Who Should Fund Social Innovation?

Abstract

Economic innovation is at once unique to its particular sector—for-profit, social, or government—and interconnected to creative processes in the world of finance more broadly. In this chapter, I discuss innovation in two of the three sectors: the social economy and government. I argue that social economy enterprises are better-positioned than governments to innovate within the sphere of social services for both ethical and practical reasons. I argue that social enterprises should engage in social innovation, and that government should not, for three reasons. First, social enterprises are more efficient at innovation than government because they are responsive to economic conditions in a way that governments are not. Second, social enterprises are more effective at innovation than government because they are mission-driven and thus have fewer competing priorities to weigh. Third, non-voluntary democratic institutions and other government structures are not in an ethical position to innovate in the social sector because innovation necessarily implies high risk. In practice, these arguments call for a division of labor between government and social enterprise in which social enterprises incubate and governments scale. This is an argument in normative ethics, using distinctly analytical and humanist methodologies, but applied to the analysis of social-scientific research.