Collaborating with market and state?
The Third Sector’s Potential of creating employment within
tri-sectoral local networks


1. Starting points

Inclusion into the society is endangered by long-term unemployment. Nevertheless there have not been created enough jobs for the long-term-unemployed so far, neither by increasing economic growth nor by active labour market policies. In order to overcome this failure of both the market and the state, great hopes are set in the „Third Sector“ by current political and scientific debates as well as by a number of programmes promoted by the EU-Commission and some EU-member states.

Accordingly, this dissertation concentrates on the question which contribution the „Third Sector“ could make to the future of the European Model in the field of job creation for the long-term unemployed.
The available empirical data together with theoretical debates about the Third Sector’s potentials lead to three premises on which the dissertation is based:


1) Third Sector Organisations show specific advantages which might, under certain circumstances, be able to compensate for the failures of market and state in the creation of employment.

These advantages are most visible on a local level. They can be characterised in an idealtypical way as follows:

• Driven by values like „solidarity“ and „participation in society“, non-profit-organisations (NPO) of the Third Sector especially care for marginalised groups of society as e.g. the long-term unemployed.
• As organisations working for the public welfare NPO not only aim at combatting unem-ployment itself, but also its causes and consequences: they develop individual skills of the unemployment and at the same time try to develop the local economy by their activities.
• NPO are organisations that combine characteristics of the other societal sectors. Thus they seem to be well prepared to bring together conflicting aims such as entrepreneurial activities with social ones aiming at common welfare.
• As intermediary organisations NPO have access to public subsidies as well as private donations. In addition to this they are able to mobilise voluntary work.
• As part of civil society, NPO tend to be closer the needs of their clients as the bureaucracy of public institutions. They also have better access to social capital and can reproduce it more easily.

Employment projects in the Third Sector which show some of these characteristics have developed throughout Western Europe during the last two decades. However, projects that manage to combine a greater number of the potential advantages to market and state as de-scribed above are still rare.
The second premise of this work tries to explain the reasons for this:


2.) Organisations of the Third Sector can only develop their specific advantages if they cooperate with the market as well as with the state.

NPO, in spite of their potential advantages to First and Second Sector are obviously not in a position to fully compensate for the failures of market or state:

First of all, NPO are always forced to cooperate with the other sectors because they them-selves are prone to manifold forms of Third-Sector-failure. These comprehend, above all, dissoluble internal conflicts resulting from their various and divergent goals and the task to mediate between demands of the members of their organisations and their environment.
Additional great problems often stem from the specific organisational culture of NPO:
They show, for example, a tendency to reject economic thinking, formal controls and/or any hierarchical management. Often their ideological orientation does not permit any criticism by its members and employees.
Even worse, most NPO are not able to fully finance themselves and therefore depend on public subsidies and/or entrepreneurial activities of their own. If this dependency gets to high, NPO have to either give in to the logics of the private economy (maximising of profits, compe-tition) or to that of the state (bureaucratic control) to an extent that destroys their own, par-ticular goals and ways of action.

In view of this we will not have to look for a future role of the Third Sector that replaces that of market and state, but rather one that complements both of them. The Third Sector will have to cooperate with the other sectors in a way that leads to a „synergetic welfare mix“.

Such „Local Partnerships“ have been promoted by the EU-employment-strategy since the middle of the 1990ies. As to Germany, the Western-German traditions of subsidiarity, social partnership and self-governing offer good preconditions for a synergetic welfare-mix. On the other hand there are not only various legal, financial and administrative barriers for a synergetic welfare-mix in the promotion of employment. There is also another barrier concerning the governance of Local Partnerships:


3.) The Third Sector is not able to realise its goals within neocorporatist arrangements.

Even if NPO manage to get access to partnerships between the First and the Second Sector, the way of governance within these arrangements of a rather neocorporatist kind is predominantly hierarchical. This leads the public institutions to more or less make use of the participating Third-Sector-Organisations to put its own public employment schemes into practice.

Thus NPO are faced with the dilemma to be neither able to develop their specific potentials without actors of market and state nor together with them.

A possible solution to this dilemma that offered more freedom to NPO could be another mode of governance put forward by some parts of recent governance theory. This conceptualises cooperative bargaining in policy networks that includes all societal agents concerned with a problem and grants them equal rights of participation. Within these "bargaining networks", the role of the state is more or less confined to activating, moderating and coordinating societal agents.

Up to now, experiences with bargaining networks in other policy fields and in other countries indicate on the one hand that these networks can indeed promote innovative solutions. On the other hand, bargaining between different actors with very different interests, resources and rationales does not automatically bring about solutions which are for the public good. It rather turned out to put high, maybe impossible demands on all agents involved.

German employment policy does not demand any systematic networking of the three societal sectors as of yet. This is one of the reasons why we still do not know much about the possibilities and limits that tri-sectoral cooperations might present to Third-Sector-Organisations. Even though there many evaluations of Local Partnerships throughout Europe exist already, these primarily aim at practical rather than theoretical knowledge. Notwithstanding the interdependencies between Third Sector and the state have so far mainly been investigated with a focus on economic aspects or in the light of neocorporatist theories. Neither have any satisfying theoretical approaches as to the general functioning of bargaining networks been developed so far. Moreover, Third Sector research suffers from a general lack of theory and inter-disciplinary approaches and it is only beginning to discover the "social economy" as a field of research.


In view of all this, the central question of my dissertation is:

To what extent are Third-Sector-Organisations able to realise their specific advantages within tri-sectoral bargaining networks?

To answer this, two further questions have to be investigated:

1.) In what way is the Third-Sector-Organisation's room for manoeuvre within tri-sectoral bargaining networks enlarged or limited by the specific characteristics of Third-Sector-Organisations such as. their logics of action, their goals, their organisational structure, their ways of financing or their legal forms?

2.) Which characteristics of bargaining networks impede, which ones promote the development of the participating Third-Sector-Organisations?


This analysis will concentrate on Germany, as the object of research is not only very complex but also highly dependent on country-specific conditions. The focus of my research will be the local level, where the special advantages of NPO are most visible and on which current employment strategies of Germany as well as the EU-Commission are aimed.



2. Research Programme

The theoretical part of my work comprehends elaborating relevant theoretical approaches of Third-Sector research, governance theory and network analysis. The next part points out specific conditions of Local Partnership in Germany, such as, above all, German and EU-employment policies and policies for developing local economy. In addition to this the present role of each of the three sectors under investigation within German strategies of promoting employment will be analysed. Moreover the already existing empirical studies about Local Partnership will be interpreted with respect to their contribution to the subjects of this dissertation.

As my object of research has hardly been examined with respect to the questions posed above, I am conducting an empirical study of my own, exploring several Local Partnerships in Germany with qualitative methods of research.


3. Reference to the European Social Model

The possible contribution of this dissertation to a future European Social Model is threefold:

First, the ideal of a comprehensive inclusion into society is pivotal to all concepts of a European Social Model. According to the still widespread values of a "labour society", integration into the labour market seems to be a crucial precondition to this societal inclusion.

Second, the majority of European Welfare States is characterised by having institutionalised cooperative modes of conflict-resolution. The Cooperation within bargaining networks would maintain and develop this mode.

Third and last, another distinct feature of the European Social Model is that actors of civil society are involved in the formation of policies as well as their implementation to a great extent. In view of this the results of my dissertation are also meant to give further clues for the possible role of the Third Sector within a future welfare-mix.