Introduction

Several studies have shown that social enterprises have assumed a prominent role as providers of public services during the past twenty years. They have grown in number, influence, and politico-economic importance during this time, and in some cases they have also replaced the state in providing public assistance to the citizenry (Angroff and McGuire 2003; Harding 2004; Borzaga 2008a, b; Nicholls 2008, 2009; Manetti 2012; Zamagni 2005; Zamagni 2006; Bagnoli and Manetti 2008). The European Union (EU) is paying increasing attention to social enterprises, largely based on the assumption that these kinds of organisations should be able to satisfy the growing need for social services in a context of decreasing public spending, while also creating employment opportunities, particularly for people who have been excluded from the labour market (Thomas 2004; Borzaga 2008a, b; Ecchia and Viviani 2006; Defourny and Nyssens 2012; Bagnoli and Toccafondi 2014; Roy et al. 2013).

Between 2014 and 2016, the Italian Parliament debated a new law on social enterprises inside a wider reform of the third sector. At the same time, among the for-profit sector new forms of enterprises such as Benefit corporations—for-profit companies that declare the pursuit of social objectives in their statutes and are certified by a third-party—were introduced. The connection between these developments, the evolution of the Italian welfare system, and national and international policy discourses has not yet been completely tackled by scholars. We hope to contribute to this literature by exploring the co-evolution of social enterprises and the welfare state in Italy and the influence of policy discourses in setting the direction of this metamorphosis in recent years.

The next section of this paper presents the interpretative framework of our study. We use a system of indicators developed by EMES (Defourny and Nyssens 2012) and a set of categories created by Esping-Andersen (1991, 2002) to examine the evolution of the Italian welfare model and the emergence of social enterprises and describe the main findings of the research. The third section describes the methodology used in the study. The results are discussed in section four, providing an understanding of the internal and external influences that led to both the bottom-up development of social enterprises in the 1970s and its more top-down evolution in recent years. This section also discusses the role played by social enterprises in the development of the Italian welfare state. The concluding section summarises the main findings of our research and discusses opportunities for further research.

Interpretative Framework

In Europe, the EMES (Emergence des Enterprises Sociales en Europe) European Research Network has developed one of the first multidisciplinary theoretical and empirical approaches of social enterprise analysis (Borzaga and Defourny 2001; Defourny and Nyssens 2012). Defourny and Nyssens (2012) provide an analytical representation of the model proposed by EMES, which is based on a set of three dimensions and nine indicators. The indicators (and their economic rationale) are summarised in Table 1. Rather than constituting prescriptive criteria, these indicators describe an “ideal-type” in Weber’s terms; in other words, they act as a compass that enables researchers to position themselves within the “galaxy” of social enterprises (Defourny and Nyssens 2012).

Table 1 EMES approach to social enterprises and its economic rationale.
Full size table

In Italy the largest part of this galaxy is represented by social cooperatives (according to law 91/1991) and imprese sociali (a specific type of social enterprise that was brought about by law 155/2006, Borzaga and Zandonai 2009). Zandonai and Venturi (2014) report that 12,570 social enterprises—including social cooperatives, which make up the vast majority of social enterprises—were operating in Italy as of 2014. Italian social cooperatives and imprese sociali generally include all of the entrepreneurial, social, and participatory dimensions that are outlined in the EMES approach.

Besides social cooperatives and social enterprises, other types of organisations can also have some of the features listed by the EMES, including voluntary organisations that are defined by Act 266/1991, associations and foundations regulated by the Civil Code of 1942 that provide social services on a steady and ongoing basis, and traditional co-ops defined by the Act of 1947 that operate in sectors of collective interest, including charitable organisations and public institutions that offer various social services (Borzaga and Santuari 2001). According to the ISTAT Census, 289,927 non-profit institutions (excluding social cooperatives) were operating in Italy in 2011 (European Commission, Directorate-General for Employment, Social Affairs and Inclusion 2016). Nonetheless, a relatively small number of institutions have the same economic and entrepreneurial dimensions that are outlined in the EMES approach.

We used the EMES compass and research by Defourny and Nyssens’ (2006, 2010, 2012, 2013) as starting points in analysing the role of social enterprises as social services providers (Defourny and Nyssens 2006). Their guidelines used the Esping-Andersen typology (1991) to identify the driving forces that helped create different configurations of social enterprises in the European socio-economic context (Defourny and Nyssens 2006, pp. 232–233). We also used Esping-Andersen’s (1991) categorisation of welfare regimes and Ferrera’s (1998) examination of Mediterranean welfare systems in order to look at the historical trends that led to the “recalibration of the (European welfare) system” and its consequences on society.

Esping-Andersen (2006) examines three welfare state models and their effects on living conditions in OECD (Organisation for Economic Co-operation and Development) countries: (1) the liberal welfare state; (2) conservative and corporatist regimes; and (3) social democratic welfare regimes. Italy is included in the conservative and corporatist regime due to the presence of several structural characteristics that are consistent with this typology, such as being shaped by the Church and being strongly committed to the preservation of traditional family structures (Esping-Andersen 2006, p. 168). Ferrera’s categorisation broadens Esping-Andersen’s typology by identifying a so-called Fourth Social Europe, which refers to welfare systems in other Southern European countries—namely Spain, Portugal, and Greece (Ferrera 2006, Ferrera et al. 2012).

According to Kerlin (2009), the faltering economy and “retreat or poor functioning of the State” (Kerlin 2010, p. 167), in combination with weak state programs and funding, can be seen as a driving force behind the emergence of social enterprises. In this respect, Ferrera (2006) claims that this new welfare model is characterised by a two-tiered and polarised social protection scheme that provides high protection standards to specific categories of citizens and little to no protection to others, thus segmenting the beneficiaries. Hence, there is a significant gap between occupational categories, and the development of the Italian welfare model has been characterised by the overprotection of risks. In fact, although the Italian expenditure on social protection (in  % of GDP) is slightly higher than the EU average (+1 per cent in 2013) (Eurostat 2016), the composition of these expenditures is unique in Italy. Between 2008 and 2013, most expenditures have gone to old age functions (50 per cent of the total compared to 39 per cent among the EU-28), while expenditures related to family/children, unemployment, and housing are undersized (−4.3 per cent, −0.29 per cent, and −1.93 per cent on average), thereby generating a functional distortion (Eurostat 2016).

This paper proposes to investigate how these distortions influenced the establishment (and recognition) of Italian social enterprises, which may have been a turning point in terms of encouraging institutional awareness and stakeholder participation in their development. Moreover, this paper also analyses recent attempts to introduce new types of social enterprises and for-profit enterprises in order to understand whether this phenomenon should be seen as a top-down evolution of the sector, an institutionalisation of bottom-up processes or, rather, if these two trends are intertwined. On a related note, we hope to determine whether or not bottom-up initiatives that are created to respond to new needs make use of third sector organisations that have already assumed an increasingly entrepreneurial stance.

Methodology

In order to explore the co-evolution of social enterprises and the welfare state in Italy, we opted for a qualitative methodology based on semi-structured interviews and focus groups with recognised national experts in the field of social economy, social entrepreneurship, and the welfare state. Our research question required an open, interpretative link between data and theory (Corbetta 2003), and qualitative methodology was suitable given its capacity to understand and exploit perspectives of the participants and their diversity (Flick 2009). After performing a review of academic and grey literature that focused on the interactions between social enterprise and the Italian welfare system, we undertook a series of in-depth semi-structured interviews and focus group discussions with a range of Italian stakeholders at various levels of the social enterprise ecosystem. Stakeholders included representatives from banks, social enterprises, social enterprise associations, public bodies, and support organisations such as chambers of commerce and consulting companies.

Interviewees and focus group participants were selected through purposive sampling, which is a type of non-probability sampling whose main objective is to focus on various characteristics of specific demographics (Flick 2009). The goal of purposive sampling is to sample participants in a strategic way, so that the information culled from the process is relevant to the research questions that are being posed (Bryman and Bell 2015). Given these premises, our interviewees and focus groups participants have been selected to offer a comprehensive, multi-perspective overview of the internal and external influences that shaped the development of social enterprises and the welfare State in Italy in the last forty years.

All of the subjects were interviewed in person between April 2015 and May 2016. We opted for semi-structured interviews because we wanted to cover fairly specific topics connected to our research questions. However, we also wanted to give the interviewees a great deal of leeway in how to reply (cf. Bryman and Bell 2015). The group consisted of two experts from think tanks on sustainable development and innovation, two from the financial sector, one from a social cooperative, one from a consulting agency, one from a national association of social cooperatives, one from a consortium of social cooperatives, and one academic. The interviews focused on the professional experience of the respondents, with special emphasis on social enterprise issues in specific national contexts and the role of key institutions, such as public entities, interest groups, and trade unions, in the development of social enterprises from the 1970s to the present. We carried out a total of 9 semi-structured interviews. All of the interviewees agreed to be recorded. The resulting 16 h of recording was then transcribed.

In order to collect further data and insights (cf. Bryman and Bell 2015), the same topics were discussed in two focus groups with social entrepreneurs and local stakeholders (13 participants in total) that were held between May and June 2015. The groups were composed of seven social entrepreneurs (five of which were members of social cooperatives), one representative from the chamber of commerce, one financial institution employee, one support network employee, and one member of a third sector regional association. Two moderators were used to introduce the main topics of discussion and encourage interaction among the participants. Focus groups can be very fruitful when the interaction of the members adds to the knowledge produced in data collection (Flick 2009). All of the focus groups were recorded with the consent of the participants and then transcribed.

The content of our interviews and focus groups has been analysed through the use of grounded theory, an approach that enables researchers to code recurring concepts as a means of understanding the most relevant topics that emerge in relation to our research question (cf. Flick 2009). Grounded theory, which has become the most widely used framework for analysing qualitative data (Bryman and Bell 2015), is concerned with the iterative (or recursive) development of theory out of data, meaning that data collection and analysis proceed together, repeatedly referring back to each other (Bryman and Bell 2015). This integrated research methodology enabled us to synthetically identify the policy discourses and the historical, economic, cultural, and institutional configurations that have shaped social enterprises in Italy, while also revealing potential pathways for the future development of the Italian welfare state.

The Evolution of Social Enterprises and the Welfare State in Italy

1970–2000: The Emergence of Social Cooperatives

If we look at the main consequences of the economic crises of the 1970s and 1980s, it is evident that the evolution of the third sector in Italy reached a turning point. The European welfare models relied social and economic preconditions, such as a growing economy that promoted income dividends to fund the social protection system, industrial growth, stability in the family structure, population growth, and the centrality of the state. These preconditions changed during the 1970s, as public debt and deficits, post-Fordist theory, new modalities of production, growing participation of women in the labour market, declining birth rates, ageing populations, growing expectations, and supranational interdependency weakened welfare state regimes (Ferrera 2006). Thus, the Italian socio-economic system encountered a critical period of radical change, such as the growing needs of the aged and sweeping changes to family structure. While public services proved deficient in responding to a growing and largely unfulfilled demand, the welfare state had to cope with the internal distortions that came about within systems that were built during the years following the Second World War, when the poverty of elderly people and various employment crises could not be addressed by welfare payments alone. The Italian government responded by implementing a “bread-crumb strategy” that relied on the provision of family and disability benefits instead of specific allowances (Trifiletti 1999). While describing this phase of welfare reform, Ferrera et al. (2000) coined the term “re-calibration of the system” (Ferrera et al. 2000, p. 88). In Italy, a comprehensive reform of every sector came about due to both international factors (e.g. the external constraints associated with the Maastricht Treaty) and internal factors. Italy launched a privatisation process, which was meant to reduce public management within the productive system and increase the international competitiveness of the country. While public administrations maintained the financing function of allowances and services, their management and production were increasingly externalised to private non-profit organisations. This transition, inspired by New Public Management principles, an approach to management that emphasises the idea that concepts that are successful in the private sector should also be successful in the public sector, was based on the assumption that private organisations were able to provide services with the same or higher quality as public entities, at a reduced cost for the State. Social cooperatives that had spontaneously developed during the previous twenty years were provided with a legislative framework (Borzaga and Ianes 2006) in 1991, when the Italian Parliament enacted law n. 381/1991 (“Disciplina delle cooperative sociali”—Social Cooperative Legislation). The law created a specific legal form—“cooperativa sociale” (social cooperative)—that was expected to focus on answering to the needs of the community. Hence, the Italian non-profit sector played an important advocacy role. Although the Civil Code did not permit non-profit organisations to provide social services, the Italian Constitution recognised the social function of cooperation, in which economic activities and social impact often coexist, enabling the growth of social cooperatives for answering unmet demand (Borzaga and Santuari 2001). This allowed cooperatives to start providing social services. These same cooperatives represented the first form of social enterprise in Italy (Borzaga and Santuari 2001, p. 166). If we consider the EMES approach (see Table 1), it is indeed possible to find a strong convergence between the various features that often characterise many social cooperatives and the EMES indicators described earlier: economic activity producing goods and/or selling services, an explicit aim to benefit the community, a bottom-up nature (the initiative was launched by a group of citizens or civil society organisations), limited profit distribution, and decision-making power that is not based on capital ownership, among others.

The relationship between the emergence of new kinds of needs and the increased participation of Italian social cooperatives in providing services emerged clearly from our interviews and focus groups. A member of a supporting organisation stated: “The emergence of new enterprises stems from the need to meet existing needs, as well as to respond to new ones, which the redistributive model and the public services failed to answer”. Social enterprises emerged as new third sector actors during a period of structural reform among European welfare states. One of our interviewees stated that “the development of SEs as new actors depended on the de-institutionalization process and on the contracting-out of public administration’s services, not only on civil society’s forms of self-organisation”.

Were the social cooperatives just supporting the public sector, or did they represent an innovative mediator between the market and the state? Our results suggest that social cooperatives performed both functions. The stakeholders interviewed during our research mostly agreed on the innovative nature of social cooperatives. In fact, they affirmed that the new organisations emerged due to the privatisation process started in the 1990s, introducing a significant innovation addressing unmet needs through personalised approaches that differed from the standardised policies provided by public authorities. In Italy, two acts—law 142/1990 on local autonomy and law 241/1990 on administrative procedures—had an important role in clarifying the modalities whereby local administrations can manage the welfare services falling within their competences.

As one respondent working for a support organisation explained, “the new contribution from the social sector cannot be interpreted only as an answer to the shortage of public funding. I consider social enterprise outcome as a model that differs from the State intervention: the private sector manages differently the services provided by the public”. The same interviewee also pointed out that the contribution of social enterprises arose from two premises: that there were unmet needs and that a different answer in providing supply existed. The idea here is that supply should be personalised rather than standardised. “The SEs’ originality has been the discontinuity with the traditional models through processes of innovation able to improve personalized services”. Another interviewee who worked for a financial institution confirmed the existence of unanswered needs: “Since an unmet demand that could not be addressed with the old models existed, new services were requested”. Thus, while the privatisation process enabled non-profit organisations to participate in the delivery of services and production, it has also influenced the emergence of new forms of addressing social needs. Hulgård (2010) states that the reorientation of welfare states in the direction of privatisation and membership generates a new role for civil society and creates a new and improved room for collective and solidarity movements to influence the future evolution of the welfare state. Indeed, “the paradox is that social enterprise and social entrepreneurship can be seen not only as elements in a process of privatisation but also as a manifestation of the power of civil society” (Hulgård 2010, pp. 8–9). As a result, non-profit organisations started to revise their organisational models, embracing a specific productive characterisation (Fazzi 2006). This evolution stimulated the traditional structure used by cooperatives to change in order to face various market challenges and consolidate their ability to support society, create new jobs, and defend production through strong cohesion and inclusive territorial engagement. The latter characteristic was often underlined during the interviews, which made it possible to appreciate the historical legacy of Italian social cooperatives and their ties to the territories they serve at both the national and the local level (Biggeri et al. 2014). One of the interviewees confirmed the collaborative relations that can arise between public authorities and social cooperatives, which fulfil an important function in complementing the actions undertaken by public agencies: “Due to the historical and territorial legacy, the public administration establishes a direct relation with these organisations (SEs), which are privileged partners. It is in line with the model of co-design: public actors (i.e. local health centres, municipalities, consortia) collect the proposals from the actors of a territory to co-design local services. The public subject controls and manages the planning process, allocating the resources but also acknowledging the needs”.

When we asked stakeholders about the role of social enterprises and social entrepreneurs in employing vulnerable members of the labour market, many respondents claimed that Italy has produced some innovative policies, including the creation of B-type social cooperatives that provide employment opportunities for disadvantaged people. Italian law 381/1991 distinguishes between the two different types of social cooperatives that can achieve these objectives through various activities: Type A social cooperatives, which offer a wide range of services, and Type B social cooperatives, which produce goods or services in almost every economic field with the purpose of providing employment to disadvantaged people. A stakeholder working in a support organisation claims that “this enterprise (B-type social cooperative) promoted a relevant step forward assuming that every person can create value according to his means rather than to the job description. Thus, the productivity standards are recalibrated applying a consistent model of production. It eventually originates a huge social benefit, converting an unprofitable cost in a profitable contribution. Indeed, the higher production cost is balanced by a significant social impact: the vulnerable subjects can actively participate in the social life, reducing the social costs and stimulating an autonomous life. These dimensions create an inestimable social value chain”. According to Kerlin (2010), Work Integration Social Enterprises (WISE) and their actions to reduce unemployment rates contributed to the emergence of the social enterprise movement in Western Europe. In fact, once public authorities understood the potential of social cooperatives (in both A and B form), a further boost to the growth of social cooperatives was provided by local authorities through their contracting-out policies. As a result, it was possible for local authorities to increase the supply of services without increasing the number of civil servants and their costs (Borzaga and Santuari 2000, 2001, p. 28).

The literature review, the interviews, and the discussion among stakeholders all suggest that early Social Enterprises in Italy emerged as the result of a bottom-up process in which civil society, existing legal forms, and the community played a primary role. These early experiences were further developed through a process of institutionalisation and collaboration with public authorities. While our interviewees and focus group participants shared the same ideas and opinions on how and why social enterprises developed between 1970 and 2000, different points of view emerged when we addressed the development of social enterprises from 2001 onwards.

2001–Today: Social Enterprises Beyond the Role of Social Cooperatives

Different types of third sector organisations began to develop social entrepreneurial activities in the early twenty-first century, leading to the enactment of a broader law on social enterprises (Decreto Legislativo 155/2006 “Disciplina dell’impresa sociale”) between 2005 and 2006. This law widened the types of general-interest services that could be performed and allowed a wider range of organisations to qualify as “social enterprises”. Organisations that want to acquire this qualification need to adopt a total distribution constraint, allocate profits to surplus operating funds (D.l. 155/2006, art. 3), produce more than 70 per cent of their revenue in specific, socially oriented fields of activity (listed in art. 2), and publish an annual sustainability report (art. 10) (Fici 2006). According to the Decreto Legislativo, a social enterprise is defined as a non-profit private organisation that permanently and principally carries out an economic activity aimed at the production and distribution of socially oriented goods and services (Galera and Borzaga 2009)—namely the entrepreneurial and social dimensions described by the EMES approach. Furthermore, the law on social enterprises identified a wide range of activities, which are defined as fields of “social utility”, including welfare services, work integration, environmental services, health, and education (Borzaga 2008a, b).

It is important to pay attention to one particular factor: the increasing number of subjects performing social entrepreneurial activities who anticipated the enactment of law 155/2006. These new forms of activity and their subsequent legal recognition and institutionalisation were products of a bottom-up process that was similar to the one that had previously shaped the development of social cooperatives. Nevertheless, unlike the legal frameworks established with regard to social cooperatives, the law on social enterprises did not offer evident advantages in acquiring this second-level qualification, except for the opportunity to add the term “impresa sociale” to the legal names and use it in communication and promotion activities, while also accruing some advantages connected to public tenders or grants that are specifically aimed at qualified “imprese sociali”. Since the new legal category did not offer any concrete advantages, it is not surprising to find that very few organisations have adopted it (Borzaga 2008a, b). Chamber of Commerce statistics (extracted in January 2015) reveal that the total amount of Italian social enterprises ex lege 155/06 is 1061 (CCIAA 2015). In short, almost a decade after the enactment of law 155/06 few organisations have chosen to become social enterprises. It would seem as though Decree 155/2006 has not had the same success, in terms of numbers, as the law on social cooperatives.

The 155/2006 law on social enterprises and its subsequent recognition and consolidation of different forms of social enterprises was a hot topic in our focus groups. One focus group participant suggested that the lack of adoption might be due to the narrow fields of activities foreseen in the law. According to this participant, the founders of social enterprises choose a legal qualification in order to achieve specific results and social/environmental impacts within a predetermined sector (Bellucci et al. 2012; Bagnoli and Megali 2011; Manetti et al. 2015). Once again the spontaneous nature of the activities of social enterprises has been underlined. According to some participants, it would be dangerous to force the activities of the organisation to match the institutional requirements in order to qualify as a social enterprise. This could entail adapting social objectives to predetermined and calculated needs that might not answer to problems of the local context or the contingent situation. This notion was expressed by one of the focus group participants. “This is our work: elaborating relevant projects and then identifying the legal status to achieve the expected results. This is important, because if you reverse the process the activities of the organisation would necessarily be hindered by the legal constraints, and the objectives would depend from them”. Moreover, when respondents were asked to discuss the pros and cons of the current legal requirements for social enterprises, the need to implement a less binding legislation for these organisations was often underlined.

The constraining nature of the law on social enterprises (155/2006) was often associated with the challenge of improving their ability to attract capital. This constraint was mainly cited in interviews and focus groups by consultants and representatives of financial institutions. The legal restriction on profit redistribution represented a particularly controversial point: “In the case of SEs, there is the restriction of no-redistributing profits. The entrepreneurs make available the added value to the community, with an intergenerational impact. I would agree on a form of controlled redistribution of profits in order to attract patient capital, which should not prefer other organisations instead of SEs”. According to one of our focus group respondents, “higher the limit to the rewarding of the capital, lower the development of the sector, which will remain subordinate to the others”. Due to the problems cited above, many stakeholders began to demand a reform of the law. The debate on what SEs should be, and therefore what the new law should have recognised, took place in a period in which Italy’s economic and social data worsened considerably. Unemployment rose by 65 per cent from January 2011 to January 2014 (ISTAT 2016), while the national debt as a percentage of total GDP rose from 116.4 per cent in 2011 to 132.3 per cent in 2014 (MEF 2016). In the same period the EU Commission, in response to the 2008 economic crisis and subsequent budget cuts in public spending, launched the Social Business Initiative (SBI) to promote social enterprises and increase their influence in Europe. Thanks to the resilience of the cooperative movement during the crisis (Zandonai and Venturi 2014), SEs have been conceived as a way to increase employment as well as to answer to new needs left uncovered by resource-constrained welfare states. After the initiation of the SBI, access to finance for SEs and the measurement of their social impact—the latter has been also a subject of a subgroup of the GECES (Group of experts of the Commission on social entrepreneurship)—have been among the major topics addressed in Europe. This was based on the idea that bigger and better social enterprises are needed in order to solve problems, create employment, and provide welfare services, and that more specific financial instruments are needed to boost SE growth. The debate within the EU recognised the importance of the relation between SEs and public authorities and focused on the role of public-procurement procedures in fostering or hampering SEs activities and growth. The EU directive (2014/24/EU) on public procurement included tools to evaluate tenders according to the best quality/price ratio, rather than price alone.

The discourses in Europe might have had a direct influence on the consultation process on the legislative decree for the reform of the third sector, social enterprise and civil service, as it was geared towards a model of social enterprise that was similar to traditional companies in its capacity to stay in the market and mobilise private capital. On 13 May 2014, the Italian Government published the “Guidelines for the reform of the third sector” and started a public consultation that ended on 13 June 2014. A wide range of organisations and stakeholders took part in the public consultation process. Statements were sent from third sector actors (which represented 42.3 per cent of participants), trade unions, for-profit organisations, and professional associations (9.4 per cent). Private citizens represented 38.5 per cent of the total amount, while private researchers, scholars, and representatives from various public administrations amounted to 2.6 per cent of total respondents (Ministry of Labour and Social Policy 2014). The participants supported most of the overarching goals that were delineated in the guidelines, including the importance of building a new participatory welfare model; endorsing the social economy and the third sector in order to provide new employment and growth potentialities; and offering incentives that will help sustain the activities of citizens and enterprises.

In October 2014, the XII Committee of the Chamber of Deputies examined the text of the draft law and established informal hearings with private bodies and experts from the third sector. In the first few months of 2015, the Committee carried out discussions on the proposed amendments. The amendments showed that there were politicians who wanted to preserve dividend redistribution and others who advocated for a greater distribution than the current rules allowed. Support for the status quo usually came from politicians who enjoyed close relationships with conservative parts of the cooperative world that were worried that new social enterprises (which could assume different organisational forms and distribute higher dividends) would prevail, since they would be able to attract more capital and be more competitive. Some interviewees who worked for social cooperatives perceived the distribution of dividends and the idea of opening SEs to other sectors as a risk that could undermine the central objectives of SEs. However, as one participant noted, “the restriction of non redistributing profits represents the fundamental approach of non-profit within the SE sector. There are public goods that cannot be a prerogative of Public Administration (i.e. investments in the healthcare sector) and at the same time it is not possible to achieve an economic and social impact only through the capital aggregation from the cooperative movement, since this kind of capital is really slow”.

The legislative decree was approved and enacted in July 2016 (law 106/2016), introducing the possibility for SEs to redistribute dividends at the same level as foreseen for prevalently mutual cooperatives —Cooperative a mutualità prevalente (art. 6). In this way, the law might make SEs more attractive to potential investors.

The new rules regarding capital remuneration have stimulated a vigorous debate, oftentimes revealing the influence that banks, financial organisations, consultants, and policy discourses might have had in recent years. In fact, the “impact investing movement” and various trends that first emerged in the UK (e.g. social impact bonds) seem to have influenced the draft law, and ultimately the law, more than the SEs themselves. Our interviewees and focus group participants suggested that the distribution of dividends was not a priority for smaller and medium SEs. However, some actors—most notably banks, incubators, and consultants—supported the idea of a SE sector similar to that of traditional enterprises in terms of using dividends and financial instruments to create a bigger market for their services.

Nonetheless, the innovative nature of the law lies in the new definitions of both third sector and social enterprises. The new definition of third sector focuses on an organisation’s objectives rather than its activities and/or legal forms (Borzaga 2016). The new definition of social enterprises, meanwhile, stipulates that SEs are private organisations that: (1) run entrepreneurial activities for civic, solidarity, and social utility purposes (the entrepreneurial dimension as described by the EMES approach); (2) allocate profits mainly to pursue its corporate purpose by adopting responsible and transparent management modalities (the social dimension as described by the EMES approach); and (3) favour the widest participation of stakeholders who are potentially interested in its activities (the participatory dimension as described by the EMES approach). The latter point is of particular interest since it differentiates social enterprises from all other enterprises that are committed to social aims, hence excluding those organisations that only allow paying customers to receive access to their products and services (Borzaga 2016; EC 2016; Bandini 2013; Venturi and Zandonai 2014). Benefit corporations may represent an interesting example of these types of organisations. Indeed, they were introduced in Italy as a result of the 2016 Stability Law, thereby further stimulating the debate on the possible “convergence” between for-profit organisations and social enterprises. Nevertheless, while social enterprises voluntarily pursue a preeminent social objective, benefit corporations still predominantly take part in entrepreneurial activities, while at the same time reducing negative externalities (Venturi and Rago 2015). Thus, they cannot be included in the social enterprise universe because they constitute a form of institutionalised corporate social responsibility (EC 2016). Commenting on the introduction of the benefit corporations one of the stakeholders in the EFESEIIS project argued “this law came out of no-where with apparently no one asking for it”. Other stakeholders suggested that this new law came about in order to provide a new market for certification companies and social investment funds and that these categories might have played a role in introducing it, which in turn suggests that it might have been the product of a top-down approach. The results of our focus groups and interviews seem to suggest that the ecosystem of actors and policy discourses helped shape recent reforms of the law on SEs. While the first law on social cooperatives in 1991 and the law of 155/2006 emerged from the legal recognition of existing bottom-up processes—both of which are important indicators of the social dimension of SEs—the new law on SEs in 2016 might not have followed the same process. This suggests that the need for reform did not come from existing SEs or not yet legally recognised forms of SEs, but from an ecosystem that was made up of different actors (e.g. banks, consulting companies, and incubators, among others). This particular ecosystem evolved around the SE sector, a by-product of the favourable conditions created by the privatisation of the welfare state. The growth of the SE sector legitimised the use of entrepreneurial forms to manage welfare services and solve society’s problems. On the one hand, this might have helped increase the number and prominence of bottom-up initiatives that use SEs in a market-oriented manner. On the other hand, it might have also increased the number of actors in the ecosystem that have an interest in supporting SEs that act like traditional for-profit enterprises and are able to attract and remunerate capital.

Only time will tell whether the new law on SE represents an actual need coming from the bottom-up (e.g. those that have an SE or want to set one up) in order to respond to new social problems; an attempt to gear SEs towards a more market-oriented approach that is promoted by other actors from the ecosystem in a top-down manner; or a mix of bottom-up and top-down drivers that make use of third sector organisations that have assumed an increasingly entrepreneurial stance.

Conclusions

This article investigates the factors that contributed to the co-evolution of social enterprises and the welfare state in Italy during the last 40 years. Using a qualitative methodology based on semi-structured interviews and focus group discussions, we had two goals in mind when we began this study: firstly, to produce a comprehensive overview of the internal and external influences that contributed to the bottom-up development of Italian social enterprises in the 1970s and to find out whether the same process happened in the subsequent decades; and secondly, to assess the relationship between the emergence of social enterprises and the historical development of the Italian welfare state by taking into account policy discourses at both the Italian and European level.

What emerges from the literature review, interviews, and focus groups is evidence that two main dynamics have influenced the evolution of the welfare state and social enterprises in Italy. The first dynamic relates to the increase and evolution of social needs in a context of declining economic resources. During the 1970s, new social needs emerged. As a result, non-profit organisations launched new initiatives to respond adequately to these needs, many of which were unmet by the state. This was especially true in the fields of work integration, health, education, and personal services. The economic crises of the 1970s only enhanced the third sector’s reputation as a possible solution to the problems faced by the welfare state in providing citizens with important social services. Non-profits became actors capable of fulfilling new social needs that were more tailored to individual life-projects (Barbuto et al. 2011). This new approach benefitted from a long tradition of social organisation within Italy. Social cooperatives emerged within a context of economic decline and were later institutionalised through a law passed in 1991 that supported decentralising the welfare system. The decentralisation process created a fertile environment in which social cooperatives could thrive, rapidly becoming Italy’s most prevalent form of social enterprise.

The second dynamic concerns the evolution of the Italian welfare state. In fact, the emergence of new third sector actors in the 1980s, and their legal legitimacy in the early 1990s, corresponded to a period of structural reform for welfare states in Italy and across Europe. The will to reform the public sector in Italy was the result of both international factors (e.g. the budget constraints of the Maastricht Treaty) and national factors (e.g. out-of-control public spending and public management scandals). In the 1990s, Italy initiated a privatisation process with the aim of reducing inefficiencies and decreasing public spending. While public administrations continued to finance social services, their management and production was increasingly committed to private non-profit organisations. In other words, newly founded social enterprises benefited from a decentralisation strategy that was inspired by New Public Management theories and based on the assumption that private, non-profit organisations were able to provide quality social services at a reduced cost for the state.

The focus groups and semi-structured interviews we presided over for this study indicate that these two dynamics helped shape the evolution of the welfare state and social enterprises in Italy. Indeed, the process of including private organisations in the provision of social services that started in the early 1990s and contributed in enhancing the emergence of social cooperatives is now experiencing a new momentum. A willingness to recognise the contributions of other economic actors—including companies and foundations—in providing services of public utility resulted in decree 155/2006, a law that makes it possible for a wide variety of organisations to qualify as “social enterprises”. As a result, social enterprises have received greater attention during the last ten years due to the economic crisis of 2008 and changing social needs. Suffice it to say that the organisations and individuals who presided over the emergence of social enterprises during the 1970s would find these catalysts of change all too familiar.

The research reveals that financial institutions, consultancies, and support organisations are pushing for a model of social enterprises that is more market-oriented and similar to traditional for-profit companies in terms of its dependence on financial products and consultancy. While the emergence of social enterprises in Italy during the 1970s was the product of bottom-up forces—an answer to social problems that would eventually be recognised legally by the state—the changes that have taken place over the last 10 years might have been less bottom-up than the previous ones. However, further research, as well as data on the different organisational forms that might be adopted by future social enterprises, is needed in order to properly address whether the current trend of using private-sector actors is driven by a top-down evolution or an institutionalisation of bottom-up processes that require new legal forms (or a mix of both).

Moreover, our results suggest that the measurement of outcomes and the social impact services delivered by social enterprises and other non-profit organisations vis-à-vis other types of organisations, including for-profit and public sector entities, should be promoted. In fact, the absence of specific evidence of the superiority of SEs in providing services to the public suggests that the various attempts to reform social enterprises were motivated by ideology rather than an evidence-based quest for greater efficiency. This topic is of the utmost importance for understanding how social enterprises might contribute to the evolution of welfare systems in both Italy and Europe as a whole.