Beyond the formal economy. Social cooperatives for labour integration under the pressure of market competitiveness

Purpose

Using the theoretical framework of the substantive economy, this study aims to point out the main aspects of the substantive mode of operation that help the integration of disadvantaged people while at the same time shedding light on the barriers that hinder economically efficient functioning in a market economy.

Design/methodology/approach

Research focuses on Hungarian rural work integration social cooperatives, which are engaged in producing activity by the employment of disadvantaged people. In the research, mixed methods were applied: results of a questionnaire survey covering 102 cooperatives, as well as 20 semi-structured interviews and experiences from the field. A total of 17 indicators were used to explore the substantive operational features, promoting mechanisms and problems in the following areas: organisational goals and outcomes; integrating roles and functions; productive functions; and the embeddedness of cooperatives.

Findings

As for results, substantive operational mechanisms and tools that support the integration of disadvantaged people have been identified such as mentoring, social incentives, the ability to create local value or the expansion of local community services. At the same time, several barriers have been detected that make it difficult to operate economically, such as cooperatives being a stepping stone for workers, excessive product heterogeneity or the lack of vertically structured bridging relationships.

Originality/value

The value of the study is to counterpoint the mechanisms promoting social purposes of work-integration social cooperatives and the obstacles to their long-term sustainability within the framework of the substantive economy, to better understand their functioning and the less quantifiable factors of their performance.