Synopsis: Entrepreneurship:

Setting the adequate conditions for achieving a competitive position in the knowledge economy is far

and functioning regional innovation system, where the core actors and suitable investment priorities and to allocate resources efficiently are more easily identifiable.

investments. This implies discussing the role played by the quality of regional governments in RIS3 on the

transformation of the regional economy and is based on the assessment of the supportive infrastructure for innovation existing in the region, including its connectedness to the rest of the world and the behaviour

the development of effective collaborations among all stakeholders in the innovation system, that is, to set the conditions for an â€oeinclusive†approach to the identification of policy priorities.

that vested interests from the most powerful regional stakeholders and lobbies may condition decision -makers, letting partisan politics become prevalent and often giving rise to problems of impacted

develops when so-called â€oeleading†stakeholders play the game of partnership with the sole aim of

knowledge spillovers from R&d investments in neighbouring regions(;the †social filter†index, an indicator of the key social and structural conditions influencing the capacity of a region to

institutional environment is a determining factor for enhancing the technological and economic competitiveness of a region.

The endowment of human capital and the share of high-tech employment contribute to increase the potential of the local industry to generate knowledge and innovate

gain higher returns from additional investment in innovation The Quality of Government Index is subdivided then into its four components to identify the key

officials have developed close personal ties with the local business environment. In the process of establishing key strategic priorities for innovation,

these circumstances, investments in innovation activities become more costly and the application of long -term development strategies †of the kind linked to Smart Specialisation †more complex to achieve

Investments in R&d from the private sector show a strong connection with innovation in the core group

Conversely, the evidence of a positive effect from R&d investments is marginal or absent in the

collaboration between all relevant regional stakeholders for the collective identification of key innovation assets and long-term strategic priorities

environment for Smart Specialisation and subsequent public policy action. First, they confirm the central role of an effective regional government in the whole process, coordinating and monitoring the

the regional economy. Collaborative leadership is developed by inducing participants to share their substantive knowledge, professional networks,

-national co-operation networks, where regional policy-makers can take profit from each other†s experience

Especially in peripheral economies in Europe, but not exclusively, corruption can be regarded as one of the main barriers to innovation.

opportunities for corruption by reducing the distance between policy-makers and the civil society Importantly, reforms are not generalizable

. and Schulze, W s. 2009) Entrepreneurship, innovation, and corruption. Journal of Business Venturing, 24: 465†476

Bell Journal of Economics, 10: 92†116 Griliches, Z. 1990) Patent statistics as economic indicators:

Jaffe, A. 1986) Technological Opportunity and Spillovers of R&d: Evidence from Firms'Patents, Profits and Market value, American Economic Review, 76 (5): 984-1001

Kaufmann, D.,Kraay, A.,Mastruzzi, M. 2009) Governance matters VIII: aggregate and individual governance indicators 1996-2008.

of Small-and Medium-sized Enterprises (SMES) located in Hungary and Romania. Specifically, the paper analyses the role of OI in these small firmsâ€

Existing research on developing economies has shown that SMES typically act as catalysts of economic growth and the scarce literature on

OI in SMES indicates that small firms engaging in OI practices are more innovative and competitively stronger than their counterparts that do not

Open Innovation (OI) practices in Small-and Medium-sized Enterprises (SMES) located in Hungary and Romania.

economies (Benã¡cek, 1995; Peng, 2001; Wachtel, 1999. This is recognized also by the European commission and evidenced by the funding programs targeting SME

all types of economies (Lukã¡cs, 2005), but most notably in developing ones (Peng, 2001

products/services have introduced you in the past 5 years or since you started up your company?;For how many of these new products/services have collaborated you with

external partners?;With what type (s) of partner (s) did you collaborate?;Which are, in

products/services? Analysis of the responses to the survey has led to a (qualitative overview of the OI activity (in terms of frequency of use, types of partners, etc.

catalyst role of SMES in developing economies and the articles that have come into existence on the driving force of OI practices behind SME innovativeness, survival, and

showcase examples of innovative products/services introduced by the small firms in our sample, the role of OI in these innovations,

SMES are viewed as drivers of economic growth and development as they account for over 90%of all businesses in most economies (Brunswicker and Van de Vrande, 2014

This catalyst role seems to be particularly important in developing economies, such as Hungary and Romania (Pfirrman and Walter, 2002),

and is related to the innovative strength of SMES compared to their larger counterparts where these small firms possess

despite their large presence in the economy, however, Hungarian and Romanian SMES only account for about 49%and 54%of the total economic value added, respectively

EC, 2014. In terms of innovative performance, as measured by both the number of new product/service introductions as well as innovative collaborations with external partners

and improving the business environment for SMES in Eastern europe through both financial and nonfinancial assistance (human capital and technology) the entrepreneurial

climate is still not optimal and SME owners/managers are often reluctant to engage in

characteristic of developing economies (Uzkurt et al, 2012), Hungarian and Romanian SMES also face restrictions in terms of underdeveloped skills and capabilities (a shortage

of skills in innovation management and unstructured innovation processes) and a scarcity of resources (a lack of both human and financial assets) that are typical for the SME

generate a higher number of new products/services than their peers that do not actively

opportunities, and take the lead in partner selection and the overall management of the OI

Particularly in developing economies it is important to study the effectiveness of approaches in SMES that help these small firms in

private art/creative services practice inaugurated in late 2014 Figure 1 The breakdown(%)of the sample into four distinct age categories:

service firms e g. health services (clinics), computer-programming services, design advertising, consulting practice, etc. Next, in descending order, 25%of the organizations

Simple capital replacement or Catering business: â€oewe have introduced on the 8 products and packaging cocktail base) that will

on-demand professional services LEAN manufacturing consultancy: â€oe†Rent a manager†or †rent specialistâ€.

(â€) We are not giving solutions to the clients but are sensing people that can

opportunities (stock liquidations), purchases a given number of cars at an advantageous price and finally sells these cars

having introduced between 1 and 5 new products/services in the previous five years or

products/services introduced in the past 5 years or since the company was founded To provide more in depth information on the specifics of innovative activities

a sustainable business model is taking shape with the help of OI: â€oeeverything starts from myself, Richard,

number of new products/services resulting from collaboration Fewer than five companies in our sample responded that they typically conduct all of

technology), and their peers (i e. other SMES that are not in direct competition with them).

creating market acceptance of new products/services more easily (Lasagni, 2012 12 Figure 6 Collaborativeness and variety of partners for innovation in the sample

their respective industries, such as health services and consulting, to the extent that their new services are developed in collaboration with partners

13 By contrast, the SMES in our sample have reported also a number of drawbacks to

have introduced fewer than five new products/services on the market since their establishment. In undertaking this exploration,

viewed as important drivers of innovation and economic growth in developing economies Peng, 2001; Pfirrman and Walter, 2002;

despite their majority stake in these developing economies in terms of sheer numbers they do not generate a correspondingly high share of the total economic value created by

firms of all sizes in Hungary and Romania (EC, 2014. The few publications on OI in

their portfolio of new products/services on the market point out that accessing innovative knowledge and sharing the costs of innovation with partners are among the most

products/services on the market, and their overall competitiveness, which is in congruence with the OI literature.

terms of number of new products/services brought to market in our sample of SMES is

are more likely to report that all of their new products/services were realized with the help of collaborators than less innovative SMES

services/Role of OI in innovation 1 2-5 >5 None 7%6%0 %Some 12%24%21

%Although researchers in OI and entrepreneurship have begun only just to study the role of the individual owner/manager in the success of OI within an SME context

owner/manager, his/her proactivity in terms of seeking OI opportunities and forging trustful OI relations, and his/her leadership with respect to managing the OI network

developing economies with respect to the long-term benefits of openness and the effective management of OI may

practices in these smaller firms and their overall innovativeness benefiting the economy at large 15 When it comes to the main OI challenge reported by the owners/managers of the

Small Businesses and Private Entrepreneurship during Transition: The Case of the Czech Republic. Eastern European Economics, 33,38-75

Brown, J. D.,Earle, J. S. & Lup, D. 2005. What makes small firms grow?

Finance, human capital, technical assistance, and the business environment in Romania. Economic Development and Cultural Change

54,33-70 Brunswicker, S. & van de Vrande, V. 2014. Exploring Open Innovation in Small and Medium-Sized

Enterprises. In H. W. Chesbrough, W. Vanhaverbeke, & J. West (Eds.),New Frontiers in Open

SME Performance Review-Small and medium sized enterprises-Enterprise and Industry Online. Brussels. Available: http://ec. europa. eu/enterprise/policies/sme/facts-figures

-analysis/performance-review/index en. htm Communities, S. O. o. t. E. 2005. Oslo manual: Guidelines for collecting

A comparison of small and medium-size enterprise development in Central and Eastern europe. Comparative Economic Studies, 43,35-68

The effect of intellectual capital on product innovativeness in SMES. International Journal of Technology Management, 53,1-18

an IP-based business model: The case of IMEC, a world-class research institute in nano-electronics

The economic role of SMES in world economy, especially in Europe. European Integration Studies, 4, 3-12

How entrepreneurs create wealth in transition economies. The Academy of Management Executive, 15,95-108 Pfirrmann, O. & Walter, G. H. 2002.

Small Firms and Entrepreneurship in Central and Eastern europe Springer Ragatz, G. L.,Handfield, R. B. & Scannell, T. V. 1997.

enterprises. Small Business Economics, 41,537-562 Uzkurt, C.,Kumar, R.,Kimzan, H. S. & Sert, H. 2012.

The impact of environmental uncertainty dimensions on organisational innovativeness: An empirical study on SMES. International Journal of Innovation

Entrepreneurship in the transition economies of Central and Eastern europe. Journal of Small Business Venturing, 14,417-425

and attracting venture capital for promising projects 18 iii It is important to note that collecting sensitive information from SMES (i e. information about their innovation

management related events in Romania, the establishment of crowdfunding platforms such as www. crestemidei. ro, easier access to innovation management best practice via various online and offline media

a maturing venture capital scene as well as higher workforce mobility v Each participating SME€ s core area of operation was standardized using the Standard Industrial Classification

The Oslo Manual considers both goods and services as †productsâ€, whereas the survey employs the classic †product/service†dichotomy

As one health-services company owner/manager remarked: â€oe (in our organization) new needs are identified on a permanent basis. What others

skill development, research and innovation investment for growth and jobs For Europe†s universities, most importantly, their education and training capacities should be crucially

†and science must meet regional policy and enterprises. Universities are increasingly called upon to adjust their work, both in terms of research activities and human capital development,

to contribute to regional development and the need for their fuller integration with the regional economy

the research community and enterprises. It must be stressed that Structural Funds are intended not to cover

will be the basis for Structural Fund investments in R&i for the period 2014-2020. Universities can be crucial

provides an opportunity for universities to be engaged constructively, together with other stakeholders including the private sector, in identifying areas of potential specialisation in regions and Member States

and regional authorities have a unique opportunity to form close partnerships that, together with industry and other stakeholders, can maximise the use of EU Structural

Funds for research and innovation to deliver economic and social development. From the perspective of

Strategies in partnership with other stakeholders in the region •the need for Smart Specialisation to build on the specific profile and opportunities of European regions

which should include the unique contribution of universities •active promotion and publication of Research and Innovation Strategies for Smart Specialisation (RIS3

to motivate participation of key stakeholders •coordination of regional/national/European RTD and innovation programmes, coupled with a necessary

•creation of opportunities for the alignment of university research portfolios to RIS3 priorities, including

•better alignment of timelines for the different stakeholders (universities, regional authorities and other external actors

•development of appropriate instruments for synergy opportunities in competitive/structural funding with respect to: R&d capacity-building in infrastructure but also crucially in human resources and multi

investment in high-risk spin-offs and venture capital; local firms and universities to work collaboratively; and •ensuring the sustainability of Smart Specialisation Strategies beyond the structural funding timeframe

Universities should be recognised as a vital partner for regions in the design and implementation of successful

new infrastructure in physical terms but also importantly in investment in human capital development and services to the region.

For the 2014-20 Structural Fund cycle, the EC has a new role in approving national and

•to better understand the opportunities, challenges and obstacles for regions to form collaborative partnerships in research and innovation with universities in the future programming period of EU

policy makers and other stakeholders In preparation for the workshop, the following questions were posed in advance to the participants in

The discussions revolved around the potential opportunities, challenges and obstacles for cooperation. The workshop was highly interactive,

investment is aimed often at short-term rather than long-term goals. Physical buildings and infrastructure can be achieved in the short term (within the political framework/time cycle.

the impact of the infrastructure in the region in enhancing employment, goods and services In some countries (e g.

Synergy between innovation policy and regional policy initiatives/investments is often lacking or under-used

authorities and agencies of their respective roles, contributions, opportunities and constraints are required University culture of merit, assessment and evaluation needs to recognise more the value of collaborative

National ministries of education science and technology are often â€oespatially blind†in their R&i investments hence not assessing

Several examples demonstrated the challenges and opportunities of the use of these funds. For the

social innovation in the development of new skills and services University participants felt that the future challenge for ERDF

and better understand business opportunities b) Universities†potential contribution to regional goals Regional policy debates have a tendency to adopt a conventional approach of viewing a university†s role

•enterprise and business development: promoting enterprise development and growth •human capital development: contribution to human capital and skills development;

and •enhancing social equality: improving social equality through regeneration and cultural development 6 Main themes emerging

from the workshop debate 1 6 REPORT ON JOINT EUA-REGIO/JRC SMART SPECIALISATION PLATFORM EXPERT WORKSHOP:

research and connectedness with enterprises and local authorities, all of which raise the profile of the university, increase student numbers as well as provide alternative forms of revenue in an increasingly

c) Smart Specialisation as a new opportunity for collaboration between universities and regions The new emphasis on innovation strategies for Smart Specialisation in the EU provides a great opportunity

for many universities to engage with regional development issues that, for a number of institutional

The opportunities for regional cooperation vary across the countries, depending on specific national contexts, but also geographic and institutional factors.

universities can play a role in analysing the regional needs and opportunities from an independent

formation process provides a window of opportunity to better align university and regional priorities In this context, the main challenges for universities are

demands and regional priorities •universities have to find their place in the European/national innovation ecosystem †to provide the

to unclear benefits of the outcomes and/or due to the long-term nature of the investment that the

•Competition or lack of alignment between national and regional political and policy objectives and

Dialogue/communication between universities and regions is crucial: the general perception of participants was that the workshop was an excellent way to put together universities and regional authorities

stakeholders. Hence, the dialogue between universities and regions encouraged by the EC in the context

fact that universities (and EUA as the European stakeholder for Europe†s universities) have focused upon

communication with partners. For example, universities can provide research and skills and link up with the

there will be different types of institutions to provide different services An agreement from all participants was that this dialogue must be built on trust,

Consultancy services may also be developed for the execution of projects. In particular, multi-disciplinary research and management skills are needed to address many

investment in research infrastructures and attracting leading researchers. These excellent research groups would be more likely to be successful in the EU Research Framework Programme

There was a general consensus about the importance to include all relevant stakeholders in the definition

dissemination and communication of these experiences of promoting entrepreneurial spirit in universities will be a crucial requirement to fulfil their engagement in contributing to regional development in the

It is important to note that in the less-developed regions universities have fewer opportunities to engage

Ministry for the Economy, Innovation, Science and Employment Annex 1: List of Participants 2 1

Anna maria Monterisi Italy Puglia External Relations and Communication Manager Per Erik Sørã¥s Norway Sør

Anders Olsson Sweden Värmland Enterprise and Innovation Manager Rui Monteiro Portugal Norte Head of Unit, Science and Innovation Unit

Dimitri Kyriakou Spain EC Senior Economist, JRC-IPTS John Edwards Spain EC Researcher, JRC-IPTS

investment in research infrastructures that are required for successful research collaboration. Since 2007 the University of Graz has run 26 projects with the EU Structural Funds;

maximise this investment within the country as a whole (at least 50%of the Czech Republic†s education

of human and physical capital will be crucial for the career development of young researchers in the future in addressing national and European innovation goals

â€oethe Entrepreneurial University†at the university†s Centre for Entrepreneurship and Innovation (CEI: this project is funded by the European Social Fund, the Danish Growth Council and Aarhus University.

â€oeshortcut to Knowledge†project at the university†s Centre for Entrepreneurship and Innovation (CEI: this is

investments in R&d equipment •Supporting top-level research (e g. centres of excellence programme †12 centres

•Enhancing R&d cooperation between R&d institutions and enterprises (programmes supporting materials, environmental, ICT, healthcare, biotechnologies, energy

Additionally, the value of ERDF funding for investment projects in research and equipment was â 2. 3 million

especially in projects related to training, entrepreneurship and regional competence building. The total sum of ESF funding has been â 33 million,

The building of this unit will make the research environment a global leader 2 5

the development of advanced services to enterprises, especially SMES, for example, intensive computing facilities, experimental platforms (e g. agro-materials platform, chemical and physical analysis services

Universities are obliged commonly to merge different competitive funding sources and since 2011 French universities as a whole have been involved fully in implementing the new national programme, Programme

university participated in the local regional board for the investment of approximately â 200 million where

estimate) of public investment in university RDI. The main investment areas have been •research buildings, laboratories and equipment

•human capacity building through structured Phd programmes and postdoctoral programmes •innovation through research directed towards commercial outputs (spin out

Since 2006 this investment in RDI capacity has been linked strongly to synergies with other major national investments, most notably through

Science Foundation Ireland (the largest national research funding agency), and the ability to succeed in

making this investment. Funding for innovation activities has been directed through a separate agency Enterprise Ireland) as an open competitive process on a rolling basis

There is thus a considerable synergy between structural funding and national programmes, but all administered at one step removed from the universities

and communication technologies, and including dedicated incubation space. Project financed at circa 30%with ERDF funds, administered through two separate national agencies (one for research

of human capital. Challenges lie in developing common interest and trust-building across universities business and non-government agencies.

procedures can hamper adjustments being made to meet changing opportunities and circumstances Minho University, Portugal Minho University pointed out that the EU Structural and Social Funds have been managed largely centrally

use of major infrastructure investments in science and technology facilities, e g. the European Laboratory on Tissue Engineering and Regenerative Medicine, the Institute for Bio-Sustainability and the Incubator

Spinpark. Also, funding for basic research activities in university laboratories through key research staff and equipment investments can be gained through the ON2 programme †Consolidation of the Research

Network. A general problem, however, is that necessary indirect costs of the university†s engagement are

the competition for the subsidy resources. TUKE faculties were built gradually into centres of research excellence, within which are built permanent cooperation with relevant institutes of Slovak Academy of

-driven clusters in the area of renewable energy sources and associating research entities, enterprises and

The main investments and activities covered by these funds were •Co-financing of the university†s research facilities and equipment:

and use and quality of, information and communication technologies •promoting sustainable transport and removing bottlenecks in key network infrastructures

•protecting the environment and promoting resource efficiency; and •investing in education, skills and lifelong learning

and design support services including product design, prototyping and usability testing to develop innovative healthcare products.

their processes to be oriented future to respond to growth opportunities through the exploitation of new

stakeholders through conferences, seminars, website and public ations

Reproduced with permission of the copyright owner. Further reproduction prohibited without permission The societal impact of the World wide web--key challenges for the 21st century

rights or to invest in micro-enterprises in Mumbai or Mexico city. Government data is increasingly being made public,

networks, improve communication between residents and agencies, and increase levels of local action Leadership and entrepreneurship

Digital technologies can reach into the handbags and homes of individuals who are alienated from the democratic process.

opportunities to communicate and collaborate with others and develop skills in these areas. Digital technologies allow young people to develop networks spanning

and communities will grab the opportunities for empowerment afforded to them -including those opened by digital technology.

viii http://www. youngfoundation. org/our-work/ventures-and-investment/health -launchpad/portfolio/neuroresponse/neuroresponse

Enterprise, European commission for their insight and advice We would like to acknowledge the contributions of the SIX network across

The financial and economic crisis makes creativity and innovation in general and social innovation in particular even more important to foster sustainable growth

environment, rather than focusing exclusively on the public, private or non -profit sectors The background is that Europe is in the midst of profound transformation;

it has suffered the worst financial and economic crisis in decades with unemployment set to rise to double digit figures by 2010.

Government responses to the crisis have involved major fiscal stimulus packages but will also bring in their wake major budgetary constraints.

current financial and economic crisis makes social innovation more important than ever, both as a component of economic strategies to build Europe†s

services, and as a vital contribution to achieving greater value for money in public services Just as the Lisbon Strategy for jobs and growth focused on innovation

entrepreneurship and the knowledge-based economy, the new strategy for Europe, Europe 2020, must have social innovation at its centre,

economy Regarding Europe 2020, the key issue is to move towards themes †such as †energy and climate changeâ€, for example.

markets where competition and consumer access stimulate productivity growth and innovation, and with a strong social component. †A focus on

leadership building a society †not just an economy-for the 21st century In the past decades, Europe has witnessed dramatic changes as a result of

of opportunities for Europeans and contributed to improved living conditions for all. Through the Lisbon Strategy, the European union has helped to

population has increased dramatically demands on health and care services and; in some cases migration and hyper-diverse communities have put a

competitiveness and economic growth in the long term Challenges facing Europe These social and environmental challenges come under six broad headings

opportunities, access and solidarity in 21st century Europe and the Political guidelines for the next Commissioni

•Economic growth-restarting economic growth and ensuring long -term sustainability and competitiveness for the future. In 2009, GDP

The European Commission†s Directorate General for the Environment estimated that average annual damages from 2000 to 2200 would be

solutions need to provide better access to services (health care housing and education) and opportunities for learning and

employment 8 •Public sector Innovation †growing social needs, together with budgetary constraints, call for radically new and innovative public

The financial and economic crisis together with these social challenges forms the backdrop to current discussions about building on the achievements of

The Lisbon Strategy played an important role in stimulating economic growth and creating jobs across Europe.

competitive knowledge based economy in the world, with its concomitant focus on innovation through R&d has proved inadequate to tackling the

inclusion, a strengthened industrial base and a vibrant services sector are not alternatives. They reinforce each other.

of Europe†s social model with a rapidly transforming economy Focusing innovation and R&d policy on Societal Challenges

and develop products and services for a more sustainable future. They argue Research and innovation are essential

and services that reach the market. European Technology Platforms have untapped potential and could strengthen their contribution to Europe†s

opportunities that societal challenges present This call to focus innovation and R&d policy on the Grand Challenges has

changes in society and the economy. For citizens, this means unleashing the potential of a broad range of ideas to solve real problems,

opportunities, infrastructures, competencies and incentives. Innovation policy to reinvent a new Europe in the future will involve many actors.

and involves many stakeholders across the different sectors, and a new kind of innovation which is pull-through

1. Co-creating value with customers and tapping knowledge about users 2. Global knowledge sourcing and collaborative networks

opportunities and that social and environmental challenges †such as climate change, the supply of clean water,

opportunities. †Corporate social innovation†may be an important new business area for private companies and a core driver of innovationâ€.

challenges facing the public sector †increasing demands from citizens for higher quality and more personalized public services, together with greater

budgetary constraints †also provide an opportunity for the business sector However, the authors recognize that private sector involvement in the public

business models †such as social enterprises, cooperatives or socially driven businesses Together, The New Nature of Innovation and the recommendations of the

challenges also represent significant business opportunities Challenges are also opportunities In 2006, the Independent Expert Group on R&d and Innovation, chaired by

Esko Aho, published its landmark report, Creating an Innovative Europe. The group argued that the lack of innovation-friendly markets in Europe was the

main barrier to investment in research and innovation. The Group recommended the development of innovation friendly markets in a more

the environment In light of these recommendations, the European commission has established the Lead Market Initiative (LMI) which aims to facilitate the creation and

marketing of new innovative products and services in sectors of strategic importance. These †lead markets†are defined as:

products and services with high growth potential, where EU industry can develop competitive advantage to lead in international markets and which

challenging †for example, healthcare, energy and the environment. This initiative shows that challenges are also opportunities

Clearly, health, long term care and green products and services are significant growth sectors. For example, spending on healthcare, currently between 5

%and 13%of GDP for EU countries is set to rise by approximately 4%by 2050

The Stern Review on the Economics of Climate Change brought to the fore the costs of inaction on global warming. xix

However, many forecasters expect that the green economy will bring with it millions of new jobs. xxi Estimates for Europe suggest that 1m jobs could b e

The Alliance argues that an investment of $300 billion (â 212 billion) would add more than 3. 3 million jobs to the economy

stimulate $1. 4 trillion in new GDP and produce $284 billion (â 200 billion) in

-renewable investment Social Innovation and EU 2020 Social challenges are real and significant; they threaten to constrain economic

social challenges must go hand in hand for sustainable economic growth in Europe This is recognised in the new European strategy, EU 2020,

draws from economics (especially around public finance; management studies (especially in the US; business and technology innovation (especially

communities and transition to a low carbon economy †and there are many organisations and individuals engaged in the development and use of social

economy or the creation of a preventative system of criminal justice The term social innovation is used often synonymously with social enterprise

and social entrepreneurship. They are overlapping but distinct. The term social entrepreneurship is used to describe the behaviours and attitudes of

individuals involved in creating new ventures for social purposes, including the willingness to take risks

and find creative ways of using underused assets Social enterprises are businesses with primarily social objectives whose

surpluses are reinvested principally for that purpose in the business or community. They are driven not by the need to maximise profit for

shareholders and owners. There is currently no universally accepted definition of social enterprise. This is because social enterprises can take

numerous forms, are engaged in multiple spheres of activity and because legal structures vary from country to country.

Social innovation is much 16 broader than either social entrepreneurship or social enterprise †although it

will often include one or both of these. Social innovation describes the processes of invention, diffusion and adoption of new services or

organisational models, whether in the nonprofit, public or private sector. It also describes the outcome †the service

or model being developed A recent Stanford Social Innovation Review piece put it like this Unlike the terms social entrepreneurship and social enterprise, social

innovation transcends sectors, levels of analysis, and methods to discover the processes †the strategies, tactics,

and theories of change †that produce lasting impact. Social innovation may indeed involve finding and training

and enterprises they create. But it will certainly require understanding and fostering the conditions that produce solutions to social problems. xxiv

or unresolved by services organised by the state Social innovation can take place inside or outside of public services.

delivery of services. As such, it is at odds with other definitions which provide the scope for †bottom-up†approaches to social innovation and which

financing, and can deal with new relationships with stakeholders and territories. †Social innovation†seeks new answers to social problems by

•identifying and delivering new services that improve the quality of life of individuals and communities •identifying and implementing new labour market integration processes

has accrued to shareholders and founders. The Harris/Albury definition focuses on motivations, which are rarely easy to know with any certainty.

services and models) that simultaneously meet social needs (more effectively than alternatives) and create new social relationships or collaborations.

Enterprise which tackles issues of disability and marginalisation in Germany); ) and -the household (which plays a critical role in the creation of social

Schumpeterian economics provided a frame in which a critical role is played by individual entrepreneurs engaged in risk and innovation

and services far beyond any other public services (see chapter 3 Growing numbers of movements are taking shape globally â€

social or economic system. Even public sectors which by many standards are highly inefficient, will have built up their own logic †like the military bases in

the old Soviet union that propped up local economies, or the vast US prisons built in the 1980s and 1990s that did the same

Most will have sunk investments †of time and money †in past practices that they are loath to discard or

form of social capital and mutual commitment. Much of the business of government and the social sector rests on personal relationships that may

fifty years ago, the shift to a more knowledge based economy in the last decades of the 20th century,

or the shift to a low carbon economy in the early 21st century-the opportunities for social innovation greatly increase.

Some ideas can be copied from other societies that have moved faster †for example how to run web-based exchange systems,

flow into the economy from better public health or low carbon technologies xlviii This is one of the reasons why big changes are followed often by a

the environment they are working in. It emphasises, too, that new ideas have to secure support if they are to survive.

3 Prototypes 4 Sustaining 5 Scaling 6 Systemic change Diagram 4. The process of social innovation

services accordingly. There are also many organisations which organise the prompts to themselves †through mapping and research

ideas, competitions and so on) and ways of engaging citizens, users and others in the design and development of solutions

done through pilots and prototypes or more formal methods such as randomised control trials. One new approach in the UK are Whole

elements rather than the discrete services or actions usually associated with pilots. These demonstration pilots are focused currently on

sustainability of the firm, social enterprise or charity that will carry the innovation forward. In the public sector this means identifying

At other times existing services need to be transformed or replaced. But to move from pilots and prototypes

to a securely established public innovation, it is often advisable to set it up as a separate venture, with public finance and a service contract that

can prove itself at scale. Indeed this may be crucial if the new idea is to

and spreading new services, especially through the growth of contracting out services. Although often driven

by the need to cut costs, commissioning has also been used as a means to introduce service innovation in publicly funded provision.

alternative service models provided by social enterprises and grant based organisations, often working closely with them on extending the

services at scale. xlix 6. Systemic change. This is the ultimate goal of social innovation Systemic change is very different from innovation in products or

services, and usually very different from innovation in business. It 30 usually involves the interaction of many elements:

business models, laws and regulations, data and infrastructures, and entirely new ways of thinking and doing.

works on a larger scale †establishing working prototypes of the new system, for example the low carbon housing in Hammarby Sjã stad in

services and models into practice sustainably and on a large scale. Seen through an economic lens the problem of social innovation is that

•There is a shortage of sources of capital for research, development and implementation of social innovations, because

consequently only weak incentives for investment, and •There are, at best, imperfect markets for social outcomes, which again

•†Pull†in the form of effective demand, which comes from the acknowledgement of a need within society,

and third, their communication and dissemination •Effective strategies that connect †pull†to †pushâ€,

impact and continues to do so as the environment around it changes Many promising innovations have foundered

sector will be shaped by political priorities, budgetary demands and public opinion. l Diagram 5. Effective supply/effective demand

32 Many routes to growth There are also many routes to growth †from organisational growth, to

Growing an innovation depends on effective supply and effective demand effective demand refers to the growth of evidence to show that the innovation

really works. Effective demand refers to willingness to pay. Both are needed †but sometimes the first priority is to prove effectiveness while in other cases

the priority is to create demand, both by persuading people that there is a need to be met,

and then persuading people or organisations with the ability to pay that they should do so

difficult for social enterprises and third sector organisations to recruit, retain and develop staff, and to access capital;

risk on providers, causing some organisations to reject opportunities to deliver services; too often contracts set unrealistic prices

which prevent full cost recovery; and in many cases, contracts involve an excessive burden of

There is also a role here for incubators, innovation parks and research centres For example, Mars in Toronto, links a university, hospital, business

incubator, alongside a social innovation investment fund. In Singapore Biopolis, a two-million square foot research centre brings together scientific

Denokinn, the Basque Centre for Innovation, Entrepreneurship, and New Business development in Spain is creating a business park for social

enterprises and cooperatives. The park will include start-ups, regional and governmental organisations, and charitable foundations.

the non profit sector and the social economy-which can serve as a guide to

of non profit organisations and the social economy does not necessarily fall under the rubric of social innovation-many non profits and social economy

firms are not innovative although they do deliver benefits to the communities they serve. However, it is also the case that many social innovations do come

society sector in these countries were a separate national economy, its expenditures would make it the seventh largest economy in the world, ahead

of Italy and Spain and just behind France and the UK. lvii In these 35 countries

has been observed in the economy as a whole The social economy in Europe is a comparable economic force-it employs

over 11 million people, equivalent to about 6%of the working population of the EU. In the accession member states, 4. 2%of the wage earning population

is employed in the social economy. This is a lower percentage than the average in the older member states (7. 0%)and in countries such as the

growth areas within the social economy over the last decade has been in the growth of social enterprises

Information about the scale and scope of the social enterprise sector across Europe remains limited.

There are difficulties in measuring how many social enterprises operate within member states. In part, this is because most

countries do not collect information on the number of social enterprises †instead they collect data on the number of organisations with particular legal

forms †that is, the number of social cooperatives, associations, social purpose companies and so on. For example, there were 7, 363 social co

enterprise activity is collected in official statistics A few countries have started to collect information about the number of social

enterprises. In Finland, for example, there were 170 registered social enterprises in 2008. lix However, because social enterprises in Finland are work

integration organisations (†social firmsâ€)- that is, organisations which focus on integrating highly excluded groups into the labour market,

it is highly likely that these figures significantly underestimate the true scale of social enterprise

activity in the country. With the EU, the field of social enterprise may be best developed in the UK.

Figures from 2008/9 estimate that there are 62,000 social enterprises in the UK, with small and medium social enterprises contributing

£24 billion Gross Value Added to the UK economy. lx In what follows, we†ve pulled together a range of examples of social

innovation from across Europe†s 27 member states. As this section will demonstrate, there is no shortage of ideas or even innovations.

grant economy and the household -because there are clear and distinct trends in each sector 36

and local communities co-design services together. One example from the UK is Participle, set up in 2007 to apply design approaches to public sector

rather than needs, to encourage openly inclusive services, to move away from a financial focus and towards a focus on resources,

•Collaboration †with users, front line staff and other stakeholders and partnerships with organisations from the private, public and

force in the design of new services •Highly Iterative †ideas are tested rapidly through prototyping

Prototypes involve early service models developed in situ, which are tested then and improved in rapid cycles

source untapped specialists, Participle are able to design services that people want and will use.

focus is on implementation and rolling out services The design process used by Participle is based on the Transformation Design

anthropologists, researchers, policy analysts, economists and others. It is based on in depth user research (using ethnographic research methods such

Department for Work & Pensions, to design new services to improve the quality of life and well-being of older people.

services and systems are configured (away from a near exclusive focus on care and towards building relationships and participation.

Southwark Circle is a model of how future services might look across Britain. lxiv There has yet to be any full evaluation of the benefits

Innovative media and communication activities also played a big role in demonstrating the programme for national

The portal brings together health information and online health services in one place, with personalised features for citizens over the age of 15.

services include health related information and advice, online booking facilities, prescription renewal, ordering prescriptions online, online

For healthcare professionals, services include online access to the patient appointment calendar, laboratory data, patient records, waiting list

business opportunities, and engagement in social issues as a source of new ideas, reputation and recruitment.

the development of new social business models One of the most significant developments has been in the growth of social

enterprises. These are businesses which earn a profit but are focussed on their social goals. lxvii

Definitions of social enterprise vary, but the main features are the primacy of the social mission, trading income and the provision of

services (i e. they do more than campaign, lobby or advocate The term social enterprise covers a wide range of organisations from co

-operatives to public service providers and community/voluntary associations to †work insertion†organisations and companies limited by guarantee.

Social enterprises also work across a range of social and environmental fields-in Poland and Finland, for example, social enterprises are mainly nonprofit

work insertion organisations; in France and Sweden, childcare services make up the bulk of social enterprise activity;

in the UK, social enterprises cover education, health and care †but increasingly also areas such as housing

culture and sports and; in Italy, cooperatives make up a significant proportion of social enterprise activity

43 In the main, however, social enterprise activity falls into two categories. The first is social service provision †childcare,

eldercare, care for the disabled and so on. The second is †work integration†or †work insertion†integrating the long

term unemployed or disadvantaged and marginalised groups into the labour market. lxviii A study of the WISE sector in Europe carried out by research

network EMES, found that in 12 countries, the sector consisted of 14,209 organisations employing 239,977 people.

Social enterprises can also be identified by the types of relationships they have with their beneficiaries, the way in

example, argue that †the key feature of social enterprises seems to be their ability to strengthen the fiduciary relationship within and around the

community (social capital. They do so using institutional and organisational mechanisms that rely, inter alia, on the forceful and broader representation of

the interests of stakeholders, on a participatory and democratic governance system, and on the use of volunteer labour. †lxxi

relationships, social enterprises are embedded often within their local communities. Consequently, they are attuned more and responsive to the

Social enterprises tend to be relatively small although some have established themselves in the mainstream Access to finance has been identified as a significant barrier to the growth of

sourcing models for raising finance (also known as crowdfunding. There are also now a range of institutions which cater specifically for the needs of social

businesses and social enterprises (banks for charities such as Banca Prossima in Italy or ethical banks such as Triodos Bank in The netherlands

3. The growth of social enterprise 4. The growth of microfinance 44 5. The growth of social finance institutions

network of existing mobile phone services and kiosks, transforming them into M-PESA agencies where money can be deposited

M-PESA can be used within different services, including money transfer, bill payment, and in the near future will be accepted as payment on some public

transport services. The system prompts more regular loan repayment as customers in hard-to-reach areas have easier access to a means of money

transfer. The cashless system also provides security for customers who would otherwise be forced to store their money at home

and could potentially allow public service employees, such as transport drivers, to avoid being responsible for cash amounts

with 43%of customers using the service once a month, and over 90%of users

services, therefore making an important step towards greater financial inclusion Collaborations across sectors †Grameen Danone Foods Ltd

understanding of the local environment together with their extensive networks. The benefits are multiple: the yogurt is highly nutritious

The growth of social enterprise Work Insertion-Diakoniewerk Arbeit & Kultur, Germany Diakoniewerk Arbeit & Kultur ggmbh (or the †deacon†s activities for work

Insertion Social Enterprise (WISE. It was set up in 1985 to run a small number of employment measures funded by the regional labour office

expanded into a social enterprise which provides wrap around services for social welfare in the community.

As part of the broader reform of mental health services in the late 1990s, the Greek government introduced a new legal form, the limited liability social co

independent trading enterprise and an official mental health unit, which means that it has access to national health services staff and premises.

One of the other innovative aspects is that those who work for a Koispe may earn a

By providing opportunities for the community as a whole, the Koispe has played a critical role in supporting social exclusion and

since its establishment, raised capital from more than 647,000 lenders (individuals from around the world investing

maximise both social and environmental returns on investment. Unlike mainstream commercial banks, ethical banks only lend to

portfolio of investment funds will cover a range of more than profit companies that have primarily social or environmental goals

independence are guaranteed through a special shareholding trust which protects the social and environmental aims of the bankâ€.

International Development Investment Unit which is responsible for financing micro-financing and fair trade in developing countries. lxxxi

and services where social need arises. In its mission to effect maximum transparency, all savings and investment accounts

are available to view on Triodos†website Civil society and the grant economy Civil society and the grant economy are rich sources of social innovation â€

through campaigns, advocacy and service provision, nongovernmental organisations and associations are often the pioneers of new approaches to

tackling social needs. 1 1 We describe this as the grant economy because grants play an important part, even though

much of the income received within this sector comes from other sources, such as contracts with governments and other kinds of trading income

these elements together, has been the growth of venture philanthropy Given the variety and breadth of the grant economy,

all we can do here is provide a very brief snapshot. In what follows we provide a few examples of

5. Venture philanthropy Tackling Social Exclusion †Barka Foundation for Mutual Help, Poland 50 The Barka (meaning lifeboat) Foundation was established in 1990 to help the

-generating enterprises (a further 35 are in the process of being created), as well as restoring two redundant large state farms

facilitating the emergence of civil society and social enterprise in post communist Poland. Barka has played also a key role in bringing four key

civil society and social enterprise in Poland; address the problems of social 51 exclusion with the creation of eight Centres for Social Integration and

London boroughs and European capitals by 2011. Similar models are also planned to be developed in Ukraine (Lvov and Kijev) and Belarus, where

churches and other stakeholders in the community have worked in Casal da Boba since 2006 to make life better for the whole community, especially its

which connect entrepreneurs with venture capitalists 54 with everyday tasks. The two winning projects were My Doctor, a digital

into teams around selected ideas and asked to develop a website prototype over the next 2 days.

stimulating demand for social applications of digital technology and connecting it to supply. In addition, the entire process is designed to create a

A recent evaluation by the New Economics Foundation (NEF) concluded that the SSE€ s learning programme has been highly successful:

Venture philanthropy †the One Foundation, Ireland Traditional grant making organisations have for some time been criticised for

failing to help non profits build capacity, grow and become financially sustainable. lxxxvi Venture philanthropy is a response to this criticism, and seek s

to use many of the tools of venture capital funding to promote start-up growth and risk-taking social ventures

Venture philanthropists seek social as well as financial returns on investment †although in many areas, the majority of venture philanthropy activity is

based on nonreturnable grants (i e. seeks purely social returns on investment). ) Over the last decade, venture philanthropy has played an

important role in diversifying capital markets for social purpose organisations and reaffirming some key principles for good grant making.

In particular venture philanthropy has filled a gap between traditional grants for non profits and commercial market rate equity and loans. lxxxvii

There are six main features of venture philanthropy as it has come to be practiced. Venture philanthropists

•have a close relationship with the social entrepreneurs and organisations they support •provide tailored finance to meet the needs of the projects they support

•provide nonfinancial support (such as strategic planning, marketing and communications, executive coaching, human resource advice and

access to other networks and potential funders •provide medium to long term support, typically between 3 and 5 years

with an objective of helping the organisation to become financially sustainable by the end of the funding period

•focus on building the operational capacity and long-term viability of the organisations in their portfolios, rather than funding individual

projects or programmes and 57 •make investments which are based performance, placing an emphasis on measureable outcomes, achievement of milestones and high levels

of financial accountability. lxxxviii There are more than 100 venture philanthropy organisations around the world, working with a range of organisations †not solely charities and not

-for-profits. These include social enterprises and social entrepreneurs, trading charities and socially driven commercial organisations.

Examples from Europe include Bonventure in Germany, Impetus Trust, CAN-Breakthrough and Venture Partnership Foundation in the UK, d. o. b. Foundation in the

Netherlands, Good Deed Foundation in Estonia, Invest for Children in Spain Oltre Venture in Italy and the One Foundation in Ireland

The One Foundation, established in 2004, is a venture philanthropy organisation which aspires to improve the lives of disadvantaged children in

Ireland and Vietnam by tackling issues of poverty and disadvantage, mental health, and integration of minorities.

It provides a range of financial packages †from â 40,000 upwards and the average grant is â 1 million over 3 years. lxxxix

In line with the model of venture philanthropy outlined above, the One Foundation provides hands on support for social purpose organisations

Their portfolio of investments covers four main areas: childcare and families †to break the cycle of

disadvantage by making investments in organisations dedicated to early intervention and prevention to create effective family support programmes

Entrepreneurship Ireland and Vietnam †to promote social entrepreneurship in Ireland and Vietnam by funding social initiatives and organisations acting

When an organisation finally secures investment from the One Foundation, it is usually for 3-5 years.

Investment is performance based, with annual and quarterly targets set that must be achieved for the

investments to leverage funding from alternative sources. The One Foundation also provides a range of nonfinancial tailored support

The informal household economy †individuals, families, informal groups associations and networks-has generally been recognised under as a source

especially in fields such as the environment, health and care, where it is often ahead of business or government.

Within the household economy, there are a number of emergent trends. One is new forms of mutual action between individuals †such as open source

prosumption †that is, where users are also producers of services they consume †this is especially the case in areas such as health and care

time and money is one of the defining features of this economy In recent years, the growth of alternative currencies, time credits and

economy into the mainstream economy by valorising voluntary labour. In many of these cases, these innovations have been generated explicitly outside

on the environment and the possibilities for civic action. †So, in 2009, the organisers decided to continue their efforts to support

providing opportunities in accordance with current public need Commanding attention †complaints choirs, Finland Complaints Choirs-where people come together,

concerns on issues as diverse as the environment, sexism, inequality, public 61 transport, the quality of social housing, debt, public corruption, incivility and

over the world can register to use a number of useful services. Global services include the coffeehouse chat room,

where advice can be sought from other parents on issues as varied as new recipes and how to get your child to sleep

now coordinated by universities, not-for-profit organisations, local or regional authorities (town halls,'Diputacion',regional government departments

assistance, and the opportunity to study, learn a trade, change their lives, and regain their status as full members of society.

the wide variety of enterprises it has set up which provide those being rehabilitated with on-the-job skills training.

range of services including carpentry, plumbing and decorating and manufacture a range of artisanal products such as cheese, wine, oil and

profits earned through San Patrignano†s goods and services, following a principle of autonomy. The rest comes from private donors or companies that

believe in the social value of our centre and offer their support to our mission The community in San Patrignano has recently been replicated in Sweden

across social enterprises and is a transferable credit. The second element is a time-based credit which aims to make voluntary work visible and

services Open Initiatives †Riversimple, UK By harnessing the knowledge and ideas of a global community of volunteers

terms of a business model. Built for a lifecycle of 15 years, the car is also cheap

and many stakeholders will be involved in the running of the business. The car has also been designed to be

•Overall strategic frameworks for social innovation, social enterprise or entrepreneurship. These remain rare but are beginning to spread, for

example Denmark†s recent strategy for social enterprise •Legal frameworks, such as new legal forms

•Finance of external projects, programmes and institutions. Dedicated funds exist for early stage ideas, investment, R&d, and incubation (for

example, EU programmes such as EQUAL, Framework or at the national level SITRA/Tekes in Finland.

new roles, incubators institutions Purchasing commissioning in key public services, by place, outcome &c Sector specific regulations

•Support for incubators and hubs within cities or regions to concentrate and amplify capacity and activity (for example Denokinn, the Basque

Centre for Innovation, Entrepreneurship and New Business Development in Bilbao, or the world wide network of Living Labs

•Prizes and competitions †to engage the public and different fields •Regulation †well-conceived regulations can elicit much greater

innovations (for example Mindlab in Denmark), to investment in skills and capacities, whether through intermediaries, universities, or civil

Generation Services paved the way to a â 70 million public fund backed by Portuguese and EC Structural Funds,

encouragement of Social Return on Investment methods 68 However, we emphasise that this is an emerging field without much strong

These include calls for ideas, competitions, petitions, youth parliaments, citizen juries, participatory planning and budgeting and so on

services. The public sector also has established some well tools for financing innovation beyond its borders, particularly through R&d funding for science

social enterprises and foundations to big institutions, laws and regulations There are now dozens of social innovation funds around the world, and

Fund) and others act as public venture funds, providing seed capital to social innovators (for example, the White house Office of Social Innovation and

Civic Participation SITRA, Finland Originally established in 1967, the Finnish Innovation Fund (or SITRA) is an

qualitative and quantitative growth of its economy and its international 70 competitiveness and co-operation.

Its operations are funded with endowment capital and returns from corporate funding operations. Its annual budget comes to about â 40 million.

and support changes in the Estonian economy through foresight projects and venture capital investments. The fund focuses on

initiatives with international potential. Innovation labs will support foresight projects by providing a space for dialogue about new ideas, initiatives, and

Service Economy, and Growth Vision are all foresights for the year 2018 and work towards policy reform in line with Estonia†s developmental vision

-for-profits, 5%for individual projects, while 85%will be attributed to grants for other grant-giving organisations.

opportunity. The remit of the fund is quite narrow. It focuses on nonprofits and as such overlooks the state, the market and informal networks and

Social Enterprise Investment Fund, UK The Social Enterprise Investment Fund is run by The Social Investment

Business on behalf of the Department of health in the UK. Developed in the wake of the 2006 White paper, Our Health, Our Care,

the potential role of social enterprises in developing health and social care to better meet the needs of communities, the fund was established in 2007 to

social enterprises and health professionals. Fifty £50, 000 grants are available for start-ups, while twenty £200, 000 grants are available for existing social

enterprises wishing to expand. The first funding round is in January 2010 Funds exist for various purposes,

services to manage individualised budgets under the personalisation of care agenda, growth †for existing organisations, innovation †for early stage

request †for organisations proposing alternative provision of NHS services into a social enterprise. Further to this, the fund holds workshops where

commissioners and practitioners are brought together to build upon the relationship between service providers and the public sector. The workshops

aim to develop an understanding of the role social enterprise can play in the delivery of primary and community care

preventative investments. Investing in social innovation is complicated often by problems associated with quantifying the effects of an investment

especially where those effects are not financial. This is especially the case with investment in programmes which are preventative

Social Impact Bonds, UK Social Impact Bonds (SIBS) are a financial tool being developed in the UK to

•Investments (by local authorities, commercial investors or foundations •A programme of actions to improve the prospects of a group (for

Under this model, a local authority borrows for a package of investment in a social impact programme and receives a series of payments from national

Contractors would raise their own capital either through social investment sources or on the market

Full Social Impact Bonds A third alternative focuses on third sector action to achieve outcomes.

benchmarks This model is somewhat more complex, with more handovers and transaction costs, but opens up a radical new avenue for bringing in new sources of

investment in early years programmes (based on the evidence from the Abecedarian and High/Scope Perry Preschool Programmes for substantial

and investments in health prevention and improvement. Another potential field for action is in employment

wide range of stakeholders in the design, development and evaluation of social innovation Mindlab, Denmark

of Employment to bring together government, private enterprises and the research community under one roof to promote user-centred innovation

research, design thinking and public administration Mindlab uses qualitative research techniques †such as ethnographic interviews, observation and cultural probing to better understand public

6. Communication of results 7. Measuring Recent projects include †burden hunting††reducing administrative burdens

environment for a wide range of staff to work together on some of the most

to brainstorm solutions to new and emerging needs and design services, it also seeks to build capacity for user-centred innovation across the council

and stakeholders such as senior managers or elected councillors, in setting out what is required from a

SILK has had a number of success stories including developing services for fathers with Kent Children†s Trust.

services are delivered The 27e Region, France The 27e Region is based an NGO in Paris, supported by the Association des

institutions, through community projects, prototyping and design thinking The 27th Region employs three people full time and includes a network of 25

working with the local community in order to co-create ideas, prototype solutions, develop projects, and propose improvements to the architecture

to develop a culture of co-creation, creativity, design thinking and visualisation in public authorities Innovation brokers and intermediaries

and the demand for them, does not link up automatically. In science, technology and business a vast array of institutions

venture capital firms, conferences and academic journals, consultancies which specialise in assessing companies†IP or R&d pipelines to spot patterns and

public sphere, these include innovation networks and incubators. Outside the public sphere, there has been a growth in building based intermediaries â€

There is growing interest in incubators as a method for testing promising new ideas. Incubators have long been widespread in business,

but the creation of social incubators is only a recent phenomenon. Some incubators provide support for social entrepreneurs and social start-ups, others take a more

active role in the design, implementation and evaluation of pilots and projects. Even though evidence is patchy,

these organisations are helping to build the field of social innovation and are providing new models for taking

enterprises Incubators provide a range of supports for social enterprises and social entrepreneurs. Some of these needs are the same as those of mainstream

businesses †including space, marketing, business planning and financial management. Other needs are specific to social enterprise

and arise from their social mission or particular decision-making and ownership structures †including legal issues associated with specific forms of incorporation.

innovation will have the opportunity to work together, learn from each other and develop new joint enterprises in a highly innovative environment

The Social Innovation Park will host more than 50 international companies and associations. It will also host the first †Social Enterprise Generatorâ€

enabling those in receipt of employment and social security benefits to work for the park†s enterprises without losing their benefits and;

Southern Europe†s first †Social Innovation Laboratoryâ€, providing the opportunity for those based in the park to work together to generate new social enterprises that will be

incubated in the park, with access to training, mentoring and evaluation in the process. Specific training for upgrading the quality of services for third

sector institutions, organisations and enterprises will also be available, in the form of a †Social Innovation Academyâ€

81 Innovation Agencies Innovation agencies also play a critical role in linking up ideas and resources

The most effective innovation agencies work across sectors, disciplines and fields. Here we look at various kinds of innovation agencies and the role they

quality and profitability of healthcare services if new procedures are simultaneously developed in an innovative way.

Healthcare Services which was initiated in 2008 to develop relations between government and public sector bodies in developing healthcare services, and

Built Environment initiated in 2009 to improve productivity through environments designed to promote well-being. cv

VINNOVA, Sweden VINNOVA (The Swedish Governmental Agency for Innovation Systems promotes sustainable growth by funding needs-driven research and

developing effective innovation systems with particular focus on R&d projects. The organization is dedicated to international collaboration, aspiring

VINNOVA€ s programmes include Information and Communications Technology, Services and IT Implementation, Biotechnology, Working life Materials, Transportation, Cross-Sectoral Issues, Knowledge of Innovation

Systems, and Research an Innovation in Small Companies. Current publications include The Innovation Platform, and Innovation for Sustainable

establishing healthier work environments and ways of working, and Gigahertz Centrum †a centre developing energy-efficient electronics and

mobile communications. cvi Recently, VINNOVA, together with five other leading European innovation agencies-Enterprise Ireland (IE), FFG (AT), Senternovem (NL), Tekes (FI

and the Technology Strategy Board (UK)- stated that †The Grand Challenges of Europe are an important driver for new innovation-led policy measures

These challenges are also potent business opportunities for European SMES provided that policy implementations consider

and Economics and the Internet of the Future. Workshops will be run to enhance co-creation of ideas and services

between the three institutions involved in the hope to create a diverse and wide-reaching hybrid.

intended for internal sharing and communication of ideas in the preparation and implementation stages of the university†s inception. cvii

sustainable venture. The SEIR can help organisations and individuals access finance, professional support, for instance, in exercising due diligence

preparing a business plan, marketing and facilitating introductions to networks and potential clients and commissioners. The SEIR helps social

enterprises currently working outside the NHS to develop services that NHS commissioners want to contract to help deliver better health outcomes.

services, and secure investment from funds such as the Social Enterprise Investment Fund (SEIF) and the Regional Innovation Funds (RIF) managed by

the Strategic Health Authorities (SHAS In the UK, innovation has been recognised as critical in delivering excellence

Innovation in health services and social care will happen faster if the entrepreneurial energy, skills and values of NHS

staff and local enterprises are harnessed and channelled towards delivering sustainable solutions to address health and social care needs.

creating new services, a SEIR with roots in the local social enterprise culture works to change the culture of an organisation

competition, the programme has served to highlight innovative projects within fields as diverse as youth justice, environmental management

propose improvements to services. The Seoul Metropolitan government, for example, launched its Imagination Bank in 2006.

social enterprises and lowering hand straps in the Metros for shorter passengers. Without mechanisms for turning ideas into action, idea banks will

Prizes and competitions can be an effective means of uncovering new sources of social innovation.

The Big Green Challenge, aimed at the not-for-profit sector is the first challenge prize of its kind.

their project, the scalability of their solution, and successful community engagement. Each of the ten finalists won a share of the £1m prize money as

and investment as they completed the various stages. And the further the participants progressed, the more

governmental decision-making and create opportunities for shifting †power from professional sources of authoritative knowledge to new kinds of

This knowledge is crucial in improving services and making government more accountable. Open models provide one approach for

-profits operate. One of the most important legislative developments over the last decade has been the creation of new legal forms for social businesses

These new legal forms have helped to build awareness of the social enterprise sector and distinguish social enterprises from charities, associations and other

third sector organisations Legal forms Many European countries have had long innovative legal forms for social enterprise.

They include Italy†s social cooperatives Type A and B, which has been superseded by a 2005 law on social enterprise,

and France†s Sociã tã coopã rative d'intã rã t collective (cooperative society of collective interest), a

new type of multi-stakeholder cooperative structure introduced in France in 1982, introduced as a new legal form in 2002

There is also a limit on dividends of 35%of profits This new legal form has played a critical role in opening up new kinds of

finance for social enterprises. The field is developing fast in the UK where there are an estimated 62,000 social enterprises with small and medium social

enterprises contributing £24 billion GVA (Gross Value Added) to the UK economy. cxvi New legal forms must have clear and direct benefits otherwise take up will be

slow. They must also be easy to adopt with little bureaucracy. This is the lesson from countries such as Belgium and France

Procurement and commissioning The role of public procurement in driving forward innovation is clear †it can

and boost the economy, it can also help governments achieve twin objectives of reducing costs and improving the quality and effectiveness of public

services However, existing commissioning and procurement structures are not well designed for social innovation. In most cases, contracts are too short-term

which makes it difficult for social enterprises and third sector organisations to recruit, retain and develop staff,

opportunities to deliver services; too often contracts set unrealistic prices which prevent full cost recovery;

dementia services Personal budgets Personal budgets involve users being allocated a budget to be used for ongoing care needs.

citizens by giving them greater control over the services they receive. As such, they †should be seen in the context of the wider movement to empower

Civil society and the grant economy have long been rich sources of social innovation, but they are placed not well to develop rigorous methods for

informal household economy plays a critical role in developing social innovations but it remains fragmented,

relate to capacity and capital, both financial and human. A key dimension of the problem lies in the area of finance,

awareness, trust and communication. This current lack of a rich enabling eco system is one of the key overarching factors that threaten to inhibit the

-Funding for pilots and prototypes, as well as for evaluations -Finance for embedding successful models -Finance for growth

Social economy firms remain heavily dependent on grant financing, and an inability to secure risk-taking growth capital poses a key obstacle to the long

a significant bulk of the social enterprise sector. One of the big problems facing these organisations is the reliability of funding sources.

disproportionately high prices for their basic services and overheads. cxxi The †starvation cycle†of non-profitscxxii

launch and operate social economy firms at a small scale. cxxiii cxxiv But, while grant funding is valuable in the prototyping and

A common problem faced by social economy firms is an inability to secure growth capital (also known as expansion capital) in general, and

risk-taking growth capital in particular †which is critical to enabling them to move from start-up to the next level of development. cxxv

A transition away from grant dependence towards commercial finance is crucial for the longer-term sustainability and growth of social enterprises and

ventures The Business Panel on Future Innovation Policy notes that â€oethe current finance system is not fit for the new types of innovation required to address

grand societal challengesâ€. Key issues identified include 94 •Existing support for smaller or innovative companies (grants, seeds

venture capital, loan guarantees) is fragmented and fails to mobilise private sector investment efficiently or consistently. cxxvi

•Current risk capital markets lack openness and transparency, leading to limited access and sub-optimal decision-making

enterprise. In February 2008, for example, the Office of the Third Sector committed £10 million for the creation of the Risk capital Fund for Social

Enterprise. It is the first fund of its kind and is intended to help social enterprises and early stage social start-ups to access funding to grow and

develop their businesses While financing is clearly an issue, there is a need to think more broadly

very significant increase in political support for the use of public demand to stimulate the creation of new markets, spread and mainstream emerging

sufficient demand to establish entirely new markets for innovation and intervention can be particularly crucial in overcoming various

user†of new goods and services, demonstrating their value to the wider market. In this way, the government can provide revenue and

services so that they compete more effectively in the global marketplace •In the consolidation phase of innovation, procurement can also play a

for the acceptance of new or alternative technologies and services. This removes a certain element of risk

Access to tender opportunities can also pose problems including difficulties in getting on to preferred supplier lists;

difficult for social enterprises and third sector organisations to recruit, retain and develop staff, and to access capital;

risk on providers, causing some organisations to reject opportunities to deliver services; too often contracts set unrealistic prices

which prevent full cost recovery; and in many cases, contracts involve an excessive burden of

the fact that their services are often only emerging from prototype or niche production stages,

and therefore involve risk which public procurement officers do not feel easy about taking on.

the immediate capital to finance expansion directly. Essentially, the early stage testing and prototyping of a disruptive social innovation cannot be

innovative products and services can be reduced substantially by allowing procurement officers to work closely with potential suppliers.

support, to third sector organisations that need investment to help them bid for, win and deliver public service contracts.

investment †to be audited by a third party. The Fund does not invest in †bankable†deals (that a mainstream bank would do)

their investment. cxxxii Skills and formation While there is growing interest and investment in the development of

financial resources for social innovation, very few resources have, as yet, been devoted to labour market development.

projects and business models, to design and marketing. This reflects the early stage that the field is at †but contrasts with neighbouring fields such as

There are many existing courses and programmes for social entrepreneurship and a few for social innovation. However, while some existing training

social entrepreneurship, and a market in specialist courses is beginning to emerge. Specialist academies linked to social economy initiatives, such as the

University of Mondragon in Spain, and the University of Gastronomic Science in Bra and Colorno in Northern Italy, are supporting social innovation.

strategies within the grant economy in particular and identify a lack of training and experience as one of the main barriers to the sector†s success

economy on both national and European-wide level. For example, in the UK ACEVOCXXXV cxxxvi cxxxvii

with proper investment in training materials, understanding of methods, and courses, ranging from quickly accessible online materials and short courses to

characterised by a lack of mutual awareness, trust and communication cxli and collaborations. This requires

them, that is the demand for social innovation, coming from the acknowledgment of a need within society,

absence of intermediaries able to connect the demand and the supply side and to find the right organisational forms to put the innovation into practice

investment in innovation in the UK economy, and the effect that this has on economic growth and productivity,

(2) a tool to understand innovation at the firm level that captures †hidden innovation†and

investment in R&d spending or the number of patents granted) and not outcomes In principle, there are some ways of measuring innovation activity at different

and success of social ventures, initiatives and services, which incorporate social as well as financial impact, are also coming into play, all of

Human Development Index (HDI) to benchmark countries based on combined measurement of GDP/capita, health and education.

of social ventures, initiatives and services, which incorporate social as well as financial impact, are also coming into play,

as Social Returns on Investment (SROI) and Multi Criteria Decision Analysis methods. The Young Foundation has analysed recently over 150 tools in

•Equally common are methods (drawing on economics) which seek to monetise social value by asking people what they would pay for a service

coming from economics focus on the choices people have made actually in related fields (†revealed preferenceâ€

Within the nonprofit world Social Return on Investment Methods (first developed by REDF) translated the methods of the social

social enterprises. clviii The burgeoning field of environmental economics has spawned methods for measuring everything from wetlands to emissions, usually using a combination of

these revealed and stated preference methods •NGOS and Foundations have used many similar methods to assess social

environment, identified nearly 30 in use, some designed to guide investors, and some for developers, running the gamut from methods

regeneration scheme, for example, showed that modest investments in home safety which cost about 3%as much as home repairs generated four

indicators showing how enterprises affect society. Italy has a similar †bilancio socialeâ€. Others have measured time.

2004, has mobilized many of the world†s finest statisticians and economists to develop better indicators of social progress and well-being, bearing fruit

environment clxvii clxviii or health †where decision-making is typically a complex and confusing process, characterised by multiple value tradeoffs

•Late stage/high value †approaches considered for serious investment This is done using four main dimensions,

4. Cost effectiveness (cost savings, scalability, wider economic gains The tool also makes explicit the strength of the knowledge base underpinning

problematic in fields such as health and the environment •It provides a framework for learning about what works over time

We are less confident that social return on investment models can provide this common architecture for the reasons stated above.

Second, and longer term, developing some economy and society wide measures for both the generation and take-up of innovations, drawing on the

•Priority tools for action (investment, capacity, networks procurement etc •Milestones and targets for achievement over 2, 5 and 10 years

investment, growth and so on. This should include the creation of more outcome focused funds where these are

and investment in more rigorous lesson learning. This has been a key weakness in some past programmes

transform and open up opportunities for innovation -Reporting at regular intervals on the overall success of the

scalability, demonstrating financial feasibility and risk evaluation are necessary. Given the range of funding requirements we do not propose a

2013, specifically focussed on the opportunities for social innovation in the field of ageing. We suggest more programmes which tackle these priority

incubators and hubs to advance the quality of practice in social innovation across Europe Together the funds

-European Investment Bank †along the lines of joint EIB and European commission initiatives such as JESSICA, JASMINE

-EIF to promote social enterprise alongside enterprise. The EIF could also invest in pan-European funds focused on specific

forward by citizens and stakeholders across Europe. This could be based on, or work collaboratively with existing structure, such as

3. Incubators and intermediaries Linking, brokerage and innovation intermediaries are crucial in the development of the social innovation field,

specifically to connect the existing demand (societal needs) and supply innovative ideas which will become concrete projects) sides of social

Intermediaries and physical incubators encourage and facilitate the ability of organisations, companies, and whole communities to find better

Innovation intermediaries and incubators come in a variety of forms. Across Europe, infrastructures of this kind already exist, specifically for business

venture capital funds, innovation awards and so on. However, there is currently no equivalent for social innovation. By building capacity within

•Support for a network of incubators across Europe, with a trailblazing first round and then subsequent rounds developed in the light of

from businesses, the public sector and the grant economy. It is not that a range of tools isn†t available;

and grasp new opportunities. Social innovation, in addition to traditional business and technology innovation provides this opportunity.

Europe must start innovating for social return, not just for return on investments and all sectors of the economy should be

drivers for innovation. This includes the private sector, in which the nature of innovation is also transforming.

services), for new business opportunities. The concept of social innovation should therefore also include Corporate Social Innovation. 3

Enterprise Ireland (IE), FFG (AT), Senternovem (NL), Tekes (FI), Technology Strategy Board (UK) and VINNOVA (SE) acknowledged that â€oethe Grand Challenges of

These challenges are also potent business opportunities for European SMES provided that policy implementations consider

societal services by both the public, private and third sectors, bridging the gap between the Digital and the Social agendas. â€oeeurope needs to do more to

social and business models and new consumption patterns. Broadband is not simply a new communication line but a new social infrastructureâ€. clxxiii

6. Making Social Innovation a theme in Europe As we have demonstrated in chapter 3, there is no shortage of social

Towns and cities would have the opportunity to bid each year †those who demonstrate inclusive programmes to tackle social

development of a network of social innovation hubs or incubators, cities which find the most creative solutions to specific social challenges should be

i European commission (2008) Communication f rom the Commission to the European Parl iament the Council, the European Economic and Social Committee and the Committee of the Regions

opportunities, access and solidarity in 21st century Europe, Available at http://eurlex. europa. eu/Lexuriserv/Lexuriserv. do?

ii European commission (2009), †European Economic Forecast†European Economy 10 iii Eurostat (2009), Eurostat News Release:

iv Nicholas Stern (2007) The Economics of Climate Change: The Stern Rev iew, London: HM

Costs of Climate Change, Brussels, European commission DG Environment. Available at http://ec. europa. eu/environment/climat/pdf/final report2. pdf Accessed on 11 december 2009

vi Kemfert, Claudia (2005.""Global Climate Protection: Immediate Action Will Avert High Costs.""DIW Weekly Report 1 (12): 135-141.

xi European commission, DG Enterprise & Industry, Special Business Panel (2009) Reinvent Europe through innovation: From a knowledge society to an innovation society.

http://ec. europa. eu/enterprise/policies/innovation/policy/lead-market-initiative/Accessed 11 December 2009

xvii Communication from the Commission to the European parliament, the Council, the European Economic and Social Committee and the Committee of the Regions (2009) Dealing

Services, Brussels; European Monitoring Centre on Change. Available at http://www. eurofound. europa. eu/pubdocs/2009/82/en/1/EF0982EN. pdf Accessed on 11

xixn Stern (2007) The Economics of Climate Change: The Stern Review, London: HM Treasury Available at:

http://www. guardian co uk/environment/2008/jun 26/climatechange. scienceofclimatechange Accessed 11 december 2009 xxiunited Nations Environment Programme (2007) Silver lining to Cl imate Change-Green Jobs

Available at http://www. unep. org/Documents. Multilingual/Default. asp? Documentid=523&articleid=571 7&l=en.

(and in economics to offer a synthetic theory of growth. However, all theories of this kind are based on a simple error

Even within economics, overarching theories of change and growth have not fared well compared to more modest theories focused on such

xlviii Economists generally emphasise allocative efficiency. But other kinds of efficiency can be just as important for long-term growth.

lix P. Pattiniemi,(2009) Social Enterprise Leg islation in Finland. Available at http://www. rci. org. pl/download/080728/17. pdf

lx George Leahy and Frank Villeneuve-Smith (2009) State of Social Enterprise Survey 2009 London:

Social Enterprise Coalition. Available at http://www. socialenterprise. org. uk/data files/stateofsocialenterprise2009. pdf lxi Robin Murray (2009) Danger and Opportunity:

Crisis and the new Social Economy, Provocation 09, London: NESTA lxii Jocelyne Bourgon, â€oethe Future of Public Administration:

Serving Beyond the Predictable†article published by Public Money & Management in 2009 (Volume 29, Number 1) Chartered

lxvii For more information on social enterprises and social entrepreneurship see, Alex Nicholls ed.)(2006) Social Entrepreneurship:

new models of sustainable social change, Oxford: Oxford University Press; J. Gregory Dees (2001) The Meaning of Social Entrepreneurship, reformatted

and revised, May 30; Jacques Defourny and Marthe Nyssens (2008) †Social Enterprise in Europe: Recent Trends and Developmentsâ€, Social Enterprise Journal, Vol. 4, Issue 3 and Jacques

Defourny and Marthe Nyssens (2008) †Conceptions of social enterprise in Europe and the United states:

convergences and divergencesâ€, paper presented at the 8th ISTR International 122 Conference and 2d EMES-ISTR European Conference, Barcelona, July 9-12;

Carlo Borzaga and Jacques Defourny (eds. 2001) †The Emergence of Social Enterpriseâ€, London and New

2001) The Emergence of Social Enterprise, London and New york, Routledge lxix Spear, R. & Bidet, E. 2003) †The Role of Social Enterprise in European Labour

Marketsâ€, Working papers Series, no. 03/10, Liã ge: EMES European Research Network Available at http://www. emes. net/fileadmin/emes/PDF FILES/ELEXIES/ELEXIES WP 03

I. Bode, A Evers and A. Schulz,(2002) †Work Integration Social Enterprises in Germanyâ€, Working papers Series, no. 02/04 Liã ge, EMES European Research Network

lxxi A. Bacchiega & C. Borzaga, †Social enterprises as incentive structures: an economic analysis†in C. Borzaga & J. Defourny (eds.

2001) The Emergence of Social Enterprise, London and New york: Routledge lxxii Muhammad Yunus (2008) Creating a World W ithout Poverty:

Vigorous independent enterprises meeting social needs or the emergence of †entrepreneurial not-for profits with limited social liability�

Working paper delivered at the Voluntary Sector Studies Network (VSSN) meeting in Manchester, 2004. Available at

lxxxv New Economics Foundation, †School for Social entrepreneurs: nef evaluation report†London, 2006. Available at

and Grossman, A (1997), Virtuous Capital: what foundations can learn from venture capital, Harvard Business Review, Cambridge, MA

lxxxvii Emerson, J, Freundlich, T, and Fruchterman, J,(2007), Nothing Ventured, Nothing Gained: addressing the critical gaps in risk-taking capital for social enterprise, Skoll Centre

for Social Entrepreneurship Working Paper, Said Business school, University of Oxford Oxford: UK lxxxviii Andrew Milner,(eds.

2009) †European Venture Philanthropy Directory 2009/2010†Brussels: European Venture Philanthropy Association. Available at

http://www. evpa. eu. com/downloads/EVPA DIRECTORY 2010 WEB ISSUE1. pdf lxxxix Andrew Milner,(eds. 2009) †European Venture Philanthropy Directory 2009/2010â€

Brussels: European Venture Philanthropy Association. Available at http://www. evpa. eu. com/downloads/EVPA DIRECTORY 2010 WEB ISSUE1. pdf

xc Alvin Toffler (1980) The Third Wave. London: Collins 123 xci My Estonia at http://www. minueesti. ee/?

/lng=en xcii Homeshare International at: http://homeshare. org xciii San Patrignano at http://www. sanpatrignano. org/?

E-Communications Strategy cxv Mccardle, Hamish, †The case of the sneaky wiki†2008, not published

cxvi George Leahy and Frank Villeneuve-Smith (2009) State of Social Enterprise Survey 2009 London:

Social Enterprise Coalition. Available at http://www. socialenterprise. org. uk/data files/stateofsocialenterprise2009. pdf cxvii Cabinet Office (2006), Partnersh ip In public Services:

An action plan for third sector involvement Available at http://www. cabinetoffice. gov. uk/media/cabinetoffice/third sector/assets/psd action plan. pdf

not-for-profit sector. The first step in the cycle is funders†unrealistic expectations about how

Addressing the critical gaps in risk-taking capital for social enterprise. Skoll Centre for Social

Entrepreneurship Working Paper, Said Business school, University of Oxford. Oxford: UK cxxiv Murray, R.,Caulier-Grice, J. & Mulgan, G. 2009.

Addressing the critical gaps in risk-taking capital for social enterprise, Skoll Centre for Social

Entrepreneurship Working Paper, Said Business school, University of Oxford, Oxford: UK cxxvi European commission, DG Enterprise & Industry, Special Business Panel (2009) Reinvent

Europe through innovation: From a knowledge society to an innovation society. Recommendations by a Business Panel on future EU innovation policy.

cxli European commission, DG Enterprise & Industry, Special Business Panel (2009) Reinvent Europe through innovation: From a knowledge society to an innovation society.

Measuring the UK€ s investment in innovation and its effects. London: National Endowment for Science, Technology and Arts

such as work, social connections and relationships, the environment, and (economic and/or physical) insecurity cliv Hoegen, M. 2009) Statistics and the qual ity of life:

†option use†(having the opportunity to do something †bequest use (leaving something for the future),

Social Entrepreneurship http://elware. fi/teematyo 126 clix For a recent survey see Tuan, M. 2008) Measuring and/or estimating Social Value Creation

more money on services but fails to indicate public willingness to pay for this course of action

SROI A Guide to Social Return on Investment. Lenthe Publishers clxvi Linkov, I.,Varghese, A.,Jamil, S.,Seager, T.,Kiker, G. & Bridges, T. 2004) †Multi-Criteria

Europe has made great strides in building science parks, incubators research networks and educational exchanges in specific research areas.

and user participation. †See European commission, DG Enterprise & Industry, Special Business Panel (2009) Reinvent Europe through innovation:

clxxiii European commission, DG Enterprise & Industry, Special Business Panel (2009) Reinvent Europe through innovation: From a knowledge society to an innovation society.

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