Using Social Enterprises for Social Policy in South Korea: Do Funding and Management Affect Social and Economic Performance?

This study examines the way the South Korean government utilizes social enterprises as a policy alternative to promote employment and provide social services for the socially disadvantaged. As an example of “capable policy design” characterized as high levels of instrumentality and government capacity, this study focuses more specifically on the social and economic performance of Korean social enterprises. Using the Korea Social Enterprise Data, this study conducts an empirical analysis to identify how government subsidies and management quality affect the social and economic performance of social enterprises. The results show that government subsidies partially contribute to the enhancement of the enterprises' social performance and economic performance. There are mixed results regarding the effect of management quality on the social and economic performance of social enterprises. The results also suggest that general donations from citizens along with government subsidies help social enterprises pursue social performance particularly in employment of socially disadvantaged people, while corporate donations promote the provision of social services. This suggests that government subsidy is an important instrument in the birth and growth of social enterprises as well as the social and economic performance of social enterprises but should be complemented by corporate and general donations to sustain both social and economic performance in the long run.