Social Enterprise in Mexico, a New Business Classification

Abstract

Social Enterprise (SE) is an increasingly important sector for generating employment and distributing wealth in market structures. The social business type two (SB2)—a very specific type of SE—is a category that has challenged orthodox theoretical elements in its main assumptions and behavior in the markets. SB2 is mainly classified within the category of microenterprises because they have a very small number of employees. A new official business classification is important to differentiate enterprises not only by size, but also by type of behavior. There is a new indicator that compares the profit levels of microenterprises with the poverty line as a representative tool to classify Mexican microenterprises into profit seekers and SB2. When these outcomes are contrasted with a discrete choice model under the logistic functional form, the probabilities that this indicator classifies a microenterprise with entrepreneurship by necessity, installed capacity maximization and no profit seeking as SB2 is 80% for microenterprises up to ten workers, and goes up to 92% for microenterprises with one person. With such a new classification, better policies could be promoted to support SB2, and help address both the lack of opportunities from the market economy and poverty menace.

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