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The Bright Side of Hybridity: Exploring How Social Enterprises Manage and Leverage Their Hybrid Nature

  • Luca Mongelli
  • Francesco Rullani
  • Tommaso RamusEmail author
  • Tomislav Rimac
Editorial
  • 53 Downloads

Over the last 15 years, social enterprises have acquired growing centrality in the academic debate about the role of business in society because of their recognized capacity to address deep-seated societal problems such as unemployment, poverty, and environmental damage (Smith et al. 2013).

The Journal of Business Ethics has been at the forefront of this debate with its 2012 special issue “Social Entrepreneurship in Theory and Practice” (Pless 2012), which proposed a very pragmatic perspective focusing on the most practical constituencies of social entrepreneurship. Building on this ground, in 2016 a second special issue—“Social Entrepreneurship and Business Ethics: Does Social Equal Ethical?” (Chell et al. 2016)—has opened a new, interesting research route focused more specifically on the ethical challenges faced by social enterprises (André and Pache 2016; Chell et al. 2016) and social entrepreneurs (Bacq et al. 2016; Dey and Steyaert 2014; Smith et al. 2016).

In this symposium, we move along this line and aim at investigating how social enterprises, conceived as social–commercial hybrid organizations (Battilana and Lee 2014), can advance more sustainable, human-centered markets and societies in an ethical way (Chell et al. 2016). In particular, the papers included in this symposium employ the lens of hybridity to discuss mechanisms, practices, and processes that social enterprises use to leverage their hybrid nature—and in particular their market presence—to humanize markets and address societal problems more effectively.

Thus, with this symposium we address Battilana and colleagues’ claim that “someday, we may look at the advance of hybrid organizations as an early step in a broad reformulation of a current economic order, which for all of its successes has left many disenfranchised. Hybrid organizations offer a bold, sustainable infusion of humanitarian principles into modern capitalism. … The promise of hybrids is very real, but much work lies ahead” (Battilana et al. 2012, p. 55).

Moreover, by investigating the opportunities that social enterprises can leverage thanks to their hybrid nature, this symposium also complements and advances earlier research that has mainly highlighted the managerial tensions (Pache and Santos 2013) and ethical challenges (André and Pache 2016) that social enterprises face.

So far, the literature has mainly portrayed social enterprises as organizations that try to achieve and then scale social and environmental impact, supporting this effort by means of their presence on the market (Battilana and Lee 2014; Santos 2012). Market presence is seen as instrumental to solving the problem of financial dependence on donations and grants (Mair 2010) that typically affects traditional nonprofit organizations and that could jeopardize their sustainability and undermine their impact (Dees 1998). This view emerges quite clearly when surveying the most diffused definitions of social enterprises. For example, Ebrahim and colleagues state that social enterprises are organizations “whose purpose is to achieve a social mission through the use of market mechanisms. … Their primary objective is to deliver social value to the beneficiaries of their social mission, and their primary revenue source is commercial, relying on markets instead of donations or grants to sustain themselves and to scale their operations” (Ebrahim et al. 2014, p. 82). By juxtaposing revenues and social impact, this definition implies an understanding of social enterprises as inherently fragile organizations. Indeed, it highlights, implicitly, the challenges that social enterprises face in trying to sustain market performance and social impact simultaneously (Battilana et al. 2015) and to recompose the contradictory elements—practices (Smith et al. 2013), stakeholder demands (Pache and Santos 2013), values (Besharov and Smith 2014), and managerial principles (Ramus et al. 2017)—associated with them. In this way, impact and revenues are seen as the outcomes of different processes (Battilana and Dorado 2010; Pache and Santos 2013), and the focus is on defining arrangements that prevent reciprocal harm (Canales 2013). Hence, the multiple elements that characterize social enterprises’ functioning become “the problem to solve” rather than the “opportunity to take.”

We believe that this depiction of social enterprises is not exhaustive and that it downplays the opportunities for innovation and change that these organizations can leverage precisely because of their hybrid nature (Jay 2013): that is, through the recombination of apparently contradictory but actually interrelated elements (Mongelli et al. 2017; Ocasio and Radoynovska 2016). Therefore, with the papers selected in this symposium, we want to re-direct attention toward the potential inherent in social enterprises for fostering inclusion, triggering positive societal transformation and generating impact by virtue of their commercial activities and exposure to market pressures. In so doing, we build on recent research that has begun to propose that the managerial tensions and ethical dilemmas typical of hybridity are not solely a problem that social enterprises (Canales 2013) and their leaders (Besharov and Smith 2014) must address (Battilana and Dorado 2010). Rather, embracing these tensions, using them to innovate, leveraging the dynamic equilibria they create, is a way to fully exploit the possibilities opened by hybridity (Jay 2013; Tracey et al. 2011). As Smith and colleagues (2012) put it, “pursuing commercial viability promotes efficiency, performance, innovation, and growth. In contrast, social missions elicit passion, motivation, and commitment. Taken together, the dual forces for performance and passion offer a powerful combination that can lead to new solutions to existing challenges” (p. 466).

This new perspective, which is gaining increasing momentum in the academic discussion (Battilana et al. 2015, 2017), greatly enriches the portrayal of social enterprises previously depicted by the literature. Not only can the elements conflated in the organization reach each one of its goals individually, without being harmed by the presence of the other; instead, their interconnections can be leveraged to generate externalities, cross-fertilization, re-deployment of otherwise out-of-context ideas—something that would be difficult to obtain in nonhybrid organizations (Ashforth and Reingen 2014; Jay 2013).

Specifically, with the papers included in this symposium we want to shed light on how market elements can be used to create impact well beyond the simple provision of financial support. Market presence can be a specific tool that, under certain conditions, boosts the social and environmental impact of social enterprises. Indeed, different and apparently contradictory elements associated with social and commercial objectives, when combined, can become—instead of opposing factors and obstacles—resources. Recombining these resources in novel ways might yield more innovative solutions to deep-seated societal problems (Jay 2013; Santos 2012).

Our view is consistent with recent studies showing that for a social enterprise, being in the market is much more than a simple mechanism to fuel its finances. On the contrary, it can be leveraged to achieve and scale social impact and eventually transform markets (York et al. 2016) and societies (Mair et al. 2012). For instance, Battilana et al. (2015) show that economic productivity directly affects social enterprises’ social performance, for two reasons. First, more economic resources at one’s disposal create more slack and thus more room to maneuver also on the side of impact creation (Ramus et al. 2017). Second, a higher productivity increases the legitimacy that customers and investors assign to the enterprise itself (Pache and Santos 2013), which enables it to get the resources needed to invest in social issues and manage them more effectively (Ashforth and Reingen 2014).

More recently, scholars have unveiled a more pervasive impact of commercial elements and values on social impact, suggesting that they enable the economic and social empowerment of otherwise marginalized individuals. For instance, in their study of work integration social enterprises, Mongelli et al. (2018) suggest that, under certain conditions, the involvement of a social enterprise’s beneficiaries in mechanisms typical of the market—like competition and customer orientation—can trigger processes of empowerment and emancipation that directly cater to social impact, well beyond the usual “economic support.” This empowerment, in turn, can drive positive social change that transcends the boundaries of the single organization. This effect is evident in the case presented by Haugh and Talwar (2016). A social enterprise initiated to provide women in rural India with training and production capabilities became the vehicle for their own economic, social, and political empowerment, inducing larger changes in their societies and communities. Women involved in the social enterprise could use the income generated by their activities to gain more freedom, influence, and a different role in their families. In this way, commercial activities and the proactive involvement of beneficiaries and stakeholders in market transactions become an important trigger for scaling social impact and not simply a means to guarantee the social enterprise’s financial viability.

Similarly, Santos (2012) hints at the role of market elements as triggers for social change when noticing that social enterprises typically implement market mechanisms to empower stakeholders and involve them in the production process. The engagement of disparate stakeholders through market activities often has the effect of not only producing a stream of financial resources with which the social enterprise can survive and possibly grow. It also affects stakeholders’ perceptions and, eventually, behaviors. Thanks to and because of their involvement in production activities aimed at driving a positive change in society, stakeholders often change their perceptions of and attitude toward the societal issues addressed by the social enterprise, eventually embracing these issues themselves (Lee et al. 2018). This, in turn, enables the social enterprise to scale social impact and transform markets and societies, by spreading and institutionalizing more sustainable practices and business models (Giorgi and Weber 2015; York et al. 2016).

The five papers we collected in this symposium offer a line of inquiry that stretches along the whole process centered around social enterprises’ creation, impact, and management, allowing for a more comprehensive understanding of the reciprocal influence of social and commercial elements, as from the perspective depicted above.

The first paper—“Prosociality in Business: A Human Empowerment Framework,” by Steven A. Brieger, Siri Terjesen, Diana Hechavarria and Christian Welzel—brings us to the origin of social enterprises. Namely, the paper links social enterprises’ creation to the concept of empowerment, which, as suggested above, we believe is a key element explaining how market presence can foster social change. Applying Welzel’s theory of emancipation on a sample of 15,000 entrepreneurs in 43 countries, the authors prove the role of human empowerment in promoting pro-social entrepreneurial activities. In this way, they suggest that empowerment of marginalized individuals and groups is not only a possible mechanism around which to center social enterprises (Haugh and Talwar 2016; Mongelli et al. 2018; Rimac et al. 2012). It can also be a trigger for diffusing pro-sociality in the business sector and enabling the emergence of social enterprises. According to this perspective, social enterprises are better seen as the result of collective processes (Montgomery et al. 2012) than as result of the efforts of single, exceptional entrepreneurs, motivated by pro-social values (Grimes et al. 2013), a change in perspective which has clear ethical and policy-making implications. This paper also opens interesting avenues for future research reconnecting research on social enterprises and social movements (Dacin et al. 2011). Indeed, it implicitly calls for research focused on the processes through which social enterprises and their leaders can mobilize and empower collective action aimed to foster social change.

After discussing the origins of social enterprises, the second and third papers of the symposium—“Social Enterprises, Venture Philanthropy and the Alleviation of Income Inequality,” by Francesco Di Lorenzo and Mariarosa Scarlata, and “Unpacking Variation in Hybrid Organizational Forms: Changing Models of Social Enterprise among Nonprofits, 2000–2013,” by Marya Besharov and Jean-Baptiste Litrico—investigate their functioning. Both papers implicitly support our stance that social enterprises can achieve better performance precisely because of their hybrid nature. In their paper, Di Lorenzo and Scarlata show the impact of social enterprises at the system level, specifically on income inequality in Indian municipalities. Their findings suggest that the role of venture philanthropy investments in local social enterprises is positively associated with reduced income inequality in municipalities where they operate. Venture philanthropists apply a strategy that clearly relates to market sphere, but its result is to infuse solidity and professionalism into social enterprises as a whole (Mair and Hehenberger 2014), directly impacting their capabilities to reduce income inequality. We believe this paper provides interesting contributions, both empirical and theoretical, to research on social enterprises and hybrid organizations. First, whereas previous research has mainly focused on the specific outcomes of social enterprises, they ultimately exist to have an impact on society, the dependent variable studied by Di Lorenzo and Scarlata. We believe more research is needed to further explore how and under which conditions social enterprises can reach and scale impact. Second, Di Lorenzo and Scarlata show that economic elements can have a direct influence on how that impact is generated. In this way, they give a “tighter” interpretation of hybridity, where apparently incompatible processes and features turn out to be more interwoven than expected. Finally, the point of view they explore in this paper allows us also to connect the economic dimension to the ethical stance of both venture philanthropists and supported social enterprises: it is the effort exerted in the reduction of income inequality—an economic indicator—that grounds the ethical action of the two parties.

In their manuscript, Besharov and Litrico also take a systemic point of view and show how social and commercial elements can reinforce each other. Yet, rather than focusing on the impact of social enterprises, as in the previous paper, they explore their diffusion. Namely, they show that Canadian nonprofit organizations have shifted over time toward hybrid forms able to combine commercial and social-welfare logics (Pache and Santos 2013), thus progressively transforming in social enterprises. This evolution suggests that in the nonprofit world, juxtaposing the economic dimension against social impact on the basis of a simple refusal of market mechanism seems to be no longer appealing, making more room for experimenting with new combinations. Moreover, Besharov and Litrico also reinforce the idea that hybridity and continuous adaptation and change are needed to enable more sustainable organizations and societies to emerge, an approach already foreseen by Battilana et al. (2012) and certainly requiring further empirical and theoretical investigation.

This focus on the ‘positive side’ of the hybridity characterizing social enterprises need not divert attention away from their actual viability and the tensions they face. Innovative solutions may derive from hybridity, but they become feasible only if the hybrid structure of the social enterprise is solid. In the present symposium, this point is treated by two papers: “Data Envelopment Analysis and Social Enterprises: Analysing Performance, Strategic Orientation and Mission Drift,” by Matthias Staessens, Pieter Jan Kerstens, Johan Bruneel, and Laurens Cherchye, and “Managing Value Tensions in Collective Social Entrepreneurship: The Role of Temporal, Structural, and Collaborative Compromise,” by Björn C Mitzinneck and Marya L Besharov.

In their work, Staessens and colleagues apply data envelopment analysis to study the nexus between different social enterprises’ dimensions of performance: social, economic, and overall. The aim is to investigate possible mission drifts (Ebrahim et al. 2014) that social enterprises may encounter when trying to balance their effort in social and economic activities, an issue with clear managerial and ethical implications (Ramus and Vaccaro 2017). Quite surprisingly, the results show that organizations that maximize economic performance are not only more economically efficient but also socially effective, in that they are better at transforming inputs into social outcomes. This paradoxical evidence reinforces our key message on the possibility, for social and commercial elements, when well managed, to reinforce each other. This approach implicitly but clearly calls for research reinterpreting the characteristics, role, and effects of mission drift. Yet, it also has clear ethical implications in terms of defining the real mission and the real risk of mission drift of a social enterprise, especially in relation to emphasizing the economic dimension. This is another issue that certainly requires further investigation by business ethics scholars.

In their study of German cooperatives working in the energy sector, Mitzinneck and Besharov shed more light on the mechanisms that enable social enterprises to avoid tensions and to recombine apparently divergent elements, linking them to ethical variables. In particular, the authors show that the prioritization of different goals and practices can violate the value system of some organizational members. They also show three strategies—temporal, structural, and collaborative compromise—that can be performed to compromise on these tensions and to realign individuals’ own values with social enterprises’ goals. In this way, the authors advance that novel, ad hoc, multifaceted strategies become critical to the viability of social enterprises. Not only do they favor the strategic recombination of multiple objectives and stakeholder demands; they also enable addressing ethical dilemmas that can put the very existence of social enterprises at risk. This paper is interesting also because it broadens our understanding of social enterprises as hybridizing elements associated with two different institutional dimensions: the social and the commercial. Minzinneck and Besharov suggest, explicitly, the possibility for social enterprises to recombine elements associated with more than two dimensions. This possibility opens unanticipated threats and opportunities. Research is needed to investigate them both from a strategic and an ethical perspective.

In sum, we believe that the papers included in this symposium provide a solid grounding for advancing research on social enterprises and hybrid organizations. Previous research on social enterprises has mainly focused either on how these organizations can achieve and scale social impact or on the strategies they rely on to gain financial viability through market revenues. We propose to investigate more explicitly and extensively how social impact and market revenues are intertwined and reinforce each other. In particular, we call for wide research on the business models, organizational mechanisms, and boundary conditions that can favor social enterprises in achieving and scaling their social impact because and by virtue of their market presence.

So far, research has mainly investigated the challenges faced by hybrid organizations both internally and externally as they recombine apparently incompatible institutional elements (Smith et al. 2013). We call for inquiry that instead sheds light on the opportunities triggered by hybridity and that investigates how hybrid organizations can become purposeful actors fostering social innovation, more sustainable businesses, and inclusive markets (Mongelli and Rullani 2017), exactly because of their recombination of apparently incompatible institutional elements.

Notes

Acknowledgements

We gratefully thank Associate Editor Robert A. Phillips. We also wish to acknowledge the help of Antonino Vaccaro and of all the authors and reviewers involved in this symposium.

Funding

This study was funded by FCT – Portuguese Foundation of Science and Technology, Grant: UID/GES/00407/2013. Luca Mongelli has received funding from the European Union’s Horizon 2020 research and innovation programme under the Marie Sklodowska-Curie grant agreement No 795925.

Compliance with Ethical Standards

Conflict of interest

Luca Mongelli declares that he has no conflict of interest. Francesco Rullani declares that he has no conflict of interest. Tommaso Ramus declares that he has no conflict of interest. Tomislav Rimac declares that he has no conflict of interest.

Ethical Approval

This article does not contain any studies with human participants or animals performed by any of the authors.

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Copyright information

© Springer Nature B.V. 2019

Authors and Affiliations

  • Luca Mongelli
    • 1
  • Francesco Rullani
    • 2
  • Tommaso Ramus
    • 3
    Email author
  • Tomislav Rimac
    • 4
  1. 1.IESE Business SchoolBarcelonaSpain
  2. 2.LUISS University & ERShubRomaItaly
  3. 3.Católica Lisbon School of Business & EconomicsLisboaPortugal
  4. 4.ESCI-University Pompeu FabraBarcelonaSpain

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