Field study: Germany

Field study [n.]: Preliminary research

First things first: Apologies for the excessive use of footnotes in this post. I want to give credit where it’s due and not get into trouble for plagiarism. I worked through a number of studies – some of which are great to dive deeper into the topic – and have summarized their main points. You will find MY observations at the end of this series in the Cartography post.  

My trip through the Netherlands and Belgium was followed by a month in Germany which gave me some time to freelance and the opportunity to visit support organizations in Frankfurt, Berlin and Hamburg. Having worked in the German social enterprise support sector, I had to challenge myself to step out of my preconceptions and try to see the sector for what it is.

I was astonished to find how much research had already been done on social entrepreneurship in Germany – it was almost daunting to even start diving into the topic for fear of what I would find, and how much. Here are some key insights from the studies I looked at:

Social Entrepreneurship is not new to Germany, some #SocEnt are as old as 30 years. Click To Tweet

… but they often don’t identify as such. The five most relevant social issues in Germany – according to a SEFORÏS report1)Wolf, Myriam (2014). The State of Social Entrepreneurship in Germany SEFORÏS Country Report. (based on another study by the German Ministry for Education and Research2)Müller, Susan, Dominik Rüede, Kathrin Lurtz, Hartmut Kopf, and Peter Russo (2013). Deutschland 2030: Herausforderungen als Chancen für Soziale Innovationen. World Vision Center for Social Innovation, Wiesbaden.) are

  1. Labor market: unemployment and skill shortage
  2. Education: coupling of socio-demographic background and level of education
  3. Income and wealth: increasing division between rich and poor, failure to generate income to secure existence
  4. Environment: Coupling of resource use and economic growth
  5. Health: healthcare provision (aging society) and lifestyle diseases.

Unexpected findings

Apparently, strong welfare organizations make it tricky for social entrepreneurs to find their niche and establish themselves as a unique field. It’s almost like the “market for addressing social issues” is already among organizations like Deutscher Caritasverband (German Caritas Association), Arbeiterwohlfahrt (workers’ welfare association) or Diakonie, making it difficult for new-comers such as social entrepreneurs to position themselves and try out new approaches.3)Wolf, Myriam (2014). The State of Social Entrepreneurship in Germany SEFORÏS Country Report.

Risk-aversion of Germans: “German society tends to be risk averse. Risk averseness is one of the major cultural factors impeding entrepreneurial activities and ultimately also influencing availability of funding for social enterprises.”4)Brixy, Udo, Rolf Sternberg, and Arne Vorderwülbecke (2013). Global Entrepreneurship Monitor (GEM) – Länderbericht Deutschland. Hannover. I will add that in former East Germany – having been born and bred there myself – individual behavior was not necessarily encouraged. Under socialism, the market was heavily (if not exclusively) regulated by the state – going the extra mile didn’t pay off in most cases. During the first 19 years of my life, I didn’t know a single entrepreneur.

Under socialism, entrepreneurship was not encouraged. Does it show in today's #SocEnt sector? Click To Tweet

I believe this mindset is still deeply rooted in East-Germans and hampers their entrepreneurial spirit. I wouldn’t assume this is true for all Germans that lived on the Eastern side of the wall, but it is one influencing cultural factor.

Other Influencing Key-Factors

According to the Global Entrepreneurship Monitor 2013, Germany ranks high in terms of physical infrastructure, government programs and protection of intellectual property – factors which create a nurturing environment for entrepreneurs – while ranking low with respect to entrepreneurial education in primary and secondary schools, labor market conditions, and knowledge and technology transfer – factors that don’t create this kind of favorable environment.5)GEM. Global Entrepreneurship Monitor 2013. Social enterprises can choose from over 20 different legal forms within the German system, none of which is exclusively dedicated to, nor apparently suitable for, social enterprise.6)Wolf, Myriam (2014). The State of Social Entrepreneurship in Germany SEFORÏS Country Report. Instead, social enterprises register as

  • Stiftungen (foundations),
  • Vereine (voluntary associations),
  • GmbHs (limited liability companies) and
  • Genossenschaften (co-operatives)7)Zimmer, Annette & Bräuer, Stephanie (2014). The Development of Social Entrepreneurs in Germany. Westfälische Wilhelms University, Germany.

which makes a head-count very difficult. There also is the legal form of a charitable limited liability company (tax exempt status) which is not mentioned in this study. In 2011, Wissenschaftszentrum Berlin counted

  • 580,000 voluntary associations
  • 18,000 foundations
  • 9,000 limited liability companies with tax exempt status, and
  • 8,000 cooperatives in Germany.8)Priller, E., Alscher, M., Droß, P. J., Paul, F., Poldrack, C. J., Schmeißer, C., & Waitkus, N. (2012): DritteSektor-Organisationen heute: Eigene Ansprüche und ökonomische Herausforderungen. Ergebnisse einer Organisationsbefragung. Wissenschaftszentrum Berlin für Sozialforschung. Berlin.

This leads to a total number of 615,000 organizations in the Third sector. Not bad for a country with a population of 80 million. However, the lack of a separate legal form for social enterprise results in them remaining un-differentiated from other third sector organizations such as charities or even parental or neighborhood initiatives. To be honest, this troubles me.

How important is a legal form for #SocEnt in Germany? Click To Tweet

On the one hand, this lack of differentiation makes it difficult to promote the social enterprise concept in an environment that is already heavily influenced by strong welfare organizations. On the other hand, I argue that legal forms don’t make social enterprise. I believe that mission and impact will dictate legal form, not vice versa. Thoughts anyone?

Scheuerle & Bauer give an insight into financing mechanisms of social enterprise in Germany arguing that certain issues lend themselves more to earned income generation ( e.g. related to environment) than others (social services).9)Scheuerle, Thomas, and Albrecht Bauer (2013). Social enterprises as an investment? Frankfurt.

Financing

Financing structure of social enterprises in Germany. Source: Scheuerle, Thomas, and Albrecht Bauer (2013). Social enterprises as an investment? Frankfurt.

 

What social enterprise support?

None of the reports I studied mentioned support organizations. The only reference to our work, my dear readers, is the last sentence of chapter 4.2 in the SEFORÏS study (2014, p. 11): “Entrepreneur support models, however, only recently started to emerge in Germany but are perceived as highly important for the further development of social entrepreneurship.” Amen. Though I wonder how the authors define “recent”. After all, Germany has a number of strong players in the support sector for social entrepreneurs (swing over to The Changer via google translate for a longer list):

Reason enough for me to visit some of them and learn more about their different approaches to supporting social entrepreneurs around Germany and abroad.

References   [ + ]

1, 3, 6. Wolf, Myriam (2014). The State of Social Entrepreneurship in Germany SEFORÏS Country Report.
2. Müller, Susan, Dominik Rüede, Kathrin Lurtz, Hartmut Kopf, and Peter Russo (2013). Deutschland 2030: Herausforderungen als Chancen für Soziale Innovationen. World Vision Center for Social Innovation, Wiesbaden.
4. Brixy, Udo, Rolf Sternberg, and Arne Vorderwülbecke (2013). Global Entrepreneurship Monitor (GEM) – Länderbericht Deutschland. Hannover.
5. GEM. Global Entrepreneurship Monitor 2013.
7. Zimmer, Annette & Bräuer, Stephanie (2014). The Development of Social Entrepreneurs in Germany. Westfälische Wilhelms University, Germany.
8. Priller, E., Alscher, M., Droß, P. J., Paul, F., Poldrack, C. J., Schmeißer, C., & Waitkus, N. (2012): DritteSektor-Organisationen heute: Eigene Ansprüche und ökonomische Herausforderungen. Ergebnisse einer Organisationsbefragung. Wissenschaftszentrum Berlin für Sozialforschung. Berlin.
9. Scheuerle, Thomas, and Albrecht Bauer (2013). Social enterprises as an investment? Frankfurt.