Hybrid Forms of Business:
The Logic of Gift in the Commercial World
Wolfgang Grassl
„Non tener pur ad un loco la mente‟
Purgatorio X, 46
1.
Introduction
Within the tradition of Catholic social teaching, Caritas in Veritate is nothing if not
innovative. Three basic characteristics set this Encyclical apart from previous papal documents
on society and the economy:
1.
2.
3.
the use of economic arguments involving both allocative and distributive efficiency
as a precondition for equitable solutions (Grassl and Habisch 2011);
the rejection of dichotomies in the social sphere in favor of trilateral (because Trinitarian) structures whereby the principles of civil society – reciprocity, gratuitousness, and fraternity – become normative for the market and the State (Grassl 2011);
the development of a theology of business that bridges the traditional division
between profit-based and non-profit enterprise in favor of new and creative hybrids
animated by the „logic of gift‟.
The Encyclical gives credit to the great power of „commercial logic‟ (§ 36). But Benedict
XVI does not conceive of it in a narrow and „merely technical‟ (§§ 16, 40, 71) way. He proposes
the „humanistic‟ (§§ 21, 71) ideal of an innovative and dynamic business sector that contributes
to integral human development. In fact, innovation (§§ 27, 67), a „new vision‟ (§ 21, 78), and
dynamism (§§ 5, 12, 29, 32, 39, 42, 47, 51) are key terms in his text. The Pope recognizes „that
business enterprise involves a wide range of values, becoming wider all the time‟ (§ 41). Since
„the traditionally valid distinction between profit-based companies and non-profit organizations
can no longer do full justice to reality, or offer practical direction for the future‟ (§ 46), the Pope
calls for nothing less than „a profoundly new way of understanding business enterprise‟ (§ 40).
With regard to this blurring of categories, Benedict XVI expects „hybrid forms of commercial
behaviour to emerge‟, which would reflect „an attentiveness to ways of civilizing the economy‟
(§ 38). These business models are meant for the for-profit sector, but they are hybrid by adding
the „logic of gift‟ (§§ 34, 36) to „commercial logic‟ (§ 36) and to the „logic of the State‟ (§ 39).
The disappearance of clear boundaries between profit-based and gratuitous activities has
long been noted in the business literature (Dees 1998; Seelos and Mair 2007). But business research has not been able to present a convincing explanation for it. Where it has come close, it
has referred to the complexity of human nature with its mix between self-directed and otherdirected motivation. Institutional factors such as corporate and tax law have also been used to account for the impurity of distinctions between types of business. But such explanations neglect
one crucial intervening variable – that of civil society, which through its culture can support or
impede the mutual interpenetration of putatively disparate spheres (§ 26). The Pope‟s explana-
1
tion is richer and arguably has greater content (and expectedly predictive) validity than those that
attribute the increasing fuzziness of borders to accidental developments in the sphere of business.
The vision of hybrid businesses is central to Caritas in Veritate. New forms of enterprises, particularly family businesses, cooperatives, and companies with worker participation, have
of course long been part of papal teaching, most notably in Mater et Magistra (1961) and Laborem Exercens (1981). But never before has a Pope devoted so much attention to the theological
justification of organizing the economy in new ways. Caritas in Veritate presents a theology of
business that stands in the continuity of papal social teaching but that must also be credited with
a high degree of distinctiveness and novelty. It does not primarily argue from natural law, as did
previous social encyclicals, but from the commandment of love – from charity and truth as the
twin principles of Catholic social thought (§ 5). Numerous implications follow from the Pope‟s
call with regard to corporate governance, institutional arrangements, and management practices.
This paper does not address the market economy or economics and management as disciplines but limits itself to the level of businesses. It does not survey the enormous literature in
various disciplines on gift-giving or the mechanisms of reciprocity. The paper first presents the
call for „new‟ and „hybrid‟ forms of business as flowing from the theology of business developed
in Caritas in Veritate. It then proceeds to a static exposition of pertinent developments in the present-day commercial world, by analyzing the „broad intermediate area‟ of hybrid businesses in
its „shape and structure‟ (§ 38). It concludes with thoughts on the dynamic role of the „logic of
gift‟ in the new commercial landscape, which alone can bring about the „new humanistic synthesis‟ (§ 21) that is at the heart of the Pope‟s social teaching.
2.
The Theology of Business of Caritas in Veritate
Caritas in Veritate contains the contours of a theology of business which is both pathdependent and innovative. Three basic characteristics set this theology apart from previous papal
teaching or Catholic thought on the role of business:
1.
2.
3.
it has a micro-foundation and gives clear directions for business persons;
it rejects any purely extrinsicist view of business enterprise and builds an
immanentist (or intrinsicist) conception on the Trinitarian combination of diversity in
unity;
it explicitly advocates hybrid structures, i.e. types of businesses that span profitbased and non-profit enterprise in various organizational forms.
Previous papal teaching emphasized the macro-level, especially how markets and the
State can contribute to desired ends such as human dignity, solidarity, justice, and peace. By
placing charity at the center of his social thought, Benedict XVI generates a micro-macro linkage: „It [i.e., charity] gives real substance to the personal relationship with God and with neighbor; it is the principle not only of micro-relationships (with friends, with family members or
within small groups) but also of macro-relationships (social, economic and political ones)‟ (§ 2).
In fact, the pronouncements of Caritas in Veritate on businesses and consumers are arguably
more elaborate than those on the desirable structures of entire economies or societies. Its use of
„economic logic‟ applies to the behavior of persons (Grassl and Habisch 2011). The Encyclical
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has a micro-foundation, which transpires not least in its humanistic insistence that „the primary
capital to be safeguarded and valued is man, the human person in his or her integrity‟ (§ 25).
Like his predecessors, Benedict XVI sees business as having a purpose, and persons engaged in business as having a calling (Naughton 2006). Business must be at the service of „integral human development‟ (§§ 17ff., 29f., 34, 44, 48, 51, 55, 67, 77f.). Similarly, John Paul II in
Centesimus Annus (1990) had declared that the purpose of a business firm „is to be found in its
very existence as a community of persons who in various ways are endeavoring to satisfy their
basic needs, and who form a particular group at the service of the whole of society‟ (§ 35). Businesses do not exist to produce profits but to produce goods and services that fulfill human needs;
profits are only an indication that they work efficiently. A business ought to pursue projects under the constraint of efficiency, not maximize profits under some constraint of social responsibility (Becchetti, Bruni and Zamagni 2010: 314f.). In order to achieve the „macro-project‟ of integral human development for entire nations, many „micro-projects‟ must be completed at the level
of firms, through „the active mobilization of all the subjects of civil society, both juridical and
physical persons‟ (§ 47). But more than having an exclusively or even predominantly secular
goal, Benedict XVI emphasizes the transcendent goal of business activity. His theology rejects
every extrinsicist view of the relation between nature and grace. Human beings and their institutions must not claim autonomy that neither reason nor revelation gives them. Creation of man in
the image of God lets man participate in the reality of God, but it also negates autonomy (Rowland 2008: 35ff.; Rourke 2010: ch. 2). Business must not be reduced to nature. Like every human
institution, it has a supernatural calling; it must therefore reach beyond the social sphere, for it
must be integrated in God‟s plan of salvation.
Earlier papal teaching in the Thomistic spirit saw the economic order depend on the moral
order and yet economics and moral science both employ „each its own principles in its own
sphere‟ (Quadragesimo Anno, § 42). The assumption of a sphere of the „economic‟ still harbored
some of the extrinsicism that Benedict XVI renounces. He does not allow for any dichotomy between actions on markets and actions in society: „economic action is not to be regarded as something opposed to society‟ (§ 36). Instead of upholding such extrinsicist opposition, forms of the
Divine must be integrated into all human institutions.
This theology has a clear biblical foundation. Already St. Peter had invited everyone to
„participate in the divine nature‟ (2 Pt 1:4). St. Paul expressed the same idea by asserting that the
faithful are „no longer strangers and aliens, but with the saints citizens in the household of God‟
(Eph 2:19). Accepting God as the common father naturally establishes brotherhood among men
(Eph 2:18). From this follows the importance of social structures that foster friendship, solidarity, and love, for mankind is „united in one body through the Cross‟ (Eph 2:16). Because people
are becoming „members one of another‟ (Rom 12:5) and „servants of one another‟ (Gal 5:13),
they are giving of themselves to „build up each other‟ (1 Thess 5:11) and „do good to one another‟ (1 Thess 5:15).
The theological novelty of Caritas in Veritate arises from letting human arrangements including social institutions be infused by the form of the Divine and thus be directed towards its
substance. Within the Pope‟s Augustinian theological vision, the form of God – or His mode of
being – is the Holy Trinity, and His substance is love. This was already the theme of Deus Caritas Est (2006), Benedict‟s first encyclical. Caritas in Veritate must indeed be read under the
hermeneutics of Trinitarian theology. It applies this leitmotif to the social sphere (Grassl 2011).
The fundamental theme of the Encyclical is to present the biblical account of the economy
of God‟s household (oikonomía tou theou) (Eph 2:19) as a model for ordering human society.
3
Benedict XVI outlines the normative implications of the nature of God as a community in the unity of three different persons: „The Trinity is absolute unity insofar as the three divine Persons
are pure relationality. The reciprocal transparency among the divine Persons is total and the bond
between each of them complete, since they constitute a unique and absolute unity‟ (§ 54). Like
the Father, Son, and Holy Spirit of the Nicene Creed, the three social actors – markets, civil society, and the State – have different identities and functions, and are therefore different entities,
yet are of the same substance, since they are ultimately but different forms of human organization. It is persons that exchange on markets, build institutions of society, and embody functions
of State. Yet regardless of their roles, they are united in serving one single purpose – „integral
human development‟ (§§ 4, 9, 18). Each divine person is a whole rather than a part (Aquinas,
Summa Theologiae I, q. 30, a. 4); by analogy, a society composed of human persons is also a
whole composed of wholes rather than of individuals (Maritain 1947: 46f.). The doctrine of the
Trinity says that God is Himself community, and every human institution seeking to grow into
the perfection of God must by necessity transform itself into a community of persons. Benedict
XVI does not advocate a new super-corporatism, and he abstains from invoking an „organic‟
conception of society, as previous papal teaching and Catholic social thought had done (Fanfani
1935). Rather, the Trinitarian „model‟ (and Caritas in Veritate uses exactly this term) is open and
dynamic, for „true openness does not mean loss of individual identity but profound interpenetration‟ (§ 54). The mutual interpenetration of market, State, and civil society – like the perichōrēsis („mutual indwelling‟) of the persons of the Trinity – is a theme that invites a reconceptualization of social thought, and within it of economic theory, that goes beyond the distributional
games between market individualism and State socialism: „The Church‟s social doctrine holds
that authentically human social relationships of friendship, solidarity and reciprocity can also be
conducted within economic activity, and not only outside it or “after‟ it”‟ (§ 36).
In his Encyclical, Benedict XVI clearly builds on the idea formulated by St. Augustine
and further expounded in scholastic theology that imprints of the Trinity (vestigia Trinitatis) can
be found throughout the created order (De Trinitate, VI). Contemporary theology speaks of the
ontological Trinity – the reciprocal relationships of the Father, Son, and Holy Spirit as immanent
within the essence of God – being reflected in the economic Trinity, or its operation within history in terms of the roles or functions performed by each of the divine persons. St. Augustine saw
all charity and goodwill in the world ultimately have its origin in the mutual love between the
persons of the Trinity. Benedict‟s Augustinian theology applies this thought to the human condition and to social life (§ 5). Contrary to any and all antagonistic models of society – of class
struggle, racism, feminism, nationalism, etc. – he sees humanity as a unity in diversity much
along Trinitarian lines: „that they may be one even as we are one‟ (John 17:11, 21). If identity is
defined through reciprocity, the search for an absolute identity must fail. The justification is syllogistic: achieving integral human development implies growing into the likeness of God (Eph.
2:19-22, 4:14-16); God is by His essence Triune; it therefore means participating in His Trinitarian mode of being; and this defines humans as being essentially relational rather than by membership in discrete categories.1
The social ontology of Caritas in Veritate may then be depicted in the form of equilateral
triangles. In language borrowed from the Thomistic tradition, one may see the structure of society, i.e. the three social agents, as standing in a relation of analogy with how they operate, and
with the ends to which these functional modes are ordered (Figure 1). This homomorphism (re1
It follows as a corollary that the identity politics so popular in American academics and beyond cannot be
Trinitarian; it therefore cannot be Catholic (and probably not Christian).
4
flected in congruent triangles) expresses who the players are, what their play is about, and why it
is played.
Co-operation
Autonomy
Control
Civil society
Reciprocity
State
Market
Efficiency
Equity
Figure 1: Social agents (center) in their functional roles (left) and aims (right)
Caritas in Veritate thus presents economic life as a „multi-layered phenomenon‟ (§ 38)
occurring place in various structures which are components of a more complex social ontology.
Civil society is constituted by the various intermediary communities which John Paul II called
„real communities of persons‟ (Centesimus Annus, § 49). The „civil economy‟ referenced in the
Encyclical (§§ 38f., 46f.) is then civil society using co-operation between and among producers
and consumers that aims at reciprocity. Where Benedict XVI goes beyond his predecessor, more
in emphasis than in direction, is by locating the civil economy not only in civil society but
throughout the social sphere, and thus in configuring „intermediary‟ bodies not in a linear sense
as between individuals and the State, but as the glue that holds all of human society together.
Civil society must again extend the principles that are germane to it – gratuity, reciprocity, and
solidarity – to the sphere of markets, where other principles predominate, and even to that of
public administration. Agents of the civil economy can fulfill their horizontal function of driving
development and justice only because of their vertical dimension of preparing humans with
bounded rationality and weak will for the true objective of community (koinōnía) – growing into
communion with God through integral human development (§ 54). Being multi-layered also
means that the economic system is dynamic – if its triadic structure is well integrated, it attains a
higher quality, which allows for development in a vertical sense.
The Trinitarian model of Caritas in Veritate points to the transcendent dimension of human beings (§§ 54, 75). They not only exchange goods with each other but are also „made for
gift‟ (§ 34). The gratuitousness of giving is non-calculative; it does not count on reciprocation
and is therefore not an exchange of equivalents. Gift-giving expresses gratitude for the gifts received by divine grace and thus „makes present his [i.e., man‟s] transcendent dimension‟ (§ 34).
Society must not be reduced to a system of market exchanges but also manifests itself in families, associations, churches, or companies, which are communities held together by reciprocity:
„Because it is a gift received by everyone, charity in truth is a force that builds community, it
brings all people together without imposing barriers or limits‟ (§ 34). Markets have the important
task of enabling persons to „make use of contracts to regulate their relations as they exchange
goods and services of equivalent value between them, in order to satisfy their needs and desires‟
(§ 35). But markets as such are often disembedded from society: decisions are not motivated or
constrained directly by social custom and ethical norms. Benedict XVI agrees with much recent
work on welfare economics that a market „cannot produce the social cohesion that it requires in
order to function well. Without internal forms of solidarity and mutual trust, the market cannot
completely fulfill its proper economic function‟ (§ 35). For this, it requires civil society, and
5
sometimes support by the State. Economic studies on trust, social capital, solidarity, and happiness have provided ample support for this conclusion. But the market and the State, too, have a
transcendent function. Gift-giving and gratuity are most characteristic of civil society; because
they are a sign of a divine presence in human relations, they must extend to the other social domains (Cambón 2010).
Previous magisterial teaching has pointed to Trinitarian love as „the origin and goal of the
human person‟ and of proper social relations (Pontifical Council 2004: §§ 34, 54). Yet the work
of applying the Trinitarian model to a deeper and more comprehensive understanding of social
reality has barely begun (Meeks 1989; Hemmerle 1995; Cambón 1999; Uelmen 2004). Labor,
culture, human rights, justice, health, ecology, education, art, politics, and other social phenomena have been seen under aspects of the Trinity (Cambón 1999: ch. IV). Strategic management
decisions and organizational patterns of businesses have recently been analyzed in terms of triadic structures that can be given a Trinitarian interpretation (Keidel 1995, 2010). And management
itself, as the application of practical reason, can be seen in the light of the Trinity (Grassl 2010,
2011). In all this, the model of the Trinity imposes structure on and makes sense out of social arbitrariness and chaos.
Within this theological vision, a business should become a „spiritual dwelling place for
God‟ (katoikētērion tou theou en pneumati) (Eph 2:22). First of all this means to see a business,
like the human beings of which it is composed, as a relational entity that must be embedded in
and answerable to civil society. Social development at least since the Industrial Revolution has
increasingly loosened the embeddedness of economic behavior in society and culture by moving
it into a formal and calculative space. As the process of „economization‟ (Callon and Çalışkan
2009) has increasingly arrogated functions to the market that until recently had been in the domain of civil society, markets have mutated from spontaneous arrangements for the satisfaction
of human needs and wants into mechanical „market devices‟ (Muniesa, Millo and Callon 2007).
The Encyclical recognizes the artificiality of this process of marketization that is driven not by
the „commercial logic‟ of a natural and spontaneous exchange but by deliberate human design.
Benedict XVI demands that this abstraction be reversed by re-embedding economic practices and
institutions into a context that gives them meaning in the context of human life. Caritas in Veritate clearly sides with a stakeholder view of corporate governance (§ 40). Shareholder capitalism
offends against the transcendent nature of businesses because it treats them as „almost exclusively answerable to their investors, thereby limiting their social value‟ (§ 40). Benedict XVI here
clearly contradicts previous attempts by Catholics at imputing a transcendent nature even to
shareholder-driven corporations (Novak 1981).2 Rather, he criticizes large corporations for their
short-term orientation: „it is becoming increasingly rare for business enterprises to be in the
hands of a stable director who feels responsible in the long term, not just the short term, for the
life and the results of his company‟ (§ 40). Without offering „technical solutions‟ (§ 9), Caritas
in Veritate has clear implications for corporate governance and for management.
If reciprocity, gratuitousness, trust, and cooperation take stronger roots in market behavior, the boundaries between the sectors will erode. Reciprocity is at work in many „for-profit‟
operations as well, for example in cooperatives, family businesses, social enterprises, employee
stock ownership plans, etc. According to this theological vision, there is then no reason to privilege non-profit enterprise by crediting it with a higher moral status, for the more important task
2
In fact, where Michael Novak ridiculed any attempt to „humanize‟ the corporation (Novak 1997: 1), Benedict XVI
requests just this (§§ 9, 18f., 21f., 42, 78). He views „profit as a means for achieving the goal of a more humane market and society‟ (§ 47) and understands his Encyclical as a contribution towards „civilizing the economy‟ (§ 38).
6
is that of impregnating all forms of business with love, or with what economists often call „prosocial‟ attitudes: „Charity in truth, in this case, requires that shape and structure be given to those
types of economic initiative which, without rejecting profit, aim at a higher goal than the mere
logic of the exchange of equivalents, of profit as an end in itself‟ (§ 38).
This new model of business activity constitutes not only a stark corrective of the forms of
management entrenched in capitalist societies. It also suggests entirely new forms of enterprise.
The suggestions of Caritas in Veritate on gratuitousness (§§ 6, 34, 36, 38f.), the „civil economy‟
(§§ 38f., 46f.), and the „economy of communion‟ (§ 46) are strongly integrated into the theological argument of the Encyclical. They follow from Benedict‟s thought on the nature of economic action, which in turn derives from his theological anthropology. They are by no means a
mere „add-on,‟ as critics of the Encyclical have claimed (Weigel 2009). This theology also has
clear policy implications. The traditional „social justice‟ orientation of the Thomistic tradition focussed on calls for an authoritative interference by the State into distributive outcomes. Charity,
on the other hand, is pre-emptive by inviting personal engagement, social entrepreneurship, ethical investment, and creative management techniques. At the same time, charity can reduce the
necessity for action by the State, as „subsidiarity is the most effective antidote against any form
of all-encompassing welfare state‟ (§ 57). Instead of waiting for the State to redistribute income,
civil society should support those least endowed with resources or least efficient by including
them in production. Businesses in the civil economy must aim at creating opportunities and
inclusion, for the „dynamics of inclusion are hardly automatic‟ (§ 47).
3.
Hybrid Business Models
Businesses have traditionally been categorized by ownership and predominant profit objectives. A typical classification is reflected in the following 2×2 grid (Figure 2):
Ownership
Public
Private
Primary objective
Commercial
Social
Social
Administration
Administration
Public
Enterprises
Social
Social
Enterprises
Private
Enterprises
Figure 2: Traditional classification of types of businesses
Such classification divides economic activity neatly into two sectors and assumes two objectives of business, in analogy to „mixed‟ economies consisting of private and government activities. However, the development of economies has shown that tertium datur even though the
„third‟ sector between that of private business and the State has never been well defined and
perhaps cannot be. Several classifications of the „social economy‟, or of non-profit businesses,
have been developed. Demarcation of this sector by the goals businesses pursue – into groups of
7
for-profit and not-for-profit organizations – is not straightforward. Economically the two groups
have been converging for a long time, and business law is not effective in drawing distinctions
by intended purpose (Brody 2003). Most classifications use institutional factors as criteria but are
still committed to viewing the „third‟ sector as a „non-market‟ sector (Gassler 1986: ch. 3;
Mintzberg et al. 2005; Molteni 2009). Even if a 2×2 grid is expanded to a 2×3 grid, rectangular
thinking itself relies on dichotomies, which in turn presuppose neat divisions in the object domain (Keidel 2010). The dynamics of modern business defies such categorization and blurs the
boundaries between types (Ben-Ner 2002). This development is part of a larger trend toward hybrid institutions in the economy, as has been shown in the case of product and process standards
(Bunduchi et al. 2008).
Caritas in Veritate does not present a systematic classification of businesses. It lists several business models that are within „commercial logic‟ but that differ from the shareholderdominated corporation. This new sector „is made up of traditional companies which nonetheless
subscribe to social aid agreements in support of underdeveloped countries, charitable foundations
associated with individual companies, groups of companies oriented towards social welfare, and
the diversified world of the so-called “civil economy” and the “economy of communion”‟ (§ 46).
Instead of dwelling on any static taxonomy, the Encyclical presents a dynamic vision. It
distinguishes three principles of motion – „commercial logic‟ (§ 36), the „logic of the State‟ (§
39), and the „logic of gift‟ (§§ 34, 36). They are the driving forces in their respective spheres –
markets, the State, and civil society. These principles are ordered towards an end, with markets
aiming at producing profits through exchange, the State establishing social order and equity
through regulation and redistribution, and civil society fostering the values of reciprocity and
fraternity (Table 1):
Markets
Proximate end
Efficiency
Ultimate end
Profit
Means
Autonomy; Exchange;
Contracts
Goods produced Private
Business ideology „Business is warfare‟
Civil society
Solidarity
Fraternity
Cooperation; Reciprocity; Gratuitousness
Relational
„Business is love‟
State
Equity
Order
Regulation; Control;
Redistribution
Public
„Business is power
Table 1: Three social sectors
This typology of business cuts across the classical distinction between private, public, and
voluntary (or „third‟) sector. The individual sectors also have external effects on others. The private sector tries to apply „commercial logic‟ to the State; the State exports its bureaucratic modus
operandi to markets; and civil society occasionally succeeds in infusing the other spheres with
elements of benevolence, reciprocity, and gratuity. At least some businesses in all three sectors
will therefore not be of a „pure‟ type but will bear cross-sectoral characteristics. The Pope has
high expectations for such „cross-fertilization between different types of business activity‟ (§ 41)
as they bridge at least three divides – those between primary objectives, social sectors, and economic development levels. In a sense, even a fourth divide is bridged – that between the creation
and redistribution of economic value, as social enterprises increasingly move into production
8
and, differently from many privately held businesses, are attentive to socially desirable distributive results (Becchetti and Borzaga 2010).
Not even a classification along several continua can easily model the complexity of the
business sector. The non-profit sector consists of institutions (such as foundations and associations) that do not distribute profits to managers or employees. Not-for-profit businesses (such as
cooperatives, credit unions and mutual aid societies) do not pursue profit maximization but may
distribute profits to their members. Social enterprises benefit either their members or the larger
community. In both cases, they are meant for „provision‟ rather than profit (Brown 2010). Many
not-for-profits are also social enterprises, but credit unions or housing cooperatives are not; fair
trade organizations and microfinance institutions are social enterprises without having to be notfor-profits (Becchetti and Borzaga 2010). Most of these businesses are financed with private
funds and managed according to commercial patterns; some may be in the public sector. The
public-private hybridity thus overlays the other distinctions. Lastly, at a more fundamental level,
most of these businesses can be attributed to the civil economy, i.e. the market economy under
the guidance of civil society (Bruni 2009; Bruni and Zamagni 2007, 2009). The fundamental
characteristic of the civil economy is to understand the market as a cooperative rather than a
competitive arena and enterprises as communities pursuing social projects (including those of
producing goods and services for private consumption at market prices) (Becchetti, Bruni and
Zamagni 2010: 312f.). The diversity of types of business, which is augmented by the plurality of
legal constructions in various jurisdictions, is then best represented by a Venn diagram (Figure
3):
Hybrid
enterprises
Not-for-profit
Civil
economy
Social
enterprises
Nonprofit
Figure 3: Macro-typology of businesses
At a micro-level, another typology of social enterprises may be developed. Caritas
in Veritate emphasizes the goal of economic activity (§§ 32, 38, 42, 46), the importance of integrating the values of the civil economy into business (§§ 38f., 46), and the necessary „spillovers‟
of social enterprises into the market and the State (§§ 24, 41). With respect to these points, social
enterprises can then be classified by their mission orientation, by the level of integration between
not-for-profit social programs and for-profit business activities, and by their intended target
markets (Dawans and Alter 2009). This conceptualization appears to reflect the theology of
business developed in the Encyclical. The following classification may be suggested (Figure 4):
9
Mission motive
Mission
orientation
Type of
integration
Profit motive
MissionCentric
MissionRelated
Unrelated
to Mission
Embedded
Integrated
External
Social
programs
+
Enterprise
activities
Social
programs
Social
programs
Enterprise
Target Population
Client = User
Target
market
Enterprise
Government Contracts
Client = Government
Third-Party Payer
Client ≠ User
B2B Commerce
Client = Businesses
General Public
Any private customer
Figure 4: Micro-typology of social enterprises
If there are three types of mission-orientation, three types of integration between not-forprofit and for-profit activities, and five types of target markets, there will be 3×3×5 = 45 possible
combinations. Several of these will of course be uncommon or not feasible. Using a simple
enterprise ontology composed of social enterprises, markets, and target populations served, these
possibilities can be consolidated into nine fundamental types of business models for social
enterprises which are feasible and indeed widely implemented (Dawans and Alter 2009) (Table
2):3
3
Entrepreneur Support Model
Market Intermediary Model
Employment Model
Fee-for-Service Model
Low-Income Client as Market
Cooperative Model
Mixed and complex models are here ignored but add to explaining the attractiveness of hybrid businesses.
10
Market Linkage Model
Service Subsidization Model
Organizational Support Model
Table 2: Business models of social enterprise
Examples of these models can easily be identified. European countries, and particularly
those with strong Catholic cultures, have developed co-operative movements for farmers, craftsmen, shopkeepers, and consumers, that have become formidable players on factor and consumer
markets (Cooperative Model). They allow smaller suppliers to bundle their otherwise atomistic
market power to compete with multi-national corporations and thus at least partially to overcome
diseconomies of scale (Zamagni and Zamagni 2010). They allow household buyers to approximate the purchasing power of corporate buyers, although the success of this movement may for
organizational reasons have been greater on business than on consumer markets. Several institutional forms have been created ranging from limited partnerships to marketing co-operatives and
consortia based on rules of both efficiency and equity (Grassl 1998). These models have spilled
over to other continents, but particularly to Latin America, where Brazil is now home to a
thriving co-operative movement of „solidarist‟ businesses (economia solidária) (Carvalho de
França Filho 2007). In Africa, micro-lending on the model of Bangladesh has facilitated the
emergence of a new class of business owners (Entrepreneur Support Model). Ethical investment
funds, to which Caritas in Veritate alludes (§ 45), fair trade organizations, and alternative forms
of travel complement this trend (Organizational Support Model). All these businesses use a wide
variety of corporate governance models (Travaglini, Bandini and Mancinone 2010). Under
globalization, different cultures will continue to bring about different business models for the
civil economy.
Increasing participation in the economy in more roles than those of dependent worker and
consumer, which Caritas in Veritate commends as a project of inclusion (§ 47), has brought
about a considerable rethinking in business. Reference may only be made to relationship marketing, which originally developed with the goal of raising profitability through customer
retention and satisfaction rather than a dominant focus on sales transactions, but which has
grown into a business orientation that has a more humanistic outlook (Gummesson 2008).
To a large extent, Catholic social thought stood at the origin of this movement, and often
has the Church supported the development of co-operatives, mutuals, credit unions, and other
membership-led organizations (Davis 2000, 2006 ). Caritas in Veritate indeed mentions credit
unions as a positive example (§ 65). The worldwide Economy of Communion as a project of the
Focolare Movement is a network of businesses that freely choose to share their profits according
to three principles of equal importance – to grow their businesses, help people in need, and
spread the culture of giving (Service Subsidization Model) (Bruni and Uelmen 2006; Gold
2010). Benedict XVI supports exactly these endeavors when he proposes the civil economy (§§
38f., 46f.) and the Economy of Communion (§ 46) as paradigms to be followed. Lastly, the longstanding support of Catholic social teaching for family businesses must be mentioned. Much
research has shown that they are still models for the positive role of altruism, reciprocity, and
solidarity in commercial success (Schulze, Lubatkin and Dino 2003).
11
The hybridization of business is not restricted to what has traditionally been called the
„supply side‟. Caritas in Veritate also states that the consumer „has a specific social responsibility‟ in parallel with that of businesses (§ 66). The Pope calls for new models of consumption, „for
example, forms of co-operative purchasing like the consumer co-operatives that have been in
operation since the nineteenth century, partly through the initiative of Catholics‟ (§ 66). Here,
too, creativity is needed, and the Pontiff‟s call is partially being answered. One of the most entrenched social dichotomies – that of market participants being either consumers or producers
(including intermediaries) – is breaking down as value co-creation allows consumers to participate in the production of their goods (Ramírez 1999). Better access to information, technology,
and greater transparency of corporate decisions have reduced the asymmetry of information and
thus price-setting power on which traditional forms of consumption and retailing relied. The latest paradigm to emerge in marketing – the „service-dominant logic‟ – builds on the idea of customers becoming co-creators of value (Payne, Storbacka and Frow 2008). A business landscape
is developing that exhibits many properties of a civil economy and that often cuts across the traditional categories of public and private sectors (Ridley-Duff and Bull 2011). Consumer movements have created new models of household production, direct distribution, and quality-conscious consumption. One may think of the Slow Food movement, which started in Italy and has
expanded to much of the world (Petrini 2007). Out of this movement grew Terra Madre, a
worldwide network of „food communities‟ which spreads by bypassing the large commercial
distribution systems (Petrini 2010). Under the cover term „collaborative consumption‟, various
models of sharing, swapping, bartering, trading, and renting, have been invented and have been
facilitated by advances in social media and peer-to-peer online platforms (Botsman and Rogers
2010). The transformation of passive consumers into collaborators through social media harbors
the opportunity of creating new human communities (although the quality of these still remains
to be seen) (Shirky 2010). Influential business thinkers have recognized the importance of
understanding companies as communities (Mintzberg 2009). On both sides of the market, that of
consumers and of producers, the future may lie in sharing (Gansky 2010). All these
developments are due to hybrid business models. The Pope‟s call comes at a very propitious
time.
4.
The ‘Logic of Gift’ as Agent of Integration
Caritas in Veritate develops a strong and unprecedented case in papal social teaching for
business models transgressing the boundaries drawn by several widely held distinctions. On the
one hand, Benedict XVI makes a case for hybrid business models from within „economic logic‟:
„The very plurality of institutional forms of business gives rise to a market which is not only
more civilized but also more competitive‟ (§ 46). On the other hand, he proposes an intricate
theological justification for his call, which is rooted in his view of man and of human community
under the form of the Trinity. Through the „astonishing experience of gift‟, human beings
participate in „superabundance‟ (§ 34). This breaks the economic axiom of scarcity.
At the core of Caritas in Veritate stands the Pope‟s plea „that in commercial relationships
the principle of gratuitousness and the logic of gift as an expression of fraternity can and must find their
place within normal economic activity‟ (§ 36). Gift-giving is possible in a multiplicity of forms, all of
them having the power of building relationships transcending mere exchange (Donati 2009). The
unconditionality and boldness of gratuitousness make it is constitutive of community rather than
12
society; businesses ought to understand themselves as such communities of persons (Bruni 2008:
88ff.). Benedict XVI declares that through „regular‟ business activity we can grow into the
likeness of the Triune God if we conduct it according to the „logic of gift‟. This certainly requires
vision, determination, and courage. The desirable integration of business models in the spirit of
the Encyclical – towards more mission-centric and socially embedded firms serving a variety of
target markets (Figure 4) – does not come about spontaneously. Hybridization is a process that
requires a catalytic agent. Benedict XVI explains that this agent is the love that emanates from
the Trinity and that can – if only partially and imperfectly – be captured by working within Trinitarian structures. This requires that, from its „natural home‟ (§ 39) in civil society, the „logic of
gift‟ infuse „commercial logic‟ and the „logic of the State‟. Whereas the mere reconstruction of
business models remains static, the „logic of gift‟ is a dynamic principle of motion for the entire
social sphere. It shifts equilibria in a force field between three competing logics (Figure 5).
Civil society
Reciprocity
logic of
gift
commercial
logic
logic of the
State
Efficiency
Market
Equity
State
Figure 5: Dynamics of the ‘logic of gift’
There is no expectation that this process can ever be complete and that „civil‟ enterprises
or at least hybrid forms of business will replace for-profit enterprise or public administration. But
research shows that this process is well under way (Enjolras 2009; Seelos et al. 2010; Brown
2010). Caritas in Veritate makes it clear that the efficiency which is characteristic of markets and
the equity that can be established by the State are indispensable and can only be partially
supplanted by the institutions and practices of the civil economy. But every marginal move in the
direction of strengthening the logic of gift is a step towards „civilizing the economy‟ (§ 38).
Individual action is important here, as a result of a felicitous fusion of charity and will. But of
equal importance is, as Benedict XVI never hesitates to emphasize, the existence of a supporting
culture (§§ 4, 21, 26, 37).
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