The third system has always existed in European society, although it has gone under a variety of names. For many years treated as part of the co-operative or mutualist movement, it has benefited from strong growth in the number of different types of non-profit institution to the point that it now finds itself in the vanguard of efforts to promote employment, solidarity and sustainable development. The European employment strategy for the period 2000-2006 recognises the importance of the third system by expressing the hope that all parties will help to promote measures that will realise the potential of the perspectives offered by job creation at the local level and in the social economy, notably with regard to new services (European Commission, 1999). In view of this, evaluating the third sector is now in itself a priority, for which, as indicated in a recent Note by the OECD, there are a number of reasons: the need to secure funding of different types and from
different sources, the need to move away from the perception of the third system solely in terms of social integration, and the need to take account of all of its positive impacts at the territorial level (OECD, 1999a).
Inevitably, a precise definition of the third system remains elusive. While Europeans often start with the definition suggested by the Johns Hopkins studies, they have gradually started to distance themselves from this approach as a result of the programme of action pursued by the European Commission (Borzaga et al., 2000). The difference between this European approach and the so-called “American” approach primarily lies in the fact that the former embraces all co-operatives and social enterprises – even if they distribute a share of their surpluses to their members, albeit under certain conditions – whereas the latter adheres strictly to the criterion of the non-distribution of profits. On the other hand, the European approach excludes those foundations or associations that are simply public agencies in all but name in that they are primarily financed through subsidies (universities, hospitals), i.e. the criterion of non state dependency is applied in practice and not simply for form’s sake. The following table illustrates the differences between the two approaches (see Campbell et al., 1999).
Despite these differences in approach, the indicators of the size of the third system, notably in terms of employment, are not that different. The most exhaustive European study to date – that carried out by the CIRIEC (CIRIEC 2000) – gives percentages for civil employment in the third system which are relatively comparable (8.8 million jobs, i.e. almost 6.6 per cent of civil employment in EU member states, of which 25 per cent in co-operatives, 71 per cent in associations and four per cent in mutual organisations) (see Tables 8.2 and 8.3). Despite these relatively consistent figures, the constituent elements of the third system differ quite sharply from one approach to another. This is important with regard to the definition of innovation where the Europeans place the emphasis on the “productive input” provided by the th ird system, b ut wi thout th is d etrac tin g fro m th e im porta nc e of representation, expression and mobilisation, which are central elements in the Johns Hopkins approach.
Table 8.1. Criteria for classification as part of the third system
European approach Johns Hopkins approach
Formal organisation Formal organisation Independent organisation Independent organisation Self-managed organisation Self-managed organisation Limited redistribution of profits Non-redistribution of profits Production of social capital Voluntary participation
By presenting itself as an alternative to the market and to public production, the third system has always claimed that it plays a pioneering role compared with these other two means of allocating resources. The very use of the term “system” rather than “sector” underlines this deliberately “alternative”
Table 8.2. Employment in the third system in Europe
Source: Based on data compiled by CIRIEC, 1999, pp. 17-18.
Full-time equivalent % of total civilian employment
Austria 233 662 6.91
Belgium 206 127 5.85
Denmark 289 482 12.56
Finland 138 580 6.92
France 1 214 827 5.93
Germany 1 860 861 12.56
Greece 68 770 1.81
Ireland 151 682 12.57
Italy 1 146 968 5.88
Luxembourg 6 740 4.16
Netherlands 769 000 14.69
Portugal 110 684 2.51
Spain 878 408 7.45
Sweden 180 793 5.15
United Kingdom 1 622 962 7.32
Table 8.3. Structure of the third system in Europe
(as a % of civilian employment)
Source: Based on data compiled by CIRIEC (1999), pp. 17-18.
Co-operatives Associations Mutuals
Austria 24 75 3
Belgium 17 77 6
Denmark 26 74 0
Finland 55 45 0
France 24 69 7
Germany 24 68 8
Greece 17 81 2
Ireland 21 78 1
Italy 42 58 0
Luxembourg 29 70 13
Netherlands 14 86 0
Portugal 44 55 1
Spain 46 53 1
Sweden 50 46 4
United Kingdom 7 90 3
aspect. Obviously the third sector – which ostensibly presents itself as residual – could be interpreted as a kind of catch-all category for all those bodies that feel that they belong neither to the public sector nor to the market sector, or which cannot find solutions in the latter to the problems they wish to resolve. The third system would therefore very swiftly find itself transformed, in this case, into an indicator of unmet needs, a set of preferences that have not been taken into account, or a catalogue of social demands.
However, third system institutions (TSI) in Europe have often announced ambitious objectives and presented their modes of management as contributing factors in the transformation of society. They supply services that are new in terms of the way in which they are conceived and the processes they use; they express needs that have not been taken into account; they disseminate values that help to improve life in society; they set out to make social inclusion, employment and qualifications ends in themselves and not simply instruments related to a greater or lesser degree of activity; and they create social ties. The deliberate use of the word “system” rather than “sector”
clearly indicates that they aim to function in terms of a given form of co-operation rather than play a palliative or complementary role. Emphasising the contrasts between systems in this way will make value judgements paramount and will result in innovation being conceived in terms of the differences between products rather than processes, which is unfortunate.
In more general terms, analysing the innovative capabilities of the third system for a variety of reasons poses many problems.
Innovation is generally defined as the development of something that is novel and is therefore related to creativity – indeed, to such an extent that initial efforts to measure innovation consisted of constructing indicators capable of determining whether or not products conformed to existing goods.
However, there are many new products that are not considered to be innovations, in addition to which a product considered to be novel at a given point in time may not necessarily remain so.
Innovation may consist of the introduction of new products or processes;
a system may therefore be innovative if it is able to find a different way of providing the same service by making use of other references or values.
Innovations may occur at the level of an agent, institution or system; the level at which the analysis is conducted will modify the field of innovation considered.
In view of the above, there are three questions that need to be asked:
● In what way is the third system innovative?
● What conditions encourage or discourage innovation?
● Can innovation be measured?