Associative Entrepreneurship

1
Associative Entrepreneurship

• The Importance of Society and Culture to Economic
  Enterprise

2
Structure of presentation

• Are we competitive?
• How is Wales doing in the global competition?
• An exploration of social capital
• An introduction to associative entrepreneurship

3
Economists have found that people tend to
cooperate more than they would according to their
theories, especially game theory. In the repeated
prisoners dilemma game, for example, half of
players chose to trust their partners, while
three-quarters of respondents failed to violate
this trust co-operating rather than defecting
to the Nash equilibrium.

• Experimental and everyday observations indicate
  that people tend to co-operate and follow a set
  of social norms, though it would be economically
  rational NB for the individual to defect.
• Svendsen, p. 25.

4
A Rational Mind?
5
The contribution of inward investment, and the
threat
By 1999 Wales was attracting approximately 5 per
cent of all the investment coming into Europe,
compared with its population size of 0.5 per
cent. There were about 380 foreign-owned plants
employing around 75,000 people (Huggins, 2001).
The foreign manufacturing base in Wales
represented around a third of all Welsh
manufacturing companies (Munday and Peel, 1997).
There is undoubtedly some evidence of the
movements of factories who originally installed
themselves in Wales originally when the UK
entered the EU. At that time then Wales was in
the position that Poland will be after
enlargement. It will be the lowest cost place to
assemble TV sets, electronic or motor components.
Clearly after enlargement we will no longer be
able to claim that Wales is the cheapest location
to do that kind of manufacturing investment.
(Rhodri Morgan, Welsh First Minister)
6
Fanfare for LG
7
Was the LG project cost-effective?

• 1,664m. for the promised creation of 6,100 jobs
  (WAC) from 1998
• Official cost per job of this scheme to the
  public was slightly in excess of 40,600
• Microchip factory mothballed May 2003 jobs
  reduced to 350
• Most of the 250 million of development grants
  had disappeared into LGs international debts,
  while the actual size of subsidy per job had
  risen to 124,000

8
Case-study of the Welsh steel industry

• British Steel merged with Hoogovens, a Dutch
  steel manufacturer in 2000.
• Despite profits exceeding expectations, the
  corporations Llanwern plant was closed, perhaps
  because of poor redundancy protection.
• Allied Steel and Wire, the UKs second largest
  steel maker with two plants in South Wales, went
  into receivership pensions lost but eventually
  bought by Spanish steel-maker Celsa
• Nothing could better illustrate the powerlessness
  of Welsh policy-makers and Welsh people over
  their own production and their own employment.

9
The Welsh Richard Branson
10
Are the Welsh entrepreneurial?

• Importance of Welsh culture of equality and
  community
• Dependence on secure, well-paid jobs close to
  home
• Association of entrepreneurship with exploitation
• Role of the highly oligopolistic coal and steel
  industries and the resulting concentration on
  industry-specific skills
• Strength of the radical tradition

11
Social capital as a substitute

• Chapter 6 by Lars Hulgård and Roger Spear is
  titled Social entrepreneurship and the
  mobilization of social capital in European social
  enterprises.
• Hulgård and Spear argue that the concept of
  social entrepreneurship offers an opportunity to
  explore how social capital can be mobilized,
  substituting for other resources that may be
  unavailable in depressed local economies.
• interesting since it represents a challenge to
  conventional thinking about entrepreneurship,
  which tends to emphasize the individual, whereas
  in social entrepreneurship there often seems to
  be a more collective dimension.
• Media stereotype of the entrepreneur as heroic
  individual can be unhelpful to economic
  regeneration in such areas.

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Social Capital and Entrepreneurship

• Svendsen (2004), The Creation and Destruction of
  Social Capital
• social capital as a factor of production
• He defeines social capital as the presence of
  entrepreneurship and trust in a society
• His chapter 2 provides a useful summary

13
What is social capital?

• An attempt to unite sociology and economics
• Norms are important in underpinning economic
  activity quotation
• If group members trust each other they can
  achieve more economic growth than an untrusting
  group
• What economists call transaction costs are
  reduced--take the US health system and the high
  levels of litigation as an example
• Predictability of behaviour increases and its is
  no longer necessary to monitor and enforce
  economic transactions.

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What are norms?

• Norms of behavior reflect valuations that
  individuals place on actions or strategies in and
  of themselves, not as they are connected to
  immediate consequences. When an individual has
  strongly internalized a norm related to keeping
  promises, for example, the individual suffers
  shame and guilt when a personal promise is
  broken. If the norm is shared with others, the
  individual is also subject to considerable social
  censure for taking an action considered to be
  wrong by others.
• Elinor Ostrom

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Concept began with Bourdieu

• Interrogating class stratification and
  exploitation across the economic, social,
  cultural and ideological territories
• A tamer version of social capital from his highly
  political one has been developed by such as
  Coleman and Putnam
• Economists have found that people tend to
  cooperate more than they would according to their
  theories, especially game theory. In the repeated
  prisoners dilemma game, for example, half of
  players chose to trust their partners, while
  three-quarters of respondents failed to violate
  this trust co-operating rather than defecting
  to the Nash equilibrium.

16
Bourdieu, P., Passeron, J. (1977). Reproduction
in education, society, and culture. Beverly
Hills, CA Sage.

• Economism knows no other interest than that which
  capitalism has produced through a sort of
  concrete application of abstraction, by
  establishing a universe of relations between man
  and man based, as Marx says, on callous cash
  payment. Thus, it can find no place in its
  analyses, still less in its calculations, for the
  strictly symbolic interest which is occasionally
  recognized (when too obviously entering into
  conflict with interest in the narrow sense, as
  in certain forms of nationalism or regionalism)
  only to be reduced to the irrationality of
  feeling or passion.

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Extension (and depoliticisation) by Putnam

• Published a study of social capital in Northern
  and Southern Italy called Making Democracy Work
  in 1993. He uses the following measures of civic
  engagement
• Voter participation
• Newspaper reading
• Membership of associations
• Concludes that the greater wealth of Northern
  Italy is the result of a better level of
  associational life.

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Putnam on the USA

• Then turned his attention to the USA and
  identified the role of TV in reducing
  associational ties there
• Television is . . . the only leisure activity
  that seems to inhibit participation outside the
  home. TV watching comes at the expense of nearly
  every social activity outside the home,
  especially social gatherings and informal
  conversations . . . television privatizes our
  leisure time.
• His latest work on this theme is Bowling Alone
  (2000).

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Negative aspects of social capital

• The attempt by groups to bind together to exclude
  outsiders, as in nationalism
• Distinction between bonding social capital and
  bridging social capital
• In some cases social capital can often be seen as
  a negative externality and a barrier to economic
  growth at the macro level
• Bonding social capital tends to entail
  generalised distrust and lack of co-operation
  between groups
• Bonding social capital can be seen as superglue
  which stiffens society and ultimately makes it a
  fragmented society

20
Becker the economists response

• Individuals join social networks that they
  presume will confer benefits.
• extension of the utility-maximising approach to
  include endogenous preferences is remarkably
  successful in unifying a wide class of behaviour,
  including habitual, social, and political
  behaviour
• This appears to turn Bourdieus ideas on their
  head reciprocity, self-help, compassion and so
  on are only engaged in because of the desire by
  the individual to maximise her/his utility.
• Represents an attempt to inculcate rational
  choice theory within social theory, i.e. for
  economistic thinking to colonise sociology (in
  the words of Fine).

21
The critical view of Bob Fine

• Finds a political response to his question Why
  has social capital proved so popular with limited
  effective critical response?
• Also argues that it is poorly theorised a sack
  of analytical potatoes--a new fashion not an
  operationalised concept.
• Identifies a desperation to find an alternative
  to socialism that is acceptable to the
  Establishment-- scholarly third wayism you
  can have anything you like as long as it is
  compatible with the (market imperfections view of
  the) economy
• Concept taken up with alacrity by New Labour who
  see the need for a moral and social
  reconstruction of society Commission for Social
  Justice, 1994

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A damning condemnation of social enterprise?

• A conceptual artefact of the First World (and
  wealthy), transposed to other Worlds (and the
  poor) on the basis of two closely related but
  distinct aspects. On the one hand, it is
  self-help and cooperation raised from the
  individual to the communal level at some tier or
  other. On the other hand, it is the rich and
  powerful speculating on how to improve the lot of
  the poor through prompting their self-help and
  organisation without questioning the sources of
  their economic disadvantage. (p. 199)

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Importance of terms

• if local entrepreneurs makes an argument more
  explicit by using the word social capital, they
  will probably be more successful in obtaining a
  theory or theorization effect (Bourdieu,
  1977 178), that is, by their symbolic practice
  contribute to shaping realityjust like Marxs
  the class struggle did.
• Svendsen considers the term social capital
  might have saved the dairy co-ops we would
  support instead the term associative
  entrepreneurship to describe shared economic
  regeneration activity. We have developed this
  concept particularly in the context of the South
  Wales Valleys.

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What do we mean by associative entrepreneurship

• Channelling energy in the economic sphere towards
  shared social and economic goals.
• Objectives of a regeneration strategy to be much
  broader and more socially determined than the
  creation of an elite of profit-making
  entrepreneurs
• Money invested in regeneration would have the
  objective of community advancement, and the
  objectives would be set in collaboration with or
  partnership with the community.
• The key to this process lies in ensuring that
  regeneration is not viewed simply as an
  exclusively economic process.
• Genuine commitment to the community empowerment
  that many regeneration programmes pay lip-service
  to

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Particular advantages?

• Absence of shareholder pressure
• Prioritisation of creation of well-paid jobs
  rather than short-term profit
• Harnessing the energy of local people where other
  jobs create economic inactivity
• Genuine worker involvement by uniting workers
  and bosses

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Tower Colliery as a prototype
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Success in a competitive market

• Operating for nine years, returning a surplus and
  paying a dividend in most of those years
• Important impact via its local multiplier
  without it the local economy would lose up to
  10m. per year
• Original buyout team of 239 has increased to 300
  employees, 90 per cent of whom are shareholders.
  Another 100 people are employed as contractors.
• Tower is now the only deep mine in Wales
  employing more than 150 men
• All 300 permanent employees have well-paid,
  relatively secure employment, which offers
  self-respect and is popular
• In 2002 Tower Colliery ranked 174 in a list of
  Waless top 300 companies, with a turnover of 28
  million, profits of 2.7 million and a 26.8 per
  cent return on capital