groups. There are various arguments in favour and against working with one

target group mentioned during the interviews. One of the advantages of focussing on one

single kind of handicap is the fact that you can optimally use the special talent of this target

group. In some cases this talent proves to be of exceptional level, despite the severity of the

handicap. One of the examples for this situation is the group of people that have autism (or

more specifically the syndrome of Asperger). Although they suffer from a severe lack of

social skills they have the ability to perform certain tasks with an extreme level of accuracy.

In these cases the handicap proves to be a relative blessing rather than a curse. This is the

kind of handicap that is utilized by firms such as AutiTalent. Eric Tonn from the ‘Buurtmarkt

Breedeweg’ in Groesbeek describes the main disadvantage of focusing on one target group as

follows:

“Although firms focussing on one particular handicap have the ability to become

economically successful they have the tendency to bundle personnel with all the same talents

but also deficiencies. It is these deficiencies that require large groups of very expensive

31

supervisors. Moreover, organisations like these eventually resort to the confine these

handicapped people to stick together, hereby leaving a lot of potential for improvement

unused” (Tonn, 2014)

From this statement one can learn that having a specific target group is not always beneficial.

In most cases the contrary is true and one can witness complimentary effects in groups of

employees that suffer from different handicaps. One of the exemplary firms for this finding is

‘Emma Safetyshoes’ where various groups of people are combined. There are people working

with mental disabilities (who are sometimes demotivated to work), but also people having

physical handicaps (who are often highly motivated to work). Resulting is a situation where

the highly motivated employees compliment the others with the result of a harmoniously

functioning labour pool. By having a mix of people with a mental handicap such as severe

depression and people with a physical handicap such as a hernia, one can achieve synergies

that would otherwise not be possible.

Percentage of people with a distance to the labour market

When considering the optimal mix of employees, scholars (e.g. Smit et al., 2008)

recommended a mix of people with and without a distance to the labour market in which there

is not a large majority of disadvantaged employees. In the Netherlands one often finds that the

majority of employees in the WISE is disadvantaged (Smit et al., 2008); this also holds true

for the sample at stake. The sample population’s ration has grown into its current position

mostly out of financial considerations. Some people in the sample argue that in case money

would not be an issue, it would be better to have a higher proportion of supervisors in order to

assist the personal development of the disadvantaged people. However, this ideal is often

struck by financial burdens, which are too high to take for regular WISEs. Apart from the

financial limitations firms run into other limitations, as explained in the following quote from

Balanz Facilitair:

“We took the following position as a starting point for our venture: you start out with 100%

disadvantaged people and you just keep adding regular people to create a workable working

environment for those who are disadvantaged. We have seen that this process should stop at

around 70/30 [disadvantaged/regular]. If you exceed this ratio by adding even more regular

employees you eventually have to change your business model in order to remain competitive.

This will become troublesome because your internal processes will be insufficiently suitable

to have even a small number of disadvantaged employees. You basically have to become an

ordinary facility service provider, making it impossible to run your firm with the social

missions it once had” (Cortenraad, 2014)

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Another reason for WISEs to have a predominantly disadvantaged labour force is the fact that

regular workers are often more expensive to employ than people with a distance to the

market. Exemplary for this is the Biga group. They formerly were a sheltered workplace that

was unable to write black ink. Later on this sheltered workplace became an independent

corporate entity and increased the disadvantaged/regular-ratio from ‘7-to-1’ to ’12-to-1’.

Apart from positive economic effects it also had its impact on the sense of empowerment of

the disadvantaged employee. This – according to customer satisfaction surveys – led in return

to a higher motivation of the workforce. Despite the positive effects of increasing the

disadvantaged/normal-ratio it should not be forgotten that regular foremen are still much

needed in order to safeguard the guidance of those who are disadvantaged and the continuity

of the overall work quality (Biga Social Report, 2012). Next to this, normally capable

foremen have an efficiency increasing effect on the overall workforce. A remark to this

finding is that the organisations that argue in favour of a high percentage of disadvantaged

workers perform low-skilled labour. Exemplary would be the labour performed behind a

typical assembly line. Firms who expect more complex labour from their employees also need

a higher number of supervisors to safeguard the overall quality.

Not everyone is as determined that a WISE needs a predominantly disadvantaged labour pool.

Smit warns for the side effect of getting a non-commercial working culture (Smit, 2014). This

‘social working culture’ contrasts a commercial one where people perform to their highest

possibilities at maximum efficiency. In a social working culture there is a common notion that

everything can be taken ‘easy’, jeopardizing the initial goal of creating value. Additionally

organisations that do more complex work do automatically need more supervision.

The risk of working with disadvantaged workers

One of the most commonly thought of risks for working with this particular group of people

is the risk of having excessive absenteeism. Although logical this does not necessarily have to

be true, as is explained by Henk Smit:

“It is a well grounded prejudice that ones who are working with this group of employees will

be faced with high absenteeism. This is only true if you place these employees on unwished

positions. These people stay home because they do not feel at ease with their job. This is not

on account of the employees but rather on the employers who are not adjusting the work to

their ‘special’ employees’ needs.” (Smit, 2014)

Adjusting the work to the employee is thus one method of decreasing the level of

absenteeism. Moreover, it is beneficial to do everything in ones power to decrease the overall

level of stress. Emma Safety Shoes did just this by replacing the regular assembly line with a

33

system with small carts. These carts can hold 10 finished products before they move to the

next station. Not only has this implementation led to a decreased stress level and

correspondingly a lower level of absenteeism, it also directly led to a 20% jump in output.

Another – and even simpler solution for stress reduction – is Swink’s and AutiTalent’s

allowance for flexible working hours. Herewith they give freedom to their employees making

them more empowered and less stressed out. Although these examples both show promising

results they are no bulletproof solution for every target group. Whether or not stress reduction

and workplace adjustment are successful still largely depends on the specific type of target

group one is working with.

Whereas flexibility is a highly desirable characteristic of a WISE-entrepreneur it is also a

difficult element for some of the disadvantaged employees at stake. Employees suffering

from mental disabilities, such as autism, are known for being relatively inflexible, making it

difficult to have adaptable expectations from them. A last addition to the pool of risks is the

high unpredictability of government legislation. Governments struggle in making stable

policies, something that is related to the relative novelty of the field.

Training and motivating the employee

Alongside ‘regular’ on-the-job training – which is also commonly found in normal enterprises

– WISEs sometimes allow their employees to follow additional training aimed at learning a

particular craft or skill. This is in order to allow for their flow into a regular job independent

of an organisation such as a WISE. Additionally one regularly finds coaching for social

competencies such as work ethics, structure, and planning. What sets the WISE apart from

regular enterprises is that they often pay special attention to one’s personal private life. The

underlying philosophy is that once a person is not feeling well at home, he will not feel well

at work. An example for this is the training in public transportation provided by Buurtmarkt

Breedeweg. They provide this training with the underlying thought that it does not only

empower their employees to travel to work, they also empower them to open up an entire new

social world; a world in which they can travel to any place they desire. As a concluding

statement it is fair to say that WISEs try to go the extra mile in order to ensure the overall

well-being of their employees.

As mentioned previously empowerment can be a serious motivator. Often disadvantaged

employees are already intrinsically motivated due to the fact that they have a job; something

that is not natural to this group of people. Yet, it is shown that the sharing of corporate results

can be an additional motivating force. This vulnerable group of people experiences this as a

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sign of belonging. Along with this comes the notion that it is important to hear this group of

employees out and actually follow up on their feedback.

Turnover of employees

Despite the relatively young age of some of the study participants it is fair to conclude that

the overall employee turnover in the sector of the WISE is low. All participating

organisations indicated that the turnover is very low (apart from the employees that

participated in reintegration trajectories with the aim to find a job somewhere else). Although

it is difficult for the participating start-ups to draw conclusions, they also indicated that the

great majority of employees active at the start are still working in the organisation. This can

be explained by the fact that having a job for people with disabilities is not obvious. They

appreciate the fact that they have a job and hence are often very loyal to the employer. During

the interviews it became apparent that most of the employees do not have much of a private

social life next to their professional career. Indicative for this is also the fact that some

employees find it hard to take a holiday break and rather prefer to keep on working. Peter

Hobbelen (Emma Safetyshoes) describes the positive impact resulting from this as follows:

“When employees chose to stick around for a long period of time it creates a sense of

community and team spirit. People really get to know each other and this creates a sense of

belonging. This contributes to the perception that they [the employees] create a special

product or service together. That is what we strive for, long-term sustainable

employment.”(Hobbelen, 2014)

Reintegration trajectories

Short-term reintegration trajectories (+/- six months) have found to have little to no positive

effect on the chances of actually reintegrating people into new careers in a regular

organisation. Employers find various reasons for this finding: first, the majority of short-term

trajectories is simply too short to sustainably develop the skill-sets of the participants.

Second, the labor market is still a very competitive place in which it – due to the current

economic crisis – is increasingly difficult to get a job. Despite the fact that these trajectories

do not seem to meet their goals there are some positive side-effects described by the

employers that are worth mentioning. Although the distance to the labor market is not getting

any smaller it can also be said that it at least is not getting any larger either. Additionally, be it

minimally, the participants often do benefit from small incremental personal developments

that might prove beneficial in the future.

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4.2 Strategic Choices

As described before in the conceptual framework there are various elements that belong to the

strategic choices that a firm can make. This section will describe the positioning and value

proposition, the marketing and the client contact together with the image of the firm. Table 4

displays from each organisation whether the main focus is business-to-business (B2B),

business-to-consumer (B2C) or business-to-government (B2G). The focus of the organisation

can influence the strategic orientation.

Table 4: Overview participants B2B/B2C/B2G

Positioning and Value Proposition

When considering the level of pricing it is often assumed that social firms – given the

subsidies provided by national governments – act on the lower end of the price spectra.

Despite the logic underlying this assumption, private social enterprises do not receive the

large amounts of subsidies that some people expect. What all of the firms in the sample had in

common is that they heavily prioritized on the product/service. No social enterprise could

succeed when it is compromising on product/service quality. Consequentially, one can see

that firms on the one hand have a cost benefit when considering subsidies received whilst on

the other hand they face a disadvantage when considering the additional ‘effort’ needed to

guarantee top of the line quality. In the end one can see that the social enterprises of this

sample act on a price level that is more or less following suit with ‘regular’ high-end

enterprises. One of the possible reasons for this positioning is the fact that social enterprises

often utilize additional personnel in order to perform the same task (e.g. two people with a

labour productivity of 50% instead of one). Customers often enjoy a better overall experience

because of this additional effort. In the case of Balanz Facilitair this results in above par

performance that in the end partly offsets the pricing disadvantage. Other organisations

indicate that they can offer the customers continuity, as the turnover is low resulting in

employees getting accustomed to the specific desires of the customer. Whereas some of the

organisations would go for machinery, others that are making products often see working

with people as an advantage. By preferring manual labour to automated labour a firm can be

AutiTalent B2B/B2G

Swink B2B

Biga groep B2B/B2G

Emma Safetyshoes B2B

Balanz Facilitair B2B/B2G

Krinloopwinkel Opnieuw &

Co

B2C

De Prael B2C

Driekant B2C

Buurtmarkt Breedeweg B2C

Van Hulley B2C

36

adaptive to specific customer needs. Some organisations find that the social value they create

is also part of the value proposition for the consumer.

Marketing

When taking an overall perspective one witnesses that the social goal is often used for

marketing purposes. The majority of the companies agree on the fact, as mentioned in the

section above, that the quality of the product or service comes first before one can use the

social goal for marketing purposes. Henk Smit (Driekant) illustrates this as following:

“First of all the product should be of high quality. I would not want to be in business with a

client solely because he sympathizes with my employees. That is not a sustainable

relationship. In the long run this relationship will not survive” (Smit, 2014)

For this reason it is of utmost importance that the overall product quality is beyond doubt in

order to satisfy a long-lasting customer relationship. Only after this quality benchmark is

reached one can use the social target for marketing purposes. Over the last few years one can

see that social value enjoys a much higher esteem. Some of the larger firms from the research

pool are performing on the area of facility services. Customers in this branch are often openly

looking for affiliation with the label ‘MVO’ (Maatschappelijk Verantwoord Ondernemen;

Corporate Social Responsibility). By engaging with the WISE’s in the sample, large

corporations operating in the facility service industry open the door towards ‘MVO’, herewith

proving the fact that social responsibility is a valuable marketing asset. In particular the

facility services (such as the ‘Biga groep’ and ‘Balanz Facilitair’) benefit from this kind of

marketing. Opnieuw & Co, a store concept selling usable second hand items, does not see

notable sales increases through the marketing of their social purposes. What is noticeable is

that the general sense of goodwill is already high resulting in a large group of people who are

willing to donate their goods to the store. The smaller organisations in the sample are all

focused on B2B. In general, one sees that the companies that actively use the social purpose

in their marketing efforts often see increases in their overall revenue. Van Hulley describes

their advantage as following:

“The fact that we work with this group of women is an essential part of the decision to order

our product. Clients not only find the product very appealing, but also the fact that they play

a supporting role in helping these women towards a paid job.” (Creutzberg, 2014)

A small group of the sample does not yet benefit from the social purpose in the marketing or

does not use the social purpose in the marketing. It is interesting to see that Swink – in its

nascent state – actively used the social purpose in their marketing. The result was that people

37

expected a low quality of the services given that they worked with this group of handicapped

people. Paul Malschaert therefore decided to change their marketing strategy and not use the

social purpose at all. Soon they noticed that the sales increased. It is only since a short time

that Paul Malschaert notices that the ‘MVO’ gets important and therefore slowly brings the

social purpose back in the marketing. One remarkable exception of an organisation that

consciously does not use the social purpose in the marketing at all is ‘De Prael’. The

reasoning behind this is that they don’t want their employees to be seen as victims. They find

– like the other organisations – the quality of the product and service most important. They do

not wish to use their unique group of employees as a unique selling point.

Client contact and image of the firm

According to the participants the employee plays an important role in the client contact and

hence influences the image of the firm. The employees can both have a positive as well as a

negative influence on the relation with the client. Positively often in a surprising matter since

some clients do not expect that this kind of employee is able to work. Also, what one often

sees and experiences on the spot is that they take extensive time for the client. A negative

effect might arise in cases in which people are unaware of the limitations of the employees

and hence have disproportionate expectations. As mentioned before in section 5.1 some of the

employees lack flexibility that can in some occasions result in a troublesome relationship.

Due to this shortcoming some of the organisations - in particular the ones focussing on C2C -

estimate to lose some of their clients

Most of the organisations try to solve this problem by using foremen that try to guarantee the

quality of the service. These foremen see when something goes wrong and try to intervene

and show the employee how the task should be done. It also happens that these foremen talk

with the customer when they see that something goes wrong and explain the situation. This

often results in understanding on the side of the customer. One can also see that once

someone is convinced about the product or service that they remain loyal to the company.

4.3 Value Network

The WISE has various stakeholders that play an important role and make their existence

possible. So far the employees have been discussed in section 5.1, the clients in 5.2 and the

remainder of the important stakeholders will be discussed in this section. When asking the

participants whom they recognized as the most important stakeholders they often named the

government, but also the ‘UWV’, ‘sheltered workplaces’, financiers, shareholders, social

services and other agencies. The majority of their partners resided in the social domain. What

one can see is that the WISE and its partners have mutual interests in each other. Therefore it

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is important that this relationship is optimal. This section will first describe the relationship

with the government. Second this section will describe the relationship with the remainder of

the stakeholders. This section will conclude with a notion on the sharing of knowledge.

Government

The government and in particular the municipalities can play an important role for the WISE

in various fields. First of all the municipality could for example offer the WISE financial or

advisory support. Second of all, in some cases the government is the recipient of some of the

services. The experiences with the government are varying. Whereas some organisations are

satisfied with the relationship with the government, others describe this relationship less

positively. Some organisations find that there is no relationship with the government, even

though they wished there was. All organisations perceived the relationship with the

municipalities as very labour-intensive. Also the majority perceived the relationship as

conservative. The Prael describes it as follows:

“The relationship with the municipalities is okay, yet of very conservative nature. (…) There

are a lot of slow ‘one size fits all’ solutions. While this group has an urgent need for

customization and creativity. There is an absolute necessity to make these two colliding

worlds fit together” (Kooy, 2014)

When comparing the small and large organisations in the sample the relationship with the

government varies. Smaller organisations often do not find the time/money to get the

maximum support from the government, as the relationship is very labour-intensive. Besides

support, they sometimes face difficulties with selling their services to the government. The

following statement illustrates this:

“The municipality of Amsterdam awarded various assignments to parties other than Swink.

This is partly due to my own reserved stance regarding marketing and sales. Yet, I also know

that at various moments I just did not meet their standards. I was too small, or was not able

to make positive returns and as a result they would not award me with their contracts.

Currently however, they state that they really prioritise on social firms so I am waiting for

them to ‘walk the talk’” (Malschaert, 2014)

This statement illustrates the ‘disadvantage’ of being a small organisation when considering

government relationships. The larger organisations possess a clear advantage as the

government is usually looking for a larger party to buy services. Additionally, these larger

39

firms have the resources (both time and money) to invest in the labour-intensive nature of the

much-needed strong government tie.

Some organisations (e.g. Opnieuw & Co) that operate in different municipalities do also

recognize differences between municipalities. In general they find that the smaller the

municipality the easier the cooperation. Marcel van Goch from ‘Opnieuw & Co’ describes

this as following:

“In small municipalities officers have the possibility to – as a figure of speech – sit together

with their collaborators and discuss manners over a cup of coffee. This makes them very

adaptive and versatile, creating a sense of approachability and receptivity. The larger the

municipality is, the harder it gets to truly listen to each other’s needs.”(Van Goch, 2014)

Other stakeholders

Apart from the aforementioned municipality as stakeholders, other important stakeholders are

the financiers and shareholders. These include banks, but also foundations. Foundations

support organisations financially at the start or during projects in which the organisation

hopes to growth. Some of the organisations have shareholders. In this sample the shareholders

sometimes represent the care facilities that provide for the target group. For many employers

the ‘UWV’ is an important organisation that comes with its own set of shortcomings. Many

describe the ‘UWV’ as a bureaucratic organisation, that responds slow to their wishes.

Another shortcoming resides in the fact that entrepreneurs often have multiple contact persons

within the UWV, each taking care of various people. This makes contact very strenuous and

unnecessarily increases bureaucracy. One of the entrepreneurs described the need for a quick

response from the ‘UWV’ in the case in which they find a new job for someone. The

following quote illustrates what often happens:

“They literally tell or email me [UWV]: “we have six weeks to approve the trial placement

because that is the law” (Anonymous, 2014).

Sharing of knowledge In general one can see that organisations are very open towards sharing their knowledge with

other social enterprises. Creating employment opportunities for the disadvantaged is what

motivated most of the entrepreneurs. With this common motivation in mind they are willing

to collaborate and share their knowledge with other organisations that have the same purpose.

Exemplary for this commonality was the fact that the Biga group welcomed approximately 35

organisations lecturing them on their unique way of getting low absenteeism numbers.

40

Driekant started the ‘Hogere Ambachtsschool’; a school with the purpose of transferring

knowledge about social entrepreneurship. The sharing of knowledge is not limited to merely

social enterprises themselves, but also regards other social institutions. The majority of the

entrepreneurs indicate that the sharing of knowledge between these organisations is prone to

improvement.

4.4 Capturing Value

Although creating organisational and societal value is the prime motivation for the WISE,

capturing value should also be considered as an important part of the business model. It is

important that the organisation is a financially healthy company in order to safeguard

continuity. While a regular organisation obtains income only through the market, the WISE

sometimes uses a mix of resources. This mix of resources is sometimes necessary to

compensate the additional costs that entrepreneur has due to the target group. It is for this

reason that this section will describe the additional costs that the WISE has together with the

grants/compensation that they receive for these costs. Furthermore this section will review

whether entrepreneurs find sufficient revenue streams to cover their costs. After this there will

be a section describing how the entrepreneur tries to compensate this cost disadvantage in

case there is one. This section will conclude with a review on what happens to the eventual

profit.

Additional costs

All the organisations in the sample recognised the personnel costs as the largest contributing

cost factor for their organisation. The participants were asked if they could recognise any

additional costs due to the fact that they worked with a group of disadvantaged workers. The

most frequently mentioned additional costs were the costs for the lower productivity of the

employees and the cost for additional supervision. The organizations that focus on high

skilled work did not mention the lower productivity as a major cost factor. Most of their

employees are able to get a ‘normal’ labour productivity. The remainder of the sample

mentioned these costs as the only substantial extra costs and said that the other additional

costs could be neglected or were even non-existent. Other extra substantial costs – although

only named by a few organisations – are the higher costs due to quicker deprecation of

equipment, expensive housing due to required additional surface and the additional education

to develop the employees.

Compensation and subsidization of the additional costs

The participants were asked what kind of subsidies they received and if these subsidies

compensated the additional costs that they face because of their particular business model.

41

Table 5 summarizes the additional costs that the participants recognised and if they are

compensated for these extra costs. The main subsidies that most organisations receive are the

compensated wages due to uncompetitive productivity. The organisations that worked with

reintegration trajectories were paid per trajectory. Extra supervision and additional

training/education is in most cases not or only partially compensated. The deprecation costs

of equipment and the additional housing costs are not compensated.

Extra costs Compensated by grants or trajectory funds?

Lower productivity Compensated in almost all the cases

Extra supervision Most cases not compensated or partly

compensated

Other personnel related costs Most cases not compensated

Additional training/ education Most cases not compensated

Earlier deprecation of equipment No compensation

Extra housing costs (more people per m2, or

people need more m2)

No compensation

Building modifications Sometimes compensated

Additional expenditure on adaptations of

equipment

Usually compensated

Table 5: Overview additional costs and compensation

Remarkably all large organisations in the sample indicated that the compensation outweighed

the additional costs. Some of the smaller organisations feel that the compensation does not

always outweigh the additional costs. Also organisations such as AutiTalent and Swink – who

employ people that do high-skilled work – say that the compensation do not outweigh the

additional costs.

Additional income

In all the organisations the market income is the largest part of the revenues (varying from

50% to almost 100%). Apart from the grants and trajectory funds that compensate the

additional costs, the WISE can also have other types of income. The major part of the

participants indicated that at least at one time they received donations from a foundation. The

largest part of the respondents did not have any income in the form of goods or services. Van

Hulley and Opnieuw & Co indicated that they work with volunteers. Opnieuw & Co gets old

products that they recycle. Furthermore Buurtwinkel Bredemarkt makes use of a cheap

building that was offered to them and a van that was sponsored by the entrepreneurs in the

neighbourhood. Some organisations (e.g. De Prael) have separate day care departments that

get compensated on a per person basis.

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Compensating the cost disadvantage

Keeping the supervision costs as low as possible can partly compensate for the additional

costs that the entrepreneur faces. Furthermore it is of utmost importance to critically review

the working processes to ensure that everyone performs to his or her highest efficiency.

Swink and AutiTalent are working with job carving to make their workers most efficient.

Some of the firms see that these methods of saving cannot offset parts of the disadvantages

and are correspondingly suiting for a smaller profit.

Diversifying the business model

Various entrepreneurs in the sample showed that the diversity in the organisation is crucial.

Some of them do not look at each individual business unit, but rather at the entire

organisation. This is often seen as the success of the organisation. This is illustrated by the

following quote:

“If one is strictly focusing on all separate entities in an organisation one can only conclude

that lots of them need to be divested. Only through the diversity of operations we can run a

cost-efficient enterprise that safeguards value to all stakeholders (Smit, 2014).

Another example is Buurtmarkt Breedeweg, a supermarket combined with a lunchroom. The

manager Eric Tonn is not looking at the revenues of the separate units of the organisation.

Rather it is the diversity that makes the success that people come to this supermarket and feel

attracted. At the Biga group you see that they accept every target group, even with a severe

disadvantage. Their sheltered workplace generates large losses, but by combining it with

lucrative sidelines the organisation is successful in the end.

Profit

The organisations in the sample were – with the exception of some of the start-ups – all

profitable enterprises. The profits are mainly reinvested into the organisations in order to

propel growth and create more employment options for the disadvantaged people. Sometimes

parts of the profits go to the shareholders. But what you often see is that the shareholders

reside in the healthcare sector and find it important that there are employment opportunities

for their clients. It is for this reason that they often decide to have all the profits reinvested in

the organisation. Some organisations save the profits as buffers for economically desperate

times during which government grants are far from certain.

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4.5 Concluding section

This section will summarise the results of this study. It is remarkable that the majority of the

entrepreneurs perceive the business model as an advantage, provided that the additional costs

of working with the target group are correctly compensated. It is often the mix of the

elements that makes the success. The model displayed in figure 6 summarizes the most

important relationships found during this study.

Figure 6: Overview of results

Empowerment and the sharing of results can both increase the motivation of the employees

and hence increase the labour productivity and the revenue generating potential. The degree

of work adaptation and in some case the adaptation of the workplace can increase the labour

productivity and hence the revenue generating potential. Some target groups have extra

difficulties with stress and pressure. In these cases the adaptation of the work can reduce the

level of stress and pressure and herewith lead to a decrease in the level of absenteeism. This

in the end should contribute to higher revenues.

This study showed that in most cases the marketing of the social purpose has a positive

influence on the sales volume. However, in some cases it worked contradictory. An

organisation should decide for itself whether it wants to use the social purpose in the

marketing or not. Nevertheless, for every organisation it is important to openly communicate

about its limitations. This will increase customer loyalty and hence the revenue generating

potential.

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This study also showed that the value network plays an important role. The relations in the

social domain are in many cases described as laborious. Despite the fact that all firms stated

the laborious relationship with their stakeholders it has been observed that larger firms seem

to have somewhat of an advantage. This leads to the conclusion that firm size is a positive

contributor to the ease of partnership creation, which in turn is a positive contributor to the

revenue generation potential.

5. Discussion

This chapter provides important discussion on the newfound insights from the previous result

section. The theoretical framework of chapter two is combined with the findings in chapter

four. The findings are analysed according to deductive manner, meaning that existing

literature is compared to the findings to make sense of them. This chapter will first discuss the

elements of the business model, then the practical and academic implications and ends with

the limitations of this study together with the directions for future research.

5.1 The business model of the WISE

The Employee

This study showed that, like any other organisation, the employer of the WISE should treat its

employees equally. Employers attached great value to the fact that both people with a

distance to the labour market and their ‘normal’ counterparts are treated equally. Adapting the

work to the employee and when necessary adapting the workplace is found to be one of the

main contributors to the success of the WISE. The highest productivity can be achieved by

adapting the work to the employee. Next to the efficiency gains that the firm will enjoy,

adapting the work can also contribute to the overall well-being of the employees. The

adaptation of the work leads sometimes to a reduced level of stress and pressure and hence

the overall well-being of the employee will increase. This does not only have a positive effect

on the employee, it also decreases the level of absenteeism in the firm, which in turn is good

for overall firm potential. The WISE is characterised by its multitude of goals: economic,

social en socio-political goals (Nyssens, 2008). The social goals are well reflected in the

additional attention some employers spend on their employees. Numerous articles (e.g

Davister et al., 2004) have paid attention to regular on the job training and special social

competences training that the WISE offers, but there is little to no knowledge available on

additional trainings aimed at the improvement of an employee’s home situation. This study

showed that some WISEs offer these additional trainings reflecting the social and economic

45

goals of the firm. Social in the sense that it improves the overall well-being of the employee,

economical as the overall well-being of an employee in turn increases productivity.

While the development of the employees is seen as something very important, financially it is

not possible to give an employee the optimal individual support. It was previously shown by

scholars that the optimal configuration between workers with a disadvantage and without one

would be best if these groups were mixed. Articles have shown that the employee mix should

not be too skewed towards the employees with a disadvantage (e.g. Smit et al., 2008). One of

the main reasons for this is the suboptimal reintegration result. However, this study showed,

depending on the difficulty of the work, that a large majority of disadvantaged people is in

some occasions the best – at least financially seen – option. As a positive return one can see

that the overall capacity for incapacitated employees increases. The positive financial side-

effect comes forth from the fact that firms receive subsidies for disadvantaged employees,

making their overall labour costs very competitive. This study also showed that the more

complex the work becomes, the more regular employees are necessary in order to sustain the

desired level of quality.

In contradiction to previous literature (e.g. Report VSBfonds & Start Foundation), this study

showed that in most occasions a mix of various target groups is regarded as optimal. Each

target group has its strong sides as well as their shortcomings. By combining different target

groups the groups can complement each other and herewith offset each other’s disabilities

and create a sense of synergy. Nevertheless there are also imaginable situations in which one

can focus on one sole target group. This would for example hold true for the target group of

people with autism. This has to do with the fact that this group of people asks for a very

specific treatment. This treatment works best if there is no intervention of other people asking

for concessions in treatment.

Product/Service

When going back to the theory about social entrepreneurship, an entrepreneur sets the social

mission at the first place (Dees, 1998). However, this does not mean that the overall quality of

the product or service should be sacrificed for this condition. This study found that is rather

the opposite. High priority should be given to the quality of the product and service, only then

it is possible to have a sustainable relationship with the client. Social entrepreneurs do not see

themselves as a charity but rather as a genuine commercial business. A firm should only use

the social goal for marketing purposes if, and only if, the high quality of the end-product or

service can be guaranteed. This study found that in most cases the organisations that apply

their social mission for marketing purposes derive some of their success from it. Firms

46

focusing on B2B sometimes find that their customers are looking for affiliation for the

‘MVO’ label and hence pick for these organisations. Firms that focus on B2C generate

goodwill amongst their prospective customers by broadcasting their social missions;

something that eventually leads to higher sales figures.

Although an organisation should decide for itself whether or not they want to use the social

purpose in their marketing, open communication on the limitations of the employees remains

important. While in some organisations marketing already made it clear for the customer that

there are people working with limitations, in other organisations this is not as clear. The

WISE should therefore have an open stance towards their customer, with foreman trying their

best to ‘guide’ the expectations of the customer.

Value Network

Jonker et al. (2012) describe the new social business model as a model in which an

organisation is operating in a network of various stakeholders in which they all play an

important role and where organisations are mutually dependent. In order to get the most out

of these relationships it is important that stakeholders treat each other equally (Jonker et al.,

2012). Alongside the traditional stakeholders such as suppliers and customers the WISE also

possesses an array of stakeholders in the social domain. The study findings do underwrite the

importance of this last group of stakeholders and the relationships that they bring forth.

Literature describes the ‘ideal’ entrepreneurial setting as a setting in which partners treat each

other as equivalents. This ‘ideal’ situation is to some extend reflected by this study. All firms

seemed to strive for this ‘ideal’, yet some firms find great difficulties in receiving the mutual

partnership, making the abovementioned ‘ideal’ situation still a utopia. Like earlier described

by Smit et al. (2011), the relationship with the government is often described as an important

relation, be it of arduous nature. The relationship with the municipality can take mainly two

forms: 1) the municipality as a sales partner and 2) as a supporter or sponsor (e.g. financially).

Typically one finds the first kind of relationship in larger social enterprises. The majority of

the smaller organisations in the sample focused on B2C and not on B2G. The small

organisation that wished for a relation with the government did not get this sales position as

the government described them as too ‘small’. This holds potential for future improvement:

smaller organisations might look for mutual collaboration to enhance their own position as

small social enterprises.

Apart from the size argument there is another possible explanation for the fact that

governments rather work with larger enterprises. Large enterprises often perform simpler

47

tasks that hold very limited risk. One could think of municipality service or cleaning services;

straightforward tasks that can be performed by almost anyone. Meanwhile, smaller

organisations have difficulties competing with their large counterparts because they are less

efficient. Instead these smaller organisations often focus on niche tasks that are often of more

complex nature. This complexity of nature could be the reason that withholds governing

bodies of subcontracting these tasks to social enterprises. Instead they rather go for regular

enterprises specialised in the same kind complex labour (at the expense of the social firms).

The non-financial supportive function of the government is often a lot less spontaneous.

Although every WISE – be it small or large – indicates that this relationship is arduous and

labour-intensive, smaller firms seem to have more difficulties. The main reason for this is the

fact that small enterprises simply do not have the resources to maintain a healthy relationship

with the government.

Social enterprises are known for their open stance towards the sharing of knowledge (Díaz-

Foncea & Marcuello, 2012). This study confirmed this and showed that firms are in particular

willing to share their knowledge with other social enterprises with the hope to receive

something back in return. Their open stance towards the sharing of knowledge can be

explained through their motivation: the creation of employment opportunities for people with

limitations. Social enterprises within the Netherlands also wish to share their knowledge with

other important institutions such as the UWV, thereby creating a win-win situation for both

parties. Unfortunately this is often not the case and can hence be improved. Based on the

findings it would be beneficial when the institutions’ approach becomes more entrepreneurial.

As indicated before, one of the possible improvements could be the appointment of dedicated

personnel for specific firms. Moreover, till now WISEs experience difficulties when needing

a quick response for approval of a trial placement from institutions in case a vacancy comes

free. A quick response from the institutions is necessary given the short time span in which

these vacancies tend to be available.

The Revenue Model

As shown by the existing body of knowledge the WISE acquires a mix of market and non-

market resources. This is confirmed by this study. Furthermore it found that within the sample

the majority of the income is generated through the market. However, it also found that in

most cases governmental financial support is still deemed necessary to compensate for the

additional costs that the entrepreneur faces. While in other countries barter or voluntary

services (e.g. volunteers) are more common, this is not commonly seen in the Netherlands

48

(See for more information also appendix E). Only in a few cases the WISEs found additional

income through for example the use of volunteers.

Like earlier literature, this study found that the most important cost factor that a WISE faces

is represented by the additional expenditure derived from the employment of disadvantaged

people. This cost factor is composed out of a relatively low productivity and the necessity to

have additional supervision. All sample members focusing on low-skilled work confirmed

these two cost components, stressing the importance of this factor. The organisations focusing

on high-skilled work see the additional supervision as the main cost factor. Other important

cost factors stressed by some of the sample members are the costs for the education of the

employees, their development, housing costs and administration costs. Whereas most

entrepreneurs did not name administration costs, it is still plausible that these might be

substantial. Despite the fact that these costs find little to no origin in existing literature, they

are still worth investigation. One should question whether some of these additionalities

simply are non-existent or whether some of the entrepreneurs do not seem to recognize them.

This study showed that the large organisations perceive that they receive enough government

compensation whereas some of the smaller organisations sometimes struggle with the amount

of the subsidies they receive. A possible explanation could be the scale advantage of larger

organisations and the corresponding ability to organize their workforce in such way that they

are more efficient. Furthermore both sample organisations with high-educated employees do

indicate that the financial compensation does not outweigh the additional costs.

In order to offset the additional costs that are not financially compensated by the government

there are several options that a firm can put into effect. One of these options is the

diversification in the organisation (O’hara & Shaughnessy, 2004). Cooney (2011) described

two options: 1) diversifying the products and services within one single business venture and,

2) diversification through the dispersion of multiple ventures. This study also showed several

cases in which the entrepreneur described the diversity of the organisation as the key to

success, focusing on the total organisation, instead of looking at one single element. The

socially significant, loss-making elements can be compensated with lucrative side-elements.

Furthermore this study found that organisations with low-skilled workers try to compensate

their cost disadvantage by keeping the supervision costs as low as possible. Gaining

efficiency in the organisation can do this. In the organisations with high-skilled workers one

can find job carving as a tool to keep the costs as low as possible.

49

In some situations one can see that both the governmental support and the above-mentioned

measures still do not outweigh the additional costs and hence result in lower profits or even

losses. In case of positive returns these organisations typically reinvest in their organisation in

order to sustain their existence or growth in order to safeguard the creation of employment

opportunities.

Remarkably financial sustainability is indicated as an important part of the ‘new’ business

model (Jonker et al. 2012). Continuity is a very critical part of the business model (Jonker et

al., 2012). Whereas profit driven firms tend to stress short-term profitability, social firms

seem to be focussed on the realisation of long-term sustainability. This reveals itself in robust

financial planning and a certain degree of risk-averseness. This has at least partially to do

with the unpredictable ‘revenue’ streams of social businesses. A proportion of the firms in

this field is greatly depending on government subsidies and therefore has difficulties in

predicting next year’s financials. Conse uentially these firms resort into conservative

spending patterns in order to ensure their long-term continuity. This results in an interesting

paradox in which one can see that social firms can only predict short-term financials and are

yet focussing on long-term sustainability.

5.2 Academic implications

So far the literature on the business model of social enterprises has been scarce (Santos,

2012). There is hardly any research on the business model of the WISE, let alone research in

the Netherlands. This study is the first attempt to close the identified research gap of the

WISE business model. By relating the findings from the case studies to the literature from

different disciplines this study tried to gain more insights in what the business model of the

WISE looks like within the context of the Netherlands. This research contributed to the

current body of literature by getting insights in the four main elements of the business model:

creating value, capturing value, strategic choices and the value network.

5.3 Practical implications

Several practical implications reside within this study. Various groups of people can benefit

from this study, such as (nascent) social entrepreneurs and policy makers. Compared to other

European countries the Dutch WISE is not supported to the same extent (See also the

extensive literature review on this topic in appendix E). This might clarify the relatively small

sector of the WISE in the Netherlands. This study is one of the first in the Netherlands that

focused on the business model of the WISE and emphasizes the importance of this particular

kind of business and the governmental support that this type of enterprise needs. This study

underlined the importance of the close collaboration of social enterprises, municipalities and

50

other institutions. In many situations the relationship with the municipalities or other

institutions is suboptimal and should hence be enhanced. In the future small organisations

need to improve their mutual coherence in order to boost their position as small firm. This

should lead to a more prominent position on the radar of both municipalities as well as other

assisting institutions, which in turn should have a beneficial effect on the commercial

performance of these firms. Also it could benefit to the sense of sustainability of the sector.

With a strong representation of even the smallest firms the sector as a whole will be perceived

as ‘here to stay’, something that should have its upshots on the stability of policymaking.

Since this has been pointed out as one of the areas of improvement this change should lead to

a more suitable environment for the entire sector. Lastly stable policymaking is also a sign of

recognition and acknowledgement, two factors that should be seen as tokens of appreciation.

Apart from the abovementioned implications this study provides insight on the various

success factors of the WISE. This thesis helps (nascent) social entrepreneurs to become aware

of their business model. Furthermore it might help to improve the aspects deviating from the

best practices as presented in this thesis.

5.4 Limitations

This paragraph will give a concise overview of the various limitations that need to be taken

into consideration when interpreting the results. Some of the limitations are inherent to the

chosen methodology, whilst others are caused by the limited amount of literature available

and are hence inevitable.

The choice for a qualitative research approach is deduced from the fact that the existing body

of literature is still in a nascent state and hence does not provide sufficient basis for

quantitative research. The overall generalizability is consequentially jeopardised since the

relatively short time span of this study did not allow for elaborate sampling. This was not the

foremost concern given the explorative nature of the study; the purpose was not necessarily to

achieve optimal generalizability but rather to make an initial exploration and provide a deeper

inside into the business model of the WISE.

Next, all the participants from the research sample were selected from the network of Social

Enterprise NL. A disadvantage of selecting all the participants from this network is that they

might be susceptible to groupthink. On the other hand there are reasons to assume that the

organisations that join this network are in general more willing to share their knowledge. The

fact that they join this network already indicates that they want to share knowledge in order to

strengthen the social enterprise sector.

51

Another limiting factor arises from the quadrants of the analysis framework (size and level of

education) that are not equally represented. The number of WISEs that perform high-skilled

labour with disadvantaged people within the Netherlands is very limited. There has been a

search outside of the scope of the network of Social Enterprise NL to find additional members

of this group but none of these endeavours were fruitful. It is for this reason that only one

small and one large organisation with disadvantaged high-skilled workers participated. The

two other quadrants with low-skilled workers were both represented by four organisations.

Although the quadrants give insights in the differences between the various firms they do not

represent sufficient members to guarantee sufficient generalizability.

Additionally, due to the limited time frame of both this study and the participating

entrepreneurs (the interviews lasted approximately anywhere between 80 to 120 minutes) it

was not possible to go in depth into each element of the business model.

A last limitation is the availability of archival data. While some of the organisations were

willing to share ample documents providing key figures of their operations, others could not

or would not share these documents with the same ease. Again others were still in their start-

up phase and hence could not provide any underwriting documents simply because they did

not exist yet. This again contributes to the limited generalizability of the study.

5.5 Future research

This research took the first step in exploring the business model of the WISE. To overcome

the limited generalizability that is inherent to this study future research should investigate

each element of the business model in depth. In a later stadium quantitative research can

improve the generalizability of the findings. The model based on the findings presented in

section 4.5 should also be tested on a larger scale. Whereas this study has worked with a

framework prioritising on size and difficulty of work, other variables may also be able to

bring forward additional insights. Due to the limited time frame of this study only the

entrepreneurs of the participating organisations have been interviewed. Future research could

also investigate the experience of the employees in the organisation. The majority of the

participating organizations were able to generate sufficient income to at least achieve break

even. It is arguable that firms who are not in an as privileged situation face different or more

pronounced difficulties. Where best practices are worth copying it is just as important to

know how to avoid pitfalls. It is for this reason that it would be interesting to see how the less

successful firms cope in today’s business environment.

52

6. Conclusion

This concluding chapter answers the research question: What does the business model of the

Work Integration Social Enterprise look like within the context of the Netherlands? This

question was examined by investigating the four main elements of the business model:

creating value, capturing value, the value network and the strategic choices. The main success

factors of this particular type of business have been explored through the usage of case

studies.

This study showed how the WISE could create value (societal as well as customer) with one

of its most important ‘resources’: the employee and the corresponding processes. Among

various contributors of success this study showed that a mix of target groups is in most cases

of essential importance due the synergies that the firm derives from it. In case target groups

prove to have an exceptional talent in a specific field, organisations better focus on this sole

target group. This study also showed that the ratio between regular employees and people

with a disadvantage depends on the difficulty of the work. Organisations performing low-

skilled labour are usually better of with an employee mix skewed towards the disadvantaged

group of workers, given the low need for supervision. In case firms perform work of more

complex nature they tend to need more supervision, demanding a more balanced mix of

employees.

Also, this study described how strategic choices could influence the WISE. It showed that the

quality of the product/service of the WISE is essential to create a sustainable relationship with

the customer. The organisation should communicate openly about the limitations of the

employees and can in some situations benefit from marketing its social purpose. This study

showed that the value network of the WISE is of great importance. While the ‘ideal’ model is

one in which partners treat each other equally and are dependent on each other, this study

witnessed that this is not always the case in the Netherlands. Dutch entrepreneurs do not

always receive the amount of support on which they should be able to rely based on their own

efforts. This should therefore become one of the areas of future improvement. The revenue

model of the organisation is greatly influenced by the decisions that that are made by the

organisation with respect to the employees, the product/service and the value network.

Regarding the costs that are faced by the Dutch WISEs one witnesses that the major

contributor is the reduced productivity combined with much needed supervision; factors that

are not always sufficiently offset by the provided subsidies. Especially small firms or firms

that perform complex labour face significant challenges regarding these cost factors and

should hence try their best to optimise their operations.

53

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Appendices

Appendix A: Questionnaire (in Dutch)

Inleiding

Doel van het onderzoek uitleggen.

Opzet interview (Open vragen, beoogde tijdsduur)

Is het in orde als ik het interview opneem?

Zijn er nog verdere vragen van uw kant?

Openingsvragen

Kunt u kort de ontstaansgeschiedenis van het bedrijf schetsen?

Waarom bent u dit bedrijf begonnen? (Motivatie)

Verwacht u dat het bedrijf verder gaat groeien?

Middenstuk

Werknemers

Hoeveel werknemers zijn er in dienst?

o Hoeveel daarvan hebben een afstand tot de arbeidsmarkt?

Arbeidsmatigs dagbesteding

Reguliere arbeidsovereenkomst (loondienst)

In dienst via regeling begeleid werken

Detachering via WSW of anders

Stage, werkervaringsplaats of re-

integratietraject

Proefplaatsing

Wat voor beperking hebben deze werknemers? (Open vraag)

Lichamelijke handicap

Ernstig sociale problemen (Bijvoorbeeld alcoholisten, drugsverslaafden, ex-gedetineerden en

mensen met ernstige familie problemen).

Achtergestelde minderheden

Moeilijk te plaatsen in een baan (Bv. door leeftijd of kwalificaties)

Jong en laagopgeleid ( Bijvoorbeeld school drop-outs)

o Wat voor werk verrichten deze mensen?

Hoe worden werknemers geselecteerd?

Wat is de ratio ‘gewone werknemer/werknemer met beperking’?

o Hoe ervaart u de verhouding?

o Waarom is er voor deze verhouding gekozen?

Is de werkomgeving aangepast aan de werknemers? (Is de functie van de werknemer

ook aangepast?)

o Zo ja: hoe is deze aangepast?

Hoe worden werknemers binnen het bedrijf gemotiveerd?

Worden er trainingen gegeven?

o Wat is het doel van deze trainingen?

Wat is het risico van deze arbeidsgroep?

o Hoe gaat het bedrijf om met dit risico?

Wordt de arbeidsproductiviteit gemeten?

57

o Hoe ga je hier mee om als bedrijf?

Indien er re-integratie trajecten zijn, zijn deze succesvol?

Wat is de tijd dat een werknemer gemiddeld in het bedrijf werkt?

Product/marketing

Welk soort klanten is uw doelgroep?

Wat voor waarde creëren jullie voor de klant?

o Hoe onderscheiden jullie je van andere bedrijven?

Wat voor invloed hebben de werknemers op het product of service? (Kwaliteit,

imago, klantrelatie)

Hoe positioneert het bedrijf zich ten opzichte van de concurrentie? (Prijs &

Klantrelatie)

Wat is uw marketing strategie? Gebruikt u de uw maatschappelijke doelstelling in de

marketing, en zo ja hoe en in welke mate? Heeft het effect op de loyaliteit van de

klanten?

Stakeholders

Wat zijn de belangrijkste stakeholders?

Hoe gaat het bedrijf met deze stakeholders om? Wat voor relatie is er?

Ervaart u steun van de stakeholder?

Staan jullie open om kennis te delen? In welke mate ?

Indien overheid (gemeente/ provincie) een belangrijke stakeholder is, wat is de rol

van de overheid voor het bedrijf? Hoe zou u de relatie kenschetsen ?

Verdienmodel

Inkomsten

Waar komen de inkomsten vandaan? (verkoop producten/ service, bedrijfsbrede

subsidies, subsidies per individuele werknemer, giften, etc.)

Hoe hebben de inkomsten zich over de tijd ontwikkeld?

Wat betekent jullie model voor inkomsten wat betreft loonkostensubsidie, hoeveel is

dat in procenten van de omzet over 2013?

Krijgen jullie andere aan mensen gekoppelde subsidies zoals dagbesteding,

trajectgelden, etc. ? Hoeveel is dat in procenten van de omzet over 2013?

Krijgen jullie andere specifieke subsidies vanwege jullie model? Welke en hoeveel

in procenten van de omzet?

Zijn er ook inkomsten in de vorm van goederen of services?

Is er winst? Wat gebeurt er met de eventuele winst?

Uitgaven

Wat zijn de belangrijkste kosten voor het bedrijf?

Hebben jullie meerkosten vanwege jullie model ? Wat zijn daarvan de grootste drie

posten?

Weet u in welke mate de ontvangen subsidies opwegen tegen deze meerkosten ?

58

Algemeen

Wat betekent jullie business model voor de commerciële omzet, is het model een

voor- of een nadeel, en hoe groot is dat voor- of nadeel?

Op welke manier compenseren jullie je eventuele kostennadeel ?

Eind

Is het mogelijk om het jaarverslag te krijgen en uw business plan?

Bedank voor medewerking aan interview

Uitleg vervolg van dit onderzoek. Resultaten worden teruggekoppeld. In een

gezamenlijke werksessie zullen de resultaten besproken worden.

Heeft u verder nog vragen?

Appendix B: Overview participants’ interviews

Organisation Name Function

Biga groep Gerhard ten Hove Director

Opnieuw & Co Marcel van Goch Director

Balanz Facilitair (Part of

Vebego)

Niel Cortenraad Managing Director Public

Sector Vebego

Ben Theeuwen Director Balanz Facilitair

Emma Safetyshoes Peter Hobbelen Director

De Prael Arno Kooy Founder & Director

Van Hulley Jolijn Creutzberg Founder & Director

Driekant Henk Smit Founder

Buurtmarkt Breedeweg

(Part of Pluryn)

Eric Tonn Manager social enterprises

Pluryn

AutiTalent Paul Vermeer Founder & Director

Swink Paul Malschaert Founder & Director

Appendix C: Experts and entrepreneurs during the workshop

Participants Function

Marian Lambert Marketing expert (Former purchasing

director HEMA)

Tineke Kemp Venture Philanthropy Manager Anton

Jurgens Fonds

Aukje Smit Researcher inclusive labour market

Martine Breedveld Strategy UWV

Elco van Burg Associate Professor of Entrepreneurship and

Organisation

Mark Hillen Social Enteprise NL

Stefan Panhuijsen Social Enterprise NL

Marijt Regts Social Enterprise NL

Jolijn Creutzberg Entrepreneur, Van Hulley

Henk Smit Entrepreneur, Driekant

Paul Malschaert Entrepreneur, Swink

Paul Vermeer Entrepreneur, AutiTalent

59

Appendix D: Overview codes

General Employee Product/Service Stakeholders Revenue

Model

Type of

organisation

Number of

employees

Target group Important

stakeholders

Mix of

resources

Motivation

employee

Type of disadvantage Value

proposition

Sharing of

knowledge

Most important

costs

Type of work Customer

contact

Relationship

municipality

Additional

costs

Tasks/responsibilities Influence

employee on

service (Quality

& Image)

Relationship

remainder of

stakeholders

Business

model

advantage/

disadvantage

Selection of

employees

Marketing

strategy

Compensation

of

disadvantage

Ratio regular

employees/

disadvantaged

employees

Positioning

(Price &

Quality)

Profit

Motivation

Training

Risks

Labour productivity

Turnover

Reintegration

trajectories

1

The Work Integration Social Enterprise; an extensive literature review on

its characteristics and differences within various European countries

VU University

Amsterdam, 20-06-2014

Van den Broeke, L.T. (2541621)

Master Business Administration:

Entrepreneurship

Capita Selecta Assignment

Supervisor: Dr.ir. Elco van Burg

2

Preface

The literature review that you are about to read is best regarded as an extensive

appendix to the final thesis titled: 'Explaining the success of the Work Integration

Social Enterprise; a study after the key business model elements within the context of

the Netherlands'. This review will describe the general characteristics of the WISE.

Also, and more interestingly, it will explore the various governmental supportive

actions throughout Europe (and their corresponding impact) and see whether the

Netherlands can learn from these actions.

This review complements on the relevance of my main research. In order to make an

investigation on the specifics of the WISE within the Dutch landscape, it first needs to

be assumable that the Dutch case is unique in its kind. By investigating surrounding

countries I can discover whether international differences do exist. International

differences will make it assumable that the Dutch landscape also has its distinct

characteristics, making it important to dedicate a study on its specifics. Once the

distinctiveness of the Dutch situation is established it is worth diving deeper into the

specifics of the Dutch landscape to explore the WISE in detail and find out all about

its specifics.

3

Table of Contents Preface .................................................................................................................................................. 2 1. Introduction .................................................................................................................................. 4 2. Methodology ................................................................................................................................. 5 3. Research on the WISE................................................................................................................ 6 3.1 Italy ................................................................................................................................................ 8

3.1.1 Background information ............................................................................................... 8 3.1.2 Characteristics and legal framework ........................................................................ 9 3.1.3 Governmental support plans ........................................................................................ 10 3.1.4 Practical Implications .................................................................................................. 10

3.2 Germany .................................................................................................................................... 11 3.2.1 Background information ............................................................................................ 11 3.2.2 Characteristics and legal framework ..................................................................... 11 3.2.3 Governmental support plans .................................................................................... 12 3.2.4 Practical Implications .................................................................................................. 12

3.3 United Kingdom ..................................................................................................................... 12 3.3.1 Background information ............................................................................................ 12 3.3.2 Characteristics and legal framework ..................................................................... 13 3.3.3 Governmental support plans .................................................................................... 13 3.3.4 Practical Implications .................................................................................................. 14

4. Conclusion and recommendations .................................................................................... 15 Bibliography.................................................................................................................................... 18 Appendix .......................................................................................................................................... 21

4

1. Introduction

Unemployment amongst Europeans is, compared to the United States and Japan,

relatively high. Contributing factors to this high unemployment are for example the

extensive social security (Spear & Bidet, 2003). A major proportion of the

disadvantaged people in the US are involuntarily forced to make ends meet, whereas

their European counterparts have a relatively safe social security net that catches their

fall once they become disadvantaged themselves. What the continents have in

common is the fact that people who are unemployed due to labour inhibiting

disabilities are a difficult target group. These people not only demand significant

funds but they can also face great personal struggles. As they are often able to work

but are too costly to be employed, they often end up as a difficult group. The WISE is

intended to help this vulnerable group of people get reintegrated in the labour market.

Modes as productive activities or qualification trainings are installed to make the

reintegration possible. WISEs are operating in many areas, such as simple manual

labour and in the maintenance of public areas (Davister, Defourny & Gregoire, 2004).

The WISE is an organization characterized by its multitude of goals; it has social,

economic and socio-political goals (Nyssens, 2008). The social goals are the

employment opportunities that the WISE offers to people with a vulnerable position

in the labour market. The economic goals are related to the organizations’

entrepreneurial culture that allows them to be self-sustainable. Socio-political goals

are the goals that indicate the desire for social change through the influence on public

policies in the field of work integration (Nyssens, 2008).

Based on the existing body of literature this appendix will provide further insights on

the WISE. This review will answer the question: What can the Netherlands learn

from other European countries in order to stimulate the growth of the private sector

WISEs? The first paragraph covers a methodological section on how the literature was

gathered and how it was analysed correspondingly. After this is delineated there is a

section on the contents of the used literature in which the specifics of the WISE in

Germany, the United Kingdom, and Italy are discussed. This review will end with a

conclusion and recommendations.

5

2. Methodology

The main topics of this literature review are 1) the WISE in Europe (in particular

Italy, Germany and the UK) and 2) the characteristics of the WISE. The latter topic

can be found in chapter 2.2 of the thesis. Google Scholar is used in order to

systematically find and review relevant articles. When using the search term ‘work

integration social enterprise’ this resulted in 231 results in April 2014. When using

the search term ‘work integration social enterprises’ this resulted in a total of 657

results in April 2014. 29 articles were selected based on the title, abstract and

academic credibility. Afterwards these 29 articles were summarized and in total 13

articles proved to be relevant.

The snowball method is used in order to obtain additional relevant literature (Jalali &

Wohlin, 2012). This resulted in an additional number of 17 articles (See the appendix

for an overview of the articles found through Google Scholar and the snowball

method). Most English research dates back to the period of 2000 – 2004, which was

the point in time in which the WISE became the research subject of various institutes

and scholarly bodies. Given that both circumstances and knowledge are factors that

are affected by rapid transition it is possible that the resulting literature is no longer

completely up to date, implying that this is one limitation with which the research has

to work. This limitation is partly overcome by having email contact by foundations

that are currently investigating into the field of the WISE. Their knowledge regarding

the specific topic and the corresponding target markets makes it possible to partly

neglect the impediments of working with Google Scholar search results.

6

3. Research on the WISE

This section describes the arising of the WISE and the research done on it so far. It

was during the year 1991 that the Italian parliament adopted a law that paved the road

for the growth of ‘social co-operatives’. These co-operatives responded to the needs

that were not adequately met by public services (Borzaga and Santuari, 2001). From

this moment onwards, European researchers started to notice other similar

organizations as well, though they were labelled differently and exhibited themselves

in different entities. Researchers decided to dedicate more research on this type of

organization and developed a network called the EMES European Research network.

The fifteen European countries that at that time formed the European Union were

represented by different researchers (Borzaga & Defourny, 2001A). One of the

projects that the EMES network organized was the PERSE project. This project in

particular focused on the WISE and was supported by the European Union (Nyssens,

2006). A comparative analysis of the WISE was performed amongst 11 European

Countries. Remarkably, Denmark and the Netherlands, both countries known for their

robust social security net, did not participate with the study. In the end a total sample

of 160 varying WISE’s was investigated (European Commission, 2014). Next to the

PERSE project, the ELEXIES project was organized. The goal of this project was to

get an overview of the different types of the WISEs in the European countries. Again

the Netherlands did not participate (EMES Network, 2014).

Although European WISEs are similar in many aspects, there are also differences

amongst them and their corresponding countries. For example the number of WISEs

in a country, the activities in which they engage, and the form of the organisations are

all varying. In some countries the WISEs match the definition of a social enterprise

according to the EMES network (See table 1), whilst in others they do not meet all the

criteria (Borzaga & Defourny, 2001B). It is unclear why there is such a large

discrepancy in the number of WISEs amongst the different countries. This might for

example have to deal with the coherence of national policy and in particular if there is

specific legislation in the country (Spear & Bidet, 2003).

7

Economic aspect Social aspect

- Continued economic activity in goods and

services

- An explicit objective of benefits to the

community

- High degree of autonomy - An initiative created by a group of ordinary

people

- Significant level of risk - Power is not based on capital ownership

- Market-oriented enterprises - Nature of participation by those groups of

people affected by the activity

- A minimum number of workers - Limited distribution of profits

Table 1: The definition of a social enterprise according to the EMES network. From “The Emergence of Social Enterprise”. By Defourny, J. (2001), in Borzaga, C. and Defourny, J. (eds) The Emergence of Social Enterprise, London and New York: Routledge, 1–28.

The WISE in the Netherlands

As mentioned above the EMES network did not investigate the WISE in the

Netherlands and hence the literature on this topic is limited. Within the Netherlands

there are also WISEs, however they are not recognizable under the same denominator

or name as they are in some other countries (Smit, Van Genabeek & Klerkx, 2008).

Additionally – although there are no exact numbers available – the sector is relatively

small. The WISE gets compensated for the lower productivity of the employees and

some other additional costs. Other than that the governmental support is limited

(Smit, De Graaf, Verweij & Brouwer, 2011).

Comparison countries The following sections will in depth explain the legal forms from three countries

chosen on their relevance and the available literature. The chosen countries are Italy,

the United Kingdom and Germany. The different forms of WISEs are related to the

context of the country. Differences in context, labour market and economic situation

are often large and hence it is difficult to make a unilateral comparison. Although

these measures and experiences cannot simply be applied to other countries such as

the Netherlands, it is still interesting to see how other countries are coping with the

phenomenon of the WISE. The following sections will give a concise delineation on

the differences with respect to WISE-related legislation. Also it will give a closer look

at the various governmental support plans (such as grants and subsidies) that are

existent in the countries at stake. Once these two topics are concisely described it is

important to investigate the practical implications of these issues. For reasons of

8

compliance with the research sample this chapter limits itself to investigating private

sector initiatives.

3.1 Italy

3.1.1 Background information

It was in the late ‘70s and ‘80s that the failure of the welfare model in Italy became

clear. There was a stringent need for more social services. Various events resulted in

the unemployment of disadvantaged people (Borzaga & Santuari, 2000). One of the

failures was the shortcoming of Law 462/68, which was the quota system that

obligated firms to hire disadvantaged people. The quota was set too high and private

firms could therefore simply not comply with the newly set regulation (Loss, 2003).

The lack of public service offerings was first noticed by small groups of individuals

who recognised the existent gap between demand and supply of social services

(Borzaga & Santuari, 2000). These groups tried to bridge the gap by organizing new

organizational forms. It started with organizations that mainly helped the ‘new poor’;;

these were for example the elderly and drug addicts. Soon a large number of these

voluntarily organizations saw the light of day. These organizations were mainly

independent and did generally receive no support from the government (exceptions

were unique cases in which small governmental funds were granted). There was

however one large legal constraint that these organizations faced, they were not

allowed to start activities related to production or economical activities. Particularly

the organizations that helped the unemployed were constrained by this. It was for this

reason that these organizations started with the idea of using the legal form of a co-

operative for their organizations (Borzaga & Santuari, 2000). This had several

advantages, such as the allowance of participating in economical activities, and the

fact that they as an organization were not liable to tax on undistributed profits. It was

in 1991, that Law 381/91 – intended to recognize these social co-operatives – was

implemented. This new law removed some of the restriction of the traditional co-

operative (Borzaga & Santuari, 2000).

9

3.1.2 Characteristics and legal framework

According to Kerlin (2006) Italy was the first country in Europa that established such

legislation. Law 381/91 distinguishes two different types of social co-operatives: 1)

‘A’ co-operatives with the aim of delivering social, health and educational services

and 2) ‘B’ co-operatives with the objective of integrating disadvantaged people into

the labour market (Borzaga & Loss, 2002). These co-operatives are member-owned

and thus not privately owned (Costa, Andreaus, Carini & Capita, 2012). Requirements

are existent for either type. The members that can be involved are: volunteers,

workers and for example funders of the co-operatives, which are often the

municipalities (Borzaga & Santuari, 2000). In order to ensure that volunteers are seen

as a supplement rather than a substitution for normally remunerated employees the

percentage of non-paid voluntary workers may not exceed 50. In general, you see that

this number of volunteers is much lower than the 50%. ‘B’ co-operatives’ main goal

is to integrate disadvantaged people in a wider community. 30 % of the workers must

be disadvantaged in some way according to this legal form (Gosling, 2002). Those

groups benefiting from ‘B’ co-operatives include: “people with physical, mental and

sensory disabilities, former patients of psychiatric hospitals, people undergoing

psychiatric treatments, drug addicts, alcoholics, young people under 18 but of

working age with family difficulties and prisoners admitted to sentences which are

alternatives to imprisonment” (Law 381/91, article four as in Gosling, 2002). In

practice ‘B’ co-operatives also include other target groups of disadvantaged people

than the ones strictly prescribed by the law. For example they provide integration for

people who’ve been unemployed for a long time or elderly who otherwise have great

difficulties in finding a job position. It is interesting to see that in most cases half of

the income of ‘B’ co-operatives comes from contracts with the private sector and a

somewhat smaller proportion from the public sector (Gosling, 2002). The private

sector is officially obligated to hire disadvantaged people when employing more than

15 staff members. The private sector can make contracts with the ‘B’ co-operatives

and in this way obey to their obligations. This is probably one of the main reasons that

the private sector awards these contracts to the co-operatives (Gosling, 2002). In

2006 a new law is implemented, not only social co-operatives could set up this type of

social firm, but also for example non-profit organizations (Schwarz, 2011).

10

3.1.3 Governmental support plans

The ‘B’ social co-operative is in various ways supported by the government. This

section will describe the most important measures and policies that the government

has installed to pave the road for social co-operatives. First of all the social co-

operative is exempted from social security contributions. The co-operative benefits

from this measure if a minimum of 30% of its total number of employees belong to

the group of ‘recognised’ disadvantaged employees (Recognised under the

specification mentioned in subchapter 3.1.2.) (Loss, 2003). Second, social co-

operatives are advantaged through allowing them to establish contracts with public

domains without the issuance of a public invitation to tender. The only bylaw to this

exemption is that the total worth of the contract may not exceed the limits for public

offers set by the European Commission (Loss, 2003). Third, a ‘B’ social co-operative

can sometimes also get public contributions that cannot be seen as remunerations for

performed labour. Rather they are subsidies to cover for the additional cost of labour

of this particular labour group (whereas a normal employee would have an output of

100%, a disabled worker can only perform up to 70%, the resulting gap is filled with

the abovementioned subsidy). Whereas this form of contribution is a major source of

income within the Netherlands, it is of only marginal nature in Italy (Loss, 2003).

Lastly, social co-operatives have a major advantage by having a special value added

tax tariff of only 4% (Loss, 2003).

3.1.4 Practical Implications

The enforcement of this legal form has lead to several changes in the social co-

operatives sector. While first there were in 1993 only 287 social co-operatives of type

B, in 2000 there were already 1915 social co-operatives of type B. In 1993 in total

1675 disadvantaged people were employed by these co-operatives, this largely

increased to 13.569 in 2000 (Loss, 2003). Unfortunately, there is limited data

available for the number of social co-operatives after. Costa et al. (2012) however

found that this number of ‘B’ social co-operatives is largely increased to +- 6000.

11

3.2 Germany

3.2.1 Background information

While the unemployment in Germany has always been a large problem, it did not

further increase during the last few years. This stands in stark contrast to other

European Countries. However, the group of people with a distance to the labor market

remains large. In Germany there are various well-documented types of WISEs. These

are for example the municipality owned social enterprises, social enterprises

organized by small and local initiatives, and social enterprises organized by welfare

organizations (Schulz, 2003). These three mentioned business forms are for the

largest part dependent on government subsidies and furthermore are not allowed to

compete with other organizations (Schulz, 2003). Another type of WISE that is not

mentioned by Schulz are the so called ‘Integrationsfirmen’. Integrationsfirmen do get

their income for the largest part from the market. It is hence that this type of WISE

does fit to the research sample and will be discussed here.

3.2.2 Characteristics and legal framework Since 2001 Law SGB IX 132 gives a clear definition of the so-called

Integrationsfirmen. These firms are legally and economically independent companies

that employ people with disabilities. The Integrationsfirmen are firms in which at

least 25% of the people and a maximum of 50% of the people have disabilities

(Schwarz, 2011). The reasoning behind the minimum of 25% and maximum of 50%

is that the market position is not weakened, as the government argues that people with

a disadvantage integrate the best in an as regular employment status as possible (Smit

et al., 2008). Most Integrationsfirmen are able to generate 70 % of their income from

the revenues of the market within their first 2 or 3 years of operation. The majority of

the Integrationsfirmen operate in the service industry, but also a somewhat smaller

part in other traditional – labour intensive – industries (Smit et al., 2008). The legal

form of the Integrationsfirmen is called ‘Gemeinnützigkeit’. Only firms that benefit

the society can have this legal title. The profit should be reinvested to the organisation

and not the shareholder. The advantage of this legal form is that there is a sales tax of

a mere 7 %. However, on the downside these firms often face a difficult access to

capital (Smit et al., 2008).

12

3.2.3 Governmental support plans

The government gives support to the Integrationsfirmen in various forms. The firms

get support in the form of subsidies to compensate for issues such as the lower

productivity of the employees or other additional vulnerabilities that make a

‘Integrationsfirm’ less likely to be successfully competitive (Smit et al., 2008). For

regular firms there is a quota to integrate disadvantaged people in their firms. While

the public domain does obey to these regulations, many private firms do not obey to

this quota and hence get a penalty. This penalty is called the ‘Ausgleichsabgabe’

(Smit et al., 2008). The money that is generated through the Ausgleichsgabe is used to

financially support the Integrationsfirmen (Smit et al., 2008). This support includes

for example the funding for business consulting and the abovementioned allowance

on labour costs (Schwarz, 2011).

3.2.4 Practical Implications

There are expectations that law S§ 132 SGB IX significantly influenced the number

of Integrationsfirmen in Germany (Smit et al., 2008). The last number available was

700 (BAG-IF, 2014).

3.3 United Kingdom

3.3.1 Background information

Social enterprises have been around in the UK for a long time. It is estimated that the

number of social enterprises in the UK is now approximately 68.000 (Social

Enterprise Works, 2003). However, the UK government applies a different definition

to the firm we know as social enterprise. In the perspective of the UK government, a

firm can already be named a social enterprise if – next to the obvious social purposes

– a mere 25% of its revenues originate from the market (Social Enterprise Works,

2003). This low lower boundary is the most significant indication for the large

number of social enterprises. While the number of social enterprises in the UK is

enormous in comparison to other countries, the number of WISEs is remarkably low

within the UK (Social firms UK, 2003). Scholars differentiated six types of WISEs in

the UK: worker co-operatives, community businesses, social firms, intermediate

13

labour market organisations, quasi-state social enterprises and voluntary organisations

with employment initiatives. From these six types the social firms and worker co-

operatives are the forms that are most independent and privately organized (Spear,

2002). Although the number of social firms is still relatively low, the sub branch

shows signs of steady growth (Spear, 2002). The next section will describe the social

firm in detail.

3.3.2 Characteristics and legal framework

As written in the abovementioned paragraph the social firm is one of the existing sub-

types of WISE that exist in the UK (Smit et al., 2008). The social firm focuses on

people with a learning disability, mental health problems, prison record, experience of

drug or alcohol abuse and/or homelessness (Cunliffe, 2014). Most social firms are

independent organizations that are privately owned (Smit et al., 2008). It is nationally

defined that social firms are organizations where at least 25% of the total employees

belong to the target group. At least 50% of the revenues come from the sales of

products and services (Aiken, 2007). Furthermore there is economic empowerment

through the offering of employment contracts in which is stated that each employee

should get a wage correspondent to the market or at least equalling the legally defined

minimum (Aiken, 2007). Any profits are reinvested in the social firm (Cunliffe,

2014).

3.3.3 Governmental support plans

The government strongly believes in the importance of the social enterprise in the

UK. Therefore there is a national government policy for all types of social enterprises.

In 2006 the office of the third sector released an action plan to support social

enterprises. The main goal of this action plan is to create the right conditions for

social enterprises and subsequently increase the number of social enterprises. There is

no specific legislation for social firms, even though the social firms do sometimes

also have needs for specific measures (Smit et al., 2008). Although there are no

specific measures, there are still different options that social firms can use. For

example there are options for advice and support. Furthermore a social firm can

decide to use the legal form that is called the Community Interest Company (CIC).

This is a legal form for organizations that use their profits and capital for the common

14

good. The advantage of this legal form is the set up of the business and the flexibility

that comes with this form. It is remarkable that social firms do usually got not

compensated for the reduced labor productivity (Smit et al., 2008).

3.3.4 Practical Implications

The social firm sector is changing quickly. The latest number of social firms dates

back to 2010. According to Social firms UK there were in 2010 in total 99 firms and

82 emerging social firms. Emerging social firms are firms that do not yet belong to

the social firms defined by the UK, but are planning to become a social enterprise

(Cunliffe, 2014). Furthermore there are also employability social firms. These are

firms that focus more on providing work experience and developing employability

skills. This can help the person to find employment elsewhere. Although Social Firms

UK has not carried out research about this number, they estimate that there are many

more of this type than employment social firms (Cunliffe, 2014).

15

4. Conclusion and recommendations

Based on the review on the WISE on Italy, the UK and Germany the following table

summarizes the most important findings from the three countries.

Legislation/ Requirements Governmental

Support

Number of

organizations

Italy (‘B’ social

co-operatives)

- Law 381/91

- Minimum of 30 % of the

employees should be

disadvantaged people

- A maximum of 50 % is

allowed to work as

volunteer in the

organisation

- Exempted from

social security

contributions

- Precedence over

tenders

- Subsidies (such as

wage

compensation)

- Tax tariff of only

4%

- 6000 ‘B’ social

co-operatives

(2012)

Germany

(Integrations-

firmen)

- Law SGB IX 132/ 135

- Gemeinnützigkeit

- Minimum of 25 % and a

maximum of 50 % should

be disadvantaged people

- Ausgleichsabgabe

(financial support

to support

competitive

position)

- Sales tax 7%

- 700

Integrationsfirmen

(2014)

UK (Social

firms)

- Community Interest

Company

- Minimum of 25 % of the

employees should be

disadvantaged

- Minimum of 50 % of the

revenues should come

from the market

- Advice and

(financial) support

- 99 social firms

(2010)

- 82 emerging

social firms

(2010)

Table 2: Overview ‘B’ social co-operatives, Integrationsfirmen and social firms. Based on the literature review in section 3.1, 3.2 and 3.3.

Although this study has occasionally faced the difficulty of having to work with out-

dated literature, it has tried to delineate the situation per country regarding the WISE

as accurate as possible. Whilst taking into consideration that most of the findings are

16

very context-specific – and hence need to be taken care of with caution – there is the

possibility to draw several valuable lessons from the resulting overview. This section

will describe some of the discoveries that could be beneficial to the overall situation

of the WISE in the Netherlands.

One of the first points of improvement lies in control of the central and local

governments. Currently governments already prioritize on the private sector when

announcing a request for proposal. Within these cases, in which the government

assigns large or small assignments to local instances, resides a lot of potential for the

WISE. Till now, governing bodies predominantly focus on the cost side of tender

offers. The party with the tender accompanied with the lowest cost may perform the

task. Moving away from a system focussing on solely cost price towards a system that

also evaluates societal costs is a shift that could bring great potential for the WISE.

Whereas the WISE often cannot compete on direct costs it proves to be a powerful

player when one is also considering the societal gains that flow from an assignment.

The higher direct costs that are often accompanied by the assignment of a WISE are

greatly offset by the indirect social gains. If governments chose to have an all-

including cost measure they will in the end resort in the assignment of more WISEs to

tasks that are now performed by firms that do not provide the same societal gains. By

employing this – similar to the Italian – way of thinking WISEs will find themselves

in a far better position than they currently are.

The second recommendation elaborates upon the Dutch ‘participatiewet’;; a law

instigating a strict quota on the minimum number of disadvantaged people employed

by a firm. The corporate world is strongly opposing this quota claiming it impossible

to create long-term employment opportunities for these disadvantaged people. The

problems resides in the fact that corporations do not (yet) have the capacity to create

long lasting positions specially dedicated to the employment of this vulnerable group.

It should therefore be made possible to also include disadvantaged workers contracted

through subcontractors – for temporary assignment only – into the required quota. By

doing so it would be easier for corporations to abide the ‘participatiewet’. Also

WISEs that now find difficulties in subcontracting their personnel are given a

substantial helping hand that should help them – and their work pool – in getting a

better competitive position. In the end this should result in more customers for the

17

WISE, herewith creating the opportunity to help disadvantaged people that otherwise

would be left in the cold as corporations are unwilling to create the necessary

permanent working places. Like described before in Italy a large number of the ‘B’

social co-operatives get their clients through this quota (Gosling, 2002).

The last recommendation targets the lacking of a clear definition of the WISE within

the Dutch landscape. What one can see is that in the other discussed countries the

WISE much clearer is defined. Currently social firms face significant uncertainty

when determining what business forms exactly fall under the term WISE.

Correspondingly there is uncertainty concerning the available governmental support,

making it less attractive to make the step to get fully involved. By introducing a clear

legal definition of the WISE entrepreneurs will no longer be facing this uncertainty

and have a clear overview of what kind of assistance they are entitled to.

The abovementioned recommendations should make it possible to give the WISE a

permanent strong position within the Dutch landscape without incurring substantial

costs for the current domain of businesses. The costs that are inevitable are largely

offset by the resulting societal gains. These gains in return represent savings on

‘costs’ that would otherwise arise from helping this target group through the

traditional governmental channels.

18

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Defourny, J. (2001) ‘From Third Sector to Social Enterprise’, in Borzaga, C. and Defourny, J. (eds) The Emergence of Social Enterprise, London and New York: Routledge, 1–28.

Defourny, J. & Nyssens, M. (2010). Social enterprise in Europe: At the crossroads of market, public policies and third sector. Policy and Society, 29(3), 231–242.

Díaz-Foncea, M. & Marcuello, C. (2012). Social enterprises and social markets: models and new trends. Service Business, 6(1), 61–83.

European Commission (2014). PERSE - The Socio-Economic Performance of Social Enterprises in the Field of Integration by Work. Retrieved from: http://ec.europa.eu/research/social-sciences/projects/152_en.html

19

EMES Network (2014). Retrieved from: http://www.emes.net/what-we- do/publications/working-papers/?no_cache=1

Gardin, L. (2006). ‘A Variety of resource mixes inside social enterprises’. In M. Nyssens (Ed.), Social enterprise—at the crossroads of market, public policies and civil society. London/New York: Routledge, 111-136.

Gosling, P. (2002). Social co-operatives in Italy: lessons for UK. Retrieved from: http://socialeconomyaz.org/wp-content/uploads/2011/06/ SocialCooperativesInItaly.pdf

Gruber, C. (2003). National profiles of work integration social enterprises: Austria. EMES Working Paper.

Hara, P. O. & Shaughnessy, M. O. (2004). Work Integration Social Enterprises in Ireland. EMES Working Paper.

Jalali, S. & Wohlin., C. (2012). Systematic Literature Studies: Database Searches vs. Backward Snowballing. Proceedings of the ACM-IEEE international symposium on Empirical software engineering and measurement.

Kerlin, J. (2006). Social Enterprise in the United States and Europe: Understanding and Learning from the Differences. Voluntas: International Journal of Voluntary and Nonprofit Organizations, 17(3), 246–262.

Loss, M. (2003). National profiles of work integration social enterprises: Italy. EMES Working Paper.

Nyssens, M. (2006). Social Enterprise : At the Crossroads of Market, Public Policies and Civil Society . London/New York: Routledge.

Nyssens M., (2008). ‘The Third Sector and the social inclusion agenda: the role of social enterprises in the field of work integration’, in: The Third Sector in Europe: Trends and Prospects, Edited by Stephen P Osborne, Routledge, London, 87 – 101.

Schulz, A. (2003). National profiles of work integration social enterprises: Germany. EMES Working Paper.

Schwarz, G. (2011, May). Social Firms in Europe. Retrieved from: http://www.dinf.ne.jp/doc/english/resource/employment/Social_Firms_in_Eur ope.html

Spear, R. & Bidet, E. (2003). The role of social enterprise in European labour markets. EMES Working Paper.

Spear, R. & Bidet, E. (2005). Social enterprise for work integration in 12 european countries: a descriptive analysis. Annals of Public and Cooperative Economics, 76, 195–231.

20

Smit, A., De Graaf, B., Verweij, E. & Brouwer, P. (2011). Sociale ondernemingen en werknemers met een arbeidsbeperking. TNO-Report.

Smit, A., Van Genabeek, J. & Klerkx, M. (2008). Europese ervaringen met sociale economie Werk voor gehandicapten en langdurig werklozen. TNO-Report.

Sociaal Ondernemen: Passie en Poen (2013). VSB Fonds & Start Foundation

Social enterprise Works (2013). A Report for the West of England Local Enterprise Partnership. Retrieved from: http://www.socialenterpriseworks.org/wp- content/uploads/2013/05/WoE-SE-mapping-report.pdf

Email contact about Social firms in the UK with: Di Cunliffe, Policy and Services Officer, Social firms UK

21

Appendix

Overview sources found through Google Scholar search and snowball method

Sources used for this review are blue

Sources used for the literature review on the WISE in the thesis are black

Sources used for this review and the literature review of the thesis are orange

Articles systematically found through

Google Scholar search

Articles found through snowball method

Borzaga, C., & Defourny,J. (2001B). Conclusions: Social enterprise in Europe, a diversity of initiatives and prospects, 350–370.

Aiken, M. (2007). What is the role of social enterprise in finding, creating and maintaining employment for disadvantaged groups? Retrieved from: http://webarchive.nationalarchives.gov.uk/+/http:/www.cabinetoffice.gov.uk/ media/cabinetoffice/third_sector/assets/social_enterprise_employment.pdf

Borzaga, C. & Santuari, A. (2000). Social enterprises in Italy. The experience of social co-operatives.

A Report for the West of England Local Enterprise Partnership. Retrieved from Social Enterprise Works website: http://www.socialenterpriseworks.org/wp-content/uploads/2013/05/WoE-SE-mapping-report.pdf

Borzaga, C. and Santuari, A. (2001) ‘Italy: from Traditional Co-operatives to Innovative Social Enterprises’, in Borzaga, C. and Defourny, J. (eds) The Emergence of Social Enterprise, London and New York: Routledge, 166–81.

Bundesarbeitsgemeinschaft Integrationsfirmen (BAG IF). (2014). Retrieved from: http://www.bag-if.de

Cooney, K. (2011). An Exploratory Study of Social Purpose Business Models in the United States. Nonprofit and Voluntary Sector Quarterly, 40(1), 185–196.

Borzaga, C. & Defourny, J. (eds) (2001A) The Emergence of Social Enterprise, London and New York: Routledge.

Defourny, J., & Nyssens, M. (2010). Social enterprise in Europe: At the crossroads of market, public policies and third sector. Policy and Society, 29(3), 231–242.

Carini C., Costa E., Carpita M., Andreaus M., (2012), The Italian Social Cooperatives in 2008: A Portrait Using Descriptive and Principal Component Analysis

Díaz-Foncea, M., & Marcuello, C. (2012). Social enterprises and social markets: models and new trends. Service Business, 6(1), 61–83.

Davister, C., Defourny, J. & Grégoire, O. (2004), WISE Integration Social Enterprises in the European Union: an Overview of Existing Models, EMES Working Paper WP no. 04/04, 29p

Gruber, C. (2003). National profiles of work integration social enterprises: Austria.

Defourny, J. (2001) ‘From Third Sector to Social Enterprise’, in Borzaga, C. and Defourny, J. (eds) The Emergence of Social Enterprise, London and New York: Routledge, 1–28.

Hara, P. O., & Shaughnessy, M. O. (2004). Work Integration Social Enterprises in Ireland.

European Commission (2014). PERSE - The Socio-Economic Performance of Social Enterprises in the Field of Integration by Work. Retrieved from: http://ec.europa.eu/research/social-sciences/projects/152_en.html

Kerlin, J. (2006). Social Enterprise in the United States and Europe: Understanding and Learning from the Differences. VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations, 17(3), 246–262.

EMES network (2014). Retrieved from: http://www.emes.net/what-we-do/publications/working-papers/?no_cache=1

Nyssens, M. (2006). Social Enterprise : At the Crossroads of Market, Public Policies and Civil

Gardin, L. (2006). ‘A Variety of resource mixes inside social enterprises’. In M. Nyssens (Ed.), Social enterprise—at the

22

Society . London/New York:Routledge.

crossroads of market, public policies and civil society (pp. 111–136). London/New York: Routledge.

Schulz, A. (2003). National profiles of work integration social enterprises: Germany.

Gosling, P. (2002). Social co-operatives in Italy: lessons for UK. Retrieved from: http://socialeconomyaz.org/wp-content/uploads/2011/06/ SocialCooperativesInItaly.pdf

Spear, R., & Bidet, E. (2003). The role of social enterprise in European labour markets.

Loss, M. (2003). National profiles of work integration social enterprises: Italy

Spear, R. & Bidet, E. (2005). Social enterprise for work integration in 12 European countries: a descriptive analysis. Annals of Public and Cooperative Economics, 76: 195–231.

Nyssens M., (2008). The Third Sector and the social inclusion agenda: the role of social enterprises in the field of work integration, in: The Third Sector in Europe: Trends and Prospects, Edited by Stephen P Osborne, Routledge, London, 87 – 101.

Schwarz, G. (2011, May). Social Firms in Europe. Retrieved from: http://www.dinf.ne.jp/doc/english/resource/em ployment/Social_Firms_in_Europe.html

Smit, A., De Graaf, B., Verweij, E., & Brouwer, P. (2011). Sociale ondernemingen en werknemers met een arbeidsbeperking. TNO-Report.

Smit, A., Van Genabeek, J., & Klerkx, M. (2008). Europese

ervaringen met sociale economie Werk voor gehandicapten en langdurig werklozen. TNO-Report.

Sociaal Ondernemen: Passie en Poen (2013). VSB Fonds &

Start Foundation