Abstract
AbstractIn the US and increasingly internationally as well, considerable efforts have been made in recent years to introduce new legal forms, such as the benefit corporation, at the local level as an additional structural option for social entrepreneurs. These efforts have been met with considerable apprehension on the part of nonprofit sector advocates, who perceive these new organizational forms as potential competition. This paper investigates whether the benefit corporation is in fact a likely competitive threat to nonprofits. Presenting the findings of an early uptake study, it reviews the early experience with the state-level introduction of the benefit corporation in Maryland, the first state to adopt the new legal form.
Highlights
While nonprofits were long the predominant alternative to the traditional for-profit form, the social enterprise boom in recent years has led to a growing interest in hybridity and a proliferation of various new legal forms available to social entrepreneurs
Callison and Vestal 2010; Kleinberger 2010) and its development has stalled in recent years, this paper focuses on the benefit corporation (BC)
Do social entrepreneurs take advantage of these new rules, or are they continuing to use the nonprofit corporate form? How extensive is the conversion of organizations from the nonprofit form to these new hybrid entities” (Smith 2014, 1501)? Is the benefit corporation likely to outcompete nonprofits in their traditional areas of activity? While far from providing definitive answers, the early adoption experience of the benefit corporation in Maryland suggests that this might not be the case and that the nonprofit sector need not be overly concerned
Summary
While nonprofits were long the predominant alternative to the traditional for-profit form, the social enterprise boom in recent years has led to a growing interest in hybridity and a proliferation of various new legal forms available to social entrepreneurs. The research question motivating this paper is whether entrepreneurs perceive the benefit corporation primarily as a mechanism to conduct socially-oriented proprietary businesses or as an alternate conduit for traditional nonprofit activities If the former, nonprofits and their advocates need not be concerned about a competitive challenge to their support bases and funding prospects. I will briefly introduce the concept of the BC and how the introduction of this new legal form has been received by nonprofit scholars and advocates This is followed by the presentation of findings of an early uptake study in Maryland that reviewed the corporate charters of newly-formed BCs and secondary sources in the first years after Maryland enacted its BC statutes. I conclude with an outlook on where nonprofits and BCs could usefully intersect in the future
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