A New Model for Building Social-Benefit Markets – Research by Jacqueline Corbett and Erb Institute Visiting Scholar, Wren Montgomery

Feb 6, 2018 2:00 PM ET

Like all markets, social-benefit markets provide a platform for buyers and sellers to exchange commodities, but they are distinguished by their unique goal of improving social and environmental conditions. For example, most people are familiar with carbon trading markets, which aim to reduce greenhouse gas emissions. Social-benefit markets are not only a promising strategy to combat pressing social and environmental problems; they are also contributing significantly to the world economy, with trading volumes estimated to reach $1 trillion by 2020. Still, the problems that these social-benefit markets address are large, complex and multifaceted; their development and sustenance therefore will require novel entrepreneurial approaches.   

The power of a collective
In the article “Environmental Entrepreneurship and Interorganizational Arrangements: A Model of Social-Benefit Market Creation,” recently published in Strategic Entrepreneurship Journal, Jacqueline Corbett and A. Wren Montgomery, who is a visiting scholar at the Erb Institute, propose a model for creating social-benefit markets. According to this model, the collective contributions of several key sectors provide the necessary resources and legitimacy for the new market. Specifically, Corbett and Montgomery suggest a core group of entrepreneurs “must come from three main sectors—business, government, and social movements.”

To succeed in the formation of a social-benefit market, these core entrepreneurs require characteristics typical of entrepreneurs:  innovativeness, proactiveness and a willingness to take risks. The researchers explain that “a single entrepreneur lacks the skills, capabilities, and credibility necessary for social-benefit market creation.” Diverse individuals and organizations combine their expertise and resources to achieve a common objective.

Public goods
One problem with social-benefit markets is that they trade in so-called public goods—such as clean air and water—which may involve no inherent private property rights. Social-benefit markets need to create different incentives for participation than traditional markets do. A potential solution is developing an IOS (interorganizational information system) that will “facilitate the creation and management of virtual property rights for public goods.” This IOS can measure and control the benefits, define tradable units and facilitate trading.

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