Introduction:What role does governance play in creating sustainable third sector organisations?

Part 1: governance and the avenues of its development in the third sector.

 “Within the old economy, innovation was often generated through a series of discrete steps in research, development, and production. In the New Economy, innovation is increasingly generated in networks where value is generated through productive working relationships or collaboration. In fact, Peter Drucker has suggested that a main organizing principle of the New Economy is networks, partnerships, and collaborative ventures” (Atkinson & Fountain, 1998).

 Social and institutional innovation within society are based on the principles of the “New Economy”, they redefine roles and relationships across independent entities to accelerate and amplify learning and reduce risks (Hagel, 2007). Social innovation can be routed within the sphere of basic human needs encompassing autonomy or self determination of individuals who require education, health and good governance.  Institutional innovation seeks more productive ways to connect with talent wherever it resides and builds relationships that foster and focus learning. Moulaert et al. (2002) defines that social innovation within a local level emulates two avenues, “institutional innovation (innovation in social relations, innovations in governance including empowerment dynamics) and innovation in the sense of the social economy i.e. satisfaction of various needs in local communities”.  Thus as opposed to being defined as two separate entities it is seen that social innovation creates a platform for institutional innovation.

 From this view social innovation can be seen to emulate towards the creation of a platform for the development of the third sector. Hirst (1994) validates this “voluntarism allows for exit if associations are unresponsive to citizens’ needs and demands”.   Within the economy sub-systems at the community level belong to the production and allocation of clusters that are continuously or recurrently in search for innovation. Without these types of institutional innovation, new social production and allocation initiatives cannot be grounded in community dynamics and will be alienated from community needs; thus institutional innovation is connected to evolution and creativity in the creation of this sector. Social innovation and the creation of social innovation can be further identified in Hirst’s definition for self-governing and democratic associations, an alternative pattern to the governance of the existing welfare system. This is reflected within contemporary societies as the “New Economy”.

 Within the New Economy, the third sector comprises of community /voluntary organisations, social economy organisations and social enterprises. There is evidence that the community and voluntary sector has grown in recent decades and become an increasingly important economic and political force.  According to the Organisation for Economic Co-operation and Development (OECD):‘The non-profit sector, often associated with concepts such as the “social economy”, “third sector” and “third system”, is a growing social and economic force all over the world and a key element in employment and social policies in most OECD countries’  (OECD, 2003, 10).

 The following definitions of the three tiered system are as detailed:-

• Community and Voluntary Organisation exist to meet social needs in a local community (community employment projects, community development projects, tenants associations or credit unions), at regional or national level (the Irish Farmers Association, ICMSA, or Foroige (Irish national youth movement ) or even at international level (Goal (Irish non-Governmental organisation which developed projects in third world communities), Concern (Irish non-Governmental organisation which works in the third world and especially works in areas of drought and hunger) or the Red Cross).  Community and voluntary organisations can be formal or informal (including local groups, associations or even anarchic or environmental groups) and use a wide range of resources including pure volunteerism, grant aid, fund-raising and donations, through to fund management, foundations and trading companies to achieve their appropriate objectives.  They are characterised as being socially driven, empowering, pragmatic and with some degree of community or member ownership.
• Social economy organisations like community and voluntary groups are built on foundations of social innovation.  However, the core difference is social economy organisations are more developed, the majority of them still predominately rely upon grants as part of their income stream although traded income is part of this collective. 
• Social Enterprises are sustainable social economy organisations.  Social enterprises have their core income as traded income with marginal or no reliance upon grant funding. These enterprises where priority that is given to man and the social purpose rather than to capital, they are people’s enterprises (except for foundations).  They allocate any resources not required by their social purpose to reinvestment or distribution in line with members’ wishes for job creation, activities, new enterprises, bonuses on capital invested, services to members, socio-cultural activities, etc.

 Hirst and Moulaert neglected to make citations with the third sector.  Hirst provided an overview of associational characteristics, they mirror the characteristics and criteria used by the International Centre of Research and Information on Public and Cooperative Economy (CIRIEC) to distinguish organisations within an entity within the third sector: “The object of providing services to members (common or mutual interest) or the community (general interest); The primacy of people over capital; Democratic functioning; and A management system which is independent of the public authorities” (CIRIEC 2000: 11).

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