Promotion of Social Entrepreneurship Through Public Services in the Madrid Region: Succesful Aspects

Fernández, M. Teresa Fernández; Martínez, Ana Fernández-Ardavín; Herrero, David Berenguer Article Promotion of Social Entrepreneurship Through Public Services in the Madrid Region: Succesful Aspects Amfiteatru Economic Journal Provided in Cooperation with: The Bucharest University of Economic Studies Suggested Citation: Fernández, M. Teresa Fernández; Martínez, Ana Fernández-Ardavín; Herrero, David Berenguer (2012) : Promotion of Social Entrepreneurship Through Public Services in the Madrid Region: Succesful Aspects, Amfiteatru Economic Journal, ISSN 2247-9104, The Bucharest University of Economic Studies, Bucharest, Vol. 14, Iss. Special No. 6, pp. 774-785 This Version is available at: https://hdl.handle.net/10419/168772 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. http://creativecommons.org/licenses/by/4.0/ AE Promotion of Social Entrepreneurship Through Public Services in the Madrid Region: Succesful Aspects Amfiteatru Economic 774 PROMOTION OF SOCIAL ENTREPRENEURSHIP THROUGH PUBLIC SERVICES IN THE MADRID REGION: SUCCESFUL ASPECTS M. Teresa Fernández Fernández 1, Ana Fernández-Ardavín Martínez 2 and David Berenguer Herrero 3 1)2) Rey Juan Carlos University, Madrid, Spain 3) Vicálvaro Business Incubator, Madrid, Spain Abstract This article analyzes the promotion of social entrepreneurship through the delivery of services in public business incubators in the Madrid region. The research is innovative since the implication of the public sector in boosting social entrepreneurship is quite new in Spain. Methodology starts with a literature revision of the factors conforming social entrepreneurship and focuses on networking. Then, social entrepreneurship presence and its promotion is analyzed both in the practices and services provided by the Madrid Development Agency in its “Madrid Emprende” incubation program and also through a survey addressed to the 113 firms hosted in its network of business incubators. Results of the survey show that social entrepreneurship is present as the main purpose of their activity in a majority of the firms, in their social products and services, in their social legal form supported by the public network and in some forms of public-private partnership promoted by the Madrid Business Incubators Network. Services provided by the public network show the quality, the added value and the know-how of the practices of the public program and have an impact in the efficient performance of the firms regarding social entrepreneurship and in the public-private alliances established for some social purposes. Keywords: social entrepreneurship, service innovation, public-private networks JEL Classification: L26, H4, L84 Introduction The profound transformations of recent decades and the outbreak of the economic crisis are shaking the foundations of the Welfare State and questioning the ability of traditional systems institutions to give a solution to the many economic and social challenges. It has provoked the emergence of the social economy which gathers concepts such as social entrepreneurship, social firms or social innovation. Specifically, during the last years, the concept of social entrepreneurship has quickly gained importance both in the economic  Corresponding author, M. Teresa Fernández Fernández – teresa.fe[email protected] Contribution of Services to Economic Development AE Vol. XIV • Special No. 6 • November 2012 775 literature and in the practice (Steyaert and Hjorth, 2006; Brooks, 2008) to show social entrepreneurs’ strategies for meeting social problems (Bornstein, 2004; Yunus, (2006); creating social value (Di Domenico, Haugh and Tracey, 2010; Kosgaard and Anderson 2011); driving the social change (Miller and Wesley II, 2010; Nicholls, 2006; 2010; Steyaert and Hjorth, 2006); establishing a priorization of the social issues above the economic ones (Dey and Steyaert, 2010; Mair and Marti, 2006; Nicholls, 2006; Thompson, Alvi and Less, 2000; Urbano, Toledano and Ribeiro Soriano, 2010); finding new sources of profitability and competitiveness for private enterprises through new business models (Mutis and Ricart, 2008) and helping the public sector to address the problems arising in nowadays Western societies in a context of crisis where public services must maintain a delicate balance between efficacy (good services) and efficiency (what the ideal size of the state should be and ways to support it (Jiménez Escobar and Morales Gutiérrez, 2011). An effective public-private service provision through social entrepreneurship can be a solution in this context of crisis. The aim of this paper is to test, as a main hypothesis, if social entrepreneurship can be found through the delivery of public services in public owned business incubators in the Madrid region as a first hypothesis and if public-private alliances contribute to a better performance of social entrepreneurship in this region as a second hypothesis. The networking approach is chosen for the benefits it has in terms of innovation, economies of scale and synergies. 1. Social entrepreneurship: a networking approach Socially oriented business models can generate sources of innovation with an economic value and impact, based on co-creation and strategic networking, which are main features of services as activities provided and consumed in interaction. Marti and Mair, (2008, pp.40), define social entrepreneurship within the network theory as a “process resulting from the continous interaction between social entrepreneurs and the context in which they and their activities are embedded”. Their interactions are central for social entrepreneurship (Zahra et al., 2009).Entrepreneurial networks provide frameworks for facilitating innovation and the development of regional entrepreneurial environments (Drakopoulou and Anderson, 2007) and permit to gather several actors in co-operation sharing information and knowledge (Birley, 1985; Witt, Schroeter and Merz, 2008). Networks are efficient tools for catalyzing change and gaining support for their mission (Alvord, Brown and Letts, 2004). “The image of social entrepreneurship can then be perceived as the successive enactment of social opportunities continuously produced by the connections established through the entrepreneurs’ personal network” (Toledano, 2011, 19). Social entrepreneurship in its networking approach of connection and interrelations has been defined by some part of the literature as the “fourth sector”, gathering the public, private and social sectors which develop social innovation activities (Jiménez Escobar and Morales Gutiérrez, 2011) as an effective way to solve the inabilities of the public sector to meet the changing and growing social needs, to find new profitable activities for private enterprises, and to give the adequate importance to the society and a fulfill it demands. Social needs are understood as collective needs, which, sometimes, achieve the dimension of social problems (Steyaer and Hjorth, 2006; Johanisson and Olaison, 2007). It involves attempts to resolve the social issues through social innovation and the creation social values AE Promotion of Social Entrepreneurship Through Public Services in the Madrid Region: Succesful Aspects Amfiteatru Economic 776 (Dees, 2001; Diochon and Anderson, 2010; Dorado, 2006). There is where social opportunities emerge for social entrepreneurship (Borstein, 2004). 2. Social entrepreneurship through public-private networking in business incubators: the case of Madrid Emprende Development agency Madrid Emprende is the first Economic Development Agency of the City Council of Madrid. It was created in 2005 to tackle a wide variety of objectives and the desire to organize and boost a technologically advanced, diversified and competitive productive system in a context of economic promotion, internationalization and balance of the City objectives. Madrid Emprende has been distinguished with the best national and international practices and endowed with legal competences and is allowed to develop municipal policies. Since its creation, Madrid Emprende's actions have focused firstly on achieving widespread recognition of the figure of the entrepreneur as a main element in economic dynamism and the creation of employment and, secondly, on the generation of an environment that favours small business initiative. The objective has been to influence and mobilise all public and private entities which may have an impact on business initiative in favour of it, and achieve coordination between their actions and those of the Agency. The aim of the Madrid Emprende strategic plan is to create high quality employment through the promotion of business initiative, taking into account Madrid's strengths in this field: how highly qualified its citizens are professionally, the wealth and stability of its productive structure, the quality of life and entrepreneurial spirit -Madrid is the Autonomous Community of Spain where most businesses are set up. In this aspect, the general strategy for intervention revolves around a concept known as the "Entrepreneurial Ecosystem", shown in figure 1. Figure no. 1: The Entrepreneurial Ecosystem Source: IESE Business School 2009 "Entrepreneurship and business management" is Madrid Emprende’s main area of action (see table nr.1). In this field, Madrid Emprende carries out actions related to promoting entrepreneurial culture; boosting innovation, investment and business financing, and the Contribution of Services to Economic Development AE Vol. XIV • Special No. 6 • November 2012 777 development, attraction and retention of entrepreneurial talent. One of the most notable actions has been the implementation of the Madrid Emprende Business Incubator Network. Table no. 1: Actions taken by Madrid Emprende (2008-2011) % Entrepreneurship and business management 69% Infrastructures 19% Internationalisation 12% Source: Madrid Emprende Economic Development Agency, 2008. 2.1 The Madrid Emprende Business Incubator Network The creation of Madrid Business Incubator Network is one of several strategies and actions taken by Madrid Emprende to encourage entrepreneurial talent and innovative culture in the City in order to improve the advantages of Madrid for the business performance, by rolling out a framework of spaces specifically designed to support new initiatives. The project was launched by Madrid Emprende in 2005 and currently includes seven centres strategically distributed throughout the south/south-eastern side of the city according to the principle of territorial rebalance: San Blas, Vicálvaro, Villaverde, Puente de Vallecas, Carabanchel, Moratalaz and Móstoles (see table nr.2). These centres offer accommodation, mentoring, business advice and ongoing training for pre-incubated, incubated and post-incubated projects for supporting the development, consolidation and expansion of businesses. Along these lines, activities are organised for networking and boosting employment amongst the companies incubated in the Network (for a description of services provided in business incubators see Fernández Fernández, Blanco Jiménez and Cuadrado Roura, 2012). Table no. 2: Centers of the Network in operation and their main orientation CENTER SECTORAL/SOCIAL GUIDANCE Carabanchel Social economy Moratalaz Design and related industries Móstoles University entrepreneurs Puente de Vallecas Textiles/fashion San Blas Information and Communications Technology (ICT) Vicálvaro University entrepreneurs Villaverde Dependence and social integration Source: Madrid Emprende Economic Development Agency, 2010 In 2010 Madrid Emprende was awarded with the “Business and Innovation Center” (BIC) status by the European Bic Network, which validates the business promotion model developed in the Business Incubator Network based on quality standards set by the European Commission. This has given the Madrid Emprende Business Incubator Network the opportunity to work with the best incubators in Europe, with a view to establishing transnational synergies between entrepreneurs and undertaking projects within the framework of the European Union. There are four different levels of action in the Business Incubator Network: AE Promotion of Social Entrepreneurship Through Public Services in the Madrid Region: Succesful Aspects Amfiteatru Economic 778  Support to entrepreneurs and business owners from Madrid. It implies the provision of consultancy services related to business management, the implementation of administrative procedures, the availability of government aid. There are also training seminars in different aspects related to the business activity. It also provides with electronic processing services for setting up limited companies.  Pre-incubation program with the assistance of experts and seminars and allowing access to a work station and co-working spaces as well as to the use of communal areas in the centers of the Network (meeting rooms, training classrooms). All of it is provided in a networking scheme with complementary activities and events.  Incubation program providing business accommodation in one office of the business incubators.  Post-incubation program by keeping in touch with the enterprises graduated in the business incubator for further assistance, networking maintenance, seminars and events. The management of Madrid Emprende's incubators responds to a public-private collaboration model, within which the municipal agency builds and administers infrastructures. The Incubator Network's development model therefore fits perfectly in a triple helix model (Etzkowitz, 1997) in which Public Administration, knowledge institutions and companies interact to undertake economic development projects which result in an increase of wealth and employment. 3. Social entrepreneurship in Madrid Emprende Business Incubators Network To address social entrepreneurship in Madrid Emprende Business Incubators we have focused on three aspects: the social content of the incubated enterprises, its social legal form as business firms, and finally some forms of effective public-private partnerships (items 4.1, 4.2 and 4.3 respectively). 3.1 Firms of social content: some stylized facts A survey to firms pertaining to Madrid Emprende Business Incubators Network has been carried out to study their performance as social entrepreneurs. The survey has been addressed to all those enterprises (113) and 24 firms have fulfilled the survey, that is, the rate of response has been 22%. Table nr. 3 shows that 70.4% Of the firms of the survey have a social content in one or more of the following aspects: in the main purpose of the firm, in their business model, or in the networking alliances. These firms are mostly service ones according to the NACE classification: other business services (29.4%), education (17.6%), social services without lodgment (11.7%), other personal services, computer services, audiovisual services, employment services, building and gardening services (5.9% each one) and only a 5.9% corresponds to the textile industry. Their social entrepreneurship motivation is mainly to get a profit (75%) by creating a social value (68.8%). This is an important finding, since up to now, social matters where seen as a task of the public sector. Social entrepreneurs see social contents as a source of profitability Contribution of Services to Economic Development AE Vol. XIV • Special No. 6 • November 2012 779 in the very economic sense with a potential for creating social value, meeting social needs and contributing to social change, in order to achieve a sustainable and inclusive growth. The economic crisis and the consequent welfare state crisis are conducting these entrepreneurs to see a business opportunity in services traditionally provided by the public sector. Table no. 3: Social entrepreneurship patterns in Madrid Emprende Business Incubators (%) Social motivation of the firm is to search for new sources of profitability and competitiveness 75 to create social value 68.8 to meet social needs 50 to contribute to social change 50 to priorize social problems instead of economic ones 25 Firm's social entrepreneurship is shown mainly in social value creation 100 specialization in clients with social needs 71.4 productive processes 57.1 networking and alliances 42.9 key resources employed 28.6 channels for putting the output in the market 14.3 Cost structure 14.3 Social purposes have been possible thanks to Madrid Emprende Network 62.5 Other institutions/firms networking 56.4 Source: own elaboration with the survey data This social entrepreneurs show their social content in three aspects in the main purpose of the firm (to create a social value (100%), in their business model (specialization in clients with social needs (71.4%) and productive processes (57.1%) and in networking and alliances (57.1%) which are both with Madrid Emprende Network and with other institutions/firms. Social entrepreneurs show social vocation to meet social needs, entrepreneurial spirit since they act for profiting, business intelligence when they see an opportunity to fill a service gap, and most of them have become social entrepreneurs after a personal experience where they had to face a social need. It is interesting to remark that social entrepreneurship is more likely in firms where the majority of workers, included the owners are women, as shown in table nr. 4. Table no. 4: Presence of women in social and non-social firms Type of firm Gender of workers Social Non social Total % firms Only women 100 0 100 20.8 Majority of women 66.7 33.3 100 12.6 Women = men 71.4 28.6 100 33.3 Less women than men 50 50 100 33.3 Source: own elaboration with the survey data AE Promotion of Social Entrepreneurship Through Public Services in the Madrid Region: Succesful Aspects Amfiteatru Economic 780 3.1.1. Two case studies of success Two enterprises in Carabanchel business incubator are taken as case studies of social entrepreneurship due to their social purpose besides their appropriate legal form. They are Zauma. Inclusión y diversidad and Serdomás Sistemas. Zauma. Inclusión y diversidad Two reasons are behind the existence of this firm. First, its director is a disabled woman who had previously worked in a multinational enterprise and thus could know the drawbacks but also the opportunities to contract handicapped people. She has created a human resources head hunter consultancy for hiring physically and psychologically disabled people and offering them to enterprises with all the necessary advise for them to treat these people adequately and thus to gain in competitiveness with the incorporation of these workers. Zauma also advises the enterprises to take advantage of the Act of Social Integration of Disabled People. This firm has developed a LISMI analysis which shows the possibilities of enterprises and for enterprises and the needed task to adapt the work places or the work procedures. Consequently, Zauma performs two social roles: on the one hand to provide enterprises with talented people despite their disabilities which allow them to develop as professionals, and on the other one to generate competitiveness in enterprises which contract these people with the wise advisory of Zauma consultancy.Zauma aims not only to deliver a social service but also to induce a change in the values of the enterprises and of the whole society. Serdomas Sistemas This firm takes as starting point the Alzheimer disease of the founder’s mother and the lack of attention on the part of the public administration. Getting unemployed was the final impulse. Its founder has developed a wide range of services delivered at home and provided in terms of networking with other enterprises, foundations, associations and taking advantage of the Act for the Promotion of the Personal Autonomy and Attention for Dependent People. Thus, it has not only filled the gap to meet that social needs but also enables the families to continue with their professional tasks and carry their normal lives and also hires with preference people in risk of social exclusion (women who have suffered gender violence and immigrants). It offers assistance at home for elderly, ill or disabled people, services developed in monitored homes, home architectural works for the adaptation to the needs of the dependent people and also training courses. It has been awarded as the best enterprise of social economy of all the Madrid Emprende Business Incubator Network. 3.2 Business model: legal form Sometimes is the legal form the element which confers the quality of social entrepreneur. That is the case of enterprises whose decisions are agreed in a democratic way. Madrid Emprende has devoted the Carabanchel business incubator to host social firms according to their legal form (cooperatives, labour societies and self-employed societies) which confer to Contribution of Services to Economic Development AE Vol. XIV • Special No. 6 • November 2012 781 their workers a participative status in the firm’s decision. These legal forms are very appreciated in a context of economic crisis with high unemployment rates. Carabanchel hosted firms are service ones, usually with family equity. Main features of these firms are shown in a strengths, weaknesses, opportunities and threats (SWOT) analysis in box nr 1. To solve their problems and to promote their competitiveness, Carabanchel Business Incubator has been provided by Madrid Emprende Network with tangible and human resources and with intangible resources like good practices promotion and co-operation agreements among the incubated firms. It also offers courses and seminars for hosted firms pushing these enterprises for innovation and technological development, as well the Social Economy Administrative Point for helping these firms and other potential incomers with information and legal and administrative procedures. It has also created the Permanent Observatory for the Participative Enterprises in Madrid. It has a virtual platform for labour participative societies. Gender equality, immigration, work time and family life conciliation and sustainability are also main areas of this business incubator work. Box no. 1 SWOT analysis of firms in Carabanchel Business Incubator Strengths Weaknesses Micro-firms Democratic rules of governance Little economic and professional formation Prone to networks Need external advisory in main areas Need to reinforce competitiveness Threatens Opportunities Public support could disappear with the crisis Differentiated social services as a product Self-employment due to the crisis Source: own elaboration based on information provided by Carabanchel business incubator 3.3 Partnerships and networking Some entities working with Madrid Emprende are institutions, foundations and associations committed to the promotion of entrepreneurial talent, which have been selected thanks to their connection with or knowledge of the business environment in which the entrepreneurs plan to operate: Universidad Rey Juan Carlos (university), Fundación Tomillo (social development not-for-profit organization), Unión de Cooperativas Madrileñas de Trabajo Asociado (Union for worker-managed cooperatives in Madrid), Agrupación de Sociedades Laborales de Madrid (Association for worker-owned companies in Madrid), Unión de Profesionales Trabajadores Autónomos (Union for the selfemployed), Asociación Empresarial del Comercio Textil y Complementos (Business association for trade in textiles and accessories), Asociación de Jóvenes Empresarios (Association for young business owners), Asociación de Empresas Confeccionistas de Madrid (Association for clothing manufacturers) and Federación Nacional de Trabajadores Autónomos (National federation for the self-employed). Some major companies (Microsoft, Philips, Hewlett-Packard, Cisco, Repsol etc.) have also been involved in the development