SIBs and the implications on the relationship between social enterprises and the public sector: a case study from the Netherlands

• Date: 27 March 2024
• Pages: 421-437
• DOI: https://doi.org/10.1108/IJPSM-05-2023-0132
• Published date: 27 March 2024
• Subject Matter: Public policy & environmental management,Politics,Public adminstration & management
• Author: Valentina Patetta,Marta Enciso-Santocildes

SIBs and the implications

on the relationship between social

enterprises and the public sector:

a case study from the Netherlands

Valentina Patetta

Deustuko Unibersitatea, Bilbao, Spain, and

Marta Enciso-Santocildes

Private Law Department, Deustuko Unibersitatea, Bilbao, Spain

Abstract

Purpose –The aim of this paper is to provide insights and knowledge about the motivations and implications

for social enterprises’participation in SIBs, particularly in terms of collaboration and partnership with the

public sector, as well as the different positions on this issue. The overall aim, therefore, is to show how social

enterprises and public organisations have interacted in the context of SIBs and what has been achieved by

participating.

Design/methodology/approach –This multiple case study approach applies qualitative methods like

observations and semi-structured and unstructured interviews.

Findings –The study shows that SIBs can be an option for financing social enterprises within a strategy of

income diversification and resource dependency. Despite tensions and complexities, SIBs can renew the

traditional funding relationship by adding innovation, strengthening the co-creation process and creating a

stable relationship.

Research limitations/implications –Research findings may lack generalisability due to the specific

context in which the case study is rooted.

Practical implications –The paper offers practical implications in terms of insights and suggestions for

social enterprises and the public sector interested in developing the scheme.

Originality/value –This paper adds the voice and perspective of social enterprises on the relationship with

the public sector within the framework of SIBs initiatives.

Keywords Social enterprise, Public sector, Social impact bonds, Service delivery, Social enterprise funding

Paper type Case study

Introduction

Social enterprises (SEs) emerged as a new expression of civil society committed to building

resilient communities against a backdrop of welfare state crisis, economic austerity and social

injustice. Since their inception, SEs have in many ways been involved in solving “wicked

problems”(Karr

eet al., 2011) caused by the inefficiencies and difficulties of the public sector or

the limited interest of the private sector (Borzaga and Defourny, 2001). Their crucial role has

been particularly evident since the COVID-19 crisis as they complemented the State action by

filling gaps in service provision, as documented by Bynner et al. (2021). This further

highlighted the importance of their voice, as noted by Thiery et al. (2021, p. 6) who observed

that the pandemic allowed the voluntary and charitable sector to “re-gain its collective voice.”

While SEs have demonstrated their ability to address social needs through civic

engagement and participation, governments have increasingly involved them in delivering

welfare services. This trend, often referred to as the “nonprofitisation”of the welfare state

(Salamon, 2015), stems from the public sector’s limitations in tackling complex,

interconnected problems. As Karr

eet al. (2011) argue, collaboration with civil society is

crucial for building resilient communities and finding effective solutions.

Social

enterprises and

the public

sector in SIBs

421

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/0951-3558.htm

Received 1 May 2023

Revised 5 October 2023

19 February 2024

Accepted 29 February 2024

International Journal of Public

Sector Management

Vol. 37 No. 3, 2024

pp. 421-437

© Emerald Publishing Limited

0951-3558

DOI 10.1108/IJPSM-05-2023-0132

Despite the crucial role they play in delivering public services, the majority of SEs are still

dependent on public funding. According to the 2022 European Social Enterprise Monitor

(ESEM), 69.3% receive support, with 38% receiving grants and 29.3% receiving subsidised

activities. This highlights a persistent funding challenge, with 76.7% of European SEs citing

financial support as their main barrier. As a result, different solutions have emerged over the

years to fill this gap.

Evolution in the financial sector, particularly with outcome-based finance and impact

investing, has significantly reshaped the landscape of social service delivery and the

interactions between SEs and public actors. One example of this transformation is the

emergence of Social Impact Bonds (SIBs). Defined as a form of outcome-based contracting,

SIBs involve private investors providing upfront capital to social service providers who

implement or scale up interventions designed to achieve specific, measurable outcomes set by

a public commissioner (Dagher, 2013). This approach redefines not only “what”is financed

but also “how,”fostering a new relationship between public and social actors. Thus, this

article explores how SIBs are reshaping the relationship between SEs and the public sector in

the European Union (EU), focusing on the Netherlands as a case study.

In this paper, the term “social enterprise”encompasses different legal forms, movements

and experiences developed in Europe. The definition used is that of the European

Commission’s Communication on the Social Business Initiative (EC, 2011, p. 3), which refers

to three key dimensions of these organisations: entrepreneurial, social and inclusive

ownership and governance.

This research aims to bridge that gap by giving voice to SEs involved in SIBs across the

EU and also in the scholarly debate. The EU context presents distinct features compared to

the Anglo-Saxon world, where much of the current SIB discourse is developed. As Wilson

et al. (2020) emphasise, “broader perspectives”are crucial, and this research responds by

examining the SIB experience through the lens of social enterprises themselves. Furthermore,

while the role of SEs in SIBs is often limited to service providers, and their experiences

marginalised (Ormiston et al., 2020), their involvement can contribute significantly to market

development (Bengo and Calderini, 2016). Therefore, this research seeks to redress this

imbalance in the current academic discussion by providing the perspective of SEs.

The decision to conduct the study in the Netherlands is driven by the interesting dynamics

in the interaction between public actors and SEs. This becomes particularly noteworthy in

the demanding context of budget constraints, coupled with the profound impacts of the 2014

Participation Act. Notably, while previous studies have been conducted in the Netherlands,

this paper uniquely provides the perspective of the SEs involved for the first time.

The paper proceeds as follows. After the introduction, the theoretical background is

presented by focusing on the relationship between SEs and the public sector, the social

enterprise funding and SIBs. It then presents the data and research methodology of the

article. Finally, the case study is described and analysed.

Theoretical background

Social enterprise and public sector

Due to their ability to broaden citizen participation, solve complex problems and create social

value, SEs have gradually collaborated with the public sector. This collaboration is driven by

two key factors. First, public contracts serve as an important source of financial support for

those SEs operating in the social services sector and providing redistributive goods (Young,

2016). Second, public administrations are increasingly recognising SEs as valuable partners

in achieving social goals. This shift, driven in part by the “non-profitisation”of the welfare

state as governments seek alternative service providers due to fiscal constraints (Salamon,

2015), has led to the emergence of institutionalised partnerships and cross-sector

collaborative initiatives (Choi et al., 2020).

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