Philanthropy, market creation, and enterprise development

The institutions of philanthropic giving and the commercial market are traditionally perceived as distinct. But philanthropic resources are increasingly flowing into both for-profit and non-profit market-based organisations, and there is a new focus upon philanthropy's role in creating or repairing markets in order to achieve social and economic impact. This chapter describes this market support role of philanthropy and analyses in detail two distinct modes of action: a market creation function, modelled on the mainstream capitalist market, that seeks to enable the development of innovative market structures and products that can resolve social problems at scale; and a ‘community enterprise’ function, whereby philanthropic funding develops the commercial capacity of locally based social enterprises and businesses. The chapter recognises normative criticisms of philanthropy's role in market development, but argues that there is an important social policy function for philanthropy in repairing specific absences and failures of both market and state.