Social enterprises as economic stabilisers

A doctoral study at LUT University demonstrates that social enterprises not only address social issues but also act as economic stabilisers, particularly during crises. Furthermore, companies that successfully integrate commercial and social objectives tend to perform better in innovation competition than traditional firms.

In her dissertation, Annu Kotiranta aimed to determine whether external factors influence the growth potential of these businesses in the same way as commercial enterprises.  

"The growth potential of social enterprises should not be overlooked, as they play a crucial role in strengthening economic resilience. Hybrid companies that balance social and commercial goals appear to display explosive growth and outstanding performance in the innovation system. Investments in these businesses should continue," Kotiranta explains.

Social enterprises grow during crises  

Social enterprises thrive particularly during economic downturns, when societal problems increase, creating markets for their solutions. For instance, employment-related businesses prosper when unemployment rises, while circular economy enterprises benefit from increased demand due to resource shortages.  

"Recessions often give rise to societal challenges that social enterprises address, which can, in turn, boost their business compared to an average company," Kotiranta states. 

Social media is not always an effective tool

Traditionally, social enterprises invest heavily in communication through social media. However, research suggests that this approach does not always enhance their success. "It appears that developing digital capabilities supports the growth of both social and commercial enterprises equally, yet investing in social media has had a negative impact on the productivity of social enterprises," Kotiranta observes.

Innovation funding needs re-evaluation

The current innovation support system favours businesses aiming for export and revenue growth. According to Kotiranta, funding for social enterprises should also be structured to support companies that generate broader societal impact.  

"Some social enterprises do not benefit from the existing innovation funding system. Overlooking these businesses means that a significant number of potential problem-solvers for key national challenges, such as ageing and social inequality, remain outside the current framework."

"Social objectives do not hinder business growth; on the contrary, they can add value. In addition to economic growth and value creation, social enterprises generate societal value. As a result, their overall value creation surpasses that of conventional companies," Kotiranta concludes.