Grant Maintained or Grant Restrained? Rural Social Enterprise in
Ceredigion, Wales
Journal of Rural Enterprise and Management vol. 3 (1), 5-23, 2007
Julienne Senyard
Brisbane Graduate School of Business, Faculty of Business, Queensland
University of Technology, Brisbane 4000 Australia
Tel: +61 (7) 3138 1407, Fax: +61 (7) 3138 5250
[email protected]
David Pickernell
Department for Enterprise and Economic Development, Business School,
University of Glamorgan,
United Kingdom
(tel) +44 1443 483759, (fax) +44 1443 482380,
[email protected]
Nicholas C. Clifton
Centre for Advanced Studies, Cardiff University, Cardiff
(tel): +44 2920 876064,
[email protected]
Michael J. Christie
Murdoch Business School, Murdoch University, Perth, Australia
(tel.) + 61 (8) 95 82 55 59, (fax) + 61 (8) 95 82 55 15,
[email protected]
Contact:
David G. Pickernell, Welsh Enterprise Institute, University of Glamorgan
Business School, Treforest. Pontypridd, CF37 1DL, U.K.
(
[email protected])
Grant Maintained or Grant Restrained? Rural Social Enterprise in Ceredigion
Type of Paper
Case Study Research
Purpose
The purpose of this study is to examine the type and extent of social
enterprise in a rural region in Wales, and the suitability of government
policy towards rural social entrepreneurs.
Design / Methodology / Approach
The rural unitary authority area of Ceredigion is surveyed to examine the
number and type of social entrepreneurs and their experiences in dealing
with government policy
Findings
Overall, the analysis suggests that successful Social Enterprise (SEs) in
Ceredigion are typically based around dedicated groups of people engaged in
a collective, mainly government grant-supported local action, in comparison
to a more , "community entrepreneur"-based model.
Research Limitations / Implication
This study suggests that the current focus of government policy on grant-
based funding of SEs may be influencing the development of rural social
entrepreneurs, highlighting in particular the need for development of
alternate funding allocation mechanisms which encourage the development of
trading capacity in SEs.
Practical Implications
There is thus a requirement for more joined-up and focused SE-specific
development policy from government.
Originality / Value
Original work which examines social entrepreneurship in a rural setting
Keywords : social enterprise, rural enterprise, trading, grants, networks
Grant Maintained or Grant Restrained? Rural Social Enterprise in Ceredigion
Introduction
Government policy in Wales, supported by European Union (EU) Objective One
resources, has become increasingly focused on encouraging entrepreneurial
solutions derived from local individuals, firms and communities (Brooksbank
et al, 2001). This is particularly pertinent to the rural economy, which
has clear opportunities in terms of economic development Bristow (2000).
The EU has attempted to promote economic sustainability, diversification
and development of rural areas through agricultural policy, EU Structural
Funds, strengthening rural development policies, international trade
liberalisation, processes of globalisation, technological change and
localisation (Lowe et al (2002), Stathopolou et al (2004). Warren (2004)
further argues that rural economies require restructuring and reform, which
agricultural policies alone (notably the EU's Common Agricultural Policy)
cannot ensure. This is even more apparent in the more peripheral rural
areas, characterised by depopulation, infrastructure problems, high
dependence on agriculture, and vulnerability to economic adjustment
processes (Stathopolou et al, 2004). A paucity of research exists on the
performance of programs designed to assist rural entrepreneurs, however
(Chrisman at al 2002). Ray (1999), further argues that research should
shift its focus onto territories in rural locations and marginalised social
groups living in rural locations.
The Countryside Agency (2003) in its work in the UK also recognises that
social enterprise may also be important, both directly in encouraging
entrepreneurship, and indirectly in assisting the development and
diversification of the rural economy. 'Social entrepreneurship' has shown
its increasing role in community development and the achievement of the
double bottom line which seeks to satisfy both social (mission) and
financial (make money) objectives (Pomerantz 2004), where social mission is
explicit and central (Dees, Hayes and Hayes 1998). This has expanded within
the UK since the 1990s (Shaw, 2004), as social enterprises have been
identified as potential developers and deliverers of innovative ways of
tackling social problems unresolved by traditional public, voluntary or
community mechanisms (Leadbetter, 1997; Shaw, 2004). In some quarters,
social entrepreneurship is being seen as a virtual panacea to the delivery
of some social services Dart (2004).
Simultaneously, there are clear distinct dissimilarities between the
traditional focus of 'mainstream' versus social enterprise characteristics
(Smallbone et al, 2001), and the differences that exist between rural and
urban social enterprises (Smallbone et al, 2002; Countryside Commission,
2003). The purpose of this paper, therefore, is to examine the extent of
social entrepreneurship in a rural part of Wales, Ceredigion, and the
implications of government policy towards these social entrepreneurs. Prior
to a reviewing the further literature on social entrepreneurship,
literature on macro rural characteristics will first be provided.
Characteristics of Rural Settings and Rural Enterprise Programs
Unemployment rates in rural areas tend to be lower than the national
average (Hodge, 1999; Parsons, 1999). This is often accompanied, however,
by relatively low wage levels and high seasonal employment (Hodge, 1999;
Countryside Agency, 2003), even where the structure of rural employment has
moved significantly away from agriculture, owing to the development of the
private employment market in tourism. With these characteristics, Warren-
Smith and Jackson (2004) argue that the perceived need to encourage rural
entrepreneurship has led in the UK to a plethora of government-funded
(small) business support mechanisms, in the form of Rural Development
Agencies, Business Link/Training Enterprise Councils and other
associations. This has been done in a very 'top down' way (Lowe et al,
1998; Welsh Assembly Government 2004), with solutions and initiatives often
imposed from outside the areas where development is required.
Rural Entrepreneurship
Rural entrepreneurs are also often impacted upon by the effects of rurality
on the entrepreneurial process (Whittaker et al., 1999; Parker, 1998). The
main difficulties facing these businesses are location specific,
highlighting issues such as isolation, lack of basic business services, and
time management problems caused by care commitment issues (Warren-Smith,
1999; Jackson, 2000; and Warren-Smith and Jackson, 2004). Rural areas also
suffer from remoteness (Reid, 1987) and low population: two economic
factors that have inhibited rural business creation in the past (Salzar
2004). Further, there are fewer rural bank branches; and risk management,
the nature of financing requirements, and locational biases, tend to work
against rural areas (Green & McNamara, 1987). In recent work by Salazar
(2004), shifts in consumer preferences have, however, also created new
opportunities for rural entrepreneurs. The internet has increased access
to target and actual markets for rural manufactured products. Consumer
preferences for regionally branded organic fruits and vegetables or
organically fed animals has also enabled increased potential for venture
creation and development (Richards, 2002). Stathopolou et al (2004) also
argue, however, that a growing number of rural entrepreneurs choose to
develop or maintain lifestyle firms which focus on lifestyle factors rather
than traditional rational, profit maximising, growth-focused firms found in
mainstream economic theory. Both rural and social enterprise, therefore,
often use criteria other than finance when developing, maintaining and
evaluating firm performance.
Social Entrepreneurship
As Shaw (2004) states, however, there is no universally accepted definition
of what constitutes a "social entrepreneur", with various definitions being
offered by Ashoka (www.ashoka.org), Blair (1997) and Thompson (2002).
Thompson (2002), in particular, illustrates the blurred, overlapping nature
of the main activities (between social and entrepreneurial activities), of
'help', 'volunteering', 'job creation' and 'utilisation of building'. This
blurring extends to definitions of the social enterprise (SE) and its
creation of social capital. Where SE contributions are in areas where the
welfare state is unable or unwilling to help people, or services could be
provided more efficiently and effectively than by government (the third
state), Thompson (2002) sees the issue as perhaps one of emphasis, of
social capital or social capital. The DTI (2002) definition perhaps
encapsulates it in the most practical terms:-
'Businesses with primarily social (including environmental) objectives
whose surpluses are principally reinvested for that purpose in the
business or in the community, rather than being driven by the need to
maximise profit for shareholders or owners'.
Some of the common characteristics of social enterprise defined by Social
Enterprise London (2006) are:
Enterprise Orientation: they seek to be viable organisations with an
operating surplus, versus traditional economic profit motives.
Social Aims: they have explicit social aims such as job creation,
training, or provision of local services. They have ethical values
including a commitment to local capacity building, and they are
accountable to their members and the wider community for their social
environmental and economic impact.
Social ownership: they are autonomous organisations with governanace
and ownership structures based on participation by stakeholders groups
(for example, users, clients, local community groups) or by trustees.
Profits are distributed as profit sharing to stakeholders or used for
the benefit of the community.
The absence of an agreed definition, makes estimations of the size of the
sector difficult. The UK Social Enterprise Unit (SenU), however, conducted
research in 2004, which identified approximately 15,000 social enterprises
in the UK (counting only those that are incorporated as companies limited
by guarantee or industrial and provident societies). This represents 1.2%
of all enterprises in the UK, employing 450,000 people, of whom two-thirds
are full-time, plus a further 300,000 volunteers. They had a combined
annual turnover of £18 billion, and median turnover of £285,000, of which
84% is from trading. In Wales a network of Social Economy organisations met
in 1999 to develop a strategic vision for the social enterprise sector. The
Welsh Development Agency (WDA) were the lead body, with the scope for
harnessing their resources in the fields of entrepreneurship development,
business support, business mentoring, financial support, SME development,
community regeneration, information collection and storage and the
development of a communications strategy. In 2000, research from the Social
Economy Network (SEN) report was published, which highlighted the growing
importance of the social enterprise sector in Wales, estimated to have over
600 actively trading SEs providing a turnover of some £150 million. Recent
policy development of the Social Enterprise Strategy by the Welsh Assembly
Government (WAG, 2005), further recognises its growing importance and
impact on economic and community development. Other policy and research is
also further developing the understanding of rural communities, enterprise
and entrepreneurship in the UK seen through various policy documents,
including the UK Small Business Rural Survey (2004), and Wales Rural
Observatory's (2004) Wales Rural Business Survey.
Rural Social Enterprise: Putting the Constructs together.
Countryside Agency (2003) found that, in comparison to urban social
enterprises, rural social enterprises tend to be more focused upon
community transport, agricultural cooperatives, community and sports
centres, and heritage or environment related activities. They argue that
the relatively dispersed nature of rural populations and failure of service
provision in some ways creates a greater niche for social enterprise to
respond to (for example refer to Byrne et al (2004) and O'Toole and
Burdess, (2004). They also face higher delivery costs, however, and thus
need to find innovative ways to access markets and supply chains and obtain
the benefits of sector clusters which are more prevalent in urban
environments. Given that rural social enterprise, as for entrepreneurship
more widely, exists in the context of the wider rural economy, it is worth
noting some key aspects of this context with respect to the case study
rural area, Ceredigion (West Wales), illustrated in tables 1-3 below:-
(Table 1 about here)
In a rural region like Ceredigion, self employment is very significant, as
is part-time, agricultural, distribution, hotels and restaurant, and public
sector employment, including employment in health and education.
(Table 2 about here)
Comparison of the statistics in the three tables also suggests that
agriculture and construction are relatively dominated by small firms and
self employment.
(Table 3 about here)
Overall, the statistics reveal Ceredigion to display characteristics of
typical rural economies, having more extreme versions of GB and Welsh rural
structures in reliance on agriculture and tourism-related activities, part-
time and self-employment. Direct employment is further restricted by a lack
of access to traditional male dominated industries such as manufacturing
and the statistics highlight this in Ceredigion. Social enterprises in
Ceredigion thus need to be evaluated within the wider context of an economy
reliant on small firms, a large dominant public sector, and tourism-related
activities.
Research Methodology
The research methodology was thus designed to enable an assessment of the
extent of social enterprise within the county, and the role of government
policy in the development of this sector in the context of a rural economy.
Because of the difficulty in defining social enterprise and what
constitutes 'social enterprise', the working definition used was that of
the DTI (2002), highlighted earlier. In the absence of an ideal way to map
social enterprise, a combination of elements was also employed. The
defining attribute was the use of existing knowledge and networks within
the sector, and high levels of participation by social enterprise in the
area. Whilst personal contact is more resource intensive, there are
benefits in terms of coverage in networks and thorough preparatory work.
Disadvantages of this method include resource intensity, a dependence on
goodwill, and focusing on the 'usual suspects', with care needed to try and
capture organisations outside existing networks. This approach also enabled
the use of 'snowballing', i.e. using local networks and identified social
enterprises to suggest contacts for refer-on questionnaires.
Through this very process, 61 Social Enterprises in Ceredigion were
identified, with a subsequent survey response rate of 38% (conducted in
2004), the analysis being based on the 23 responding organisations and 5
follow up interviews. This response rate was consistent with the results of
the SEN report. 20 organisations out of the total of 23 responding to the
survey operated as 100% social enterprises in terms of their ethos, as
defined by surpluses reinvested into the business or community, and not
being driven by the need to maximise profit. Data on the following was then
gathered from the respondents, as the basis for the study:-
number of employees (part-time / full-time)
number of employees (temporary / permanent, volunteers)
geographical location of social enterprise
core trading activity of social enterprise
turnover (incl. proportion from trading / non-trading activities)
income sources, including proportion from each source
geographical scale of market served
additional trading activity of social enterprise
date of registration
networking activities
Results : Social Enterprise in Ceredigion
The main survey results suggest that most social enterprises in Ceredigion
were not engaged in significant trading activities. Related to this were
issues surrounding 'doing business' with the public sector. Unsurprisingly,
funding was also seen as a crucial issue, with calls for a reduction in the
red tape surrounding access to existing funding streams, which needed
instead to be simplified, streamlined and made more accessible to social
enterprises.
For the reasons highlighted above, combined with the small numbers involved
in the sample, any estimates of the total size of the social economy within
Ceredigion can only be indicative, and must be treated with some caution.
If it is assumed that the 60 organisations can be taken as a proxy for the
entire Ceredigion social economy, this would give rise to the following
estimates: 250 full time employees, and 450 volunteers (both full time and
part time), and a turnover of £4m. These figures refer only to the direct
activities of the SEs themselves. Multiplier effects from these activities
are also likely, the SEN report suggesting a figure of between 2.5 and 3.
It is likely, however, that responses to the survey will be biased towards
genuine, larger, trading social enterprises which, combined with the
application of more strict definitions of trading, will lead to a scaling
down of these figures.
A large majority of the respondents (18 of the 23 organisations), reported
that they were Social Trading Organisations. This included two Local
Economic Trading Schemes (LETS), two Worker Co-operatives, one Credit Union
and one Quasi-Public Service Organisation (defined here as a former
statutory public sector organisations in housing, health, social, community
and personal care, e.g. Housing Association). Figure 1 (below) indicates
the types of activities these organisations are engaged in, both at all and
as a main activity, and include arts and culture, care, advice, education
and training and environment. Given the concentration of the Ceredigion
economy in agriculture indicated in table 3, the 7 SE organisations
involved in agriculture (only 2 as a primary activity) may also indicate
the usefulness of SEs in diversifying the economy, at least to a small
extent. The majority of organisations responding to the survey, a total of
nineteen organisations (90%) out of 21, were also not part of a national or
regional organisation, indicating the local nature of social enterprise in
Ceredigion.
(Figure 1 about here)
The majority of responding organisations in the social enterprise sector in
Ceredigion had established these organisations relatively recently, with a
total of 14 out of 17 (82%) firms being established in the last ten years.
The employment patterns and financial data also emphasises the micro and
small nature of these organisations (potentially a result of the
comparatively new status of many of the organisations). Only 12 out of a
total of 24 employ permanent full-time staff, with the vast majority of
these organisations (10 of 12), employing between 1 and 5 permanent
employees. By contrast, only two organisations have more than 20 employees,
with only one of these employing between 51 and 100 employees. 10
organisations also have part-time, but permanent employees, again the
majority employing between one and five. The majority of the volunteers in
responding social enterprises in Ceredigion are employed on a part-time
basis. Ten of the organisations employ voluntary staff on a permanent basis
working fewer than thirty hours per week, with eight organisations
employing their staff on a part-time, temporary basis. 14 of the 24
organisations responding to the survey also provided details of their
annual income/turnover, results of which concentrated in the range £21,000
to £150,000, with none in excess of £150,000. Of these the most common
range, reported by six organisations, is between £51,000 and £100,000. In
terms of "market" geography, nearly three quarters of the organisations
that responded to this question reported that they had a very locally based
(village / town / Ceredigion) "market" for their good or service.
Conversely, only a third saw a regional element of the market, less than
20% reported a market elsewhere in Wales, with none reporting a market at a
higher (UK or international) level than this.
(Table 4 about here)
In terms of trading activities, however, less than 55% of respondents
supplied details that indicated they received any income at all from
trading, with various grants being the other obvious source of finance.
Table 4 above indicates, that Welsh Assembly grants the most common. Of the
9 respondents receiving WAG grants, 33% of their income is derived from
this source. In comparison, there are 6 firms receiving WDA grants through
which 65% of their income. A distinction is often now made in the UK
between 'established social enterprises' (50+% income from trade) and
'emerging social enterprises' (
