Understanding regional growth of social enterprises: the art of the state

The paper examines the key driving factors behind the rapid and uneven growth of social enterprises in China based on Kerlin’s Macro-Institutional Social Enterprise (MISE) model of social enterprise development, with an emphasis on testing key local institutional factors.

The study adopts the quantitative method approach. The hypotheses have been tested based on a cross-regional empirical analysis with two national datasets on China.

This study shows that among the state, market and civil society, local government support in terms of favorable policies is the sole determinant factor driving China’s social enterprise growth. On the other hand, the market is irrelevant and local civil society impedes social enterprise growth. This demonstrates that the current growth model is the result of government intervention.

The datasets have a limited sample size. We suggest that future studies may collect a larger sample size with more comprehensive information. We think this study will encourage more comparative qualitative studies at the local level to reveal the underlying mechanisms of growth.

Since government policy is the determinant factor, the quality and quantity of government-backed incubation programs and platforms would matter the most for social enterprise growth. Our study also helps social entrepreneurs understand what factors matter when they try to develop social enterprises in China. They are advised to work on aspects of gaining legal legitimacy and political support in order to grow the sector.

This conclusion suggests that professionals and practitioners should review the implications of the current growth of social enterprises in China, in terms of their sustainability, given their institutional isolation from other sectors.

Current studies have yet to thoroughly explore the role of meso- and micro-institutional factors in social enterprise development, especially in different contexts. With reference to Kerlin’s framework and the tri-sector model, this paper advances the understanding of social enterprise growth in China.