Value devolution in social enterprises: Institutional economics and systems theory perspectives

Agafonow’s article locates the role of social enterprises in devolving value through output maximizing behavior. This short paper embeds Agafonow’s argument in the societal and institutional context by building upon Luhmann’s social systems theory. According to Luhmann, the functional system of the economy exhibits “imperatives” that cause social ills. The institutional form of social enterprises is shown to weaken these imperatives in several ways. One of these ways, discussed by Agafonow, is the substitution of profit maximization by output maximization. Other ways are the substitution of high-powered incentives by low-powered ones as elaborated in the work of Williamson and Hansmann.