Cooperative social enterprises: company rules, access to finance and management practice

Objectives: In light of the faster than expected take up of the Community Interest Company (CIC) in the UK, this paper revisits findings from a study undertaken in 2000 on the impact of asset-locks on the longevity, growth and management styles in co-operative social enterprises.

Prior Work: The co-operative and employee-ownership movements played a leading role in the establishment of Social Enterprise London and the Social Enterprise Coalition. The heritage of the UK co-operative movement, however, differs from its continental counterpart in placing a much stronger emphasis on common ownership that inhibits the transfer of capital and assets to private interests.

Approach: This paper is both conceptual and empirical. It examines different worker co-operative traditions and develops a meta-theory that explains underlying assumptions in different forms of co-operative social enterprise. Using empirical data from 5 common ownership co-operatives and 5 equity-based co-operatives, this exploratory study found differences in management style, access to finance and growth prospects both within and between the two groups.

Implications: Devolution of management responsibilities was more prevalent in co-operatives permitting both individual and collective ownership, as opposed to common ownership. Access to external finance was less problematic for organisations where individuals had made investments. Despite this, it was not established that organisations with external equity or loan finance grew quicker or faired better over the longer term.

Value: The value of the paper lies both in the development of a meta-theoretical framework for differentiating forms of worker co-operative, as well as empirical evidence on the impact of asset-locks in the management and development of social enterprises. The study suggests that the CLS version of the CIC, or abandonment of the CIC in favour of an appropriately structured CLS or IPS model, may be appropriate for social enterprises wishing to grow, but makes little difference in small service oriented social enterprises.