The social enterprise features are well known in the world history while in Latvia there is a lack of studies and understanding about it. The aim of the research paper is to study the influencing factors of social entrepreneurship in Latvia. In the research the essence of social entrepreneurship and the main principles for definition of social enterprises – social mission, business orientation and involvement of marginalized groups are described. The analysis to determine the most important internal and external factors influencing development of social entrepreneurship was carried out. It was found out that the main external factors are political and legal environment, lack of knowledge about significance of social entrepreneurship, dominating values in society and such internal factors as access to finances, recruitment of professional and well motivated personnel.

Social entrepreneurship plays an increasing role in society. It is evidenced not only by the inclusion of a section on social entrepreneurship in the Europe 2020 strategy but also by the engagement of European countries in making legal documents on social entrepreneurship as well as designing support programmes in order to help entrepreneurs to start up a social entrepreneurship business. The research aim is to characterise the legal aspects of social entrepreneurship and support instruments for the promotion of social entrepreneurship in the Baltic States. In order to achieve the aim, the research analysed legal acts and strategic policy documents regulating social entrepreneurship in Latvia as well as analysed the legal framework for social entrepreneurship in Lithuania. To do the analysis, the research examined the kinds of support for starting up a social entrepreneurship business in the Baltic States. The research has found that no uniform definition of social entrepreneurship is available in Europe, which does not result in a unanimous opinion on what a social enterprise should be. In the Baltic States, the Social Enterprise Law has been passed in Latvia and Lithuania; besides, the laws mainly focus on the integration of target groups into society, addressing no other essential problems that could be solved by means of social entrepreneurship, e.g. environmental protection.

Covid-19 has affected the whole economy of Latvia, leading to various social and economic problems in the country. Social economy actors applying an innovative approach to solving social problems could make a significant contribution to improvement in social life, especially during the Covid-19 crisis and the post-crisis by supplying various services and products, helping the state to solve gaps that it cannot cope with without the help of the private or non-governmental sector. The research aims to describe the challenges faced by social economy actors in Latvia during Covid-19 and their responses to the crisis. The research employed case study analysis to describe the responses of 9 social economy organizations to mitigate the consequences of the crisis. The research found that Covid-19 had a negative impact on the performance of social economy actors faced by financial, organizational, social and psychological challenges, which overall did not significantly differ from those faced by other market actors in the particular situation. To solve the current problems in society and ensure their self-existence, social economy actors implemented an innovating strategy that focused on three priorities: new digital experiences, products and services in response to changes in customer behaviours and needs; development of new offers for a new or the current target group; new partnerships both within and outside the industry.

Social enterprises, as an interdisciplinary form of business, often face problems that traditional enterprises and civil society organizations have already overcome: lack of legal framework, complex business models, business identity problems, lack of public awareness, lack of visibility and difficulty in accessing investment markets. The name ‘social entrepreneurship’ makes it clear that it is not easy to have a business oriented towards a social goal, because ‘social’ implies that the business is directed to the goal of reducing social problems and enhancing the quality of life, which, besides being expensive, is also a complex process. The purpose of the article is to reflect the challenges faced by representatives of social entrepreneurship in Latvia: before April 1, 2018, when this type of business was non-profit, and after, when the opportunity was given to establish a profit-making social enterprise. In order to achieve the goal, following tasks are set — to provide a theoretical explanation of social entrepreneurship, as well as, with the help of empirically obtained information, to reveal the challenges faced by representatives of social entrepreneurship in Latvia. According to interviewed informants, the main challenges for social entrepreneurs in Latvia are the lack of qualified employees, institutional cooperation and funding, which would allow organizations to effectively carry out their business; in addition, difficulties are caused by situations when financing is too complex or difficult to access, and social entrepreneurship lacks public support. Rather often, social entrepreneurs lack knowledge about business risks and how to plan their business in the long term.

Performance is a concept which is critical to both conventional businesses as well as social enterprises. However, for the latter, performance is closely tied to social impact which social enterprises and governments supporting the social entrepreneurship field are seeking to achieve. Despite the criticality of the topic, in Latvia performance of social enterprises has not been analysed in detail before; therefore, this study serves as a valuable starting point for discussions and evidence-based policy and also as a benchmark for future development in the field. Research results indicate that the Latvian social enterprises regard their performance across the social dimensions to be stronger, compared to their results in the business/financial dimensions. A greater balance between the social and businesses/ financial performance dimensions is desirable, providing ample space for interventions aimed at strengthening the business skills and capacities of social enterprises, paying particular attention to those engaged in work integration.