Paul Tracey is Lecturer in Social and Community Enterprise at the Judge Institute of Management, Cambridge University. He has also held posts at the School of Geography, Oxford University and the Centre for Entrepreneurship at Newcastle University. His research interests include entrepreneurship, competitiveness and innovation, and the social economy. His current work is concerned with cross-sector partnerships between corporations and third sectors organizations, and the extent to which these partnerships provide an effective mechanism for regeneration and encouraging wealth creation.
Nelson Phillips is Professor of Strategy and Organizational Behaviour at the Business School, Imperial College London. His research interests include knowledge management, technology strategy, interorganizational collaboration, and international entrepreneurship. He has published over 40 academic articles and book chapters including articles in the Academy of Management Journal, Academy of Management Review, Management Science, Sloan Management Review, Organization Science, Journal of Management Studies, Journal of Business Ethics, and Organization Studies. He has also written a book with Cynthia Hardy, Discourse Analysis, which was published in 2002. Professor Phillips obtained a PhD in organizational analysis in 1995 from the University of Alberta.
Helen Haugh is Course Director for the postgraduate Masters degree in Community Enterprise at the Judge Instiute of Management, the University of Cambridge’s Business School. Her research interests include entrepreneurship, management and strategy in new and established organizations in the for-profit and not for profit sectors, as well as business ethics and corporate social responsibility, Her research has been published in the Journal of Small Business Management, Community Work and the Family, and Small Business and Enterprise Development.
are distinguished from other third sector organizations by their generation of income through trading, rather than philanthropy and/or government subsidy, to finance their social goals. They also include democratic governance structures which allow members of the community or constituency the serve to participate in the management of the organization. Partnerships between corporations and community enterprises therefore raise the possibility of corporations moving beyond philanthropic donations toward a more sustainable form of intervention involving long-term commitments to communities. At the same time they change substantively the nature of any collaboration by allowing relationships to proceed on the basis of mutual advantage, thereby broadening their appeal and scope. In doing so, partnerships build capacity and enfranchise communities in a way that avoids the paternalism that has traditionally characterized relationships between corporations and voluntary sector organizations. Power relations are transformed because partners are seen as sources of valuable assets, knowledge and expertise, rather than recipients of patronage of charity.
KEY WORDS: community enterprise, social enterprise, corporate legitimacy, corporate social responsibility, local accountability, partnership, resource dependency, stakeholder engagement
Introduction
While many writers have argued for the importance of corporate social responsibility (CSR), there has been very little scholarship that considers how corporations should manage their CSR activites in order to use their resources to deliver the greatest improvement in social outcomes. This is surprising given the substantial sums that are being invested by corporations in CSR, the potential benefits for both corporations and local stakeholders, the rising levels of expectation surrounding CSR and its potential to encourage economic regeneration, and the level of effort devoted to persuading corporations to consider themselves citizens’ with rights and responsibilities in relation to a range of stakeholders. It is perhaps even more surprising given that CSR is all too often poorly directed, unfocused, and ineffectual in generating social benefits (Alexander, 1997).
We believe that these difficulties stem partly from corporations’ continued reliance on philanthropy as the dominant mode for delivering CSR initiatives which fall outside the boundaries or core operations of the firm, and which in practice consists mainly of uncoordinated and piecemeal donations to ‘worthy’ local causes (Porrter and Kramer, 2002). This is symptomatic of the fact that these kinds of CSR activity are regarded as peripheral in many companies, with the relevant departments and teams operating quite separately from other management functions (Brammer and Millington, 2003). Howerver, much of the blame can also be attributed to the voluntary-sector organizations through which corporations channel resources. CSR is usually ‘sub-contracted’ to nonprofit organizations in the third sector which are responsible for delivering the social benefits as corporations are unlikely to have (or are unwilling to commit) the necessary resources or expertise in-house. These organizations are often viewed as recipients of charity: they are rarely considered as equal partners or as sources of entrepreneurship, knowledge and innovative ways of managing and organising.
In this article, we argue that the emergence of a new form of organization-community enterprise-provides an alternative mechanism for corporations to behave in socially responsible ways. Community enterprises are distinguished from other third sector organizations by their generation of income through trading, rather than philanthropy and/or government subsidy, to finance their social goals. In this sense, there are clear parallels to be drawn with the social enterprise movement the is now well developed in the US, the UK and elsewhere. Unlike most social enterprises, however, community enterprises are multifunctional organisations engaged in several different kinds of initiative designed to contribute to local regeneration in a holistic way, and include democratic governance structures which allow members of community or constituency they serve to participate in the management of the organization (Pearce, 2003). A well-known UK example is Westway Development Trust, a large community enterprise which uses the surpluses it generates from renting workspace to local businesses and running a sports centre to invest in a range of community-focused services including education and training opportunities for local people, and supporting local enterprise (www.westway.org).
Partnerships with community enterprises thus raise the possibility of corporations moving beyond philanthropic donations, toward a more sustainable form of intervention which involves long-term commitments to communities. At the same time they change substantively the nature of any collaboration by allowing relationships to proceed on the basis of mutual advantage, thereby broadening their appeal and scope. In doing so, these partnerships build capacity and enfranchise communities in a way that avoids the paternalism that has traditionally characterized relationships between corporations and voluntary sector organizations.
We focus in this article on the UK experience. There are several reasons for this. Perhaps most importantly, the UK’s social economy in general, and community-based organizations in particular, have developed in quite distinctive ways in recent years. Also, the development of community enterprise has been strongly supported by the UK government. This has led to the rapid growth of the sector, and to the emergence of a cadre of ‘community entrepreneurs’ with a distinctive set of skills and competencies. Moreover, these organizations have been the subject of much policy-focused research, and yet they remain largely ignored by academic commentators. Despite our UK focus, however, we believe that our arguments have important implications for corporate-community relations across the developed and developing worlds-the difficulties of managing CSR activities are shared by corporations regardless of geography, and community enterprise is an organizational form that is applicable wherever corporations are working to achieve CSR outcomes.
In developing our arguments, we make three contributions to current thinking about CSR. First, we outline the characteristics of community enterprise, which is playing an increasingly prominent role in local regeneration in the UK Community enterprise is little known outside of the British context, and this article seeks to introduce the interesting developments in the UK to a wider audience. Second, we describe the main challenges faced by corporations in their efforts to improve their citizenship behavior, an issue largely neglected in the academic literature where the focus of attention to date has been the extent to which corporations should be socially responsible (i.e. the ethics of CSR). As this debate is now well developed, it is important that researchers begin to widen their discussions to include the pressing realities of managing CSR activities. Finally, we propose a new mode of CSR governance with the potential to build relationships between corporations and their local stakeholders, and to improve the delivery of CSR outcomes. We contend that this approach has the potential to address the problems of effectiveness and accountability that plague much CSR activity.
The article proceeds in the following manner. In the next section, we outline the changing nature of CSR and the pressures placed upon corporations to encourage stakeholder engagement and behave in socially responsible ways. We then discuss the dominant structures corporations currently use to govern CSR activities, noting their limitations and short-term focus. Following on from this, we describe the emergence of community enterprise as a distinctive organizational form in the UK. Finally, we