Retos de las ciencias administrativas desde las economías emergentes: Evolución de
sociedades.
Indigenous social entrepreneurship in subsistence economies: a
sustainable alternative for regional development in rural sectors.
Mario Vázquez Maguirre*
*Tecnológico de Monterrey.
EGADE Business School.
Monterrey, Nuevo León. México.
Email: [email protected]
Teléfono: 8115877381
Abstract:
The objective of this research is to identify the elements and analyze the
strategies through which indigenous community-based enterprises are formed and build
sustainability in subsistence economies. To this end, this paper follows an exploratory,
qualitative approach. The research technique applied is case study. I identify five
categories in the two explored cases that are presumably related to the successful path
the organizations have followed: organization, cross-sector partnerships, investment in
technology and human capital, sustainability, and diversification. The ability of the
community to form a functional productive organization and partnerships with
government agencies are essential for the initial survival of these enterprises. Likewise,
partnerships with NPOs (Non Profit Organizations), vertical integration and product
differentiation through environmental certifications seems to be related to the
consolidation of the venture.
Página 1
Capítulo 6. Administración del Desarrollo Regional y Sustentabilidad
Introduction:
Developmental activities for poverty alleviation is social issues have brought
discouraging results in the last 50 years (Burnside & Dollar, 2000). Despite good
intentions, the most widely adopted approaches have often been paternalistic, seeking
unintentionally cultural assimilation, while ignoring the strength of local organizations
(Davis, 1993). One common problem in developmental activities is that most projects
have been conceived and managed by the development agencies rather than by
members of the community, which has often led to a lack of any significant sense of
ownership on the part of the target beneficiaries. Once a given developmental project
exhausts its budget, local people seem, in many cases, to lose interest in pursuing the
project autonomously (Peredo & Chrisman, 2006). In addition, governments worldwide
are facing increasing debt, structural adjustments and reduced spending, which have
diminished the impact of the state in the poverty alleviation of social issues
(Chossudovsky, 2003). There has been a global shift away from a social welfare state
approach to development towards a neoliberal approach with an emphasis on market
forces as primary mechanisms for the distribution of resources (Johnson, 2002). This
has also produced a generalized increase in inequality in the last 20 years (OECD,
2008).
Literature Review
Under this context, the study of social entrepreneurship and social enterprises has
gained strength as a new emerging topic that can potentially contribute to address
fundamental social and environmental issues by providing economic vitality to
marginalized areas. A social entrepreneur is an individual or a group which aims to
create social value, either exclusively or at least in some prominent way; shows a
capacity to recognize and take advantage of opportunities to create that value; employs
innovation, accepts an above-average degree of risk and is unusually resourceful
(Peredo & McLean, 2006). Martin and Osberg (2007) add that a social entrepreneur
must create scalable projects and affect the establishment of a new stable equilibrium
that secures permanent benefit for the targeted group and society at large.
The concept of social entrepreneurship has been poorly defined and its
boundaries with other fields of study remain fuzzy (Mair & Martí, 2006). One of the
efforts to offer a sound theory of this area was proposed by Filipe Santos (2009). He
defines social entrepreneurship as the pursuit of sustainable solutions to problems of
neglected positive externalities.
He argues that social entrepreneurship is a
fundamentally distinct phenomenon from other forms of economic organization. While
economic theory is based on the assumption of self-interested economic actors, social
entrepreneurs exhibit economic behaviors that seem conflicting with this motivation.
Santos (2009) acknowledges that some individuals derive utility from improving the
Página 2
Retos de las ciencias administrativas desde las economías emergentes: Evolución de
sociedades.
welfare of other members of the society, and they may create organizational forms
which are different from the common for-profit enterprise. Social entrepreneurship
seems to be run for the benefit of specific users of society as a whole, often involving
systems of cooperation that transcend formal organizations instead of a primary
concern with competitive behavior. Santos suggest that social entrepreneurship is not
about upholding particular values but about the creation of social value, which involves
the fulfillment of basic long standing needs to those members of the society who are in
need (Certo & Miller, 2008).
The main characteristics of social entrepreneurship, which differentiates it from
commercial entrepreneurship, are the need to achieve a sustainable solution and the
adoption of a logic of empowerment. The field of strategy is based on exploring how
firms can achieve and sustain competitive advantage over rivals. Theories such as
industrial analysis, resource-based view and dynamic capabilities propose models with
such end. Social entrepreneurs, however, aim to provide long term fixes to problem
caused by market and government failure. Sustainable solution are approaches that
systematically address the problem, maybe through the development of a new market
mechanism, or through alliances with other actors such as the government or NPOs
(Non Profit Organizations), or a combination of both mechanisms. The fixing of the
problem involves that the externality is internalized for the benefit of the society and the
work of the entrepreneur may be no longer necessary (Santos 2009).
This research focuses on social enterprises that are managed by an indigenous
community or group of communities in rural areas. Community-based enterprises
(CBE) are defined by Peredo and Chrisman (2006) as a community acting corporately
as both entrepreneur and enterprise in pursuit of the common good. I am particularly
interested in social entrepreneurs that looks for market mechanisms to achieve its
mission by establishing social enterprises; which are primarily characterized by
searching for economic value as a mean to obtain social value. These entities involve
taking a business-like, innovative approach to the mission of delivering community
services. The focus of social entrepreneurs on social value creation does not preclude
the "earned income" strategy; economic value creation is seen as a necessary condition
to ensure financial viability (Mair & Martí, 2006).
Research Questions
The objective of this investigation is to examine what are the mechanisms by
which these social initiatives achieve success in their business activities. For this, I
identify the elements and analyze the strategies through which indigenous communitybased enterprises are formed and build sustainability in subsistence economies. The
main question this paper will address is: what are the elements and strategies through
which indigenous community-based enterprises are formed and build sustainability in
subsistence economies? Secondary questions that will provide guidance to this
Página 3
Capítulo 6. Administración del Desarrollo Regional y Sustentabilidad
research are: (a) what is the role of external entities such as government or NPOs in the
formation and development of these enterprises? (b) How does the governance
structure contribute to the sustainability of these enterprises?
Context of the Research
Both cases were documented in the southern Mexican state of Oaxaca.
Although Mexico is classified by the World Bank (2011) as an “upper middle income
economy”, half of the population lives in some degree of poverty. Moreover,
subsistence economies usually exist within national economies that are otherwise
classified as enjoying higher average income levels (West III, Bamford, & Marsden,
2008). This is the case for the state of Oaxaca, where poverty rate is around 62 percent
(CONEVAL, 2008). Oaxaca is one of the poorest entities of the country, 65 per cent of
the 3.8 million inhabitants lives in rural areas and almost 1.16 million are indigenous
(Mexico‟s indigenous population is 6.7 million). Almost 80 per cent of the indigenous
people in Oaxaca live in poverty (CEIDAS, 2011). This region share key characteristics
that are representative of subsistence economies such as poor educational systems
and infrastructure, little access to markets and financial resources, emigration, and
primary activities as a main source of income.
Indigenous communities are distributed along the state. Oaxaca‟s two mountain
ranges make communication and trade extremely difficult. These communities have
different backgrounds; most of them are governed under a system of customs. There
are three main indigenous groups that inhabit the state: mixes, zapotecas, and
mixtecas.
The mixes are an ethnic group that inhabits in the northeast of the state; they
mainly grow corn and beans during rainy season, although coffee and mullein are crops
that represent a higher income for them. The mixes inhabited the highest mountains in
the state in an attempt to preserve their culture. They were never conquered by any
other ethnic group or by the Spanish. The mixes have a traditional religious organization
(a mixed of Catholic and pre-hispanic traditions) based on a system of cargos or
communal jobs that begins with the topil (in charge of the security of the community) to
reach the most important mayordomía or stewardship. These religious charges are
interspersed with political cargos to give the individual a higher status within the
population. The most outstanding feature of mixe‟s culture is its music; where they
manifest the sense of their ethnicity.
The zapotecs or zapotecas are not a homogeneous cultural group like the mixes.
They are distributed in five zones around the state (northern mountain range, southern
mountain range, central valleys, coast and Isthmus of Tehuantepec), each region has
developed a language that is very difficult to understand for the other zapotec groups.
Subsistence production of zapotec families based on primary activities allows them to
have food for only three to five months of the year. They complement their economy
with the commercial production of handicrafts, international remittances from migration
Página 4
Retos de las ciencias administrativas desde las economías emergentes: Evolución de
sociedades.
and wage labor in nearby villages. The most prominent handicrafts include black mud
figures and telares or looms (hammocks, huipiles or traditional dresses, mats). This
ethnic group is deeply religious; community participation involves hierarchical-religious
codes of conduct, implying strong luxury-ceremonial expenses.
The mixtecas or mixtecs in turn, represent the country's fourth ethnic minority
after the nahuas, mayas and zapotecs. The community is the basic unit of identity
among mixtecs. Conflicts and rivalries with other mixtec communities are not unusual.
The relative isolation of many communities has resulted in sub-languages that are
unintelligible by nearby communities. The mixtecs have staged major diasporas to the
northern states of Mexico, United States and Canada. This has altered their family
structure based on the father‟s leadership in favor of a more protagonist role of the
mother. In many communities there is still the figure of the council of elders that
governs social life and appoints municipal authorities. The economy is based on
agriculture and remittances. The most important crops are corn, wheat and beans.
Handicrafts for commercial ends include cotton textiles, reed and palm basketry, and
jícaras or gourds.
One of the indigenous community-based enterprises analyzed in this research is
located in Ixtlán. This zapotec community is located 62 kilometers north of the capital of
the state. Ixtlan has an area of 19,000 hectares at 2,030 meters over sea level. Its
complex topography includes a variety of climates that generate a complex biodiversity,
from oak and pine forests in the highlands, to evergreen rainforests at the bottom.
Forests used for timber reach the 12,000 hectares and constitute an important resource
to generate income for the community; although the economy is based on domestic
agriculture and livestock. Ixtlan is one of the 570 municipalities of the state and a
district seat; it has 7.674 inhabitants (INEGI, 2011). Land‟s property is communal, with
384 comuneros or villagers exercising legal rights through a Commissariat of
Communal Goods and a Supervisory Board since1986. About 60 per cent of the
population speaks an indigenous language, predominantly zapotec. The municipal
government is chosen by a system of customs and traditions. Near 70 per cent of the
population is Catholic, while the rest is Protestant; but there are still some families with
pre-Hispanic beliefs.
Methodology
In order to address the research questions, this paper follows an exploratory,
qualitative approach. The research technique applied is case study. Research in the
social entrepreneurship field has been documented using both this technique (e.g.
Anderson, Dana, & Dana, 2006) and grounded theory (e.g. Weerawardena & Mort,
2006; Khavul, Bruton, & Wood, 2009). Social entrepreneurship research is in an
exploratory stage, so these techniques are ideal to generate large amounts of
Página 5
Capítulo 6. Administración del Desarrollo Regional y Sustentabilidad
information that may provide knowledge about the strategies that these social ventures
follow.
The sampling strategy focused on searching for the most successful indigenous
community-based enterprises in rural areas of the state of Oaxaca. This was
determined by: (a) interviews with researchers and academic experts from the region,
(b) interviews with staff of financial institutions focused on the development of rural
areas (e.g. FIRA, a National Bank of Mexico‟ trust focused on rural development), and
(b) a search in national and regional events and competitions which are intended to
promote social enterprises. Two organizations were the most frequently mentioned as
successful cases of social entrepreneurship: Ixtlan group and CEPCO. I decided to
select the two organizations to address the research questions. The respondents‟
criterion to classify an organization as successful was based on characteristics such as:
(a) size of the enterprise in terms of assets and number of employees (b) statewide and
national recognition (c) level of sales and financial health, and (d) level of contribution to
their communities (creation of social value).
Semi-structured interviews were the main instrument of data collection. I
considered three dimensions in the interview guide: environmental, social and
economic. Additionally, I sought data triangulation through instruments such as video
analysis, analysis of documents and direct observation. I carried out ten in-depth
interviews with selected members of each company. With the aim of obtaining the
perspective of different groups within each organization, I interviewed five high-ranking
employees (directors or managers) and two middle-ranking personnel (technician or
plant worker). The interviews lasted between 30 minutes and one hour with 20 minutes.
It is important to mention that one of the interviews did not follow the traditional path of
an individual interview because the employee at some point decided to add two more
people to the conversation. The personal interview became a group interview that
lasted over an hour and a half. I decided to continue with the conversation and include
the transcript in the analysis since valuable insights about the organization and its social
context were received. Similarly, I decided to interview two outsiders who had a broad
knowledge of each organization. I considered essential to take into account an external
view to improve the variety of sources. Therefore, I interview FIRA‟s analysts in charge
to supervise each organization‟s financial health and future projects. In both cases, the
analysts had at least a three-year working relationship with the social enterprise, mainly
through credit supervision and support, monthly visits to the facilities, and monitoring of
financial and social indicators. The interviews lasted 40 minutes on average and were
conducted at FIRA‟s facilities in the capital of the state.
Similarly, I collected additional data that allowed us to complement the
interviews; the information was provided by both companies and FIRA. The collected
material included videos made for national competitions, conference reports, brochures
and information found on the companies‟ website. Most of this information was
Página 6
Retos de las ciencias administrativas desde las economías emergentes: Evolución de
sociedades.
elaborated to inform different stakeholders such as financial entities, government
agencies and workers about the activities that the organization is doing to enhance its
operations.
Likewise, information was obtained by direct observation during visits to the
facilities. Manufacturing plants, offices, warehouses, cafeterias, and stores were visited
in order to observe the dynamics of the relationships among workers, the distribution of
the facilities, the materials and equipment that workers employ, etc. I also visited the
communities‟ main gathering centers (markets, central plaza, and church) to collect
information about the social and cultural context. I
First, the transcripts were analyzed to generate a number of themes and then
grouped in thematic clusters according to criteria of recurrence, connection and
meaning. Subsequently, these categories were confirmed or modified by the analysis of
data collected via video analysis, direct observation and analysis of bibliographic
materials. This data triangulation is necessary to validate the process of information
generation. In case studies, triangulation can be performed by using multiple sources of
information (Yin, 1994).
Case 1: CEPCO
CEPCO (Coordinator of Coffee Producers of Oaxaca) is an organization formed
by 34 communities of indigenous coffee growers from different regions of the state.
CEPCO was formed in 1989 during a major crisis in the international coffee market.
Additionally, at the national level, the withdrawal of the Mexican Coffee Institute
(Inmecafé) also affected the coffee growers, who received constant support from
Inmecafé. At that time, CEPCO members did not know how coffee was collected or
sold, and they had no access to credit for marketing and production purposes; but the
struggle to survive forced them to rethink ancient forms of organization in order to be
heard and get access to markets. The initial objective of the organization was to carry
out the activities that Inmecafé had left vacant, including: (a) coffee promotion, (b)
research, (c) training in production, (d) product transformation, (e) commercialization, (f)
and funding. Once the organization established itself as a socially stable enterprise,
there were additional initiatives such as supply chain projects, promoting women
participation in productive activities, product diversification, and the constant struggle for
indigenous rights and quality of life.
CEPCO‟s mission is to transform the material conditions of life of its members
and their relatives, to overcome extreme poverty, to build a sustainable and
comprehensive alternative that allows its members and their relatives to live better lives,
to promote and encourage development at local, regional and state levels, and to
promote cultural values. This mission is achieved through the development of a
sustainable coffee industry and the development of economic, social, and cultural
projects. The four fundamental values that govern CEPCO are: (1) autonomy of
Página 7
Capítulo 6. Administración del Desarrollo Regional y Sustentabilidad
regional organizations (communities); (2) democracy in decision making; (3) plurality of
politics, ideology and religion; and (4) accountability in the management of resources.
CEPCO is composed by five companies that are governed by a Congress of
Delegates appointed by each of the local assemblies of the communities. Each
community is entitled five delegates, plus one delegate for every ten active members.
Women participation in the Congress must be at least of 30 per cent. The Congress
appoints a board that is formed with one member from each of the six regions
represented at CEPCO; the positions (president, treasurer, secretary and three
members) are elected by single-majority vote. The board chooses the companies‟
managers and directors, with the endorsement of an intermediate body called the State
Assembly of Representatives. This meeting is held monthly with the assistance of at
least one representative from each community, the board, and directors of the Women's
Commission.
CEPCO’s Enterprises
Comercializadora Agropecuaria del Estado de Oaxaca, SA de CV (CAEO)
It was established in 1990 to make the functions of collecting, processing and
marketing coffee for domestic and international markets. This is CEPCO‟s main
enterprise; they share directors and offices.
Financiando el Desarrollo del Campo (FINDECA)
It started operations in 2007 as a Multiple-Purpose Financial Entity (SOFOM).
This legal figure allows it to access adequate financial instruments at preferential rates,
technological subsidies, guarantees and direct funding. The purpose of the financial
entity is to address the funding needs of social organizations willing to develop
sustainable productive activities in the southern Mexican states. The current portfolio
includes producers of coffee, tomato, papaya, wood, gum, mango, and cocoa.
Fondo de Inversión, Crédito y Ahorro para Fortalecimiento Económico
(FINCAFE)
This Popular Financial Entity (SOFIPO) provides financial services for the
development of rural communities in Oaxaca. Similarly, the enterprise captures savings
from CEPCO members and fund productive and personal loans. FINCAFE has six
branches distributed in the major towns of the state.
Unión de Crédito Estatal de Productores de Café del Estado de Oaxaca
(UCEPCO)
It funds CEPCO‟s members‟ productive activities related to coffee collection,
production and marketing.
La Organización
This venture was established in 2008 as another step towards the elimination of
intermediaries in the coffee chain. The entity is formed by a roasted and ground coffee
plant, 3 cafeterias located in the capital of the state, plus 150 coffee machines that the
organization rent to private companies and government agencies.
Página 8
Retos de las ciencias administrativas desde las economías emergentes: Evolución de
sociedades.
Case 2: Ixtlan Group
Timber exploitation in Ixtlan started in the 1940s by a private-owned company
that closed operations two decades later. In 1956, the federal government decided to
establish a public enterprise to continue with the production of wood. Both companies
hired peasants from the region as a work force, usually under poor working conditions.
In 1975, Ixtlan and surrounding communities organize themselves to block the
enterprise‟s operations. The communities wanted the power to exploit their own
resources without external leadership. In 1981 de federal government established a
new public entity to exploit the forest but the growing resistance of the villagers finally
paid off; the different communities started managing their resources together, until they
decided to split seven years later. Thus, the Unidad Comunal Forestal Agropecuaria y
de Servicios (UCFAS) was established in 1988, and to this day, it has become the basis
for Ixtlan‟s community development.
This enterprise, which has turned into a group, is managed by a Commissariat of
Communal Goods that represents the 384 comuneros or villagers. The comuneros
were the first settlers of the region, and they together have legal land ownership.
People that want to inhabit in Ixtlán need to ask the Commissariat and municipal
authorities (they are usually the same group) for land to borrow. The people which are
not comuneros are called citizens; they constitute 80 per cent of Ixtlán group‟s
employees, and they work under the same conditions that comuneros do.
Ixtlan’s Enterprises
Servicios Técnicos Forestales de Ixtlán SPR de RI
This organization is responsible for performing the technical studies,
management programs, control of waste and invasive vegetation, natural regeneration
of the fronts, intermediate cuts to create space, and sustainable and rational use of the
forest based on norms and international certifications.
Unión Forestal Santo Tomás Ixtlán (UNFOSTI)
This entity is in charge of cutting and transporting the wood from the forest to the
production plant.
Unidad Comunal Forestal Agropecuaria y de Servicios (UCFAS)
This company produces and commercializes wood furniture. It has two
production plants and it shares ownership of two stores in the capital of the State.
Ecoturixtlán S.P.R. de R.I.
This is a firm that offers ecotourism services. The facilities include 13 cabins with
a total capacity of 70 people, a dining room for 150 people and a training center for 250
people.
Página 9
Capítulo 6. Administración del Desarrollo Regional y Sustentabilidad
Fideicomiso de Ixtlán
This Multiple-Purpose Financial Entity (SOFOM) is newly established and it is
expected to begin operations in early 2012. The purpose of this entity is to fund
productive projects within the region with a preferential rate.
Ixtlán group also owns a gas station and a hardware store located in Ixtlán.
Discussion
There are five main categories that emerged from the analysis of the transcripts,
videos, bibliographic material and direct observation: organization, cross-sector
partnerships, investment in human capital and technology, sustainability, and
diversification strategy.
Organization
Ability to organize for productive ends
The most recurrent variable mention by the persons interviewed which is
considered key for the formation of a social venture is the communities‟ capacity of
organization. As a FIRA analyst mentioned: "those communities that take advantage of
the government subsidies are those that manage to build an organizational structure
that gives them access to credit ... when the government finds out that people is
organized, it usually provide support". A director of one of Ixtlan‟s enterprises explained
what he answers when people from other communities ask him about the secret of
Ixtlan‟s success: "When they ask me the question: how do you do it? I say, I will tell you
the magic words: just organization". He also argues that most communities cannot be
organized around a common productive interest because there are internal conflicts,
religious conflicts and individual interests that prevent them from establishing a
functional organization.
In both cases, I see a crisis that forces the communities to organize themselves
to undertake a project aimed at providing productive welfare and quality of life for their
members. Ixtlan group was born after a government's attempt to establish a public entity
in the region. The villagers joined other communities and resist such imposition,
creating a crisis that caused the collapse of the entity but also high unemployment. This
context of crisis was favorable for the emergence of a new organization governed by
community. For its part, CEPCO was born after the combination of two events that
negatively affected their communities: the crisis in the international coffee market prices
and the withdrawal of the national entity that provided support to the small coffee
producers. Both events triggered the search for a new form of organization, as one
director wrote in the proceedings of CEPCO‟s annual conference: "the struggle for our
own organization also meant getting rid of the ancient forms of organization among
peasants".
Organizational structure
The organizational structure in analyzed cases tends to be flat. Although both
organizations have committees that manage and control each enterprise, differences
Página
10
Retos de las ciencias administrativas desde las economías emergentes: Evolución de
sociedades.
among hierarchical positions are hard to notice. The phenomenon is even more evident
when analyzing the informal structure of both organizations. This could be the result of
a sense of equality and community shared by the workers. At the CEPCO‟s
headquarters in the state capital, for example, all employees have similar working
environments in terms of space and furniture; the desks are practically the same size
and there are no private offices. There are no formal positions also. When interviewing
a director of CEPCO, he did not know what the name of his position was, but he knew
exactly what their role was within the organization. Although his role was clearly one
similar to a director or manager, he considered himself just one more employee, like
everyone else in that office or the production area.
A flat organizational structure is also appreciate in Ixtlan group. Even though the
largest enterprise has over 150 employees, I noticed no more than three or four
hierarchical levels (manager, supervisor, and worker).
Cross-sector Partnerships
Government
Although one of the reasons for the formation of both organizations was some
level of conflict with governmental authorities, these entities have kept a high level of
openness with national and state governments. Evidence suggests that governmententerprise partnerships are fundamental for the formation and subsistence of social
enterprises. An analyst from FIRA with five years of experience supervising rural
enterprises in Oaxaca commented: “No social venture would be possible without the
government making important initial investments in basic infrastructure”. CEPCO has a
number of programs to support its members that include partnerships with the federal
government through the Ministry of Agriculture, Livestock and Rural Development
(SAGRAPA) for production equipment and supplies for subsistence agriculture in areas
of low productivity.
In 2006, Ixtlán group made a partnership with the National Entity for the
Development of Indigenous Communities (CDI). The partnership included co-financing
13 cabins, a dining room and an exposition center in order to form an ecotourism center
in Ixtlan. The new enterprise was called Ecoturixtlan. As one of the administrative
personnel of this enterprise explains: “The Commissariat agreed to create a new
enterprise focused in ecotourism and it looked for a partnership with the government…
Ecoturixtlan employs 13 people from the community and its working at full capacity right
now… the general manager is thinking to ask the Commissariat for the construction of
more cabins soon”.
Both organizations have developed a close relationship with FIRA. This financial
entity provides funds at preferential rates, but it has also established partnership with
these organizations in order to develop training programs for the personnel. FIRA also
takes managers and directors to different countries to learn the best practices from the
Página
11
Capítulo 6. Administración del Desarrollo Regional y Sustentabilidad
most successful enterprises of the sector. An analyst from this institution explained:
“some years ago, the analyst that was supervising Ixtlan enterprises took a bunch of
managers to Brazil. The personnel from Ixtlan had the opportunity to see how Brazilians
managed their forests and produced furniture. The visit was so productive that they did
the same trip a year later without FIRA‟s financial support”.
Non-profit organizations (NPOs) and socially oriented institutions
Collaboration between NPOs and enterprises will grow in frequency and strategic
value in the twenty-first century. Relationship between both entities will migrate from
philanthropy towards strategic importance (Austin, 2000; Jamali & Keshishian, 2009).
NPOs and other socially oriented institutions can play an important role in business
development by rethinking operational activities and identifying new products and
marketing opportunities (Rondinelli and London, 2003), especially in developing
countries (Hart and Sharma, 2004).
For example, given the recognition by CEPCO that women needed to be valued
in their family work and also play a greater role within the organization, CEPCO made a
partnership with Grassroots International. The purpose of the alliance was to establish
a program to build organic backyard gardens as an income diversification strategy for
women. Through a model farm established in 2000 and named Ita Teku, which means
“the flower of life,” CEPCO‟s training programs have educated women in organic
agriculture, fish farming and animal husbandry. This strategy, targeted to both
individual women and women‟s organizations, has fostered economic and food security.
Building on its success with the Ita Teku model farm, CEPCO has also initiated an
organic chicken and egg production and marketing initiative (Grassroots International).
Similarly, the three enterprises from Ixtlan that are related to the wood chain
made a partnership with the Harp Helú Foundation. The purpose was to build a
greenhouse with a capacity of half-million pine trees. The Harp Helú Foundation is
focused in green, sustainable productive projects in Mexico, especially in the building of
greenhouses. Thus, the knowledge acquired by Ixtlan group through this project was
considerable. The responsible of the greenhouse explained: “This greenhouse cost
close to 2.3 million pesos [USD 190,000]… it has a Swedish irrigation system and a
couple of machines that make the task of growing pine trees less hard and quicker”.
Investment in Technology and Human Capital
Technology
There is high-level of awareness in both organizations that to respond actively to
the markets‟ demands, they need to make constant technological improvements in
production and create innovative business strategies. CEPCO proudly announced in its
webpage being the only organization in Mexico with a digitalized internal control system
for the organic production coffee. In the same way, the coffee machines that they rent to
other entities are highly sophisticated and costly for the region. But CEPCO believes
Página
12
Retos de las ciencias administrativas desde las economías emergentes: Evolución de
sociedades.
that investing in technology can make a product differentiation that will finally turn out in
a higher market share.
Ixtlán group recently built a new computerized production plant of wood furniture.
It is one of the most highly tech plants in the state. The supervisor of the plant
commented about the use of technology: “we are constantly looking to innovate in our
processes and products; technology is not opposed to handicraft furniture… once a final
product comes out of the computerized plant, our artisans can give the furniture a
personalized touch that can be highly valued in the market”.
Human capital
A constant investment in human capital is one of the most valuable social
outcomes of these enterprises. Workers of both organizations are constantly in training
programs. There is a special interest in employing people from the communities and let
them grow within the organization through training programs. Thus, it is difficult to find
personnel that do not belong to the communities. One of the managers in Ixtlan
commented that they try to be an open organization as long as the external entities are
willing to train and teach people from the community. There is a feeling among them
that they can be as good as any other worker if someone teaches them how to do
things. Since Ixtlan group is a social enterprise, they primarily try to provide jobs for its
community and nearby villages. As a new generation of comuneros is asking for an
opportunity to work in Ixtlan group, one young manager mentioned that the
Commissariat does not ask for certain years of experience for a position. This board is
aware most young people are recently graduated from high school or college and
largely inexperienced. They have given them jobs precisely because the Commissariat
wants them to gain experience so they can be managers in the short run.
Environmental Sustainability
Culture of sustainability
There is an ancient culture of environmental protection within the indigenous
communities of the state. In both cases, the workers seem to have incorporated this
culture to the organization. One of the members of supervisory board in Ixtlan group
mentioned: “the environmental issue surges as a natural concern for the Ixtlan
community, I mean, I want to exploit the forest, but I also want to continue having
recourses because I live here and I want to preserve nature, not to overexploit it”. A
manager added: “We have an ancient tradition of nature preservation... we had already
made some progress and now, with the accreditation [international certifications], it was
almost as if we already had the requirements cover before they came. I tell you, this
was possible especially because of the community‟s culture of nature conservation”.
CEPCO is also aware that the environmental viability of their communities
depends greatly on the way they produce coffee. One of the internal reports indicates:
“We need not only to provide quality coffee, organic and in fair trade conditions, but a
Página
13
Capítulo 6. Administración del Desarrollo Regional y Sustentabilidad
coffee that addresses the environmental issues we are facing, endorsing a
management that ensures long sustainability and an environmental balance. We are not
just talking about healthy grains and less pollution in our plots, but all environmental,
social and cultural services that coffee plants provide to our communities”.
Differentiation through environmental sustainability practices
Environmental culture has given both organizations the opportunity to exploit this
feature in order to accomplish certain degree of differentiation. This has been achieved
through different certifications that may add value to the final product.
CEPCO is certified by national and international organizations such as
Certification of Ecological Products and Processes in Mexico, International Fair Trade
Certification, Fair Trade Mexico, Naturland Certified, Organic Crop Improvement
Association, and 100% Certified Organic Coffee from the United States Department of
Agriculture. These certifications have allowed CEPCO to enter new markets such as
the organic coffee or fair trade markets, expand to international markets, and receive a
higher price for its products. Similarly, Ixtlan group holds an important number of
certifications about responsible forest management such as the ones provided by the
Forest Stewardship Council (FSC) and World Wide Fund for Nature (WWF). A manager
remarked that an increasing number of customers want to know that the furniture they
are buying comes from certified forests, and that may end up being an important
product differentiator.
Diversification
Vertical integration
Both organizations have focused their efforts in eliminating market
intermediaries. They believe that the low price they used to receive for their products
was due to intermediary traders between producer and final customer. CEPCO has a
couple of posters in the headquarters‟ walls mentioning that no coyote or informal trader
is going to take advantage of them again. This struggle to take their products to the
final customer has ended up in the vertical integration of both groups. CEPCO controls
an important part of the coffee chain from the production of coffee in distant
communities to the cafeterias where part of that coffee is sold. Likewise, Ixtlan‟s
production of wood furniture is vertically integrated from cutting off the trees to the
selling of the product in a partly-owned furniture store in the capital of the state. In both
cases, the vertical integration has responded to the need to eliminate market
intermediaries and capture a higher share of the value chain.
Market diversification
CEPCO and Ixtlan group have diversified to other industries, and the pattern that
they are following seems to be focused on addressing the most urgent needs of their
communities. For example, both groups have established a Multiple-Purpose Financial
Entity (SOFOM). These enterprises are intended to provide financial services to
communities which otherwise would be unattended. Microcredit in these communities is
Página
14
Retos de las ciencias administrativas desde las economías emergentes: Evolución de
sociedades.
limited, and interest rates can be very high in Mexico, around 74 percent annually
(Vázquez, 2011). Both financial entities have access to credit at preferential rates that
can reduce the cost of loans for the villagers. Ixtlan group also established a gas
station and a hardware store in the village. The nearest gas station is more than 60
kilometers away from town.
Conclusion
This paper identified and examined the elements and strategies through which
indigenous community-based enterprises are formed and build sustainability in
subsistence economies. Derived from the analysis of two cases of successful social
enterprises, I describe five broad elements through which these organizations are
formed and build sustainability in subsistence economies: organization, cross-sector
partnerships, investment in technology and human capital, environmental sustainability,
and diversification. In the same sense, two strategies have driven the expansion of
both enterprises: (a) a vertical integration strategy in the initial growth stages of the
venture; mainly motivated by the need to eliminate all the intermediaries between the
community and the final customer; and (b) a diversification strategy primarily lead by the
needs of the community in terms of products and services.
One of the key characteristics for the development of both enterprises is the
communities‟ ability to form a functional productive organization. Both social enterprises
were capable of incorporating community values such as equality, democracy and
accountability to its governance structure, which allowed them to grow while minimizing
internal conflicts among shareholders. The internalization of such community values
have generated a horizontal and transparent governance structure which contributes to
the organization‟s sustainability.
One the other hand, different external entities have provided critical resources for
the success of both ventures. Cross-sector partnerships, mainly with government
entities, were fundamental in initial stages of the venture, when funding was necessary
for building an adequate infrastructure for the enterprise operation. Likewise, NPO‟s
played an important role in providing training, guidance, and know how. Both cases
documented in this research show the importance of providing job opportunities to
people from the community, incorporating sustainability issues to the organization, and
having a vertical integration strategy. This can contribute to build a successful
organization that can address local social issues through market mechanisms and
empower people of the community.
Employment is very effective in reducing social issues. In OECD countries,
poverty rates among jobless families are almost six times higher than those where at
least one member works (OECD, 2008). Community-based enterprises seem to be an
adequate mechanism to generate jobs in rural indigenous villages. Further research
Página
15
Capítulo 6. Administración del Desarrollo Regional y Sustentabilidad
may be focused on the relationship between government, social enterprise and
community in order to establish what policies can be beneficial for this ventures.
This study is subject to the common limitations of generalizability associated with
the case study methodology, which are well documented elsewhere (e.g. Eisenhardt,
1989). It is important to provide more evidence on how indigenous community-based
enterprises are formed and build sustainability, since social entrepreneurship can be an
important phenomenon to generate productive opportunities in subsistence economies.
Sources
Alvarado, J. 2009. Fair trade in Mexico and abroad: An alternative to the Walmartopia.
Journal of Business Ethics, 88: 301-317.
Anderson, R. B., Dana, L. P., & Dana, T. E. 2006. Indigenous land rights,
entrepreneurship, and economic development in Canada: „„Opting-in‟‟ to the
global economy. Journal of World Business, 41: 45–55.
Austin, J. E. 2000. The collaboration challenge: how nonprofit and business succeed
through strategic alliances. New York: John Wiley & Sons.
Burnside, C., & Dollar, D. 2000. Aid policies and growth. American Economic Review,
90(4), 847-868. http://0-www.proquest.com.millenium.itesm.mx/; Document ID:
60949157.
CEIDAS. 2011, May 24. Oaxaca: con deudas sociales. Excelsior, 16.
Chossudovsky, M. 2003. The globalization of poverty and the new world order. Québec,
Canada: Center for Research in Globalization.
Christie, M. J., & Honig, B. 2006. Social entrepreneurship: New research and findings.
Journal of World Business, 41, 1-5.
CONEVAL. 2008. Evolución de la pobreza e índice de rezago social en el Estado de
Oaxaca. Retrieved August 4, 2011:
http://www.coneval.gob.mx/cmsconeval/rw/resource/coneval/entidades/8688.pdf
Davis, S. H. 1993. Indigenous views of land and the environment. Washington: DC: The
World Bank.
Eisenhardt, K. M. (1989). Building theories from case study research. Academy of
Management Review, 14(4), 532-550.
Grassroots International. Oaxaca State Coffee Producers Network (CEPCO). Retrieved
September 29, 2011: http://www.grassrootsonline.org/where-wework/mesoamerica
Página
16
Retos de las ciencias administrativas desde las economías emergentes: Evolución de
sociedades.
INEGI. 2011. México en cifras. Retrieved September 14, 2011:
http://www.inegi.org.mx/sistemas/mexicocifras/
Inkpen, A. C. 2005. Strategic Alliances. In M. A. Hitt, R. E. Freeman, & J. S. Harrison,
The Blackwell Hadbook of strategic management: 407-432. USA: Blackwell
Publishing.
Inkpen, A. C. 2009. Strategic alliances. In A. M. Rugman, The Oxford handbook of
international business: 389-414. New York: Oxford University Press.
Jamali, D., & Keshishian, T. 2009. Uneasy alliances: Lessons learned from partnerships
between businesses and NGOs in the context of CSR. Journal of Business
Ethics, 84(2), 277-295. http://0-www.proquest.com.millenium.itesm.mx/;
Document ID: 1606675331.
Johnson, S. 2002. Social entrepreneurship literature review. Retrieved August 2, 2011:
http://www.cfc-fcc.ca/news/news.cfm?intNewsID=170
Khavul, S., Bruton, G. D., & Wood, E. 2009. Informal family business in Africa.
Entrepreneurship Theory and Practice, 1219-1238.
London, T., & Hart, S. L. 2004. Reinventing strategies for emerging markets: beyond the
transnational model. Journal of International Business Studies, 35(5), 350-370.
http://0-www.proquest.com.millenium.itesm.mx/.
Mair, J., & Martí, I. 2006. Social entrepreneurship research: A source of explanation,
prediction, and delight. Journal of World Business, 41, 37-44.
Martin, L., & Osberg, S. 2007. Social entrepreneurship: The case for definition. Stanford
Social Innovation Review, 30-39.
OECD. 2008. Growing unequal?: Income distribution and poverty in OECD countries.
Retrieved August 4, 2011:
http://www.oecd.org/document/4/0,3343,en_2649_33933_41460917_1_1_1_1,0
0.html
Peredo, A. M., & Chrisman, J. J. 2006. Toward a theory of community-based enterprise.
Academy of Management Review, 31(2), 309-328.
Peredo, A. M., & McLean, M. 2006. Social entrepreneurship: A critical review of the
concept. Journal of World Business, 41, 56-65.
Página
17
Capítulo 6. Administración del Desarrollo Regional y Sustentabilidad
Rondinelli, D. A., & London, T. 2003. How corporations and environmental groups
cooperate: Assessing cross-sector alliances and collaborations. Academy of
Management Executive, 17 (1), 61-76.
Santos, F. M. (2009). A positive theory of social entrepreneurship. Retrieved June 10,
2011: http://www.socialenterpriseportal.org/files/Library/Social-EntrepreneurshipFelipe-Santos.pdf
Skippari, M., & Pajunen, K. 2010. MNE-NGO-host government relationships in the
escalation of an FDI conflict. Business Society, 49 (4), 619-651. DOI:
10.1177/0007650310377312.
The World Bank. 2011. Country and lending groups. Retrieved August 5, 2011:
http://data.worldbank.org/about/country-classifications/
Thorne, E., & Catchpole, T. 2009. How NGOs can advance corporate citizenship
objectives: roadmap to partnership success. Retrieved June 10, 2011:
http://bcorporation.net/
Vázquez, R. 2011, July 5. El microcrédito en México, de los más caros. Retrieved
September 23, 2011: http://www.mexicanbusinessweb.com/noticias/inversionesinmobiliario.phtml?id=6865
Weerawardena, J., & Mort, G. S. 2006. Investigating social entrepreneurship: A
multidimensional model. Journal of World Business, 41, 21-35.
West III, G. P., Bamford, C. E., & Marsden, J. W. 2008. Contrasting entrepreneurial
economic development in emerging Latin American economies: applications and
extensions of resourced based theory. Entrepreneurship Theory and Practice,
15-36.
Yin, R. K. 1994. Case study research: design and methods. Thousand Oaks: Sage.
Página
18