How an incentive to trade shapes social and community enterprises

“British policymakers argue that social organisations that earn their income are less dependent on grants, and more resilient. Others say that commercialisation corrupts the social goal. Kerryn Krige and Jonathan Roberts set out to understand what happens when social and community enterprises are incentivised to trade. They find that commercialisation helps in unexpected ways. And that grants are not the enemy. For more than two decades, government policy has encouraged social enterprises and community businesses to be more “commercial” – to earn a greater proportion of their income through trading rather than relying on grants. Earned income, the argument goes, addresses grant dependency, promising financial resilience, organisational autonomy and freedom from the power-inequality of philanthropy. But social organisations are geared towards impact, which can be far removed from commercial practices. What actually happens when organisations are incentivised to trade? Our new research tries to answer that question by studying Match Trading, an enterprise grant scheme introduced by the School for Social Entrepreneurs that links funding directly to growth in traded income. Organisations that are accepted onto the 12-month programme agree to focus on developing their commercial revenue. For every additional pound that they earn, they receive an additional £1 – the “matched” trade. There is a cap on the amount that is paid out (in our sample it was never higher than £10,000) and organisational leaders commit to attending a training programme that introduces them to commercial management techniques. Match Trading then is not simply a grant nor a training programme, but a deliberately engineered mix of incentive, learning and capital. During 2022 and 2023 we interviewed 14 participating social and community organisations (we will call them SCO’s), working in rural and urban parts of England and Scotland. These represented very different fields, from running services for children and families to managing community centres, hubs and media projects, as well as mental health support and employment for ex-offenders. The leaders of all of the SCO’s described the isolation of leading complex organisations, the pressures of balancing beneficiary and customer needs and a difficult funding environment which constrained their efforts to deliver social goods. Participating in the Match Trading programme was seen as a win-win – a low-risk opportunity to strengthen commercial income and with it a matched grant. The changes then to both organisation, leaders and leadership were unexpected. Commercialisation was a cognitive shift not an ethical trade off One of the most interesting findings is not that Match Trading increased earned income, but how. Sometimes there can be an experienced moral tension between commercial activities (profit) and doing good (purpose). But all the participants in our study were comfortable with the idea of generating commercial revenue. Instead, the programme reshaped how leaders thought, noticed opportunities and understood their roles. Participants became acculturated to commercial practices. By learning to look at the world ‘through the eyes of a commercial actor’ participants experienced a shift in cognitive habits. Leaders spoke about switching attention from grant applications to customers, from beneficiaries to users and from organisational survival to pricing, sales and market demand. This distinction – between moral position and cognitive habit – matters. Much of the academic and policy debate on social enterprise frames commercialisation as a values problem: will market logic crowd out care, inclusion or solidarity? Our findings suggest a different dynamic. The sharper tension may lie not in ethical compromise but in acculturation: learning the routines, language and analytical frames of the market. Once leaders begin routinely asking “How do we monetise this?”, organisational behaviour starts to shift in subtle but powerful ways. This reflects the cognitive dimension of the entrepreneurial mindset : how entrepreneurs think is key to how they act and create value. Professionalisation through learning Participants consistently emphasised the importance of the training programme itself. The programme created a cohort of peers who continue to connect with each other. Learning took place in real time and was applied immediately, resulting in more formal systems and processes, such as financial management, clearer performance indicators and greater delegation across teams. Participants described this as a “professionalisation”, a systematising of their work. As leaders they felt more confident and capable, better able to step back from day‑to‑day delivery and run their organisations strategically. The training programme was widely credited as strengthening organisations’ capacity to sustain and deliver on their social and commercial goals. “…it’s professional now. It’s like we really have confidence in what we do and the quality of what we’re doing has improved such a lot. We’re a proper organisation now, whereas before it was just me, really.” Beyond mission drift “Mission drift” describes situations when the pursuit of resources causes organisations to drift away from their social purpose. It is striking that few participants were deeply worried about the pursuit of commercial revenue causing such drift. For all, the social mission came first and commercial growth was a means to this end, not the end itself. This was especially true for work integration social enterprises, where more sales meant more jobs for marginalised people. And yet beneath this confidence sits a fragile equilibrium. In organisations charging service users directly, the pressure to increase turnover could – in less reflective hands – push fees upward or privilege easier-to-serve customers. One participant explicitly noted the emotional challenge of making business decisions that affect vulnerable people. “ We can’t be making money without thinking about the consequences of how we make the money.” This suggests that the issue is not whether commercialisation can align with mission – it often can – but how much relational, ethical and emotional labour is required to keep that alignment intact. A commercial mindset may be cognitively learnable, but it still needs careful governance and management. Grants are not the enemy One of the most important findings is recalibrating the narrative that earned income should replace grants. Despite enthusiasm for trading, every participant affirmed the continuing necessity of grant funding. Some services simply cannot be delivered through markets without excluding those most in need. Grants also play a distinct role as risk capital, enabling innovation and experimentation beyond thin commercial margins. The choice for leaders was not either grants or earned income, but grants and earned income – assembled in different proportions depending on mission, field and context. How then should we rethink the relationship between commercialisation and social outcomes? The study demonstrates that commercialisation is not simply a funding strategy. It is a cognitive and cultural shift, shaping how leaders understand their role, notice opportunities and organise their work, with implications for identity, practice and power within social organisations. Training plays a critical role in building confidence, reducing isolation and enabling leaders to professionalise systems and practices in ways that strengthened both leadership capacity and organisational resilience. Our findings challenge a persistent binary narrative that commercial income should replace grants and in doing so, they “solve” dependency. For the organisations we studied, earned income and grant funding played distinct and complementary roles. Trading brought agency, flexibility and momentum, while grants provided subsidy, risk capital and the capacity to deliver services that markets alone cannot sustain. It was precisely the combination of these income sources, and leaders’ ability to manage them together, that underpinned organisational resilience. The real question then is not whether social enterprises should be more commercial, but rather how we can support leaders to hold both market discipline and social purpose. This requires rethinking funding and support systems that recognise the strength, autonomy and resilience that comes from hybrid organising and financing. This blog is based on “Match Trading and the behaviours of community businesses and social enterprises” , a research study of the LSE’s Marshall Institute in collaboration with the School of Social Entrepreneurs. This article gives the views of the author, not the position of LSE Business Review or the London School of Economics. You are agreeing with our comment policy when you leave a comment. Image credit: PeopleImages provided by Shutterstock. The post How an incentive to trade shapes social and community enterprises first appeared on LSE Business Review .

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