The emerging fourth sector

Abstract

The Fourth Sector is a new phenomenon related to dual social and financial value creation, until now not clearly defined with crisp sectoral boundaries and an operationalized definition. The phenomenon is getting increased attention in media, conferences, business schools and by organizations all over the world, and this study intends to explain the macroenvironmental changes that led to the rise of the fourth sector, describe new trends of social value creation in the private sector and financial value creation in the nonprofit sector – and thereby also find that there is a convergence of sectors towards a new hybrid intersection of dual social and financial value creation – sometimes referred to as the fourth sector. The existing definitions will be critizied, and the fourth sector will be redefined with a new, more operationalized definition. In addition, a strategic analysis of two fourth sector companies – Me to We Style and God El – will be conducted. This analysis will focus specifically on the internal analysis of these companies, analyzing whether the fourth sector business model leads to any competitive advantages/disadvantages. All other things will be isolated from this analysis, and an external analysis will not be relevant here, since the fourth sector business model will not influence the external competitive environment in these cases. Relevant findings are indications that fourth sector companies (here defined by God El and Me to We Style) can have competitive advantages in their fourth sector business model, in their customer relations, in their employee relations and especially in their relationships with their suppliers and other alliances, where they are able to really leverage the business model, saving cost for the company. It is unclear whether access to capital might become a competitive disadvantage for fourth sector companies over time – it is not for these two fourth sector start-ups analyzed here.