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| , Jan2012, Vol. 37 Issue 1, pp. 10-20. Stevenson H.H., et Jarillo P.M. (1990), A paradigm of entrepreneurship : entrepreneurial management. Strategic Management Journal, (Special Issue, Summer), 17-27. http://www.opinion-way.com http://www.opinion-way.com/bourseauxetudes/ 14 http://www.societegenerale.com Social innovation in social enterprises, the case of governance in the French cooperatives “SCOP” Laurice ALEXANDRE-LECLAIR Maître de Conférences HDR Université Paris Descartes-Sorbonne Paris Cité CEDAG EA1516 Laurice.alexandre-leclair@parisdescartes.fr, laurice.alexandre@gmail.com Abstract: In our article, we discuss the governance as a social innovation factor in cooperatives in France. We chose the case of SCOP (cooperative and participative corporation) because it is the most representative of the democratic and participatory governance in France. Our researchis mainly based onadeep case studyof a SCOPin the field ofManagement Consulting. According to our results, SCOPs participate strongly in the economic development of companies and employment. Its participative and democratic governance helps employees to feel themselves responsible of the success of the cooperative and have more autonomy to reach their objectives. The deep motivations of managers and employees are the self-fulfillment and the feeling to be useful for the Society by offering their competencies to develop employment and to resolve social issues. We can conclude then that SCOP governance is a factor of social innovation when its main objectives are to resolve social issues. Key words: Social innovation, social entrepreneurship, cooperatives, SCOP, France, SME, governance "Social entrepreneurship can be defined as a profit or non profit venture with sustainable and social purposes, through social innovation and participatory governance" (Alexandre-Leclair, 2013). The main objective is to focus on social value settlement rather than financial value. Indeed, managers and employees working in this field accept a limited personal profit making for the benefit of the company. In fact, a big part of profits are reallocated in order to help the company growing and recruiting more employees. That doesn’t mean that the company cannot have profits. On the contrary it must develop and face the competition which means it is considered as a “regular” company. In France, cooperatives are a part of solidarity and social economy (SSE). Itis characterized by its structure’s status considered as groups of people rather than capital (National Observatory of Social and Solidarity Economy, 2012). SSE includes associations, cooperatives and foundations. In France SSE counts for about 10% of French labour, 215.000 employers, and more than 100,000 jobs created each year (CNCRES, 2012).In France, the associations occupy the most common legal structure in the SSE sector with 80% of the employments, followed by cooperatives representing 12% of the employments and 8% left for mutual insurance companies, and foundations. Moreover, the rate of employment growth in the sector was about 2.4% in 2008 against 1.8% for the private sector within the same period.The average size of a venture in SSE sector is about 11 employees, against 9 employees for the private sector. Most of businesses are in the services sector especially for associations, mutual insurance companies, and Foundations, they concern the majority of employees, while cooperatives are mainly engaged in production activities: industry, construction, and agriculture. These figures highlight the role of the sector as a drive for employment. Although cooperatives are less representative in the SSE than associations, we chose cooperatives as a subject of discussion because it is within these structures that the participative and democratic governance peaks. Furthermore, cooperatives, reconciling economic and social values, resist better the crisis. In France, the cooperatives “SCOP” are tightly linked to social entrepreneurship, so, we wanted to observe the link between the social innovation and the governance whithin the frame of a SCOP. Also, we wanted to know then motivations of managers and how do they create or manage this kind of structures,in particular when we know that they are a limited profit ones, through a case study of a French SCOP in the service sector. So, after a presentation of the state of the art of social entrepreneurship and cooperatives specifically SCOPs, we will present our research frame, the methodology adopted and finally our results. Social entrepreneurship Arrow (1963, p. 947) stated, “when the market fails to achieve an optimal state, society will, to some extent at least, recognize the gap, and nonmarket social institutions will arise attempting to bridge it.”Indeed, the practice of social entrepreneurship in France could be totally integrated in this definition. Most of social companies in France are working on niches of the market where the government didn’t intervene or succeed or where the market isn’t large enough for a “classic company”. In this case, the “gap” could be considered as an “opportunity” for doing business and entrepreneurship actions. So, social entrepreneurship is a growing international practice based on solidarity and deep willing to work on social causes and developing economy. However, economic models of social enterprises are not strictly economic. They are part of a plural economy, mobilizing the government, the companies, and citizens in a variety of configurations (Le Livre Blanc, 2011). One could consider social entrepreneurship within the frame of an innovation system.Alexandre-Leclair (2013) has presented the social innovation as a full part of a nation’s innovation system on the same level then technological innovation. In France, social innovation and innovation systems prevail in most of the studies on social entrepreneurship. So, when the cooperatives are managed on a democratic way, we wanted to verify if this democratic way of governance could be considered as a social innovation, especially when the issues surrounding the structuring of social entrepreneurial activities have been examined primarily through an economic lens(Kistruck and Beamish, 2010). As aresult, theories such as agency and transaction cost economics have been used to study thepreference of nonprofit or for-profit forms on the basis of information asymmetry, incentives,and constraints (Borzaga&Tortia, 2006; Glaeser&Shleifer, 2001)1. In this vein,nonprofit and for-profit forms represent alternative governance structures for organizingtransactions, with their relative efficiencies dependent on the level of concerns regardingmoral hazard and adverse selection (Ben-Ner& Ren, 2008)2. In order to better understand the cooperatives SCOP and their functioning, we will present a short literature review on cooperatives, we will present afterwards the specifities of the SCOPs in France. Cooperatives According to ICA.coop (2012), cooperatives are based on the values of self-help, self-responsibility, democracy, equality, equity and solidarity. In the tradition of their founders, cooperative members believe in the ethical values of honesty, openness, social responsibility and caring for others. Cooperatives provide over 100 million jobs around the world, 20% more than multinational enterprises. The cooperative movement brings together over 1 billion people around the world. The United Nations estimated in 1994 that the livelihood of nearly 3 billion people, or half of the world's population, was made secure by cooperative enterprise. These enterprises continue to play significant economic and social roles in their communities. Gibson and Graham (2006), argue that cooperatives offer substantial opportunities to challenge the growth imperative by re-socializing and re-politicizing the global economy, thus creating the socio-political space to encourage a more general shift in economies away from reliance on growth for business viability. The cooperative movement continues to thrive across the globe with new entities being formed in a variety of political, social and economic circumstances (Morrison, 1999). The contribution of cooperatives to economic activity varies from country to country (The International Cooperative Alliance, 2011). In France, cooperatives are the ventures the most resilient to crisis. However, cooperatives are seen as user-controlled, user-owned and user-benefit oriented firms (Cook, 1995). In the research field, cooperatives have been undertaken within the angle of different theories such as game theory, agency theory, property rights theory, transaction cost (Chaddad, 2012).Chaddad and Cook (2004) provided an ownership typology of cooperatives which are diverse in terms of the level of control, ownership and benefits of the members in the cooperative firms. Recently, Chaddad (2012) considered cooperatives as a hybrid form basing his statement on “the recent versions of theories having started to realize the multidimensional nature of governance”. Chaddad (2012) quotes Williamson (1991) who suggests that ‘each viable form of governance – market, hybrid, and hierarchy – is defined by a syndrome of attributes that bear a supporting relation to one another.’ Williamson (1991) concedes that transaction cost economics has focused on the study of polar forms (i.e., markets and hierarchies), at the expense of hybrids, and also has neglected the abstract description of governance structures. The relative costs and competencies of alternative modes of governance have receivedlessattentionthantheattributesofthetransaction.Headvancesthehypothesis that each generic form of governance is supported by a different form of contract law; and that there are crucial differences between markets, hybrids and hierarchies in how they adapt to changing circumstances and in the use of incentive and administrative control instruments”. By his side Menard (2004) declares that hybrid organizations form a ‘specific class’ of governance structures combining contractual agreements and administrative entities or ‘authorities’ with the purpose of coordinating partners’ efforts to generate rents from mutual dependence while controlling for the risks of opportunism. So what about the governance model of SCOPs? In France, cooperatives have an important socioeconomic weight, counting 21000 companies employing near a Million individuals. In 2010, they realized 288 billion accumulated revenues, increasing by 5.1% since 2009. Cooperatives are present, and sometimes leaders, in all the business sectors: agriculture, handicrafts, banking, trade, consumption, culture, education, industry, housing, NTIC, fishing, research, services, transport, etc.) (Rapport du Conseil Supérieur de la coopération, 2007).Different kind of cooperatives exist in France: agricultural, SCOP, SCIC, Consumers, etc.In this article, we will focus on the SCOP ones because of their specific governance. In order to better understand what is a SCOP, we present their status and their functioning below. SCOPs SCOP stands for “société cooperative de production” in French, which means a “cooperative of production society”. SCOPs are considered as regularcompanies on the market, they have the imperative of profitability and areexposed to the competition. The use of their profits is turned first and foremost to the employees and the sustainability of the company (SCOP.coop, 2012), and the governance follows the principle of one person one vote. It is possible to undertake in SCOP in all kind of businesses. In France, around 30% of SCOPs are in the building and civil engineering field, 25% in the industry and more than 40 % are in the services of all kinds. SCOPsare been developing in France for more than fifteen years and their added value doubled in 10 years. The rate of survival of companies created in SCOP amounts to 57 % in comparison to the national average which is 52 % (INSEE, 2010). In the industry, for example, SCOPhave better resisted than the other SMEs thanks to their cooperative governance. History and functioning of the SCOP in France: During the first three quarters of the 19th century, workers try to defend their labour’s rights and their autonomy. Labour unions are created in a secret way, because the law “Le Chapelier” of 1791 forbid them. The contributions of theorists and practitioners, popularizing the ideas of community and democracy, contributed to bring to the foreground the movement of the cooperation of production. Among the most famous: Saint Simon, Charles Fourier, Jean-Baptiste Godin, Louis Blanc, Philippe Buchez, Jeanne Deroin, Joseph Proudhon, Robert Owen(SCOP.coop.fr, 2012). According to the same source, 1831 was the year of the first contract of “association of workers” established by joiners with the aim of improving their working conditions. The status of the employees did not stop evolving since, and cooperatives took more and more scale. It is in 1915 when texts concerning (cooperative of production) was born in the book III of the labour code. And in 2010 the appellation "Cooperative and participative company(SCOP)", replaces the ancient one. Status Legally, SCOP is a venture with the status of limited company. The employees are the majority shareholders and hold at least 51 % of the share capital and 65 % of the voting rights. All the employees are not associated, but they all have authority to become it. The manager is elected by the employees (shareholders). Only the strategic decisions are taken with all the shareholders during the annual general meetings. So, the social relationships are consequently more balanced between employees and managers. In the practice, the average duration of exercise of a manager of SCOP is about twenty year average. The managers of SCOPs have no bonus or stock-options. SCOPs recognize by nature the qualifications and the skills of their employees. SCOP is the only cooperative whose shareholders are necessarily employees. In an agricultural cooperative or consumers' cooperative, the shareholders are not the employees, but farmers or consumers who share their resources in the frame of the cooperative. However, SCOP can have outside partners who can detain until 49 % of the capital and 35 % of the voting rights. Beyond these 49 %, the outside partners can also invest in equity shares, which do not give them voting right, but attribute them a stronger remuneration, made up of a fixed part and a variable part depending from profits realized by the company. In SCOP, the sharing of the profit is fair and organized according to 3 rules: - All Employees, have participation and profit-sharing; - The shareholders have dividends; - A part of profits is allowed to the reserves of the company. The reserves, (an average of 40 to 45 % of the profit) contribute throughout the development of the company to strengthen stockholders' equity and to assure its sustainability. The shareholders receive a salary and invest in capital inflow, but when they leave the company their capital is refunded to them without a capital gain. The French Federation of shareholders reserves the qualifier of shareholder employee as "a shareholder who invested voluntarily, in the long term, a part of its savings in securities of his company, in a direct or indirect way, within the framework of specific operations reserved for all the employees, by wishing to get involved more in his company by showing his trust in it". Research Frame The social aspect of innovation has been taken into consideration in the researches of large companies since the end of the 19th century. Indeed, according to Fontan (2004), the concept of innovation makes a disguised entry in the sociological language in particular when Tarde (1890) explained the evolution of societies by the accumulation of inventions on a daily basis“by innovations”, which modify gradually the human behaviour. It emerges from all these considerations that innovation, in the broad sense of the term, is not the result of an isolated act, but the product of a social dynamics, involving a large number of actors. Our research question considers two aspects: the social innovation and the governance. So, we will discuss these two concepts separately. |
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