Journal of Knowledge management, Economics and Information technology 409 Special Issue December 2013 The Impact of Innovation in Romanian
Economic growth Development Author: Oncioiu Ionica, Titu Maiorescu University Bucharest ionicaoncoiu@yahoo. ro, Romania Small firms are big business in the aid of economic development.
knowledge economy, innovation and creativity become a decisive factor in the economic activity because knowledge tends to be developed in the
actual contexts. Technical progress leads to innovation waves and creativity stands in the doorway of these phenomena,
the economy. The purpose of this study is to explore the implications positive and negative, of the changed economic environment in Romania
as in all transition economy play an important role in the economic growth development and are
increasingly recognized as having a permanent role as a seedbed for future growth Keywords: innovation;
Enterprises on Economic growth Development 410 Special Issue December 2013 Introduction Given the importance of SMES in their world,
economies everywhere are given special attention. Hence the concern for their delineation as appropriate, with the intention to create conditions for broader and more
effective participation in economic activities in or involved. The substance of this upgrade though is situated in a great range of
and rise or fall of SMES in the economy of any country is their contribution to creating new value,
and vital part of the modern economy. The second argument is more qualitative: in spite of the heterogeneity of the SME sector, they differ
Enterprises on Economic growth Development 411 Special Issue December 2013 concept. The new business concept is conceived from the current state of
All countries statistics result that SMES dominate in economy representing over 99%of the total of companies,
Enterprises on Economic growth Development 412 Special Issue December 2013 higher. Therefore, when engaging in research,
In a Romanian economy located yet in a consolidation process and of getting stronger of SMES sector, environment factors (generally
Enterprises on Economic growth Development 413 Special Issue December 2013 the innovation in a transition economy, as Romanian is?
What are the factors that influence in the low level of innovation of Romanian SMES
Enterprises on Economic growth Development 414 Special Issue December 2013 reasons of the emergence of companies in specialized exchange economy
and where are directed the resources to the price mechanism Although Coase developed a new theory of the firm in 1937, she
progress, and economic growth. At the same time, most small businesses that constitute the core of the economy do not innovate.
Most SME innovations are marginal improvements of already existing products, and instead of new technology creation, they rely on the adoption of the
Enterprises on Economic growth Development 415 Special Issue December 2013 Lankhuizen and Woolthuis 2003, Rothwell 1986,1994.
environment and the general development of the economy. Long term economic difficulties are focused attention on the importance of
stimulation of knowledge-based economy and only a few companies proved able to compete through innovation.
Enterprises on Economic growth Development 416 Special Issue December 2013 maxims of scientific method: construct validity, internal validity and
SMES in strategies of development economic activity Results This study analyses the quantitative and qualitative results of
Enterprises on Economic growth Development 417 Special Issue December 2013 4 Pattern not evaluated 36 6, 10%1
proportion technical innovations that are economy applicable. Many work places will come by innovation, and new discoveries will give birth
Enterprises on Economic growth Development 418 Special Issue December 2013 Thus, despite the economic reform, small and medium
capital to help boost the sector's role the Romanian economy This innovation process is based on defining groups of
Enterprises on Economic growth Development 419 Special Issue December 2013 the crisis, and the winners will be those who will be able to make
businesses represent the engine of the economic growth and a vector for disseminating the research and development results.
Enterprises on Economic growth Development 420 Special Issue December 2013 more economic growth, employment, a better balance of payments
improve the labor conditions References 1 Biatour, Bernadette and Kegels, Chantal and Vandecandelaere Siska, Le financement public dc l†mnnovation:
Small Business, Small Business Economics Vol. 16 No. 1 february pp. 31-35,2001 6 Iacob Kerlek Ši colectiv, Economia à ntreprinderii, Editura
Enterprises on Economic growth Development 421 Special Issue December 2013 11 Soete, Luc a o.,Eindrapport van de Expertgoep voor de
Enterprises on Economic growth Development 422 Special Issue December 2013 26 www. cnipmmr. ro 27 www. europa. eu. int
economies in which the family SME operates. High levels of performance can facilitate firm growth and subsequent profit performance,
tend to be and thus more rapid economic growth (Florida 2002. Further, knowledge has been tied to the development in the number of SMES in economies (Petrakis and
Kostis 2012 Through establishing a link between knowledge, innovation, and firm performance this research serves to inform managers that firms need to be managed effectively for
Such conditions aided in the establishment of economic systems sup -portive of innovative capacity and knowledge-based competencies,
contribution to the US economy through the payment of taxes or the use of American
Large shareholders and firm performance†an empirical examination of founding-family ownership Journal of Corporate Finance, 14, 431†445
) â€oefamily businesses†contribution to the U s. economy: a closer look. Family business Review 16 (3), 211†219
) Information technology and the U s. economy. The American Economic Review, 91 (1), 1†32 Katz, N,
Small Business Economics, 38 (1), 85†101 Kirzner, I. 1979. Perception, opportunity, and profit. Chicago:
Journal of the Knowledge Economy, 1†20 doi: 10.1007/s13132-012-0115-6 Porter, ME.
economic growth, men, women, and minorities. Westport Quorom Books Rigby, D, & Zook, C. 2002). Open-market innovation.
) A stakeholder perspective on family firm performance. Family business Review, 21, 203†216 Zhou, KZ, & Wu, F. 2010).
Small Business Economics, 6 (5), 327†347 ation-entrepreneurship. com/content/2/1/14 doi:
Setting the adequate conditions for achieving a competitive position in the knowledge economy is far
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
collaboration between all relevant regional stakeholders for the collective identification of key innovation assets and long-term strategic priorities
the regional economy. Collaborative leadership is developed by inducing participants to share their substantive knowledge, professional networks,
Especially in peripheral economies in Europe, but not exclusively, corruption can be regarded as one of the main barriers to innovation.
Bell Journal of Economics, 10: 92†116 Griliches, Z. 1990) Patent statistics as economic indicators:
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
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
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
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
characteristic of developing economies (Uzkurt et al, 2012), Hungarian and Romanian SMES also face restrictions in terms of underdeveloped skills and capabilities (a shortage
Particularly in developing economies it is important to study the effectiveness of approaches in SMES that help these small firms in
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
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
Eastern European Economics, 33,38-75 Brown, J. D.,Earle, J. S. & Lup, D. 2005.
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 Business Economics, 41,537-562 Uzkurt, C.,Kumar, R.,Kimzan, H. S. & Sert, H. 2012.
Entrepreneurship in the transition economies of Central and Eastern europe. Journal of Small Business Venturing, 14,417-425
to contribute to regional development and the need for their fuller integration with the regional economy
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
partnerships that, together with industry and other stakeholders, can maximise the use of EU Structural
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
to motivate participation of key stakeholders •coordination of regional/national/European RTD and innovation programmes, coupled with a necessary
•better alignment of timelines for the different stakeholders (universities, regional authorities and other external actors
policy makers and other stakeholders In preparation for the workshop, the following questions were posed in advance to the participants in
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
There was a general consensus about the importance to include all relevant stakeholders in the definition
Ministry for the Economy, Innovation, Science and Employment Annex 1: List of Participants 2 1
Dimitri Kyriakou Spain EC Senior Economist, JRC-IPTS John Edwards Spain EC Researcher, JRC-IPTS
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
The financial and economic crisis makes creativity and innovation in general and social innovation in particular even more important to foster sustainable growth
has suffered the worst financial and economic crisis in decades with unemployment set to rise to double digit figures by 2010.
current financial and economic crisis makes social innovation more important than ever, both as a component of economic strategies to build Europe†s
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.
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
competitiveness and economic growth in the long term Challenges facing Europe These social and environmental challenges come under six broad headings
•Economic growth-restarting economic growth and ensuring long -term sustainability and competitiveness for the future. In 2009, GDP
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
of Europe†s social model with a rapidly transforming economy Focusing innovation and R&d policy on Societal Challenges
changes in society and the economy. For citizens, this means unleashing the potential of a broad range of ideas to solve real problems,
and involves many stakeholders across the different sectors, and a new kind of innovation which is pull-through
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
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
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
shareholders and owners. There is currently no universally accepted definition of social enterprise. This is because social enterprises can take
financing, and can deal with new relationships with stakeholders and territories. †Social innovation†seeks new answers to social problems by
has accrued to shareholders and founders. The Harris/Albury definition focuses on motivations, which are rarely easy to know with any certainty.
Schumpeterian economics provided a frame in which a critical role is played by individual entrepreneurs engaged in risk and innovation
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
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.
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 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
£24 billion Gross Value Added to the UK economy. lx In what follows, we†ve pulled together a range of examples of social
grant economy and the household -because there are clear and distinct trends in each sector 36
•Collaboration †with users, front line staff and other stakeholders and partnerships with organisations from the private, public and
anthropologists, researchers, policy analysts, economists and others. It is based on in depth user research (using ethnographic research methods such
the interests of stakeholders, on a participatory and democratic governance system, and on the use of volunteer labour. †lxxi
independence are guaranteed through a special shareholding trust which protects the social and environmental aims of the bankâ€.
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
1 We describe this as the grant economy because grants play an important part, even though
Given the variety and breadth of the grant economy, all we can do here is
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
A recent evaluation by the New Economics Foundation (NEF) concluded that the SSE€ s learning programme has been highly successful:
The informal household economy †individuals, families, informal groups associations and networks-has generally been recognised under as a source
Within the household economy, there are a number of emergent trends. One is new forms of mutual action between individuals †such as open source
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
and many stakeholders will be involved in the running of the business. The car has also been designed to be
qualitative and quantitative growth of its economy and its international 70 competitiveness and co-operation.
and support changes in the Estonian economy through foresight projects and venture capital investments. The fund focuses on
Service Economy, and Growth Vision are all foresights for the year 2018 and work towards policy reform in line with Estonia†s developmental vision
wide range of stakeholders in the design, development and evaluation of social innovation Mindlab, Denmark
and stakeholders such as senior managers or elected councillors, in setting out what is required from a
and Economics and the Internet of the Future. Workshops will be run to enhance co-creation of ideas and services
new type of multi-stakeholder cooperative structure introduced in France in 1982, introduced as a new legal form in 2002
economy. cxvi New legal forms must have clear and direct benefits otherwise take up will be slow.
and boost the economy, it can also help governments achieve twin objectives of reducing costs and improving the quality and effectiveness of public
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,
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
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
Specialist academies linked to social economy initiatives, such as the University of Mondragon in Spain, and the University of Gastronomic Science
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
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
•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€
environmental economics has spawned methods for measuring everything from wetlands to emissions, usually using a combination of
2004, has mobilized many of the world†s finest statisticians and economists to develop better indicators of social progress and well-being, bearing fruit
Second, and longer term, developing some economy and society wide measures for both the generation and take-up of innovations, drawing on the
forward by citizens and stakeholders across Europe. This could be based on, or work collaboratively with existing structure, such as
from businesses, the public sector and the grant economy. It is not that a range of tools isn†t available;
just for return on investments and all sectors of the economy should be drivers for innovation.
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
xixn Stern (2007) The Economics of Climate Change: The Stern Review, London: HM Treasury Available at:
(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.
Crisis and the new Social Economy, Provocation 09, London: NESTA lxii Jocelyne Bourgon, â€oethe Future of Public Administration:
lxxxv New Economics Foundation, †School for Social entrepreneurs: nef evaluation report†London, 2006. Available at
that spam more than the 70%of the Industrial Economy CLUSTER POLICY 9 X Warsaw (February 2012
OPENÂ ECONOMY AXISÂ 2 INNOVATIVE, Â ENTREPRENEURIALÂ ANDÂ TECHNOLOGICALLYÂ ADVANCEDÂ ECONOMY AXISÂ 3: Â SUSTAINABLEÂ ECONOMY
AXESÂ of the Basque Competitiveness Plan 15 X Warsaw (February 2012 AXIS 1: OPEN ECONOMY
†40 †30 †20 †10 0 10 20 30 40 2008 2009 2010 2011â (I†III
USA EU€ 27 Spain Basqueâ Country GROWTH OF INTERNATIONAL EXPORTS %16 X Warsaw (February 2012
OPEN ECONOMY Foreign Trade 17 X Warsaw (February 2012 The Competitiveness Plan is an umbrella plan, various Government
economy. It is fantastically rich, and demonstrates the diversity of initiatives being led by entrepreneurs and campaigners, organisations
2. Support in the grant economy 167 3. Support in the market economy 180 4. Support in the informal or household economy 195
Bibliography 209 Index 211 Acknowledgements 220 2 THE OPEN BOOK OF SOCIAL INNOVATION This book is about the many ways in
and the household †in the overlapping fields of the social economy, social entrepreneurship and social enterprise.
This is as true for the private as for the social economy. New paradigms tend to flourish in areas where the institutions are most open to them, and
An emerging social economy Much of this innovation is pointing towards a new kind of economy.
It combines some old elements and many new ones. We describe it as a †social
which are very different from economies based on the production and consumption of commodities. Its key features
include •The intensive use of distributed networks to sustain and manage INTRODUCTION 5 relationships, helped by broadband, mobile and other means of
Much of this economy is formed around distributed systems, rather than centralised structures. It handles complexity not by standardisation and
outside the economy, as too complex and ungovernable, but has now come to be recognised as economically critical, with all the needs for support, tools
In both the market and state economies, the rise of distributed networks has coincided with a marked turn towards the human, the personal and the
quantitative metrics of the late 20th century state and economy (hence the rise of innovations like the Expert Patients programmes, or Patient Opinion
social economy Measuring success Measuring success in the social economy is particularly problematic. In the
market the simple and generally unambiguous measures are scale, market share and profit. In the social field the very measures of success may be
and rapid learning that are accompanying the birth of this new economy. But we can be certain that its emergence will encourage ever more interest in how
those within each economy: the public sector, the grant economy of civil society, the private sector,
and the household. Some of these conditions are about structures and laws, others are about cultures
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
refining and testing ideas is particularly important in the social economy because it†s through iteration,
the social economy in many other ways, whether through inspiration and emulation, or through the provision of support and know-how from one
economy and household sector, usually over long periods of time In this part of the book we explore each of these stages in depth, with a
Within the social economy, especially amongst artists, entrepreneurs and community groups, there is a long tradition of taking advantage of empty, abandoned or derelict buildings
Deming, E w. 2000) †The New Economics for Industry, Government, Education. †2nd ed Cambridge, MA:
Nooteboom, B. 2000) †Learning and Innovation in Organisations and Economies. †Oxford Oxford university Press
the development of new innovations in the social economy. This means 2 that competitions need to be structured in such a way that participants
such as the New Economics Foundation and Forum for the Future 80) Design labs. In Finland, the national innovation agency SITRA has set
what the economics look like, and how it could be made cheaper. The driving principles at this stage are speed,
economy, however, there are arguments for sharing, rather than shifting the risk. This can be achieved through a stage-gate process, where
economy require as much care and creativity in their generation as the social ideas. The two are developed best together to sustain and re
For the social economy the issues of control, the team and relations with users are likely to have greater
In the social economy, ownership is an ambiguous concept. Its organisational structures are the site of contending pressures of goals and interests.
creating different categories of shareholder; by giving particular groups voting rights; or golden shares. These arrangements can be fixed
trusts, with a further 95 supporters†trusts having shareholdings in their clubs. There has also been a growth of †New Mutualismâ€,
established as multi-stakeholder mutuals; GPS have organised mutuals to provide out of hours primary care;
stakeholders that do not depend on representation on a board 120) Boards for innovation. Some design features of boards can actively
as an annoying necessity where small shareholders can vent their anger Social movements, by contrast, use AGMS to reinforce commitments to the
122) Stakeholder governance. There are a number of ways in which core stakeholders can be incorporated in the structure of an organisation and
its processes. These include the constitution, a shareholders†agreement or the terms of a limited partnership
early stage to guide negotiations between stakeholders. We anticipate considerable web-based innovation in this field, with websites providing
members and stakeholders 124) Consumer shareholding can be used to involve consumers more directly in the work of a venture, both directly, and through
representation on the board. This was one of the main reasons Cafã direct opted to have a share issue geared to small shareholders as a
means of raising finance 125) Gold standards and Golden Shares. Social businesses like Cafã direct have adopted a detailed Gold standard to provide a constitutional
Much of the social economy is made up of organisations that are not dissimilar to those in the state or private business which have a
133) Shared backroom economies. Many new ventures carry high overheads because of their small scale, or they fail to invest in financial
from a reciprocal economy of information, and in extending the value and impact of the knowledge they contribute.
In a volunteer economy, roles, relationships and incentives have to be thought about differently to those where there is
within the social economy that include saving and lending circles, but much of the loans now being made for social ventures are coming from
It has 2, 400 shareholders. Image courtesy of Andrew Watson 4 80 THE OPEN BOOK OF SOCIAL INNOVATION
The private economy is structured to reserve the benefits of an innovation to its own organisation or to those
The social economy †being primarily oriented around social missions, favours the rapid diffusion of an
economy has less compulsion to organisational growth and more towards collaborative networking as a way of sharing innovation. 1
reap different kinds of economy (scale, scope, flow, penetration etc To grow effective demand, there may then be need a for diffusion through
idea behind the project becomes a key method for the social economy as does developing a capacity to respond to those inspired by the idea
and can also lead to economies in processing tenders. The public sector†s procurement portal in the UK is Buying Solutions,
We look at platforms as the nodes of the new economy, and at other ways in which users and originators can engage in the evaluation and adaption of
grant economy. However, we suggest that in a distributed economy a different conception of scale is needed, one that focuses on economies of information
and communication, and structures that can deliver that. Organisations within the social economy have less compulsion to organisational growth and more
towards collaborative networking as a means of sharing innovation 200) Organisational growth is the simplest way to grow an innovation
However it is surprisingly rare †innovations more often grow through other means. Small social enterprises and other NGOS generally find
211) Revealed preference methods come from the field of economics and focus on the choices people have made in related fields in order to
The benefit of SROI is helping stakeholders to recognise all of the potential benefits a project or program might have,
them instead as processes for discussion between stakeholders 218) Social accounting methods have been used by many countries
value to notions of opportunity cost (that is, what people would give up in order to receive a service or outcome whether through payments
234) New models of the support economy. These reorient services around support for the user rather than the simple delivery of a standardised
246) Rewiring economies, connecting sectors like the utilities and automotive industries for the development of plug-in hybrid cars, or
as natural disasters, crises of care or of the economy †to underlying causes, and using this as the basis for proposing major systemic change
They are one of the reasons why economics has found it hard to understand innovation without a substantial dose of sociology added in
economy intermediaries to become more explicitly focused on their knowledge and relationships. One of their roles is to grow fields and markets:
are multidisciplinary and able to engage a wide range of stakeholders in the design, development,
innovation, as well as innovation for the economy. The Department for Business, Innovation and Skills (BIS) in the UK is one example.
Economics, and the Catholic University of Leuven. There is also the Poverty Action Lab at MIT which tests out alternative interventions
the social economy ††they can leverage the assets that already exist in a
range of benefits that are particularly important within the social economy they can expand rapidly and widely;
stakeholders to discuss issues relating to inclusive entrepreneurship, local development, and social entrepreneurship 305) Action learning sets are groups of between four and seven people
This social economy is the source of social innovation. However, while it already plays the key role in developing new models and services to meet
It has been argued elsewhere that the social economy, as a source of innovation and production, could stand on an equal footing with the private
social economy remains little understood. So, what is the social economy The Social Economy The social economy is a hybrid.
It cuts across the four sub-economies: the market, the state, the grant economy, and the household.
Each of these sectors has its own logics and rhythms, its own means of obtaining resources, its own
structures of control and allocation, and its own rules and customs for the distribution of its outputs.
But the parts of these economies which we term the social economy are united by their focus on social goals, by the importance
given to ethics, and by their multiple threads of reciprocity. Their production ranges from the micro scale of domestic care in the household to the universal
services of a national welfare state. Although analytically distinct from the private market, it includes social enterprises engaging in the market, as well as
some of the activities of private companies that have primarily social goals. 2 If the social economy is a hybrid,
so are the firms, states, charities and households that operate within it. They have a base in one of the four sub
-economies, but also operate across its boundaries. In the market, private firms receive grants from the state, for example,
Age Concern are shaped still primarily by the grant economy in how they raise their money,
sub-economies that together constitute the social economy. The diagram shows that none of the four sub-economies is concerned wholly with the social
economy WAYS OF SUPPORTING SOCIAL INNOVATION 143 The interfaces Formally, if there are four sub economies,
there will be six interfaces. The first three interfaces are between the state and the other three sub-economies. 3
Central to these interfaces is the way finance crosses the borders, inwards in the form of taxation and fees, outwards in the form of grants, procurement
and investment. There are many others, including the regulatory, fiscal and legal conditions determined by the state,
by the state for the actors in other parts of the social economy. Each of these
The fourth interface is between the private market and grant economy. These relations include, for example, corporate sponsorship, charitable donations
The Social Economy Source: The Young Foundation 144 THE OPEN BOOK OF SOCIAL INNOVATION healthcare, combining commercial provision of goods and services with mutual
economy†s relations with the other three sub-economies. Taking the interface between the household and the private market first, this is of course the
extent to which social networks and a gift economy operate in the sphere of consumption has long been remarked on by anthropologists for example (from
economy of environmental change Between the grant and the household economies there are also two way
movements of donations and volunteering from one direction, to a multitude of services from the other.
is when associations and movements from the household economy partially transfer themselves into the grant economy,
appointing professionals paid for by subscriptions or grants These examples are the tidy, analytical depiction of the interfaces.
however, each sub-economy may relate simultaneously to a number of others. 4 For example, the state can promote social innovation in the market as well as
the grant economy by applying certain policy and regulatory levers such as minimum trading standards, and compulsory targets for the employment of
the household and the other sub-economies. First is the development of new systems of support economy as put forward by Jim Maxmin and Soshana
Zuboff in The Support Economy. 5 This is closely linked to the development of co-creation and co-production representing a partnership between households
and professionals. Personal budgets (introduced for people with disabilities in the UK in the 2000s), for example, are an important innovation in this space â€
Neither the state nor the grant economy has the structure or incentive to innovate in this way.
hand †that most distributed of economic systems †generates ideas but on its own lacks the capital, surplus time,
Crisis and the new Social Economy. †Provocation London: NESTA 2. This is a wider definition than the more usual one
which refers to the social economy as the third sector †namely NGOS and social enterprises.
public economy †whose values and goals have much in common with those of the third sector
†and the informal economy of the household 3. The social components of these three sub economies outside the state are the economic
parallel to civil society, and could be thought of as the civil economy, that is to say that part of
the social economy that is outside the state 4. There are also interfaces within each sub economy, for example between the private and
social markets. This may take the form of joint ventures, as in the recent case of Grameen
-Danone and their collaboration in a social enterprise producing yoghurt for low income households in Bangladesh
5. Maxmin, J. and Zuboff, S. 2004) †The Support Economy: Why Corporations are Failing
not deal with those areas of the economy which are difficult to commodify 146 THE OPEN BOOK OF SOCIAL INNOVATION
economic growth of the past three decades. More recently there have been experiments in health insurance in Chongqing, and democratic
fit the economics of social businesses Legislation and regulation Governments shape the conditions in which social entrepreneurs, businesses
economy such as compulsory targets, including the employment of people with disabilities, regulations for renewable energy, fiscal
385) Planning and tax rules to promote creative economies such as subsidised rent in art districts, including Soho in New york and Hackney
Crisis and the new Social Economy. †Provocation London: NESTA 3. See for example, Murray, R. op cit.;
SUPPORT IN THE GRANT ECONOMY 167 2 SUPPORT IN THE GRANT ECONOMY Civil society and the grant economy are the most common sites of social
innovation †in campaigns, social movements, non-governmental organisations and associations. By its nature this sector tends to be fragmented and small in
scale. But its sense of mission often means that it is better than other sectors
We describe this sector as the grant economy because grants play an important part, even though much of the income received within this sector
grant economy, there need to be new kinds of finance, platforms, packages of support, and regulatory, governance and accountability frameworks.
SUPPORT IN THE GRANT ECONOMY 169 and enterprises works best, or how to stage funding to maximum effect
grant economy Grant giving Increasingly, donors are trying to avoid some of the limitations of traditional
SUPPORT IN THE GRANT ECONOMY 171 408) Intermediaries who allocate grants for specific projects on behalf of
investment and development packages for commodity development projects, or the UK€ s Department for International Development (DFID
SUPPORT IN THE GRANT ECONOMY 173 Governance and accountability Too often within the grant economy, governance and accountability structures
do not resonate with the organisation†s social mission. And, in the UK at least there are often questions about who a charitable or nonprofit organisation
SUPPORT IN THE GRANT ECONOMY 175 424) Members and associates as sources of innovation and review
stakeholder communications (for more information on metrics see methods 208-229 426) Effective philanthropy methods, encompass many tools for feedback
grant economy and identified a lack of training and experience as one of the main barriers to the sector†s success. Leaders of nonprofit organisations
of financial sustainability and stakeholder management while keeping the organisation aligned to its mission and values
430) Developing skills within the grant economy. In the UK, ACEVO and the NCVO provide a range of training programmes for nonprofit
SUPPORT IN THE GRANT ECONOMY 177 intelligence †model. Many programmes now include a strong emphasis
435) Planning and tax rules to promote creative economies such as subsidised rent in arts districts,
SUPPORT IN THE GRANT ECONOMY 179 End notes 1. Blackmore, A. 2006) †How voluntary and community organisations can help transform public
ECONOMY The boundaries between the private sector and the social sector are breaking down for many reasons.
Economy TTTHEHEHE Stat Stat Stateee The Granthe Granthe Granttt Economeconomeconomyyythe Househthe Househseholseholseholddd 3 182 THE OPEN BOOK OF SOCIAL INNOVATION
447) Extending the cooperative economy in production, including MONDRAGON and Peruvian coffee co-ops 448) Foundations as owners of corporations, such as the Bertelsmann
of shareholders and savers in the company†s decision making process must be encouraged; each organisation which accepts
They remain critical to the social economy, both in assessing products and services on the basis of social criteria, and in
They create their own protected economies with discounts for particular products and services from specified places
The growth of parallel mechanisms to favour the social economy has been primarily geared at promoting the local economy.
There remains scope for a considerable expansion of these methods to promote social and environmental
483) Specialist academies linked to social economy initiatives, such as: the University of Mondragã n in Spain;
economy, such as Harvard†s Advanced Leadership Programme pioneered by Rosabeth Moss Kanter and launched in 2008/9
SUPPORT IN THE INFORMAL OR HOUSEHOLD ECONOMY 195 4 SUPPORT IN THE INFORMAL OR HOUSEHOLD
ECONOMY Many innovations begin in the informal life of households †a conversation around a coffee, a kitchen table,
more formalised and shift into the grant economy and subsequently into the public or market economy.
The informal household economy has generally been recognised under as a source of innovations. But it has played a critical
Within the household economy, we can see a number of emergent trends One is new forms of mutual action between individuals †whether in the form
SUPPORT IN THE INFORMAL OR HOUSEHOLD ECONOMY 197 providing others, selling information on users and so on. 1 In the field of open
However, this is not just a virtual economy. It is also about care and support in
Economy TTTHEHEHE Stat Stat Stateee TTHEHE Ma Marrkekett TTTHEHEHE GGGRANTRANTRANT EEECONOCONOCONOMMMYYY 4 198 THE OPEN BOOK OF SOCIAL INNOVATION
But to spread the benefits of the social economy, we will need to rethink many of the ways in which the household economy relates to the two main
sources of finance †the market and the state. Issues such as the distribution of working time, the valorisation of voluntary labour, the content and channels
SUPPORT IN THE INFORMAL OR HOUSEHOLD ECONOMY 199 498) Hosts and moderators as online guides.
In the social economy, rather than restricting access to knowledge and information, there is value in diffusing and sharing ideas and information
economy by limiting free riders. Examples include open licences 500) Open licensing has redrawn the traditional battle lines between the
informal economy, such as the right to request flexible working time 4 SUPPORT IN THE INFORMAL OR HOUSEHOLD ECONOMY 201
506) Training for volunteers †the provision of training and incentives for volunteers, and networks for linking volunteers and projects (such as
They create an economy based on direct household time and can serve as alternatives to mainstream currencies
SUPPORT IN THE INFORMAL OR HOUSEHOLD ECONOMY 203 514) Extending public spaces for domestic production such as
SUPPORT IN THE INFORMAL OR HOUSEHOLD ECONOMY 205 517) Users as producers †such as the Expert Patients Programme, which
SUPPORT IN THE INFORMAL OR HOUSEHOLD ECONOMY 207 This could include educational coaching services, relief and back
economy, and have developed innovative forms of distributed network organisation and action, further facilitated by the advent of the internet
Jim Maxmin and Soshana Zuboff, The Support Economy: Why Corporations are Failing Individuals and The next Episode of Capitalism, Penguin, 2004
Walter Stahel, The Performance Economy, Palgrave Macmillan, 2006 INDEX 211 INDEX 5 a Day Campaign 86
Public economy 149-161 budgets to promote internal innovation 150-152 democratic accountability and democratic innovation 152-155
Grant economy 168-173 grant giving 169-171 improving the grant relationship 171-172 mission related investment 172-173
Grant Economy 142-145; 167-179 Green Homes 88 Green Valleys 55 Greenpeace 28; 99
The Household economy 142-145; 195 -208 Hubs 129; 135 I Want Great care 21; 148
New Economics Foundation (NEF) 49 New Philanthropy Capital 171; 175 New York†s Open Book 154
Social economy 4-6; 63; 82; 84; 136 141-145; 192; 198; 199 Social Enterprise 2;
Support Economy 5, 111,144 Sure Start 111,150-151 Tällberg Foundation 44 Taproot Foundation 172
Robin Murray is an industrial and environmental economist. His recent work has focused on new waste and energy systems and on projects in the social
economy. He was cofounder and later chair of Twin Trading, the fair trade company and was involved closely in the companies it spun off,
economy, social entrepreneurship and social enterprise. It draws on inputs from hundreds of organisations around the world to document the many
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