Social Entrepreneurship in Germany

Social Entrepreneurship in Germany

Business Start-ups in Germany – It’s not all gloom or doom

The number of business start-ups in Germany – measured in terms of business registrations, and thus also the number of entrepreneurs – has fallen steadily in absolute terms over the last decade. In 2018, just under 542,500 new businesses were founded according to the Statistisches Bundesamt (Federal Statistical Office of Germany) in Wiesbaden (2019). This decline can particularly be observed in companies of greater economic importance as well as in small enterprises. The number of sideline enterprises has increased slightly compared to small and medium-sized enterprises. The Institut für Mittelstandsforschung Bonn (research institute for SMEs) (2019) has come to a similar conclusion: In 2018, some 367,000 new business start-ups were recorded in Germany; 3.6 % fewer than in the previous year (see Chart 1). Of these, 269,950 start-ups were situated in the commercial sector (73.5 %), 90,380 (24.6 %) in liberal professions and other self-employed persons, and 6,720 (1.8 %) in agriculture and forestry. In an OECD comparison, in 2018, Germany was in the lower field with a self-employment rate of only 9.9 % of the employed population (OECD 2019, p. 60), whereas in a Europe-wide comparison the self-employment rate is 15.5 %.

Business Start-ups in Germany (in 1,000) (Source: Institut für Mittelstandsforschung 2019)

Social Enterprises in Germany- The Rising Star

It is true that most business start-ups still primarily take place in the commercial sector. However, the scope has been opening up in the social and health care sector. On the one hand, this is achieved by outsourcing the services of various service areas of public institutions. On the other hand, the critically invoked “economization of the social” and (quasi-)market structures and market mechanisms, which are brought about by the Neues Steuerungsmodell (New Control Model), among other things, create scope for social entrepreneurship. According to the ZiviZ GmbH survey (2017), about 16 % of all social institutions see themselves as social enterprises. Expressed in absolute figures, this includes about 80,000 non-profit organizations (out of a total of 634,000). A similar result was also obtained by the German Startup Monitor 2018 of the Bundesverband Deutscher Startups (Federal Association of Startups) (2018, p. 27): Approximately 38.1% of the start-ups surveyed attributed their company’s social commitment to social entrepreneurship. Within the framework of a current study by Social Entrepreneurship Netzwerk Deutschland e. V. (Social Entrepreneurship Network Germany) (SEND 2019, p. 9f.), a number of interesting additional findings can be derived that paint a specific picture of the current situation for social entrepreneurs:

  • 9 out of 10 social enterprises solve social problems in Germany; 3 out of 4 are highly innovative;
  • 50 % of social enterprises were founded by women;
  • in 56 % of social enterprises, employees have a direct influence on decisions or have a say in them;
  • 33 % of the social enterprises rate the effects and impacts observed and the products and services offered as a worldwide or EU-wide market innovation;
  • 62 % of those surveyed see start-up financing and 65 % see follow-up financing as a major barrier;
  • 55 % perceive access to support services as a significant barrier;- politicians only receive a grade of 4.6 on a scale of 1 (very good) to 5 (bad) for the support of social entrepreneurship in Germany;
  • 73% of social enterprises would like to see greater representation and recognition;
  • Social enterprises are not only very heterogeneous, but they are also very diverse in their business and impact models, their chosen legal forms and their financing;
  • 87 % of social enterprises strive to scale up their business model.

Conclusion

These results show that the establishment of new social and health care institutions is of great importance within an economy. This makes it all the more important to know the prerequisites, foundations, and framework conditions that enable founders to set up their own business in the social sector in order to successfully and sustainably implement innovative business ideas.

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References

Bundesverband Deutsche Startups (2018). Deutscher Startup Monitor. Berlin. URL https://deutscherstartupmonitor.de/fileadmin/dsm/dsm-18/files/Deutscher%20Startup%20Monitor%202018.pdf [23/05/2020].

Institut für Mittelstandsforschung Bonn (2018). Gründungen und Unternehmensschließungen. Bonn. URL https://www.ifm-bonn.org/statistiken/gruendungen-und-unternehmensschliessungen/existenzgruendungen-insgesamt [23/05/2020].

OECD (2019). OECD Employment Outlook 2019: The Future of Work. Paris: OECD Publishing. URL https://doi.org/10.1787/9ee00155-en [23/05/2020].

Social Entrepreneurship Netzwerk Deutschland e. V. (SEND) (2018). Deutscher Social Entrepreneurship Monitor 2018. Berlin. URL https://www.send-ev.de/uploads/dsem-2018_web.pdf [23/05/2020].

Statistisches Bundesamt (2019). Pressemitteilung Nr. 118 vom 28. März 2019. Bonn. URL https://www.destatis.de/DE/Presse/Pressemitteilungen/2019/03/PD19_118_52311.html [23/05/2020].

ZiviZ GmbH (2017). ZiviZ-Survey 2017 – Vielfalt verstehen. Zusammenhalt stärken. Berlin. URL https://www.ziviz.info/download/file/fid/276 [23/05/2020].

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Dr. Maik Arnold is Professor for Non-Profit-Management and Vice-President for Research, Innovation and Transfer at University of Applied Science Dresden.