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Social Innovation and
Business in Taiwan
Social Innovation and
Business in Taiwan

I Han and Sheng-Tsung Hou

SOCIAL INNOVATION AND BUSINESS IN TAIWAN
Copyright © I Han and Sheng-Tsung Hou 2016
Softcover reprint of the hardcover 1st edition 2016 978-1-137-40561-6
All rights reserved. No reproduction, copy or transmission of this publication
may be made without written permission. No portion of this publication
may be reproduced, copied or transmitted save with written permission. In
accordance with the provisions of the Copyright, Designs and Patents Act
1988, or under the terms of any licence permitting limited copying issued
by the Copyright Licensing Agency, Saffron House, 6-10 Kirby Street,
London EC1N 8TS.
Any person who does any unauthorized act in relation to this publication
may be liable to criminal prosecution and civil claims for damages.
First published 2016 by
PALGRAVE MACMILLAN
The authors have asserted their rights to be identified as the authors of this
work in accordance with the Copyright, Designs and Patents Act 1988.
Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited,
registered in England, company number 785998, of Houndmills,
Basingstoke, Hampshire, RG21 6XS.
Palgrave Macmillan in the US is a division of Nature America, Inc.,
One New York Plaza, Suite 4500, New York, NY 10004-1562.
Palgrave Macmillan is the global academic imprint of the above companies
and has companies and representatives throughout the world.
ISBN: 978–1–349–57266–3
E-PDF ISBN: 978–1–137–40381–0
DOI: 10.1057/9781137403810
Distribution in the UK, Europe and the rest of the world is by
Palgrave Macmillan®, a division of Macmillan Publishers Limited,
registered in England, company number 785998, of Houndmills,
Basingstoke, Hampshire RG21 6XS.
Library of Congress Cataloging-in-Publication Data is available from
the Library of Congress.
A catalogue record for the book is available from the British Library.
To the taxi drivers and farmers in Taiwan
 Contents

List of Figures ix
List of Tables xi
Foreword xiii
Dr. Cheng-Shu Kao
Preface xv

Introduction 1
1 Why Social Enterprise Matters 5
2 Theoretical Foundations 17
3 Methodology: Participatory Action Research via
Industry–Academia Collaboration 29
4 Taiwan Taxi Company 37
5 East-Taiwan Private Trip 57
6 Happy Yilan, Creative Countryside 69
7 The Post-WTO Rice Industry in a Local Development:
The Initiatives of Chih Shang Rice Company 85
8 The Rural Community of Regeneration: Yong-An
Community at Luyeh Taitung 111
9 Theoretical Implications 137
10 Practical Implications 149
11 Toward the Practice of Social Innovation for the Common
Good: An Integration of “Teaching–Research–Service” 161

Notes 189
References 193
Index 211
 List of Figures

1.1 Wealth Distribution by Income in the United States in

the Twentieth Century 7
1.2 The Common Social Problems of the World 8
1.3 Civil Engagement and Initiatives of Social Enterprises 13
1.4 The Spectrum of Social Enterprises 15
3.1 Dimensions for Typologies of Engaged Scholarship 33
4.1 Satellite Dispatching vs. General Taxi 52
4.2 Taiwan Taxi Service Innovation System 54
A5.1 Guide Map for East-Taiwan (Hualien & Taitung Area) 66
A5.2 Concept of “East-Taiwan Private Trip” 67
A5.3 Business Card from Taxi Drivers (Museum Related) 67
A5.4 “East-Taiwan Private Trip” App (https://play.google.com/
store/apps/details?id=grasea.cloudtaxi.tourplanner) 67
A5.5 A Press Conference of the Alliance Cultural Foundation
(with Chairman Stanley Yen, Wife of Taitung Magistrate
Chen Ling-Yan, and Research Team from Professor Hou) 68
6.1 Yilan Introduction 70
6.2 Yilan as a “Museum” 70
6.3 The NPO: TAIWAN Taxi Academy Association 76
7.1 Geographic Distribution of Rice Farming 86
7.2 Traditional Model: Vertical Trade 92
7.3 The CEO/Owner of CSRC, Mr. Cheng-hsien Liang 94
7.4 Contracting Model: Collaborative Alliance 97
x LIST OF FIGURES

7.5 The Trend of Annual First-Harvest Buying Price:

The Effect Chi-shang Rice® USD per 100 kg
(Dry, Unpolished Rice) 102
7.6 Retail Prices of Rice Brands of CSRC 102
7.7 Tourists and Participants of Something for Each Season in
Chishang Event in front of Local Famous Da-Po Pond:
2012 Spring Picnicking Festival—Poetry 107
8.1 Annual Growth of Rural Community Associations with
Rural Regeneration Granted Projects (Year 2011–2014) 115
8.2 Mr. Chung-Hsun Liao (Right) and Mrs. Liao as the
Leadership at Yong-An Community 119
8.3 Community Café and Regular Sales Display for 2626
Farmers’ Market 131
8.4 Monthly Official Visitors in 2009 136
9.1 Sources of Social Innovation 141
9.2 Mechanism and Process of PPP Toward Social Innovation 143
9.3 Four Stages of Social Innovations 145
9.4 Common Good System 146
10.1 Concept for Practical Implications of Social Innovation
via Social Enterprise 153
10.2 Common Good Innovation System 155
10.3 Social Issues at Rural Communities 157
10.4 Relations: Region–Industry–Firm 159
11.1 The Five Major Elements of Strategy: Diamond Model 163
11.2 Industry–University on Taxi: Strategic Analysis via
Diamond Model 168
11.3 Value-Integration Model of Human Centered
“Teaching–Research–Service” 182
 List of Tables

2.1 Noncorporation Alternatives of Organization 20

4.1 Daily Average Passengers in Taipei Metropolitan 39
4.2 Stages of Value Created and Connotation Exchanged by
Taiwan Taxi 50
4.3 Taxi Driver’s Income: Comparing Satellite Dispatching vs.
General Taxi 51
7.1 Major Food Policies, Post-WWII to WTO 88
7.2 Collaborative Rice Farmers and Farming Area with CSRC
(per Harvest) 97
7.3 Annual First-Harvest Buying Price USD per 100 kg
(Dry, Unpolished Rice) 100
7.4 Something for Each Season in Chishang Event and Number
of Participants 104
8.1 Rural Community Associations with Rural Regeneration
Projects: Geographic Distributions (Accumulated
Numbers during Year 2011–2014) 115
8.2 A Brief Overview of Yong-An 120
8.3 Rural Regeneration Projects and Funds Granted 121
8.4 Projects and Funds Granted by Others at the Public Sector 123
8.5 Activities and Participating Number of Residents in 2009 125
8.6 Agriculture Periods for Different Products in Luyeh 129
8.7 Awards Won by Yong-An Community (Development
Association) 133
11.1 Diamond Model Strategic Analysis of an Academic
Career (Early Stage vs. Later Stage) 169
xii LIST OF TABLES

11.2 Diamond Model Strategic Analysis of an Industry–

University Collaboration (Horizontal Level of Comparisons) 171
11.3 Diamond Model Strategic Analysis of a University and a
Professor (Vertical Levels of Comparisons) 174
11.4 The Outputs Based on “Teaching–Research–Service”
Model on Value Exchange of Taxi Industry Collaborative
Research 176
11.5 Stages on Value Creation and Value Exchange of Taxi
Industry Collaborative Research 179
 Foreword

Among a large number of management books, this one cannot be overap-

preciated. Besides, both authors are not only extraordinary scholars in the
field of management but also respectful humanitarians.
Researchers in academia used to contrast business benefits with pub-
lic welfare in a dichotomous fashion and stick to one goal. However, the
authors of this book do not succumb to the simplified logic of marketing,
nor do they praise public welfare naively. Via long-term field research cou-
pled with plenty of visits to towns and villages in Taiwan, they have tried to
find a brand new path of development, after gaining real-life experiences.
Their foremost goal is to let people in lower socioeconomic groups, for
example, taxi drivers and farmers, work and live with dignity and hope. It
can be seen, from this book, that the goal is being realized through collabo-
ration among universities, the government and industries; it is far from a
cliché. In fact, in Yilan and Taitung, counties located in eastern Taiwan, this
type of collaboration has been practiced, leading to the realization of pub-
lic welfare. It is extremely inspiring to see such an achievement in Taiwan
and the authors of this book are indeed the best witnesses and interpreters.
It is my great honor to write the foreword for this special book. I have
known the two authors for years; they are excellent teachers and research-
ers at Feng Chia University. Their endless passion for working and per-
sistence in finding truth is highly admirable. With the book publication,
a milestone has been set for us to face upcoming challenges in the future.
What excites me much more is that the book will be published in English-
speaking countries and thus unveil Taiwanese past experiences and future
prospects for Western readers. I sincerely hope that this book can arouse an
echo in the public as it will be truly beneficial to human society.

Dr. Cheng-Shu Kao

Executive Vice-Chairman & EMBA Chair Professor,
Feng Chia University, Taiwan
 Preface

Innovation is the major source of social movement. Since the Industrial

Revolution, innovation in technology has always been a major leader in
modern civilization. However, innovation does not lie entirely in new tech-
nology, but also how we use it, and even how we adapt it into a new social
form of organization in order to prepare for the new stage of human societies.
Social innovation is how we, as a human society, innovate a new form
of implementing brilliant ideas, regardless of whether new technology is
adopted or not. The central focus is on the problem of human-centered
innovation in order to achieve an advanced living standard, in terms of
business opportunity and humane values.
The world is uneven, not just in natural resources, but also in its eco-
nomic systems. The Western concept of modern capitalism has made great
strides in wealth creation, but, unfortunately, it has also made the world
more uneven. As university professors, we live relatively well, in terms of
social status as well as in our living standards. But,

Why are many young students unsatisfied with the jobs they can get (or
why is it that they can hardly get one)?
Because they see no hope of having enough income to pay for high
rents and daily expenses, not to mention the cost of buying a house/apart-
ment in their lifetime.

Why are so many people of middle-age obsolete on the job market and
have no choice but to become taxi drivers and work 18 hours a day for a
paycheck-to-paycheck life?
Because they find no opportunity to get a job requiring skilled labor in
the fast-moving technology era of human societies.

Why are so many farmers telling their sons not to stay at home as farmers
but find a career in a far-from-home city and to never come back?
Because although agricultural production supplies daily food, one never
has a chance to earn an income that is better than working in a corporation
in the cities.
xvi PREFACE

With a good income, we seem to live good lives. But, do we?

How many of us live a good life without worrying about losing out in the
competition?

When we hear more and more people around us telling us more bad sto-
ries than good, what is wrong? How can we solve the problem?

Winners say to losers that you should not blame the system, because you
play with it.

If we cannot change the uneven results of modern capitalism, how can we

find a way to become another form of a “non-loser”?

Innovation!

Unfortunately, most of us neither have the talent nor the technology-

training to make progress in technology innovation. God give each one
of us a brain!
Innovation does not always have to be in technology form. We can use
our brain to find a good way of living because we are all human beings. We
know what is a good life, so we should find a way to innovate, not just for
ourselves, but for our community.

Yes, start from your own dreams, which each one of us has had since child-
hood. If you do not want to live a miserable paycheck-to-paycheck life,
organize a new one.

Our primary objective is to provide hope to anyone who is worried about

losing his or her grounds for a good life in the current society. We demon-
strate how social innovation can start from your personal dream to carry
through a new form of organizing opportunities. There is always the pos-
sibility of letting our dreams come true through the years. Taxi drivers,
farmers, and even university researchers, show the way, not just for them-
selves, but for the communities they belong to.
By telling our stories, consolidated over nearly a decade of academic
research, in a social practice based in Taiwan, this book shows that it is
possible for one good dream to create common good for others by using
social innovation. It is not only us, anyone can learn something from this
book on how social innovation can be initiated, organized (across sectors),
implemented, duplicated, extended, and eventually diffused into more and
more people around one.
 PREFACE xvii

The dream of a common good is still achievable in modern societies. Do

not blame capitalism for creating uneven wealth, but resolve the problem
by using social innovations.

There are many people who inspired us. First of all, we want to give credit
to the taxi drivers and farmers in Taiwan, who have been the communi-
ties in our academic research fields over the past decade. We have learned
a lot from their street wisdom. Given that most of them live and work in
difficult conditions, they remain well and continue to fight for their lives.
When the morning sunrise gives hope, the storm destroys everything, but
let it be. They deserve a better life and a better living, and social innova-
tions can make it happen.
We are honored by the foreword from Dr. Cheng-Shu Kao, executive vice-
chairman and EMBA Chair Professor, Feng Chia University, and endorse-
ments from Stan Shih, founder, Acer Group, Dr. Jing-Jyi Wu, Endowed
Chair in Creativity, National Chengchi University Center for Creativity and
Innovation Studies, and Dr. Dung-Sheng Chen, National Taiwan University.
They are among the most influential scholars and industry leaders in Taiwan,
with a humane interest in businesses, education, and societies in Taiwan as
well as in the overseas Chinese world. We thank them for their precious time
spent in reading our book and providing appreciation.
We thank the years of funding for our field research, including research
projects granted by the Ministry of Science Technology in Taiwan
(MOST103-2410-H-035-044; MOST103-2410-H-035-034-SSS), National
Science Council in Taiwan (NSC 101-2410-H-035-044; NSC 100-2410-
H-035-046; NSC 99-2627-E-002-004; NSC 101-2410-H-035-042-MY3;
NSC 99-2410-H-035-010-MY2), Council of Agriculture (050101Q104),
and Ministry of Education (National Chengchi University Top University
Project). In addition, Feng Chia University, Center for Creativity and Inno-
vation Studies of National Chengchi University, Sayling Wen Cultural &
Educational Foundation, and The Keep Walking Fund provided funds to
support our dreams in academia-industry collaborative research.
We thank Feng Chia University. Both of us work in this great university,
supportive of our dreams, at SIMD (Center for Service Innovation and
Mobility Design). Since the launch of SIMD, we’ve been devoted to find-
ing ways we can achieve something by doing good rather than something
to gain credit (e.g., SSCI publications, research project grants, . . .). The
board and some senior colleagues, including Cheng-Shu Kao, Pao-Long
Chang, Bing-Jean Lee, Ming-Hsien Yang, Chyi-Ren Dow, Wei Wang, Ben-
ray Jai, Wen-Shang Lai, and many others provided physical and intangible
resources and support for our center in the past three years. Centered
at SIMD, we also now organize a loosely structured peer, called Cheers.
xviii PREFACE

Cheers invites junior scholars to discuss ideas, not just in research, but
on how to make a social impact beyond the SSCI impact factor. Members
include Jennifer Chen (Nanwha University), Jimmy Lo (National Chinan
University), CF Lee (Shih Chien University), Shiu-Ying Huang (Feng Chia
University), and Jui-Ling Hsu (Feng Chia University). Thanks to Cheers
members for regularly engaging in research, teaching, and service dia-
logues at SIMD. More importantly, we always have a good lunch or dinner
after the meeting in order to get inspired by food as well as friendship!
We also thank our research assistants. First, we thank Jason Yang, who
is a very smart and responsive college student at Feng Chia University.
Without him, this book would not be delivered on schedule. Second, we
thank Wan-Chien Lien, who is a doctoral student at National Chengchi
University. She has always been helpful whenever we need instant assis-
tance. Third, we thank Casey David Sams, who is an American studying in
the IMBA program at Feng Chia University. He offered help on editing the
book and also provided comments to make the chapters more interesting.
Most importantly, we thank all of our mentors and collaborative research
participants. This includes Dr. Se-Hwa Wu at the Ministry of Education,
Dr. Dung-Sheng Chen and Dr. Jason Chang at the National Taiwan
University, Dr. Ming-Jer Chen at the Darden School, University of Virginia,
Dr. Reuy-Lin Hsiao at National Chengchi University, Chang-Shou Yen
at Alliance Cultural Foundation, Cheng-hsien Liang at Chih Shang
Rice Company, Chung-Hsun Liao and his wife Yu-Ping Wu at Yong-An
Community, the many taxi drivers at TAIWAN Taxi Academy Association,
and the many rice farmers and residences at Chi-shang Township.

I Han and Sheng-Tsung Hou

February, 2015
 Introduction

his book introduces the core concept of a social innovation system

T based on empirical contexts observed in Taiwan. The cases presented
in this book can be extended to represent a universal concept applicable to
all human societies facing the challenges of globalized capitalism.
Polanyi (1944) argued that economic activities can never be isolated
from embedded societies. From an economic point of view, human
beings have been seen as a production factor, “labor,” since the Industrial
Revolution. However, as living beings humans can never really be similar
to other production factors. The inherent problem that exists within capi-
talism is the view that human beings are laborers in a “labor market,” who
can be adjusted as commodities toward market equilibrium, regardless
of the ill effects to the general human condition, as the world progresses
toward a final equilibrium.
The term “social” refers to a characteristic of living organisms as
applied to humans and other animals. It refers to the interaction between
organisms and their collective coexistence, whether they are aware of it or
not, and irrespective of it being voluntary or involuntary. As social ani-
mals, human beings organize their daily activities in accordance with the
embedded behaviors that exist within the societies in which we live.
This book argues that social innovation should be examined as an alter-
native which benefits our lives as human beings. This form of innovation
uses progressive solutions in the form of effective, efficient, and sustainable
methods that create social value. Social innovation is distinct from com-
mercial innovation in that it shares newly created value with stakeholders in
societies rather than with individuals or enterprises (Phills, Deiglmeier, &
Miller, 2008). The value shared takes into account the natural environment
and surrounding resources. It applies universal, humane values to provide
solutions intended for specific social contexts and cultural norms. In this
book we present five such cases observed in Taiwan to highlight the impli-
cations and outline the applications.
Chapter 1 starts from the inquiry about uneven wealth distribution
under modern capitalism and moves on to our concerns as to why social
enterprises matter and how social innovations toward the common good
2 SOCIAL INNOVATION AND BUSINESS IN TAIWAN

might be a feasible way of correcting this. “The end is determined at the

start,” as an old Chinese saying states. In Chapter 2, we develop our theo-
retical foundations based on the inquiry raised in Chapter 1 and review
related literature from organizational forums to further move toward inno-
vation in responding to the potential conflicts of interest, both public and
private, within the constructs of modern-day capitalism. We build upon
and support theories of social innovation in its structural form and the
consequences of using social enterprises in deliberating for the common
good in the contemporary global environment. Chapter 3 demonstrates
the methodology put forward in this book, based on a decade longitudinal
field study, and emphasizes the approach of participatory action done in
conjunction with the industry via cross-sector collaborations.
We use five case studies in Taiwan to elaborate how social innovations
of cross-sector partnerships can achieve common good within the realm
of modern capitalism. Chapter 4 starts with the case of “Taiwan Taxi
Company,” which is still a corporate organization. In this case, we illus-
trate that organization form matters in determining the business con-
sequences and then we reflect back to the inability in resolving the
problem between affiliated taxi drivers and corporate capitalists. In
contrast, Chapters 5 and 6 provide two separate alternatives offered by
cross-sector collaborative organizations to bridge the gap between taxi
drivers and rural businesses in an innovative way. Chapter 5 illustrates
the rural taxi businesses in Taitung and how cross-sector collaborations
evolved over time in order to resolve the challenges faced by case study
participants. Chapter 6 illustrates the major role played by the Yilan local
government in realizing public interest in a cross-sector collaboration by
transforming rural taxi businesses into an innovative local service.
Chapter 7 presents a case within the rice industry in which the chal-
lenge posed by post-WTO globalization led a leading local rice processor
to make an innovative change and develop various cross-sector collabora-
tions for the common good of an entire township. Chapter 8 demonstrates
the case of a rural community involving the leader’s ambition of building
a dream community by innovation in various businesses through cross-
sector partnerships. The spread of such local innovations, then, eventually
echoed a wider social movement toward the common good based on social
innovations.
Chapter 9 provides theoretical solutions to respond to the questions
raised in Chapter 2. Chapter 10 provides practical implications of the
inquiry into the uneven world of modern capitalism by replicating vari-
ous cases of cross-sector partnerships in other contexts and fields. Finally,
Chapter 11 provides a “how-to” in the practice of social innovation of
 INTRODUCTION 3

common good through the integration of “teaching-research-service”

within the university career.
The common good is the ultimate goal of a society based on social
innovations. The human societies we live in can definitely not be sustained
by fragmented pieces of self-interest. Instead, the personal good can be
connected and unified into the common good by maximizing mutual
interest, which is a founding principle of the Chinese philosophy of “the
whole world as one community.”
Globalization is attributed to free mobility of currencies, commodities,
services, information, jobs, and people. One of the major consequences
of fast-developing technology in the globalization context is the lack of
regional development and uneven distribution of wealth, which causes
even more marginalization of minorities. Capitalism dominates the world
economy and can be as arbitrary as jungle law, rewarding only the stron-
gest. This further enhances greed and can result in economic crises on a
global scale. The Western capitalist philosophy of competing for profit, in
turn, enlarges the gaps. A major share of the fortune is owned by a few
wealthy people, and the humane value of “common good” disappears.
Given the collapse of traditional value systems, we hope to provide some
achievable alternatives in this book to redefine the role a university can
play, with innovative functions enabling university professors to make
contributions toward more humane societies.
 1

Why Social Enterprise Matters

e have all heard the story about the six-year-old boy who suddenly
W kisses the cheek of a five-year-old girl, startling her in the process.
She exclaims, “Are you serious!” to which the boy smiles and replies, “We’re
no longer three-year-old kids.”
So it is with management science and organization theory. Like these
children, the two fields—youngsters in a community of mature social
sciences—are in the paradoxical state of precocious naïveté. They have
grown, but are surprised by their own development and by the changing
world around them. The rapidly changing world continues creating chal-
lenges for practitioners in managing organizations, particularly after the
2008 global financial crisis. Numerous social activisms were held in societ-
ies across the world to fight against an unfair consequence from a ques-
tionable capitalism. In the face of global social challenges, new forms of
enterprises are needed. Are organizations prepared to meet the demands?
What innovative designs and structures will advance the management and
organization fields, in both theory and practice, and help lead, ultimately,
to better societies?
Let us consider a social phenomenon that rippled across the United
States and around the world a few years ago: the Occupy Wall Street move-
ment. In the autumn of 2011, activists launched a protest in the finan-
cial district of New York City to shine a spotlight on economic and social
inequality, seeking to narrow the disparity between what organizers saw as
the wealth holders in the top 1% and the other 99% of the populace. The
campaign of social resistance seemed to wake up corporations and their
management teams. Surely, they thought, the effects of the populist move-
ment would reverberate throughout the business world. Could a “post-
capitalist” society be glimpsed on the horizon?
In the years since, research in the social sciences has taken a keen inter-
est in the issues at the heart of the Occupy movement, studying how
6 SOCIAL INNOVATION AND BUSINESS IN TAIWAN

enterprises might use organizational design to create social innovations

and deliver new value for the common good. What kinds of organizational
designs and structures will advance management and organization, in
both theory and practice, in order to respond to the current challenge?
Research suggests a dawning awareness and steady but slow evolution.
Can we imagine a predominant form of organization that will serve as the
model for social innovation?

I. The War of 1% Versus 99%: Occupy Wall Street

Occupy Wall Street was launched by the Canadian anticonsumer orga-

nization Adbusters Media Foundation and inspired by civil resistance
movements like the political Arab Spring demonstrations.1 In September
2011, Occupy activists took to the streets of New York’s financial district
to protest the causes and consequences of the then-current financial crisis:
massive corporate bailouts and bankruptcies, a drastic economic down-
turn, and soaring unemployment—the effects of which were billowing
from America to the world’s other economies. Adbusters had proposed a
peaceful gathering to speak out against the inaction of American leader-
ship in resolving the problems underlying the economic crisis. The protest
started with a few thousand activists demonstrating against social and
economic inequality and corporate influence in politics and government.
The Occupy movement was soon taken to other cities around the United
States, including Washington DC, San Francisco, Los Angeles, Chicago,
Boston, Charlotte, Seattle, and Denver.2
The main theme of the Occupy movement was that the 99% should
have a democratically proportionate voice in the economic and political
systems and that corruption and greed among the 1%—the “winners” of
capitalism (Figure 1.1)—needed to be corrected. The protests sought to
use a civil institution to replace politics operating in the shade of big busi-
ness. Within a month, the Occupy campaign had spread on a global scale
and exploded into an international movement spanning continents, reach-
ing Zhengzhou, Taipei, Seoul, Hong Kong, Kuala Lumpur, and cities across
Europe. As recently as 2014, major protests against business regimes were
taking place in Turkey, Ukraine, Thailand, and Taiwan, and the occupa-
tion of government buildings was still a tactic for protesting corruption in
capitalist institutions.
Why should we, as researchers in the management and organization
fields, care about the civil topics raised by social activist movements like
Occupy? What are the implications of “1% versus 99%” for business man-
agers and academic researchers, and how do these issues reflect on us?
Social enterprises around the world are modeling how organization design
 WHY SOCIAL ENTERPRISE MATTERS 7

Figure 1.1 Wealth Distribution by Income in the United States in the Twentieth
Century

may lead the way to a new, sustainable system of innovation for overall
social good. Our book presents cases in Taiwan to illustrate how social
enterprise innovations may offer alternative solutions, through theoretical
and practical dialog and design, to populist activism that will minimize the
oppositional tension between economic winners and losers.

II. The Common Social Problems of the World

To put it broadly, the message of the “99 percenters,” represented by the

Occupy movement, was that capitalism has created formidable social
problems in developed and emerging economies alike. Occupy activists
questioned whether the results of capitalism and globalization have his-
torically been any better than the outcomes of other systems in matters
of poverty and employment, economic development, the environment,
healthcare, family values, human rights, and education (Figure 1.2). The
issues may be parsed into distinct but related areas.
First, globalization has contributed to the problem of domestic pov-
erty and unemployment in many countries, particularly among younger
generations who have lost their jobs to underdeveloped nations with loca-
tion advantages and low labor costs—the types of locales where multi-
national enterprises (MNEs) prefer to outsource production. In addition,
the demand for manpower is decreasing globally, as new technologies and
automation replace the functions of many jobs.
8 SOCIAL INNOVATION AND BUSINESS IN TAIWAN

Figure 1.2 The Common Social Problems of the World

Second, capitalism is linked to a host of environmental challenges

including climate change and global warming—issues that can be framed
overall in the relationship between human beings and the silent stakehold-
ers of the environment: land, natural resources, and energy. In addition, the
treatment and preservation of animals and plants—a key to a sustainable
ecological system—is in conflict with population growth, which threatens
even scarcer natural resources.
Third, the problem of medical care, particularly in some developing
and many underdeveloped economies, is an urgent issue. Even with the
more advanced healthcare systems in developed countries, the “global-
ization of infectious diseases” across national borders via international
transportation, for example, is a constant threat. Coordinating a global
effort to advance medical systems in underdeveloped countries is an enor-
mous challenge for nongovernmental organizations and supranational
institutions.
Fourth, the erosion in family and humane values is evident in
Internet-based societies. Moreover, structural changes in the family and
institutions such as marriage may be causing a significant shift from the
past standards of value systems and interpersonal relations. Fifth, there
is the issue of human rights of minorities in the context of international
labor and new migrations from rural to urban areas in both advanced
 WHY SOCIAL ENTERPRISE MATTERS 9

and developing Asian countries. The rising demand for low-cost inter-
national labor, particularly women, has caused a structural change in
populations; along with the offer of social care in the destination coun-
try for immigrants, this has created new challenges, since most labor-
ers are located in rural regions or among the lowest socioeconomic
groups. How to take care of these migrants and how to provide them
with increased social mobility have created common problems in many
Asian countries.
Sixth, the alienation induced by the Internet economy creates chal-
lenges for civil engagement, namely, for community participation in
local environments. Many social interactions now take place entirely over
the Internet. Although social media has been used to advance certain
public issues and link events worldwide, civil engagement in the local
community—where the heart of public interest resides—is still essential.
Keeping local residents involved in local affairs is a fundamental element
of building a society for the common good. While learning and educa-
tion have always been central to upward social mobility, modern capital-
ism has influenced the educational systems of many countries in ways
that have not advanced local environments. For example, poor families
in many rural areas have gradually lost potential upward social mobility
because they are not provided with, and cannot afford, technology such
as computers or smartphones, resources that have a high rate of penetra-
tion in metropolitan areas. In short, these people lack the investments in
advanced technology and facilities that can open doors to social advance-
ment through education. Without innovative efforts to break the trap of
unbalanced resource distribution in education systems, their socioeco-
nomic status might not change for generations.
These problems are common around the world and they are “social”
issues rather than technical or economic ones. Further, these issues may
be construed as structural problems across nations of varying degrees of
development. Without question, globalization over the past two decades
has created considerable wealth among the knowledge-based economies.
However, the flip side is equally significant: the unbalanced distributions
of resources and outcomes, as a result of the inefficiency of capitalism to
meet universal human needs, have mired the majority of the world’s popu-
lation in an economically stagnant state, or worse, an economic recession.
The problem is that this system where 1% holds the reins of economic and
social power and increasingly controls more and more resources as well as
absolute wealth, based on the logic of modern capitalism, has disrupted
the structure of the middle class, pulling it down to the bottom of the
social pyramid.
10 SOCIAL INNOVATION AND BUSINESS IN TAIWAN

III. The Nature of the Organization

The social problems described here can be resolved in conventional ways

by using any of three organizational designs. The first, and perhaps most
common, is government, which can exercise its power of authority and
enforcement to provide social welfare through resource distribution.
The government may be the principal organizational form for resolving
social problems in the event of capitalist market failure, that is, when the
efficiency-based economic tools are inadequate to address issues of social
fairness, justice, and human rights. In this case, the powerful hand of
government is an effective organizational form for correcting the short-
comings of for-profit organizations. Second, the ability of for-profit orga-
nizations to take ethical actions of social responsibility may be the most
efficient way to resolve social problems, but it is often a challenge for cor-
porations to convince shareholders to invest profits and resources in the
public social sector—without a scenario that simultaneously promises a
goal of maximizing profitability. Lastly, nonprofit organizations (NPOs)
are well suited for solving social issues and are typically able to access and
integrate both government financial resources and donations from cor-
porations as well as individuals. NPOs have historically played important
roles in rectifying social problems and assisting in the reconstruction of
social value. However, the sustainable operation of NPOs is often highly
dependent on the host country’s overall economic status.
The effectiveness of these organizational forms rests on three foun-
dations of power. The government leverages its political power through
authority mechanisms. The corporation exercises its economic power
through market mechanisms. And NPOs apply societal through social
mechanisms. However, corporations and NPOs can encounter several
obstacles.
On the one hand, the existence of the corporate form of organization
fulfills the market’s needs, generated by upstream suppliers, intermedi-
ate factories, downstream business users, consumers, and even the pub-
lic. On the other hand, these needs are met through the value creation of
entrepreneurs, shareholders of corporations (financial capital value), and
management teams and executive staffs (intellectual/human capital value).
Nevertheless, how does the value created by the corporate organization
allocate the wealth produced through value creation? Capitalism, while
an efficient system for expanding the economic value of market growth,
suffers from a shortcoming: its efficiency-based ground rule is not funda-
mentally intended for fair and equitable resource and outcome distribu-
tions among stakeholders beyond the corporate shareholders. A balance
of efficiency and fairness is a “need” of all stakeholders in society, and it
 WHY SOCIAL ENTERPRISE MATTERS 11

cannot be achieved by capitalism. The value creation bible of capitalism,

rather, extols maximizing profitability for the corporate shareholders. As
the size of the corporation increases in response to market expansion and
profitability, the division between management and ownership grows as
well, and the corporation is operated with the aim of delivering and allo-
cating value beyond the corporate boundary, or external stakeholders.
Throughout the value-added activities, such creation and value exchanges
involve both internal and external stakeholders and continue onto end
users as well as non-end users (such as the public/environment). Once
profitability is secured, the corporation might use its excess capacity of
resources to respond to the needs of external stakeholders (such as local
communities and the environment), or in the form of acts of corporate
social responsibility (CSR) in response to pressure from the public.
Why is CSR increasingly important? Why—when more and more
corporations invest increasing amounts of resources for external stake-
holders, particularly for the public—are there still a multitude of problems
related to the “1% vs. 99%”? If these “whys” cannot be answered, it is pos-
sible that the corporate organization will face a major structural obstacle
in the future. Perhaps, before that consequence, we should further explore
the nature of the corporate organization itself, and the causality between
the tools of business strategy and the survival of corporations.
This explains why the existence of NPOs is necessary: to go beyond the
limitations of corporate boundaries, particularly in tackling social prob-
lems associated with the negative consequences of capitalism and its major
players, that is, for-profit organizations. In addition, external problems,
such as inappropriate use of natural resources or unfriendly relationships
with local communities, which cause market failures, cannot always be
resolved by corporations. This is where NPOs can step in to play a supple-
mentary role in fulfilling needs that are not met by the market mechanisms
of the corporate sector.
NPOs recruit resources from for-profit corporations and the public, as
well as from the government. Tapping these various sources, NPOs allo-
cate the resources according to need; nonetheless, there are limitations for
NPOs. One major limitation is funding unsustainability due to the unsta-
ble nature of resources. The irregularity of NPO resources typically stems,
ironically, from inefficiencies and market fluctuations; that is, NPOs, by
relying on corporate donations, inevitably suffer during economic hard
times when corporate profitability is at its weakest. The problem of inef-
ficiency of resource recruiting remains irresolvable, because resources are
dependent on the willingness of donation sources and on tax-exemption
incentives, from both corporations and the public. In addition, because of
the lack of internal profitability and cost measures, NPOs usually cannot
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