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Social Economy Organisations in the Theory of the Firm

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Abstract:

Social economy organisations are growing in number and relevance in advanced, developing and transition economies. Whilst their relevance for balanced social and economic development is now widely recognised, economic theory is not yet able to explain their existence properly, reducing it to the presence of market and state failures. The development of an explanation is attempted here in two steps: first, it is necessary to overcome the traditional paradigm of exclusively self‐seeking individuals. Economic actors are motivated by a variety of preferences over and above purely extrinsic and monetary ones: on the one hand, relational and reciprocal preferences exert a major influence inside organisations, mainly in terms of procedural fairness; on the other hand, intrinsic and social preferences are often drivers of entrepreneurial activities. The second step is the consideration of a new conception of the firm, near to the evolutionary tradition, which sees production organisations as governance structures not geared necessarily to the maximisation of the net economic result (profit). Instead, the working of firms requires simpler economic sustainability and needs to take into consideration the motivations and needs, including the social ones, of all the involved actors, which, generally, are locally embedded.

Document Type: Review Article

Publication date: 2007-10-01

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